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Jay Mandle: The Politics of the Budget Deficit

April 25, 2011

The federal budget showed a surplus of $185.2 billion in 2000. By 2010 it was in deficit by $1.3 trillion. What happened? Only after that question is answered is it reasonable to discuss what we should do. The numbers are clear: between 2000 and 2010 tax revenues declined from 21.5 percent of the economy’s Gross Domestic Product (GDP) to 16.3 percent. During these same years, federal government expenditures increased from 19.6 percent to 25.4 percent. The budget surplus disappeared because revenues declined by 5.2 percent of GDP and expenditures increased by 5.8 percent. 1 It does not take much investigation to explain the contrasting trends in revenues and expenditures. The two tax cuts passed during the Bush Administration, combined with the two recessions that occurred during that administration, starved the government for funds. At the same time, defense expenditures increased dramatically — from 3.7 percent of GDP to 5.6 — while health care rose from 5.0 to 7.3 percent in 2009 (the most recent available data). This means that increased health care and military spending together were responsible for about three-quarters of the growth in government expenditures as a percentage of GDP that occurred during the last decade. Economic downturns and tax cuts, combined with increased military expenditures and escalating health care costs, were clearly the villains. Logic therefore would suggest that these are the areas that need to be corrected. The economy’s vulnerability to crises should be reduced, the Bush tax cuts rescinded, defense expenditures curbed, and the health care sector made more efficient. But as obvious as these corrective steps might seem, the dominance of wealthy special interests in our political system makes it unlikely that any of them will be implemented. Despite the financial debacle of 2007, Wall Street continues to ride high and the economy remains vulnerable to a financial meltdown. Reducing health care costs will require taking on powerful special interests in a way that the Obama Administration has shown no stomach to do. Increasing taxes on the wealthy at a time of mounting income inequality is so obviously a matter of justice that it would seem not to require much of an argument. Yet spokespersons for the elite like Arthur C. Brooks of the American Enterprise Institute recently argued in The Washington Post that increasing taxation on the rich will damage not only the economy but the meritocratic ideals upon which the country rests. 2 Then there is the question of defense spending. The fact is that the importance of the military in the American economy far exceeds that anywhere else in the world. Most Americans are unaware of that imbalance or its implications. But the fact is that defense spending in the United States as a share of GDP is at least twice as high as in any comparably developed country. In contrast to the roughly 5 percent in the United States, France stands out as the big spender in the European Community at 2.4 percent. The United Kingdom’s level is 1.7 percent. 3 This commitment to the military is particularly anomalous because the United States is a relatively low tax country. Defense spending here therefore claims a significantly larger share of the overall budget. One estimate has it that United States spends 19.3 percent of budget appropriations on the military, in contrast to 6.3 percent in the United Kingdom and 5.4 percent in France. 4 The consequence is that desirable social and labor market policies are crowded out for lack of funds much more so in this country than in Europe. The people who most need social support are the same people who pay the cost of our military expenditures. Given the configuration of power in our political system and in particular the dominant role of wealth, it is all too likely that in addressing the budget deficit, legislators will inflict a grave injustice on large numbers of people. Middle and low income households were not responsible for the budget deficit. But the programs from which they benefit that are most likely to be on the chopping block. The deficit emerged because rich people succeeded in achieving major tax reductions, Wall Street decimated the economy, the costs of health care remained exorbitant, and the growth of defense spending remained unchecked. Yet as things stand, none of these will be the object of political redress. It is at times like these — when real and important choices have to be made – that the fundamental dysfunction of a political system based on wealth is most obvious. 1. Statistics from this and the next paragraph are from the Bureau of Economic Analysis, U.S. Economic Accounts, http://www.bea.gov , Table 3.2, 1.1.10, and 3.12 2. Arthur C. Brooks, the Washington Post , April 24, 2010, p. B-1 3. The World Bank, “Military Expenditures as % GDP,” http://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS 4. “How Countries Spend Their Money,” % of Total Budget Allocated to Military, http://www.visualeconomics.com

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Scott Bittle: Fiscal Follies: S&P, Groucho Marx, and the Bond Vigilantes

April 21, 2011

Admittedly, we may have an odd sense of humor when it comes to the federal budget. But after an initial shiver of fear, our first reaction to the news that Standard & Poor’s had issued a “negative outlook” for the U.S. national debt was: “Oh, no. Mrs. Teasdale has finally made her move.” You may not know who Mrs. Teasdale is, but she’s the oblivious dowager played by Margaret Dumont who starts the action rolling in the classic Marx Brothers political satire, Duck Soup . That movie starts with a government financial crisis, and Mrs. Teasdale may be the world’s first “bond vigilante.” Some say the term “bond vigilante” dates from the 1980s, while others say it was coined during the Clinton administration. Either way, it describes what happens when the traders who deal in government securities start to get nervous about a nation’s deficits and debt load, and threaten to dump their bonds unless a government changes its policies. That’s what S&P is starting to do with its “negative outlook,” and that’s what Mrs. Teasdale does in Duck Soup . Duck Soup takes place in the fictional nation of Freedonia, which is broke. Mrs. Teasdale, who has more money than sense, agrees to lend $20 million to Freedonia’s government, but only if it will appoint Rufus T. Firefly (Groucho) as prime minister. Things only get worse, and more ridiculous, from there. But while it’s an absurd situation, it’s also an indispensible lesson: when you’re in debt and need to borrow, the people with the cash on hand hold the cards. You might not think the United States and Freedonia have much in common. Now that we know we can’t fix this thing by axing agricultural subsidies and National Public Radio, we face some truly unpleasant choices — cutting spending on things that matter to people and hiking taxes in an economy that’s still sputtering. Right now we’re borrowing to get by, and we can only continue to do that as long as the world’s investors continue to loan us money. Right now, the United States relies on borrowed money that we get by issuing Treasury bonds. We have about $9.66 trillion in Treasury bonds outstanding, and we’ve got another $4.6 trillion in intergovernmental debt (mostly borrowed from the Social Security Trust Fund), which also has to be repaid. U.S, Treasuries are owned by investors around the world ranging from the People’s Bank of China and the “Caribbean Banking Centers” (The Bahamas, Cayman Islands, and the like) to state and local governments to individual bond holders like Mrs. Teasdale. For years, the United States has been in the catbird seat in the world bond market. Both here and abroad, investors have always seen U.S. Treasuries as a prudent, trustworthy investment in a dangerous, changeable world. Government bonds in general are considered one of the safest investments out there, no matter which government you’re talking about, because governments (a) can always raise taxes to pay their bills and (b) rarely go out of business. But sometimes governments get in too deep and then drag their feet on getting their fiscal houses in order. Then bondholders start wondering whether the government is actually good for the money. That’s what has happened to Greece, Ireland, Portugal, and Spain over this past year. The world’s bond markets had their Mrs. Teasdale moment when they started to see these countries as risky financial bets. That’s the reason behind the wave of budget-cutting sweeping over Western Europe right now, as Britain and France try to head off trouble. It’s important to remember: the United States is a wealthy, powerful country, the biggest economy in the world. We’re also the sole superpower, so it’s unlikely any of our creditors would impose a leader like Rufus T. Firefly on us. (We’re not saying he might not get elected on his own.) But it’s risky to think that we’re invulnerable to the power of the bond markets. They know we’re good for the money, if we tax ourselves more and/or spend less. But what S&P and others are really saying is that they don’t think we’ve got the political will to do either one. S&P said there was “significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and presidential elections,” and S&P said there’s a one-in-three chance it would actually lower our bond rating in the next two years. Is it fair that the bond market has this much power? Not really. Did the bond ratings agencies behave as dimwittedly as Mrs. Teasdale when they missed the looming financial crisis in 2008? Sure. Does that change anything? Not at all. We’ve been safe from the Mrs. Teasdales of the world so far, but with new red flags appearing every day, how long can that last? The cold fact is that the federal budget is on an unsustainable path , because as the population ages and our health care costs continue to go up, the costs for Medicare and Social Security are going to skyrocket. In a little more than a decade, our national debt could be as big as our entire economy, and nearly the entire federal budget could be taken up by Medicare, Medicaid, Social Security and interest on the money we’ve already borrowed. If we don’t start getting our deficits down and reining in our long-term spending, someday Mrs. Teasdale will come to call, and she’ll be able to make demands, and we’ll have to listen, and it won’t be funny. At that point, every single one of us could be in duck soup.

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Eric Ehrmann: Brazil Doubles Down on China Trade

April 20, 2011

With food and fuel prices causing inflation and strikes, President Dilma Rousseff has returned from China with over $30 billion in deals that will create some high value jobs and help steady the economy. But while the BRIC nations want to do business in local currencies, most of the government and private sector deals linked to the Dilma visit are dollar plays. Further declines in the US currency will require new intervention, complicating efforts to shift the image of Dilma’s government from the left to the center, a move that is key to attracting global capital in today’s currency war environment. The Dilma in China show was low-fi in contrast with the media circus orchestrated for President Obama’s stopover in Brazil last month. But while American consumer culture drives Brazil’s young, wired and affluent, the China deals — a mix of high tech ventures, defense and security moves and agricultural exports — are reminders of why Beijing has pulled ahead of Washington as Brazil’s top trade partner. To help solidify the foundation of the new Sino-Brazilian relationship, the governments have agreed to increase cultural programs and create what will become Brazil’s largest Chinese language training facility under the aegis of the Federal University of Porto Alegre. Although a study by Estado de São Paulo indicates that the boom under former president Lula brought 20 million citizens into Brazil’s middle class and put computers into 100 million households, team Dilma faces a tough challenge keeping up the momentum. CIA Factbook statistics indicate that income distribution actually worsened during Lula’s eight years in office, with less real wealth trickling down to working Brazilians like those in the northeast who need it most. Brazil’s income distribution, which is the worst among the BRICs, rating a GINI index of 56.7, is also the worst in South America after Colombia. For its part, Beijing has agreed to invest in Dilma’s accelerated growth programs that stabilize the lives of the majority of the population who are on the bubble of marginalization, many earning just the minimum wage of $340 a month (540 Reais). In a move that some in Spanish speaking Latin America might call vendepatria (selling the national patrimony), China now controls and buys most of soybean production in Goias State, an agricultural region the size of Germany. Beijing will invest in processing plants in neighboring Bahia State and help develop transport infrastructure to carry soy product to port. In a nation where politicians of all stripes have a quaint fondness of building highways to nowhere, it costs more to get a cargo of soy product from the Mato Grosso to the port in Parnanagua than it does to ship the same quantity from Brazil to China. China is also helping power Brazil’s growth by investing in the power grid technology for the huge Belo Monte hydroelectric project, which when completed will be the world’s third largest generation facility. Belo Monte has been a newsmaker, drawing criticism from US environmental groups and former US president Bill Clinton, among others. Ironically, International Monetary Fund chairman Dominique Strauss-Kahn, a socialist who wants to become the next president of France, has called for Brazil and China to cool down their relationship and focus on reforms, suggesting that the partnership is fueling the currency wars and unfair to other emerging economies, creating global instability among those who haven’t completely recovered from the ongoing crisis. Meanwhile, finance minister Guido Mantega has announced that Brazil will post a healthy 4 percent growth rate for the first trimester of this year. But while Stauss-Kahn evangelizes against economic nationalism from his bully pulpit, the globalist dimensions of the Sino-Brazilian gambit offer new reminders that to get more money into the hands of those who need it, it may be time to start reforming economics and stop talking about economic reform. Offering China the opportunity to lock in price stability that helps avoid food inflation, the $10 billion soybean deal does not create the value added jobs Brazil needs, masking a low-wage peasant economy stuffed in an agribusiness wrapper. And the $12 billion deal to produce and assemble components for Apple and other mobile items is heavily concentrated in the Amazon high tech free trade zone where unions have little leverage to help workers get higher wages; to help win this deal Dilma recently extended by decree the law establishing the zone for 50 years, citing strategic reasons. Foxconn, the company behind the Apple deal, while the largest exporter of mobile components and devices from the Peoples Republic of China, is actually based in Taiwan. While China-friendly, its key board members have been closely identified with US business and communications intelligence interests including Dan Mehan , a former ATT/ Bell Labs cybersecurity expert. With Dilma playing her cards in the fog of the currency wars and global equity packagers recycling weak dollars into Brazil’s inflation prone economy, one wonders whether if the big deals are trade or aid.

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Duetsche Telekom and France Telecom new venture to save costs

April 18, 2011

Duetsche Telekom and France Telecom new venture to save costs

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Emerging Economies Meeting Could Shuffle Global Power

April 13, 2011

BEIJING — The leaders of the world’s largest emerging economies gather this week in southern China for what could be a watershed moment in their quest for a bigger say in the global financial architecture. Thursday’s summit comes at a crucial moment for the expanded five-member bloc known as the BRICS, which groups Brazil, Russia, India, China, and, for the first time, South Africa. Chinese President Hu Jintao, Brazilian President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh and South African President Jacob Zuma will attend. With the G-20 group of major economies seeking to remake parts of the global financial architecture, it’s time for the BRICS to test whether they can overcome internal differences and act as a bloc pursuing common interests. “The key priority is for the BRICS to put creative ideas on the table rather than just react defensively to proposals put forward by the advanced economies,” said Cornell University economics professor Eswar Prasad, former head of the International Monetary Fund’s China Division. Though largely an ad-hoc grouping at present, the BRICS have the potential to emerge as a new force in world affairs on the back of their massive share of global population and economic growth. With the inclusion of South Africa, the group accounts for 40 percent of the world’s people, 18 percent of global trade and about 45 percent of current growth, giving them formidable heft when dealing with the developed economies. Thursday’s one-day meeting in Hainan’s resort city of Sanya marks only the group’s third annual summit, while moves to lend it greater structure, such as establishing a permanent secretariat, remain under discussion. The five countries are loosely joined by their common status as major fast-growing economies that have been traditionally underrepresented in world economic bodies, such as the International Monetary Fund and the World Bank. All broadly support free trade and oppose protectionism, although China in particular has been accused of erecting barriers to foreign competition. In foreign affairs, they tend toward nonintervention and oppose the use of force: Of the five, only South Africa voted in favor of the Libyan no-fly zone. Yet, while the economies of Brazil, Russia and South Africa are driven largely by raw material exports, India and China – the world’s second-largest economy – are oriented more toward manufacturing and services. Brazil and India are also concerned over large trade deficits with China that critics say are supported by a deliberately undervalued yuan. Politically, Brazil, India and South Africa are functioning democracies, while China, and to a lesser extent, Russia, are authoritarian states characterized by heavy government control over the economy and civil society. The very lack of a common cultural, political or geographical identity brands BRICS as a new type of grouping forged by nontraditional concerns such as trade barriers and monetary policy, said Li Yang, a finance expert and vice president of the Chinese Academy of Social Sciences. “The fact that they are grouped together shows the impact of new factors on international relations,” Li said. In approaching G-20 reforms being proposed by France, which holds the body’s rotating presidency, the BRICS can already point to China’s success in advancing a 6 percent shift in voting rights at the IMF that would give it the third-largest say in decision making after the U.S. and Japan. That move also creates seats for Brazil, Russia, India and China on the IMF’s expanded 10-member governing board, while reducing the influence of Britain, France and Germany. A key concern now will be stemming inflation and pushing back against debt-fueled expansionary monetary policies being pursued by developed nations that now suffer from negative or anemic growth. With about 40 percent of world reserves lead by China with $2 trillion, the BRICS countries share a concern over exchange rate volatility and macroeconomic instability in the developed world. Other priorities include reducing economic imbalances and volatility in commodity prices, pushing for even greater influence in the IMF and other bodies, and gaining a say in the potential introduction of new reserve currencies, possibly including the Chinese yuan. Manbir Singh, a top official in India’s Ministry of External Affairs, said discussions should also cover global security, climate change, and social development goals. At this juncture, the five need to answer some fundamental questions about the future of their bloc, such as whether to plan for a permanent organization or to admit new members, said Zhang Yuyan, director of China’s Institute of World Economics and Politics. “They need to decide whether to focus on boosting coordination among their members or simply representing emerging economies in their dealings with the developed nations,” Zhang said. Regardless of the outcome of such debates, the growth of the BRICS represents an important attempt to create new centers of influence and prevent domination of the world economic order by one or two major players, said South Africa’s ambassador to Beijing, Bheki Langa. “This formation plays a very important role in rebalancing the balance of forces on the world stage,” Langa said.

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Jane White: Did the American Dream Emigrate to Europe?

April 6, 2011

Mickey D’s recent announcement that it’s hiring 40,000 workers bodes ill for the future of job growth in America. According to the National Employment Law Project , while 40% of the jobs lost in the recession were in high-wage industries only 14% of new jobs created were, with 49% of new jobs paying less than $15 an hour. In other words, Mickey D’s job growth is very likely driven by laid-off factory workers who need to grab McMuffins on the way to their new lousy jobs at Wal-Mart that they were forced to take when their unemployment benefits ran out. When globalization is discussed it’s usually focused on the outsourcing of factory and service jobs to low-wage emerging markets such as China and India. But the bigger news that’s rarely covered is that high-wage Europe is not only overtaking the U.S. as the global leader but as a leader whose corporate chieftains actually pay its rank and file decently, provide them generous benefits and tend not to “divorce them,” i.e., lay them off when economic times are challenging. Americans can smugly dismiss the European Union’s role as merely the bailer-outer of dysfunctional countries, i.e., Portugal, Ireland and Greece. But the more significant news isn’t just that the New York Stock Exchange has been bought by NYSE Euronext and Deutsche Borse, but that as of 2007 the value of the European stock market surpassed that of the U.S., according to the excellent book Europe’s Promise: Why the European Way in the Best Hope in an Insecure Age , by Steven Hill. Not surprisingly, the rising value is reflective of the fact that the European Union is now the world’s wealthiest trading bloc, accounting for nearly a third of the world’s economy — almost as large as the U.S. and China combined, says Hill. From 2000 to 2005, Europe added jobs faster than the U.S., posting higher productivity gains and enjoyed a $3 billion trade surplus. Oh, and these Europeans pay high sales and income taxes. Take that, Rep. Paul Ryan! Not only did Germany overtake the U.S. as the world’s largest exporter in 2005, as pointed out in a 2006 Newsweek article entitled “Europe is a House Divided,” but it did so by selling high-quality/cost goods produced by generously compensated workers — its average hourly wage is $48, compared to $32 in the U.S. A little-discussed feature of the European Union is that it’s a partnership between large employers and their workers, not just between countries. Since 1994 when the EU issued a directive on works councils, defined as “composed of both employer and employees convened to discuss matters of common interest,” every multinational company with at least 1,000 workers within the EU and 150 workers in each of two or member states must negotiate agreements with works councils if employees petition the employer to create one, Susan Ladka writes in a June 2005 HRMagazine article entitled ” Working Together .” Works councils not only enjoy veto power over job losses but have the right to meet with management to discuss mergers and the introduction of new technologies, says Hill in Europe’s Promise . In fact, works councils existed long before the EU did. According to a 2001 article in The Economist , ” Europe: You’re Fired ,” Germany had them after the Weimar Republic and after 1945 required any company with more than 500 employees to have a “supervisory board, in which workers hold one third of the seats. A few decades later, other countries in Europe followed suit, including Austria, France, Belgium, the Netherlands, and Sweden. While the UK resisted the notion at first, because, as The Economist put it, the British approach is “sack ‘em now and argue afterwards” — it ultimately passed local works council legislation a few years ago to meet a 2005 EU deadline, Ladka writes. Incredibly, as far as I can tell, no discussion or debate about creating works councils has ever taken the place within “sack-’em-now” American workplaces, much less on Capitol Hill. So our counterparts in Europe are enjoying American-style prosperity while continuing to receive European style benefits, including health care, a free or cheap college education, pensions, and generous unemployment benefits. Our biggest French fan, Alexis de Tocqueville, once said that , “The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.” Ironically enough, she need to rip some pages from the European playbook to figure out how to restore the American dream.

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Don Tapscott: The World’s Unemployed Youth: Revolution in the Air?

April 6, 2011

A common thread to the revolutions in Tunisia and Egypt and protests elsewhere in the Middle East and north Africa is the soul-crushing high rate of youth unemployment. Twenty-four percent of young people in the region cannot find jobs. To be sure, protesters were also agitating for democracy, wanting the full rights of citizenship and not to be treated as subjects. But nonexistent employment opportunities were the powerful catalyst. Youth unemployment is similarly dire in other parts of the world. In the UK, young people aged 16 to 24 account for about 40% of all unemployed, which means almost 1 million young adults are jobless. In Spain more than 40% of young people are unemployed. In France the rate is more than 20%, and in the US it’s 21%. In country after country, many young people have given up looking for work. A recent survey in the UK revealed that more than half of the 18- to 25-year-olds questioned said they were thinking of emigrating because of the lack of job prospects. Unemployed young people comprised a large portion of the crowd that marched in London on March 26 to protest against the economic policies of the government. Fortunately, the protest was largely peaceful. But youth unemployment will continue to stay high, and the UK government’s austerity measures are not going to help. We’re deluding ourselves if we believe the young will simply continue to be stoical and deferential to authority. Today’s society is failing to deliver on its promise to young people. We said that if they worked hard, stayed out of trouble, and attended school, they would have a prosperous and fulfilling life. It turns out we were inaccurate, if not dishonest. And then we rub salt in the wound by saying we’re in a “jobless recovery” — an oxymoron to tens of millions of young people who are having their hopes dashed. Widespread youth unemployment is one facet of a deeper failure. The society we are passing to today’s young people is seriously damaged. Most of the institutions that have served us well for decades — even centuries — seem frozen and unable to move forward. The global economy, our financial services industry, governments, health care, the media and our institutions for solving global problems like the UN are all struggling. I’m convinced that the industrial age and its institutions are finally running out of gas. It is young people who are bearing the brunt of our failures. Full of zeal and relatively free of responsibilities, youth are traditionally the generation most inclined to question the status quo and authority. Fifty years ago, baby-boomers had access to information through the new marvel of television, and as they became university-age and delayed having families, many had time to challenge government policies and social norms. Youth radicalization swept the world, culminating in explosive protests, violence and government crackdowns across Europe, Asia and North America. In Paris in May 1968, protests that began as student sit-ins challenging the Charles de Gaulle government and the capitalist system culminated in a two-week general strike involving more than 11 million workers. Youth played a key role in the so-called Prague Spring in Czechoslovakia that same year. In West Germany, the student movement gained momentum in the late 60s. In the US, youth radicalization began with the civil rights movement and extended into movements for women’s rights and other issues, and culminated in the Vietnam war protests. Young people today have a demographic clout similar to that of their once-rebellious parents. In North America, the baby boom echo is larger than the boom itself. In South America the demographic bulge is huge and even bigger in Africa, the Middle East and Asia. A majority of people in the world are under the age of 30 and a whopping 27% under the age of 15. The 60s baby boomer radicalization was based on youthful hope and ideology. Protesters championed the opposition to war, a celebration of youth culture, and the possibilities for a new kind of social order. Today’s simmering youth radicalization is much different. It is rooted not only in unemployment, but personal broken hopes, mistreatment, and injustice. Young people are alienated; witness the dropping young voter turnout for elections. They are turning their backs on the system. Most worryingly, today’s youth have at their fingertips the internet, the most powerful tool ever for finding out what’s going on, informing others and organizing collective responses. Internet-based digital tools such as Twitter, Facebook and YouTube were instrumental to the Tunisian and Egyptian revolutions. We need to make the creation of new jobs a top priority. We need to reinvent our institutions, everything from the financial industry to our models of education and science to kick-start a new global economy. We need to engage today’s young people, not jack up tuition fees and cut back on retraining. We need to nurture their drive, passion and expertise. We need to help them take advantage of new web-based tools and become involved in making the world more prosperous, just and sustainable. If we don’t take such measures, we run the risk of a generational conflict that could make the radicalization of youth in Europe and North America in the 1960s pale in comparison. A shorter version of this was originally posted by The Guardian.

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Rajeev Sharma: America’s Relationship with India: A Source of Security in Times of Turmoil

April 1, 2011

Imagine a country that declares its independence from Great Britain, forges democracy from diversity, enjoys robust economic growth, and emerges as a world power. You’ve just described the United States — and modern India . In the midst of near-double-digit unemployment, many Americans are anxious about any nation that competes for high-skill jobs. But, when it comes to creating jobs, resisting terrorism, and advancing human rights, US — India relations should be regarded as an asset, expectant with opportunity, not a source of anxiety. Now is the time to broaden and deepen this mutually beneficial relationship. Commerce Secretary Gary Locke’s recent trade mission to India highlighted the economic advantages of an alliance between the world’s two largest democracies. Secretary Locke was accompanied by executives from 24 American businesses including small and medium sized enterprises. Building on President Obama’s very successful delegation to India in November, these visits are reaping rewards for American businesses and workers. Having accompanied both President Obama and Secretary Locke on each of their missions, I have personally witnessed their benefit in the increased awareness of and accessibility to US businesses in India. Most importantly, I have witnessed the impact of these trips on my fellow delegates, many of whom were visiting India for the first time, and the realization of their potential in the burgeoning Indian market. During the President’s journey, US companies completed more than $10 billion in business deals, supporting more than 50,000 American jobs at major employers. Following up on these gains, Secretary Locke’s trade mission tackled tough issues, such as tearing down trade barriers in the advanced industrial sector. As these tariffs are reduced or removed, US companies are able to expand their exports to India — and create good jobs here at home — in cutting-edge industries: civil aviation, renewable energy, communications, information technology and defense and security. These trade missions are bearing fruit because India’s fast-growing market is increasingly receptive to American exports. For its first four decades after independence, India’s economy was state-controlled and stagnant and it was considered a more challenging market to enter than China. But, following free-market reforms, including reductions in tariffs and taxes, India’s economy took off at an ever-accelerating rate, most recently growing by 5.5 percent in 2009 and an estimated 9.7 percent in 2010. India now plans for nearly a trillion dollars worth of infrastructure upgrades to its roads, bridges, harbors, water treatment and power plants, opening up opportunities on an unprecedented scale. As I write this, our company’s next generation, plasma gasification waste-to-energy solutions are being commercialized in India, both in thriving metropolitan centers and small villages without access to electricity. We are responding to a sharp growth in demand for power in India and a call by the Indian Government for 14,500 MW of added capacity from renewable sources by 2012. Competing and winning in a free market with US developed Intellectual Property, we are directly benefiting from the closer bilateral relations between the two countries. And our experience is not unique. American exports are growing in tandem with India’s economy, increasing by nearly 170 percent from 2005 through 2009 and amounting to nearly $50 billion in 2010. These exports are in sectors that help build America’s future with well-paying jobs — machinery ($2.3 billion in 2009), aircraft and parts ($2.3 billion), electric machinery ($1.3 billion), and fertilizers ($1.1 billion). Communities in this country with the largest exports to India include California ($2.2 billion) Washington ($1.8 billion), New York ($1.5 billion) and Florida ($1 billion). As exports continue to grow, those benefits will expand both within these communities and to other regions throughout the country. With India’s middle class expected to expand tenfold from 50 million to 500 million over the next 15 years, the potential market for American goods and services is extraordinary — and exponentially increasing. This is especially important because in a Global Attitudes Survey, over 76 percent of Indians responded with a favorable view of the US. This goodwill is an amazing foundation that extends to American products and American culture. But we face unrelenting competition from China, Russia, France, Britain and other rivals who aggressively want to establish dominance in this growing market, too. The prize: hundreds of thousands of high-wage, export-based jobs Our focus must be to innovate, compete and expand into this vast emerging market. Jobs created from an innovation economy provide stability and growth to the US and allay past concerns about issues such as outsourcing. And when domestic industries expand in India, we should recognize opportunity in their success, not view them as an opportunity lost. For example, India’s vaunted software and services industry accounts for about $60 billion in aggregated revenue, and spending in these sectors is forecast to grow over 17 percent per year between 2010 and 2014. In the midst of one of the most competitive markets for software services, our company is gaining traction with its open source, real time situational awareness and Cyber security software solutions both in commercial and government markets. Innovation and pioneering technology are key differentiators in all markets, even those as competitive as India. Innovation is what has distinguished American IP in the past and has to be the foundation for our growth in the future. In addition to the economic benefits, the American relationship with India is principally based on common interests and common values of free markets and trade. Unbeknownst to many, America is reaping the benefits of the newer phenomenon of growing Indian investments in the US. As Ernst and Young recently reported, Indian companies have increased their investments in the US by more than $20 billion over the past five years, supporting more than 65,000 jobs here in the US. That’s not outsourcing that costs American jobs — that’s in-sourcing that creates American jobs. Under Presidents Bush and Obama, our two nations have strengthened our strategic partnership and increasingly aligned our strategic interests; India, for example, is now the sixth largest bilateral aid donor to Afghanistan. Soon celebrating its 65th anniversary, India’s democracy includes free elections, competing parties, lively media, and an independent judiciary. Meanwhile, more than 3 million Indian Americans, including two Governors, contribute to our own country, participating in our democracy and enlivening our economy. At an event at our home last fall, President Obama eloquently discussed the indispensable nature of the US-India relationship in the 21st Century. The President postulated that the US relationship with India is an asset to be developed for the sake of American jobs and American businesses, American interests and American ideals. Americans from all walks of life can and should embrace India not only as a key partner in this recovery, but also as America’s next great ally. Rajeev Sharma is Chief Executive Officer of ABSi, a technology services and solutions company headquartered in Rockville, Md. ABSi also has offices in New Delhi, India.

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U.S. Rules On Radiation Pills Vary Widely From State To State

March 31, 2011

NEW YORK — Potassium iodide pills have played a central role in Japan’s nuclear response. And they’ve contributed to widespread paranoia in the United States, as people fearing exposure to radiation from thousands of miles away have snapped up the substance from drugstore shelves and online vendors. But as a matter of U.S. emergency preparedness policy, the government’s distribution of potassium iodide to people living near nuclear plants is a hazy and voluntary process that varies widely from state to state. Although the Nuclear Regulatory Commission included potassium iodide in its emergency preparedness regulations nearly a decade ago, the decision on whether to distribute the radiation pills to the public was left up to individual states. Twenty-three of the 33 states that have people living within 10 miles of nuclear power plants have chosen to participate in the federal program. The inconsistent standards across the country point to the difficulties in managing public perceptions of a nuclear disaster and reveal a lack of consumer education about how the pills work. State officials who have chosen not to distribute potassium iodide say they worry that residents might be lured into a false sense of security and not evacuate in the case of a disaster. But doctors and other public health advocates have long urged for a more centralized approach on potassium iodide, which can reduce the risk of thyroid cancer for those exposed to radioactive iodine, particularly in infants and young children. Critics have long said that the federal government has shied away from requiring distribution of the pills to avoid any negative stigma attached to living near a nuclear plant. “Everyone agrees with the need for evacuation,” said Dr. Lewis Braverman, a professor at Boston University School of Medicine who coauthored a 2004 National Academy of Sciences report advocating the use of potassium iodide for anyone at risk from radioactive iodine. “But if that doesn’t occur, or if it’s slow, and you’re worried about radioactive iodine in the atmosphere … then I think it should be available.” Potassium iodide is available over the counter in drug stores, but not in great supply. As evidenced by the run on the substance at drugstores in the United States, the pills are often misunderstood. If taken shortly before or after exposure to radiation, potassium iodide can be effective in reducing the risk of thyroid cancer, mostly for people under 40. But they are in no way a panacea for the effects of radiation, since exposure to other radioactive elements can lead to other illnesses, such as lung cancer. Taking the pills effectively fills the thyroid gland with enough iodine to prevent the gland from absorbing radioactive iodine, a harmful isotope emitted from a nuclear reactor. Nonetheless, other countries with extensive nuclear power industries, such as France, have consistent distribution of potassium iodide to households living near nuclear plants. For years, the American Thyroid Association and the American Academy of Pediatrics have pushed for greater and more consistent distribution of the pills. Greater distribution doesn’t mean greater intake, though. States that do participate in the program warn that the pills should only be taken as directed — in case of emergency, while evacuating to a safe distance. Following the 1979 Three Mile Island accident in Pennsylvania, a commission appointed by President Jimmy Carter recommended that the United States stockpile potassium iodide, but the Nuclear Regulatory Commission did not adopt a rule regarding the substance until 2001. The rule now “requires that consideration be given to including potassium iodide as a protective measure for the general public that would supplement sheltering and evacuation.” It applies to states that have populations within 10 miles of a nuclear plant. At the time, the commission told states that there would only be a one-time distribution of the pills; since then the commission has told states they will continue to provide more supplies if they run out. Individual states had to come up with a distribution plan and submit it to the Federal Emergency Management Agency for approval. Methods of distributing potassium iodide vary: some states stockpile it in case of emergency, while others make it available to the public at regular intervals. Officials in states that have chosen not to distribute the potassium iodide to residents point out that the pills only address the thyroid gland, and not other parts of the body that could be harmed by exposure to radioactive elements. They also point out that pills could deter evacuation efforts. “It’s better for them to leave the area and get no exposure to radiation than rely on protection from one kind of radiation,” said Chris Van Deusen, a spokesman for the Texas Department of State Health Services. Other health officials said they decided not to distribute the pills because of logistical questions: how and when to hand out the pills. “If we’re telling people to get out, but they’d rather get potassium iodide first at some distribution point, it confuses our emergency plan,” said Donn Moyer, a spokesman for the Washington Department of Health, which opted not to participate in the federal program. But the inconsistencies are notable. In Wisconsin, for example, potassium iodide is handed out in a county near two power plants but not near another one. County officials near Wisconsin’s two nuclear power plants along Lake Michigan did not want to distribute the pills. But potassium iodide is distributed in a county on the other side of the state, which is within 10 miles of a nuclear power plant in Minnesota. Minnesota officials did opt into the federal potassium iodide program, so officials in the adjoining Wisconsin county felt it would be inconsistent if they were not also available in Wisconsin. The Nuclear Regulatory Commission has not announced any specific policy changes since the Japan disaster, but noted that the commission is reviewing “all aspects of nuclear power plant safety and security regulations.”

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John R. Talbott: The Next Crisis Will Be Ten Times Bigger

March 31, 2011

If we don’t come to understand the underlying reasons for the current crisis and enact real reform of Wall Street and the banks and get big corporate money out of our elections we face a future that is truly frightening. (Yes, corporate money — total revenues of the 500 largest American corporations are 1,000 times larger than all our unions’ resources combined). There is still time to act, but we must realize that our congress on its own is not going to enact meaningful regulation of Wall Street and the banks, their biggest campaign contributor and lobbying force. Pressure for reform must come from our citizens working together outside of our traditional political parties and governmental representatives. There is no question that big banks working closely with and paying off our elected representatives to remove regulations on the books caused the current crisis and much of the current government operating deficit. It is unfair to ask American workers to stay on the job past 70 years of age to solve this financial problem as they didn’t cause it. Similarly, it makes no sense to ask average American taxpayers to step up and bail out bank creditors at 100 cents on the dollar as it was these creditors who agreed to take this repayment risk and received the rewards over time in increased interest payments from financing these corrupt banks. Americans cannot just ignore this problem and hope it goes away. Luckily, there are things we can do like cutting the defense budget (over a trillion dollars annually once you add in the costs of our intelligence services and the Department of Homeland Security) back to its level of just fifteen years ago which will save close to $700 billion a year. But first we must limit the lobbying power of the defense industry. It will not be easy, but very little is riding on it other than the very survival of liberal democratic society on this planet. I believe the key to real reform lies in the realization that all corporate power and profit comes from the people’s initial consumption decision to buy these companies’ products and services. If the people get organized and decide to stop buying the products and services of those banks and corporations that are the worst abusers of our democratic process we can affect real change. The explosion of government debt in the world will trigger the next crisis. Like the debt in the mortgage crisis, most sovereign country debt is rated AAA so no investor will expect major defaults, especially among the more advanced countries of the world. The amount of sovereign debt in the world, approximately $35 trillion and on its way very quickly to becoming $50 trillion will make the $3 trillion subprime mortgage crisis seem like a minor tremor compared to the major devastating economic earthquake to come. It is not just governments that are in trouble. Citizens around the world have not saved enough for their retirements. One, most corporations terminated the defined benefit pension plans for their employees over the last 20 years in an attempt to increase corporate profits and shift investment risk from their balance sheets to their employees. Two, Americans have done a poor job of adding to their 401(k) retirement plans as the median balance of a 401(k) today is about $12,000, hardly enough to retire on. Three, many people around the world presumed they could retire on the equity they had built up in their homes. This, thanks to the housing crash is no longer true. Many homeowners have seen their home equity evaporate as now one in four Americans have homes that are underwater, that is the house is worth less than the mortgage. Four, many Americans over 55 years of age are being laid off in this recession and cannot find other work, further straining their retirement plans. I don’t think people realize how widespread the government sovereign debt crisis is going to be. We have all heard about Greece, Iceland, Ireland, Portugal and Spain, but it is the biggest, richest and most advanced countries of the world that will be tested the most. It is the advanced countries’ banks that have lent these troubled sovereign credits money and it will be their governments who will go into further debt to bail out both the countries that get into trouble as well as the banks in the advanced countries that lent to them. So this current financial crisis could not have come at a worse time for those countries struggling to deal with their excessive debts. One, it has put the world’s largest banks in jeopardy at a time when their governments are already running significant operating deficits due to the recession. This means that any attempt by the governments to rescue the troubled banks will have to be done by issuing additional new debt thus contributing to even higher debt to GDP percentages for these countries. Two, the very notion of a global recession/depression is that high unemployment and lower business activity results in less government tax revenue. This lower tax revenue creates deficits that add to the levels of sovereign debt. If we are slow to emerge from the current financial crisis, as I expect, then these ongoing deficits will dramatically increase sovereign debt worldwide by trillions of dollars. Three, the current crisis has impacted the ability of countries to repay their debts which means their cost of borrowing will increase in real terms to reflect this greater risk. The cost of borrowing will increase as well in nominal terms if these countries decide to print money to fund their deficits as inflation returns. This means that we can expect governments to carry increased interest expense on their debt loads going forward. If the average cost of borrowing for the U.S. Treasury goes from 3% to 10% because of an increased fear of future inflation combined with paying a higher default premium, this will add an additional $1 trillion to the annual deficit making it impossible for Congress to balance the budget and thus reduce or stabilize debt loads in the future. A rough cut rule of thumb is that countries typically get into trouble when their total debt exceeds their entire GDP. The US, France, Germany and the UK, as well as most of the other European countries will very quickly exceed this dangerous threshold in the very near future. Japan is already there. The great recession and its associated government deficits will last much longer than people expect, banks will continue to write off bad loans that will require their government’s support and the retirement of the baby boom will dramatically decrease government tax revenues while at the same time putting enormous demands on governments to provide for the retirement and health care costs of their elderly citizens. This is an excerpt from How I Predicted the Global Economic Crisis*: The Most Amazing Book You’ll Never Read , a new book by best selling author, John R. Talbott. You can read more about the new book and order it at www.johnrtalbott.com or at amazon.com .

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James Sample: General Electric’s $0 Tax Bill: A Citizens United Perspective

March 25, 2011

Good news! If you’re looking to avoid federal taxes on $14 billion in profits, the financial strategists at General Electric have a few tips. Bad news! Unfortunately, and setting aside the small detail that you likely didn’t earn $14 billion in 2010, if you’re reading this, you’re a real person, which means you’re almost certainly ineligible. Ditto, incidentally, for most small businesses. An excellent article in today’s New York Times serves up an eye-popping reminder of the myriad ways in which, selective corporate personhood conveniently involves the sweet without the bitter. To paraphrase F. Scott Fitzgerald, “Let me tell you about the very rich [corporations]. They are different from you and me.” Today’s Times vividly demonstrates just how different they are when it comes to the modern political process. According to the article, in 2010, General Electric had “worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.” Their 2010 American tax bill? Zero . And actually, the Times notes, GE’s tax bill was much better than zero when factoring in a tax benefit of $3.2 billion. To put a political influence gloss on this, GE’s worldwide profits in 2010 amounted to 14 times the aggregate (and record-breaking) amount that Barack Obama and John McCain raised in contributions from actual, living and breathing, American human persons combined in 2008. Yet, to carry the comparison a bit further, it doesn’t exactly involve going out on a limb to surmise that the combined tax burden of all of those actual, living, breathing American human people amounted to a whole lot more than zero. Or, if you prefer, more than negative $3.2 billion Previously on this site, others, including Jason Linkins have explored the pragmatic consequences of the Supreme Court’s 2010 decision in Citizens United v. FEC . This site has also featured some innovative ideas, including Dan Greenwood’s , as to how to address Citizens United prospectively. There are critical differences between corporations and real people, particularly when it comes to finding a balance as between the legal bitter and the legal sweet. As I wrote here a year ago, for starters, corporations don’t go to jail; don’t face execution; don’t vote; do have eternal life; and are different from regular citizens in all sorts of meaningful ways, particularly when it comes to matters of political process. Today’s stunning revelations about General Electric, combined with the dramatic waxing of corporate political power post- Citizens United , turns taxation without representation on its head — not once, but twice. Which is to say, we’re heading for a democracy that is actually based neither on taxation without representation, nor on taxation with representation, but rather, on representation… without taxation. It is the theory of pre-Revolutionary France: the first privilege of aristocracy is exemption from taxation. There are many factors at play, of course, but at a minimum, left unaddressed, Citizens United will exacerbate those factors, resulting in a trend in which actual, living citizens of the world’s greatest republic, will increasingly find themselves politically marginalized.

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Internet Entrepreneur Bypasses High-Tech For Low-Priced

March 25, 2011

NEW YORK — The numbers that fill Warner Johnson’s head shake him from sleep most nights. There are phone numbers and area codes and long-distance calling rates to far-flung places like India, Slovenia and Hong Kong. Phantom phone calls to Mexico or Martinique ring in his dreams. “I just can’t help it,” Johnson said. “It’s my passion.” Johnson, 48, is a Harlem-based Internet entrepreneur whose model relies less on high-tech gadgetry and more on old-school simplicity and ingenuity. His most recent creation is FreePhone2Phone , a telephone service that offers free 10-minute phone calls to any city in the United States and to more than 50 countries around the world on the condition that the user listens to a short advertisement. Here’s how it works: You dial a local access number that you can locate at FreePhone2Phone.com, you listen to a couple 10- or 12-second advertisements, and then you dial the number you’d like to call. At a time when unlimited cell phone calling plans can easily eclipse the $125 mark, and smartphones and the latest tablets require costly data plans for optimized use, FreePhone2Phone is somewhat of a technological throwback. Its use and appeal harkens back to the days when a few quarters and a phonebook were all you needed to reach out and touch someone. And with the cost of gas prices, airline tickets and perishable goods rising for any number of reasons, millions of Americans concerned with everyday expenses can save anywhere from 10 cents to a $1 a minute off their long-distance charges. Johnson said the target audience for his service is broader than those with family or friends abroad, and includes anyone who wants to save money in these tough economic times. “Imagine you could save money at the gas pump by simply watching a few advertisements. Who wouldn’t do that?” he asked. “This is no different.” While the service is free, there are a few catches. Most overseas calls are limited to landline numbers. Each call is limited to 10 minutes, and if you try to call the same number a second time in the same day, the call is limited to five minutes. But the number of free calls you can make in a single day is unrestricted. Since the launch of FreePhone2Phone seven months ago, Johnson said users have made “millions” of calls and saved “hundreds of thousands of dollars.” (He admits to using the service himself at least three to four times a day to call business partners in Latin America.) His story is the stuff of pure Americana: boy with humble, middle-class roots follows his dreams, takes a few risks and finds himself along the way. And that journey has led Johnson to where he is today — a man on a mission. That singular mission has been to spread the word about FreePhone2Phone. Think an African American Billy Mays, Tony Little or Ron Popeil in a pair of perfectly pressed slacks and a sport coat. He tells the delivery guys schlepping packages up and down his block in Harlem about it. He tells the Indian and Greek waiters at his favorite restaurants. And he can’t take a bag of peanuts from a flight attendant or tip a skycap without at least a mention of FreePhone2Phone. “In the middle of the night, I’ll check the iPad to see how many people on the west coast are making calls to Asia or Europe,” Johnson admitted. “India is really big. Mexico is huge, and people are calling Europe like crazy.” FreePhone2Phone is just the latest venture for Johnson, who spent much of the mid-1980s and early ’90s working on Wall Street as an investment banker with Payne Webber. He is also the creator of the website fabsearch.com , which aggregates travel articles from luxury fashion and travel magazines to help people plan where to eat, stay and play while on vacation. His entrepreneurial impulses were nurtured at an early age, when he said his schoolteacher mother, keen to her son’s motivations, offered some sage advice. “Don’t become a doctor,” he recalled her saying. “You care too much about money to be a doctor.” So began his journey from a middle-class black neighborhood in Raleigh, N.C., where he was bused to integrated schools, to summer classes at the prestigious Phillips Academy, the elite prep school in Andover, Mass., and then to the ivy halls of Brown University, where he studied history. While at Brown, a friend introduced him to a program designed to give minority students access to Wall Street. Johnson said he took to that world naturally, and after graduating from Brown with a degree in history, went on to work as an investment banker. But after years of the stress and grind of working in finance, he felt stymied. “I realized that working on Wall Street just wasn’t for me,” Johnson said. “I was following the book and I could imagine my life with success, but I just said, ‘Why do it if my heart’s not into it?’” He recalled wanting to experience life beyond the tacky wood-paneled offices that he so often found himself in, where he consulted for many deep-pocketed businessmen with even deeper financial troubles. “I looked at Ted Turner and he was a rock star to me,” Johnson said. “Guys like that go out there and risk it.” So he quit his job and moved to France. “I learned French and partied my butt off,” he said, with a bit of boyish mischief in his voice. “I decided to eat pizza and be an entrepreneur.” After living in France for a year and a half, Johnson decided to move back to the States, first to New York City’s West Village neighborhood and then to Harlem. It was 1993 and Harlem had yet to gentrify. “Police helicopters were still flying outside of my window,” he recalled. But he said moving to Harlem, the “mecca of black America,” fueled his social and entrepreneurial juices. He was awed by the architecture and cultural richness of the place. “It has made me so proud to be a black American. And you realize the strength, the commitment, the dignity and the patience of my people,” he said. “But it also energized me to go out there and do things. I felt Harlem provided an open canvas for me to be able to pursue my dreams and I knew that I wouldn’t be judged one way or the other.” There were ups and down along the way, Johnson said. Companies he founded have both flourished and floundered. But the last few years with fabsearch.com have been profitable and full of successes, he said. And word of FreePhone2Phone has been spreading quickly, he said, mostly by word of mouth. (Surely, much of it his own.) There are plans to extend the service to more countries and investors, and advertisers have been extremely supportive given the tough lending and investing environment, he said. Meanwhile, Johnson remains his company’s best pitchman. “Your grandmother doesn’t know how to use Skype or Google Voice,” he said. “But this is simple, easy as using a prepaid calling card.” And he allowed that he is consumed by the need to spread the word about what he believes his product can offer money-conscious callers. “This is my passion and joy,” Johnson said. “I can barely go to sleep without telling people about this service.”

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U.S.’s Growing Nuclear Waste Problem

March 23, 2011

— The nuclear crisis in Japan has laid bare an ever-growing problem for the United States – the enormous amounts of still-hot radioactive waste accumulating at commercial nuclear reactors in more than 30 states. The U.S. has 71,862 tons of the waste, according to state-by-state numbers obtained by The Associated Press. But the nation has no place to permanently store the material, which stays dangerous for tens of thousands of years. Plans to store nuclear waste at Nevada’s Yucca Mountain have been abandoned, but even if a facility had been built there, America already has more waste than it could have handled. Three-quarters of the waste sits in water-filled cooling pools like those at the Fukushima Dai-ichi nuclear complex in Japan, outside the thick concrete-and-steel barriers meant to guard against a radioactive release from a nuclear reactor. Spent fuel at Dai-ichi overheated, possibly melting fuel-rod casings and spewing radiation into the air, after Japan’s tsunami knocked out power to cooling systems at the plant. The rest of the spent fuel from commercial U.S. reactors has been put into dry cask storage, but regulators only envision those as a solution for about a century and the waste would eventually have to be deposited into a Yucca-like facility. The U.S. nuclear industry says the waste is being stored safely at power-plant sites, though it has long pushed for a long-term storage facility. Meanwhile, the industry’s collective pile of waste is growing by about 2,200 tons a year; experts say some of the pools in the United States contain four times the amount of spent fuel that they were designed to handle. The AP analyzed a state-by-state summary of spent fuel data based on information that nuclear power plants voluntarily report every year to the Nuclear Energy Institute, an industry and lobbying group. The NEI would not make available the amount of spent fuel at individual power plants. While the U.S. Department of Energy previously reported figures on overall spent fuel storage, it no longer has updated information available. A spokesman for the U.S. Nuclear Regulatory Commission, which oversees nuclear power plant safety, said the capacities of fuel pools are public record, but exact inventories of spent fuel are tracked in a government database kept confidential for security reasons. The U.S. has 104 operating nuclear reactors, situated on 65 sites in 31 states. There are another 15 permanently shut reactors that also house spent fuel. Four states have spent fuel even though they don’t have operating commercial plants. Reactors in Colorado, Oregon and Maine are permanently shut; spent fuel from all three is stored in dry casks. Idaho never had a commercial reactor, but waste from the 1979 Three Mile Island accident in Pennsylvania is being stored at a federal facility there. Illinois has 9,301 tons of spent nuclear fuel at its power plants, the most of any state in the country, according to industry figures. It is followed by Pennsylvania with 6,446 tons; 4,290 in South Carolina and roughly 3,780 tons each for New York and North Carolina. Spent nuclear fuel is about 95 percent uranium. About 1 percent are other heavy elements such as curium, americium and plutonium-239, best known as fuel for nuclear weapons. Each has an extremely long half-life – some take hundreds of thousands of years to lose all of their radioactive potency. The rest, about 4 percent, is a cocktail of byproducts of fission that break down over much shorter time periods, such as cesium-137 and strontium-90, which break down completely in about 300 years. How dangerous these elements are depends on how easily can find their way into the body. Plutonium and uranium are heavy, and don’t spread through the air well, but there is a concern that plutonium could leach into water supplies over thousands of years. Cesium-137 is easily transported by air. It is cesium-137 that can still be detected in a New Jersey-sized patch of land around the Chernobyl reactor that exploded in the Ukraine in 1986. Typically, waste must sit in pools at least five years before being moved to a cask or permanent storage, but much of the material in the pools of U.S. plants has been stored there far longer than that. Safety advocates have long urged the NRC to force utility operators to reduce the amount of spent fuel in their pools. The more tightly packed they are, the more quickly they can overheat and spew radiation into the environment in case of an accident, a natural disaster or a terrorist attack. Industry leaders say new technology has made fuel pools safer, and regulators have taken some steps since the 9/11 terror attacks to reduce fuel pool risks. Kevin Crowley, who directs the nuclear and radiation studies board at the National Academy of Sciences, says lessons will be learned from the crisis in Japan. And NRC Chairman Gregory Jaczko says his agency will review how spent fuel is stored in the U.S. A 2004 report by the academy suggested that fresh spent fuel, which is radioactively hotter, be spread among older, cooler assemblies in the spent fuel pool. “You’re buying yourself time, basically,” says Crowley. “The cooler ones can act as a thermal buffer.” First Energy, which runs two nuclear power stations in Ohio and one in Pennsylvania, was able to reconfigure the spent fuel rods in its pools to make more room. Still, the company is now running out of space, says spokesman Todd Schneider. Ohio has 1,136 tons of spent fuel in pools and 37 tons in dry casks. The casks in the U.S. are kept outdoors, generally on concrete pads, but industry officials insist they are safe. Unlike the pools, the casks don’t need electricity; they are cooled by air circulation. One cask model, selling for $1.5 million, places spent fuel inside a stainless steel canister, which is placed inside an “overpack” – an outside shell composed of a layer of carbon steel, 27 inches of concrete and another layer of carbon steel. When in place, the system stands 20 feet tall and weighs 150,000 pounds, said Joy Russell, a spokeswoman for manufacturer Holtec International of Florida. Russell said engineers have designed the system to withstand a crash from an F-16 fighter jet and survive the resulting jet fuel fire. Plant operators in some states have moved aggressively to dry cask storage. Virginia has 1,533 tons of nuclear waste in dry storage and 1,105 tons in spent fuel pools. Maryland has 844 tons in dry storage and 588 tons in spent fuel pools. Utilities in Texas, though, have not. There are 2,178 tons kept in spent fuel pools at reactor sites there, and zero in dry casks. In New York, 3,345 tons are in spent fuel pools while only 454 tons are in dry storage. No cask is totally invulnerable, but the academy report found that radioactive releases from casks would be relatively low. “If you attacked a fuel cask and managed to put a hole in it, anything that came out, the consequences would be very local,” Crowley said. Casks can be licensed for 20 years, with renewals, said Carrie Phillips, a spokeswoman for the Atlanta-based Southern Co., which has a dozen such casks at its two-reactor Joseph M. Farley plant near Columbia, Ala. She said officials have “every expectation” the casks could last “in excess of 100 years by design.” But not the needed tens of thousands of years. For long-term storage, the government had looked to Yucca Mountain. It was designed to hold 77,160 tons – 69,444 tons designated for commercial waste and 7,716 for military waste. That means the current inventory already exceeds Yucca’s original planned capacity. A 1982 law gave the federal government responsibility for the long-term storage of nuclear waste and promised to start accepting waste in 1998. After 20 years of study, Congress passed a law in 2002 to build a nuclear waste repository deep in Yucca Mountain. The federal government spent $9 billion developing the project, but the Obama administration has cut funding and recalled the license application to build it. Nevadans have fiercely opposed Yucca Mountain, though a collection of state governments and others are taking legal action to reverse the decision. Despite his Yucca Mountain decision, President Barack Obama wants to expand nuclear power. He created a commission last year to come up with a long-term nuclear waste plan. Initial findings are expected this summer, with a final plan expected in January. “They are 13 years late,” says Terry Pickens, Director of Nuclear Policy at Xcel Energy, the Minneapolis-based utility that operates three reactors in Minnesota. Xcel is building steel-and-concrete cask containers to hold old waste on site, and suing the government periodically to pay for them. “We would like them to get done with what they said they would get done.” Some countries – such as France, Japan, Russia and the United Kingdom – reprocess their spent fuel into new nuclear fuel to help reduce the amount of waste. The remaining waste is solidified into a glass. It needs to be stored in a long-term waste repository, but reprocessing reduces the volume of waste by three-quarters. Because reprocessing isolates plutonium, which can be used to make a nuclear weapon, Presidents Gerald Ford and Jimmy Carter put a stop to it in the U.S. The ban was later overturned, but the country still does not reprocess. France produces 1,300 tons of nuclear waste per year, and reprocesses 940 tons. Still, fuel is only reprocessed once and then it, too, needs to be stored. France is expecting that engineers will eventually succeed in building a new type of nuclear reactor called a fast reactor that will use the waste it can’t reprocess as fuel. “They’ve kicked the can down the road,” says Frank von Hippel, a director of the Program on Science and Global Security at Princeton University. Other countries, such as Germany, store spent fuel in casks. Finland is building a repository it says will store waste safely for 100,000 years. Even though there is no long-term storage in the U.S., utility customers and taxpayers have been paying for it – twice. Customers have paid $24 billion into a fund Congress established in 1982 to pay for such storage. The charge – a penny for every 10 kilowatt-hours – would typically add up to about $11 a year for a household that received all its electricity from nuclear plants. Users pay as taxpayers, too – for dry storage. Utilities that have run out of storage space in pools successfully sued the federal government for breach of contract, because it failed to keep to the 1998 deadline to establish long-term storage. By law, the money for dry casks cannot come from the nuclear waste fund, and must come from the federal budget.

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Bill Aulet: Do Innovation Ecosystems Need Universities?

March 4, 2011

In my role at the head of the MIT Entrepreneurship Center , I have the great opportunity, at times, to travel the world and learn about entrepreneurship on a global scale, and to gain knowledge and perspective to help us be more effective in our mission at home. This past week was such an experience. There is an underlying assumption that to have an innovation-based entrepreneurial ecosystem, there has to be an “MIT-like” anchor university in the ecosystem (Technion in Israel, Stanford in Silicon Valley, IIT in India). The presence of such an institution that attracts, trains, and continually feeds skilled and talented workers into the ecosystem makes perfect sense. What if I told you of a place where there is a growing and vibrant IT entrepreneurial community, and yet it is in a country that lacks a single university in the top 500 in the world? This is exactly what I found in Romania these past few days. As I met dynamic entrepreneurs and heard stories of their friends, a pattern emerged. Most have never studied computer science at a university; they said they did have time to do so, and that it was better to get real experience (some did not even graduate from high school). Romania is a poor country, but it is also an industrious and diverse society (both of which are important). Since people don’t have much and life is hard, they have to be creative to get by and get ahead. Necessity is the mother of invention and, in this case, entrepreneurship. There is also optimism in the air, partly a result of Romania joining the EU four years ago. That is helpful, but for now let’s focus instead on the “adjita” (an Italian-American word for stomach agitation) driving things in this situation. The Romanians are learning programming without formal institutions to train them, which seems perfectly natural to them. They are driven and they have no choice. They note that Bill Gates, Steve Jobs, and Mark Zuckerberg didn’t graduate from college, either (Not a great analogy, but that’s how they see it). In my recent travels I have also found thriving, robust entrepreneurship in Scotland and Finland as well. Interestingly, if you ask people in any of these three countries if they are good at = entrepreneurship, their answer is “Oh, no.” This very humility and scrappiness is what makes these regional groups have a higher propensity for entrepreneurship than their counterparts in, say, Germany, Russia, England, France, or Spain. Should this surprise us? Not really, because here in the United States, the studies of MIT professor Ed Roberts show that immigrants are more likely to start companies than more comfortable, long-term American residents. As Eva Peron, who rose from the lowest levels of Argentine society and power to the very top, is described by narrator Che Guevarra in the immortalizing musical and film ‘Evita’, “Eva Peron had every disadvantage you need if you’re going to succeed. No money, no cash, no father, no bright light.” So the moral of the Romanian tale is to reinforce a point made in an earlier article , that while other factors like the presence of a world class research institute close to MIT’s caliber is extremely valuable, never underestimate the importance of culture in creation of an entrepreneurial ecosystem. In descriptions of such a culture, you should not see the words like “comfortable —you should see words synonymous with scrappy. Just remember Evita. [Note: Special thanks to my colleague Howard Anderson at the MIT Sloan School of Management with whom I discussed this topic and who also first pointed out the "Evita" quote].

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Raising Wages Would Be ‘Stupid,’ Europe’s Trichet Says

February 20, 2011

(Reuters) – European Central Bank President Jean-Claude Trichet warned on Sunday against raising wages in the euro zone as inflationary pressures heat up in the bloc. “It would be the stupidest thing to do,” Trichet told France’s Europe 1 radio, asked about pressure in countries like Germany for wage rises as economies emerge from the economic crisis and as higher commodity prices fan inflation. “We can’t do anything about the current rise in fuel and commodity prices but we must do everything to avoid what we call second-round effects, the fact that other prices start moving and settle at a higher level than complies with our definition (of stability),” Trichet said. “I am thinking of the whole range of other prices, including of course, salaries, and we say to employers and unions: remember that we are in a medium to long-term perspective, to maintain price stability.” Trichet was speaking the day after a Paris meeting of G20 finance ministers and central bankers where inflation was a key topic of discussion. ECB governing council member Christian Noyer commented there that pay demands should be limited. Euro zone inflation stands at 2.4 percent, above the ECB’s 2 percent target, and the ECB has warned that its inflation outlook could move to the upside. Meanwhile German Chancellor Angela Merkel and Economy Minister Rainer Bruederle have called for bigger pay rises for workers in 2011 after unions accepted modest increases in recent years as Germany was battling with recession. Trichet said inflation remained the ECB’s top concern and noted that it was those countries in the euro zone that had kept a lid on costs that had managed to reduce unemployment. The Spanish government, keen to convince markets of its long-term growth prospects, is pushing to de-link wage increases from inflation, something Germany wants to make the rule across the euro zone as part of a new competitiveness pact. (Reporting by Catherine Bremer; editing by Sophie Walker) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Robert Teitelman: Don’t Overuse the Word "Revolution"

February 18, 2011

When was the last time you strolled into your local tavern and someone yelled, “Yo, bub, doesn’t that turmoil in the Middle East remind you of 1848?” Mostly, we recall the usual televised revolutions: the Soviet bloc, 1989 (the Wall); Tiananmen Square, 1989 (the tank); Iran, 1979 (hostages); the ’60s (hair). If you’re Glenn Beck, you’re fixated on the Russky Revolution, 1917 (George Soros as Vladimir Lenin). Then come the standbys: The American and French revolutions (wigs, Chryslers, guillotines). Textbook stuff. That about empties the revolution database. But in its day, revolutionary fever swept through Europe like a forest fire, an infection, a financial crisis, metaphors we have recently learned to toss about like beach balls. The conflagration of 1848, in retrospect, was foreshadowed by minor disturbances, pressures, forebodings; but when it came, it exploded spontaneously, like Tunisia, fed by a thousand grievances. A few nations resisted it — Britain, the Netherlands, Switzerland, Russia (too far, too autocratic) — as it hopscotched through pre-unified Italy, from Milan to Sicily, leapt to France, where the first blood ran, then through the German states, including Prussia, then the Hapsburg Empire, then back to France, Europe’s Egypt. The middle classes and nobility poured into the streets; the poor joined in. Absolutism quaked. Protests led to riots, barricades, tossed paving stones, deaths. And then, as the calendar flipped to 1849, the reactionaries took back the streets. The revolutions “failed,” raising the technical question of whether you can have a “revolution” that fails. The Springtime of Peoples ended. The crowds often lacked leadership and pursued divergent goals. Mostly, they were just tired of the same old lantern-jawed despots in charge. Expectations had been rising. Technology was on the march, and a popular press had emerged. Globalization stirred. But there had been famine across Europe — the potato blight wasn’t just Irish — and a trade slump. New ideas percolated: socialism, nationalism, liberalism, romanticism; 1848 was a boost to Karl Marx’s career. And yet, in the longer view, 1848 proved to be a beginning, not an end. The old men in charge, the Hosni Mubaraks, were shaken. The folks in the street had both demography and age on their side. After 1848, Germany and Italy unified; liberal institutions took root and pursued reforms, and Europe mostly drifted on a tide of bourgeois prosperity until World War I blew everything up. “Revolution” may be one of the most overused words in the vocabulary of modernity. There is a torrid romance about the concept, particularly when it’s occurring in far-off lands, or a past when soldiers rode horses and wore feathers. What is it we’re seeing in Egypt and beyond? Alas, the greater the distance, the stranger the milieu, the looser grasp we have on events. Revolutionary moments worship a glowing, if hypothetical, future. But even from the inside, they are chaos. Revolutions are profoundly unpredictable, not only in their direction but in their result: democracy, autocracy, kleptocracy, theocracy. They are a moral arbitrage between means and ends. Like a bubble, it’s hard to discern a true revolution as it’s unfolding; the test comes after, usually when the revolutionaries are old men themselves. True revolutions release energy, unmoor populations. The notion that any group or individual can control these forces — Mubarak, Obama, the Saudis, Google — is farcical, despite the “success” of the Chinese in Tiananmen, the Bolshevikis in St. Petersburg. “Winning” is subjective, a dice roll, not a Beckian dream of infiltration and mind control. A coup requires a cabal and a plot; a revolution dispatches bodies into heated Brownian motion. The term “revolution,” of course, has long been absorbed into our world of hype, self-promotion and status seeking. Jefferson nudged this along when he suggested a revolution every generation or so, just to clear the sinuses. Revolution is a key element of what used to be called radical chic and it attaches itself to technology like a leech. NPR recently asked people to write in about their experiences in revolutions. This is a weird form of political tourism, like saying, “Tell us your experiences in your last nuclear attack. Was it fun? Informative? Exciting?” This inflationary tendency is well known and not worth pursuing, except to note another similarity of revolutions to the notion of financial bubbles. Bubbles represent the separation of value from price; there’s no anchor tethering the price of tulips, mortgages or stocks to earth. They are unhinged, floating freely, creatures of their own gassy momentum. When we attach the word “revolutionary” to every new development, from the Tea Party to the iPad to political victories (Reagan, Gingrich, Obama), we debase its meaning and lose any sense of its seriousness — the blood, toil, destruction. We become a little stupid, a little blind and more than a little superficial — not to say a little more prone to the true revolution we never saw coming.

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Air France cuts profit forecast on unexpected loss

February 14, 2011

Air France cuts profit forecast on unexpected loss

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The Day The Music Died

February 10, 2011

NEW YORK — These days, guns are more popular than guitars, at least when it comes to video games. The company behind “Guitar Hero” said Wednesday that it is pulling the plug on one of the most influential video game titles of the new century. Activision Blizzard Inc., which also produces the “Call of Duty” series, is ending the “Guitar Hero” franchise after a run of more than five years. The move follows Viacom Inc.’s decision in November to sell its money-losing unit behind the “Rock Band” video games. Harmonix was sold to an investment firm for an undisclosed sum. Harmonix, incidentally, was behind the first “Guitar Hero” game. Game industry analysts have long lamented the “weakness in the music genre,” as they call it – that is, the inability of game makers to drum up demand for the products after an initial surge in popularity in the mid-2000s. Music games are often more expensive than your typical shoot-’em-up game because they require guitars, microphones and other musical equipment. While extra songs can be purchased for download, this hasn’t been enough to keep the games profitable. Activision’s shares tumbled after the announcement, but investors appear more concerned with the company’s disappointing revenue forecast than the demise of the rocker game. As far as investors go, discontinuing an unprofitable product isn’t the end of the world, even if “Guitar Hero” fans disagree. “In retrospect it was a $3 billion or more business that everybody needed to buy, so they did, but they only needed to buy it once,” said Wedbush Morgan analyst Michael Pachter. “It’s much like ‘Wii Fit.’ Once you have it, you don’t need to buy another one.” “Guitar Hero” was iconic and often praised for getting a generation weaned on video games into music. But its end after a mere half a decade is a big contrast to other influential video game franchises, such as the 25-year-old Mario series from Nintendo. “Call of Duty” first launched in 2003, two years before “Guitar Hero.” In a conference call, Activision said its restructuring will mean the loss of about 500 jobs in its Activision Publishing business, which has about 7,000 employees. But the company’s overall work force numbers are not going to change much because it is hiring people elsewhere. Activision did better than expected in the fourth quarter, which ended in December, but that already was anticipated. After all, it launched “Call of Duty: Black Ops” in November. That game, which is mostly set during the Vietnam War, made $1 billion after just six weeks in stores. Its latest “World of Warcraft” game has also been doing well. Bobby Kotick, Activision’s CEO, said the company’s big franchises “have larger audience bases than ever before and we continue to see significantly enhanced user activity and engagement for our expanding online communities.” Revenue from so-called “digital channels” – that is, downloads, subscriptions and extra game content sold online – now accounts for 30 percent of the company’s total revenue. Activision said Wednesday it lost $233 million, or 20 cents per share, in the latest quarter, compared with a loss of $286 million, or 23 cents per share, in the same period a year earlier. Net revenue fell to $1.43 billion from $1.56 billion. Its adjusted earnings of 53 cents per share were better than last year’s 49 cents and beat analysts’ expectations of 51 cents, according to FactSet. Revenue that’s been adjusted to account for games with online components was $2.55 billion, up slightly from $2.50 billion a year earlier and above analysts’ $2.25 billion forecast. For the current quarter, which ends in March, Activision forecast adjusted earnings of 7 cents per share, and adjusted revenue of $640 million. Analysts are looking for earnings of 10 cents per share on higher revenue of $771 million. Activision Blizzard also said its board authorized a new $1.5 billion stock buyback plan. And it declared an annual dividend of 16.5 cents, an increase of 10 percent from the dividend it issued in February 2010, its first ever. Shares of the Santa Monica, Calif.-based company, which is majority-owned by France’s Vivendi SA, tumbled 87 cents, or 7.4 percent, to $10.82 in after-hours trading. The stock had closed the regular session down 19 cents at $11.69.

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U.S. Treasury Chief Says "Not Clear" on France G20 Food Proposal

February 8, 2011

U.S. Treasury Chief Says “Not Clear” on France G20 Food Proposal

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Germany, France Reveal Plan To Boost Euro

February 4, 2011

BRUSSELS — Initiating a bold effort to strengthen the euro, Germany and France on Friday laid down far-reaching plans to deepen integration among the 17 nations that use the currency. The move prompted immediate opposition, but could lead to embryonic economic government for Europe.

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Universal Biosensors (ASX:UBI) Announces Launch Of OneTouch Verio (R) In France by LifeScan

February 2, 2011

Universal Biosensors (ASX:UBI) Announces Launch Of OneTouch Verio (R) In France by LifeScan

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Paris property prices continue to surge, France stable in Q3 2010

January 14, 2011

Apartment prices in Paris and vicinity surged during the year to Q3 2010, while prices for the rest of France were generally stable.

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Air France estimates $90.36 loss from snowfall

January 11, 2011

Air France estimates $90.36 loss from snowfall

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Lease Up: Société Générale Leases 444,000 SF in NYC

January 3, 2011

Société Générale, France’s second largest bank, signed a new lease for 20 years for 444,000 square feet at 245 Park Ave., the largest leased signed in Manhattan in 2010. Société Générale’s lease will include floors three through 12. Occupancy is expected for mid-2013. The agreement also provides for a 20-year direct relationship with the building’s owner, Brookfield Properties. The original deal was a sublease from JPMorgan Chase. The 44…

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Video: Snow Extends U.K., European Train, Air Travel Delays

December 21, 2010

Dec. 21 (Bloomberg) — Snow snarled train services as well as airlines for a fourth day in Europe as travelers tried to get home for the Christmas and New Year holidays. Heavy snow forced London’s Gatwick airport to stop outbound flights until 6 a.m. U.K. time, according to the airport’s website. Paris’s Roissy-Charles de Gaulle and Orly airports were set to begin the day with at least 28 canceled flights before 7 a.m., data tracker FlightStats.com said. U.S. carriers waived fees as more snow was forecast for England, France and Germany. Bloomberg’s Nichole Itano reports from London.(Source: Bloomberg)

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Marian Salzman: Who’s in Control?

December 10, 2010

This is the tenth in a series of 12 posts expounding on the 2011 forecasts in the annual trends report from Salzman, president of Euro RSCG Worldwide PR and an internationally respected trendspotter. Remember “The Gong Show,” where there was the loud bonnnnnng to save contestants from catastrophe’s bottomless pit? Hello, Central Casting…. Has anybody seen the gong? Our 24/7 news cycle with daily cascades of worsening news has become enough to blanch even an egg. State pension funds are coming up $1 trillion short . The FDIC’s list of failed banks , a parade of former stalwarts, numbered 140 in 2009 and 149 through Nov. 19 of this year. Yes, Virginia, sometimes facades really do hide blank vessels. The ire at home, though, pales lately against the anger in Great Britain over Ireland’s required $110 billion IMF bailout . The Guardian says , “the western world teeters on the edge of calamity caused by the bank-lending extravaganza that fuelled the great property bubble.” (Echo, anyone?) Ireland’s house price index dropped almost 19 percent in 2009, to April 2003 levels–but, more shockingly, amid Flickr feeds of abandoned Irish houses, one learned that house prices would have to come down 57 percent more for the average household income to afford one. Irish government officials, meanwhile, expanded from fat cats to “morbidly obese cats”–after disclosures that 66 public servants receive more than €500,000 each (about U.S.$662,000; David Cameron’s salary, by comparison, equals about $225,800). And Bono has apparently abandoned his home shores for the Netherlands, where business tax rates are much lower. Investors dumped Spanish and Portuguese bonds in a panic sell-off; Iceland is in a cash crisis ; and this week, Ireland announced $8 billion in tax hikes and spending cuts to secure its IMF loan. Prime ministers and world leaders at the G-20 meeting in Seoul, contemporaneously, denied it was just Ireland on their minds, but how to deal with a future of restabilizing the shared currency, without country-by-country costs far outweighing the benefits to the union? Who’s in control? If we could find somebody, what possible line would be drawn around their responsibilities? (And what would Jean Monnet have said? He who thought up the EU in the 1950s, revolutionized industry for unparalleled European postwar prosperity and constantly repeated, “Continue, continue, there is no future for the people of Europe other than in union.) But, continue, continue this way? Is it any wonder that we the people of the U.S. might feel a great longing for some old way? A strong nostalgia for, yes indeed, the repressive but sedate 1950s, when the idea of union was so positive? A Norman Rockwell magazine cover, “Home for Thanksgiving,” showed a heartwarming mom and uniformed son joined to peel the taters, after a war of huge sacrifices. By 1957, tune in to June Cleaver issuing forth maternal clucking–seen through Beaver’s eyes, the Tom Sawyer of the television age. Barbara Billingsley (the real-life June Cleaver) died earlier this year, and I found all the buzz around that very significant. Did we mourn her together because June Cleaver’s death stands for the end of ideals that appeared to be collective, ideals around motherhood, gender roles , knowing and keeping your place because society itself was orderly? The flip side–and arguably more apropos to the insane volatility we’ve experienced in the last couple of years–lies in Dennis Hopper’s death this May. As Frank Booth in Blue Velvet , Hopper inhabited the dark side of the American dream. Whether you vote for pathos or horror, what can’t be argued is how finally the curtain has rung down over a simpler epoch, long-gone as the age of Lassie or silly love songs about blue velvet or blue suede shoes. One would need more than a weatherman to call out the rogue winds that have unmoored whole continents and sent stock and sterling swirling. It used to be that the things lamented as cultural fall-offs had to do with mores. Conservative parents in the ’60s responding to problems of a post-Cleaver decade blamed Dr. Spock and the Beatles. Meanwhile, in France, where new philosophies were being written, Simone de Beauvoir described Brigitte Bardot–the opposite of mommy figure–in a 1959 essay as a “locomotive of women’s history.” Lately, it strikes me as fitting to recall Peter Fonda’s warning to Hopper, as Billy, in Easy Rider : “We blew it.” That could well be the underscore of the last few years. These massive failures go straight to what mental health professionals call family systems. The effect of unsettling losses of control, where you realize you have none, is called ambiguity. In literature, ambiguity underpins terror. The less you know, the more you fear the evil behind the curtain, the unforeseen Frankenstein born of hope. As I’ve written in earlier trends in this series, we’ve all been experiencing the many effects of our loss-of-faith crisis . Stepping right up to the fear-filled plate, the Tea Party has tapped into widespread anxieties Americans have of losing control, being overwhelmed by vast, inhumane systems. The market phrase “wild swings” applies, too, to human life. In uncertain, ambiguous times, it does and should give anybody concerned about addictive and compulsive behaviors plenty to worry about. From ADHD in kids to eating disorders, suicide attempts and miscellaneous substance addictions that have parents and spouses shaking their heads over what that new thing is called, much less what it is , our wired society makes our worst impulses as easily accessible as borrowing a cup of sugar from neighbors used to be. Shopping addictions are said to affect 6 percent of Americans. Gambling is especially risky for teens. Next year, we’ll see mass-scale demands for greater control, but how will they be expressed? From the home to the boardroom, no doubt, with outcomes possibly short-term and private but longer-term socially disruptive. What precisely should be controlled, and by whom? Such queries promise to expose new schisms and widen already appearing cracks in the social network. There are those who consider addiction issues morality issues, and even sexuality an arena for legislating self-control. (But who wins a hormonal battle? Not even Christine O’Donnell could read a crystal ball on that score.) There are others who think regulatory control is the answer to corporations spinning out of control. Then there’s the issue of who controls the airwaves, the broadband, the Internet and the media, where all this gets endlessly dissected for effect, not meaning. Conservatives complain about liberal media, and liberals berate conservative agendas thinly veiled. On both sides of the aisle, election laws permit shadowy nonprofits to make contributions –and control us without ever being seen. In 2011, we’ll all be looking for more control in answer to being sick at heart, sick to busting, of unpredictability. Like “riders on the storm” (as the recently pardoned Jim Morrison sang), “into this house we’re born/into this world we’re thrown.” But we’ll be looking to redress our vertigo with greater control. Previously: “Mad as Hell–and Only Getting Madder” “Talk to the Hands” “Net Gain” “Public Mycasting System” “Booting Up” “Yes, We Can…Reinvent Ourselves” “Reinvention, Part II” “Separated at Worth” “Gender Bender” On Monday: “Tapping Minitrends”

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Jeffrey Rubin: Irish and Greek Defaults Will Reshape Europe

November 30, 2010

German and British taxpayers are beginning to realize the downside of our economic interdependence in the global economy. When British banks have too much exposure to Irish banks, all of a sudden Dublin’s property crash becomes the UK’s problem. Similarly, when German taxpayers have to bail out bankrupt governments in Athens and Dublin, Greece and Ireland’s problems become Germany’s. How long will that model of international economic interdependence last? Probably not too much longer, particularly if Portugal and Spain have to join the bailout queue, too. What’s increasingly obvious, as I noted in my May 25th blog post , is that the European monetary union is no longer feasible. A monetary union between similar economies, like those of Germany, France and the Benelux countries, is. But clumping fiscally wayward economies with much lower per-capita incomes, like Portugal, Spain, Ireland and Greece, into a common currency union with Northern Europe is no more sustainable than is a monetary union between Mexico and its North American free-trade partners, the US and Canada. It might have taken an oil-induced financial shock to unravel it, but the euro was an accident waiting to happen. By not allowing their loosely regulated banks to fail, countries themselves are failing as a result. So while Irish banks keep their doors open, schools and hospitals will soon close as the country tries to cope with a public-sector deficit one third the size of its economy. (Curiously, these are the very same banks that only recently passed financial stress tests.) German taxpayers, who must shoulder the lion’s share of the financing burden for the 85 billion euro bailout package for Ireland, are understandably increasingly irate that they have to dish out billions so that Ireland can maintain a 12.5 per cent corporate tax rate that steals jobs and production from their own economy. And they weren’t any happier when even more of their hard-earned tax dollars were being sent over as welfare checks to Greece, a country where tax evasion is a national pastime. Taxpayers in creditor countries are starting to ask themselves the same question that bond holders have been troubling themselves over. The burden of reducing a deficit as large as one third of GDP means that the Irish economy, like the Greek one, will be shrinking for the foreseeable future. And shrinking economies, riddled by growing social unrest, are not economies that are able to service gargantuan debt loads. That’s why the bond market was already charging Ireland as much as three times Germany’s borrowing rate. Chances are that Ireland and Greece (and likely Portugal and Spain) are going to default, unraveling the monetary union. What will follow: a born-again drachma, Irish pound and perhaps escudo and peseta. And as those currencies plunge in value against what’s left of the euro (likely still to be traded in Germany, France and the Benelux nations), even the free trade zone may be up for grabs.

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Stuart Holland: Europe Needs a Gestalt Shift

November 23, 2010

The eurozone must use all available methods to implement New Deal-style programs before it’s too late. Angela Merkel has recently sought support for measures to penalize EU member states with debt in excess of 60% of GDP — the nominal limit of the Stability and Growth Pact, or SGP. Meanwhile, Germany has introduced a balanced budget provision into its constitution. This is not unrelated to the word for debt in German, Schuld, which also means guilt and leads to Nietzsche’s claim that creditors seek to punish debtors for it. Yet what is needed in Europe now is also German: a Gestalt shift to recognize that while EU member states are deep in debt from salvaging banks and hedge funds, the European Union itself has next to none. It had none at all until May this year, when the European Central Bank began to buy up tranches of some member states’ national debt. But this is both costly and ineffective. Spreads on Greek bonds have risen to 10%, which is unsustainable. A serial default of several eurozone member states is possible. A simpler and costless solution would be to cut the Gordian Knot on national debt by transferring a share of it to the European Central Bank. If this were up to 60% of GDP, as allowed by the SGP, it would reduce the default risk for the most exposed member states, lower their debt servicing costs, and signal to financial markets that European governments have a proactive response to the current crisis, rather than being passive victims of unelected credit rating agencies. A ‘tranche transfer’ would not be a debt write-off. The member states whose bonds are transferred to the ECB would be responsible for paying the interest on them, but at much lower rates. Yet debt stabilization alone is not the answer to Europe’s current crisis. EU governments are aiming to cut both debt and fiscal deficits on a scale that threatens beggar-my-neighbor deflation, denies their 2008 commitment to a European Economic Recovery Plan, and risks a double dip recession and a massive crisis of confidence both in the markets and in governments. The eurozone needs to learn from Roosevelt’s New Deal, whose success gave Truman the confidence to fund the Marshall Aid, from which Germany herself was a beneficiary. The key was borrowing to invest through US Treasury bonds. These do not count toward the debt of US states such as California or Delaware, nor need European bonds count toward the debt of EU member states. Many economists have claimed that Europe cannot save itself until it has the fiscal federalism to transfer resources from stronger to weaker member states. Germany is strongly opposed to this. Yet Europe neither needs such fiscal federalism, nor the ‘economic government’ called for by Nicholas Sarkozy, to finance a New Deal-style recovery program. The institutions and powers are already in place. The European Investment Bank — already twice the size of the World Bank — issues bonds that are its liability, not that of member states, which is why national governments need not count funding from it on their national debt. Since 1997, the EIB has been given a joint cohesion and convergence remit by the European Council to invest in health, education, urban regeneration, green technology and support for small and medium firms. Since then it has quadrupled its annual lending to €80 billion, or two thirds of the ‘own resources’ of the European Commission, and could quadruple this again by 2020. This would be equivalent in funding terms to postwar Marshall Aid. The EIB only co-finances investments. But this could be matched by net issues of EU bonds or euro bonds by the ECB, which would attract surpluses from the central banks and sovereign wealth funds of emerging economies and stabilize the eurozone. When Jacques Delors proposed such bonds in 1993, both Germany and France were opposed. Now only Germany is opposed. Nor does this depend on the ECB in place of governments. The Lisbon Treaty confirms that the ECB’s primary objective shall be to maintain price stability. But also that “without prejudice to that objective, it shall support the general economic policies of the Union in order to contribute to the achievement of the latter’s objectives.” This mirrors the constitution of the Bundesbank, which obliges it “to support the general economic policies of the government.” The European Council is also empowered by the Treaty to define “general economic policies,” and the European Economic Recovery Plan is already one of them. With the EU heading for a double dip recession, there is no risk to price stability. This calls for a German Gestalt shift both on debt stabilization and on issuing EU bonds. Or, if Germany will not shift, their introduction — like the euro itself — by some rather than all member states both to safeguard the eurozone and to make a reality of a European recovery program. Stuart Holland is a visiting professor Faculty of Economics University of Coimbra and former adviser to Jacques Delors. Cross-posted from New Deal 2.0 .

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Tim Hanni: A Challenge to the Wine Industry

November 18, 2010

There are many positive factors that have parlayed wine into the adult beverage most associated with good taste, sophistication and style. Wine quality, at all price levels, has improved dramatically. The range of wine types and styles available today is complete enough to satisfy every possible consumer preference and pocketbook. Indeed one of the challenges consumers face is how to confidently drill into the overwhelming number of choices and find wines they will love. An equally dizzying number of choices exist with wine classes, educational initiatives and the availability of wine evaluations and information. The birth and expansion of social media, blogs and on line wine communities ranging from eRobert Parker, Jancis Robinson and Snooth have provided and explosion of connectivity and the ability to share points of view. To top it all off there are new generations of wine heroes and evangelists like Gary Vaynerchuk, Joe Roberts, Jeff Lefevere, Alder Yarrow and many, many others that millions of consumers and professionals alike tune into every day. Yep, there is plenty of wine information and interaction available. This being said I am struck by how often the same issues and obstacles to expanding wine consumption seem to arise over and over again. So let’s take a look at the progress that has been made over the past 10 years. The following quote appeared in Brand Week a decade ago and at the center of discussion in many wine industry circles as a call to action: “The fragmented, historically insular (wine) industry generally seems resigned to accepting the wine consumer pool as is rather than aggressively pursuing new markets… the next decade could easily be referred to by future wine historians as the “years of missed opportunity.” Brand Week, May 1, 2000 10 Years After So what does the wine landscape look like 10 years after Brand Week’s prediction that “the next decade could easily be referred to as the ‘years of missed 0pportunity’”? “The wine industry is guilty of going out of its way to confuse the consumer, and must urgently come up with ‘a new big idea’, according to a British advertising heavyweight…’The wine industry is the most fragmented market I’ve seen. Fragmented, confusing, impenetrable.’” Sir John Hegarty, June 28, 2010, Masters of Wine International Symposium, Bordeaux, France Hmmm. Sounds pretty familiar. What is it that keeps us stuck in this deeply etched rut carved into the path of wine enjoyment and appreciation? I am convinced that it is a combination of complacency, misinformation and stubbornness in the wine industry. It is an unwillingness to adapt and change that is preventing us from having a larger consumer base and compromising our long-term fiscal stability and health. Despite ample evidence that the wine industry would be well served by becoming more consumer-focused, simplifying our messages and improving OUR ability to communicate our mantra remains the same, “we must better educate consumers, move them up to better wine.” This is nothing new about the wine industry mission to educate consumers and there is also nothing wrong with the idea. Ditto for the idea of moving them up to better wine. Perhaps what we really need is another strategy to run concurrently. We seem to be keeping something in place that is not working for a really large portion of the market and then we wonder why we are not making more sustainable progress in removing the overwhelm and intimidation as evidenced in every wine consumer study ever conducted. This quote about the Project Genome consumer study taken from Wines & Vines in 2008, “With the highest percentage of consumers falling into the “Overwhelmed” category, Leslie Joseph, Constellation’s vice president of consumer research affairs, commented: ‘We need to do a better job as an industry of helping these people understand what a wine’s going to taste like.” And the following is from the UK site WINEOPTIONS.COM illustrating this phenomenon is present on a global scale. “WineOption.org feels the wine trade has traditionally placed its focus on connoisseurs and wine snobs rather than the much greater number of unpretentious people who enjoy wine. Many producers, retailers and wine writers have traditionally taken much of the potential enjoyment out of wine drinking by shrouding the subject with myth, snobbery, and arcane or pretentious language. This facade has been, and in some quarters remains, a convenient means of confusing or even intimidating wine shoppers into making purchase decisions much less helpfully informed than is the case with most other foods and beverages. In fact, it is perfectly possible to provide in relatively simple day to day language the basic information which most wine drinkers need and want to select any given wine.” I think that it is high time we look in the mirror and ask ourselves, “What are we missing that keeps a vast majority of consumers (and many of us professionals who are able to admit it) confused, mystified and intimidated?” The answer as I see it is to turn the tables and start newly educating ourselves and cleaning up a lot of the tired clichés and misinformation that is disseminated under the pretense of “wine education”. I am not implying that we stop wine education per se, just that we enforce a greater rigor in the information we dispense and come up with alternative solutions for the huge market segment that is further disenfranchised by our narrow, product-based and self-serving approach. The call to action is not to change anything about the many things we are doing right as an industry, it is a call to action so we can collectively discover what we may be missing that would add immeasurably to our continued growth and success. I love this quote: “To effectively communicate, we must realize that we are all different in the way we perceive the world and use this understanding as a guide to our communication with others.” Tony Robbins What would it look like if the wine industry and wine communities to on the mission to understand, embrace and cultivate ALL wine consumers, not just the over-saturated segment we narrowly define as ‘worthy’? What if our next educational initiative were internal and focused on learning more about consumers and discovering more about who likes what and why? I would love to hear your thoughts on the matter!

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William K. Black: The Celtic Chimera

November 17, 2010

I’m writing from the scene of the first Kilkenomics Festival, which brings together finance experts and professional comics to try to answer the public’s questions about why the world is suffering recurrent, intensifying financial crises, why Ireland has gone to the heights and crashed spectacularly, and what options does it have that other nations in crisis have used successfully. David McWilliams, an Irish economist, and Richard Cook the man that started the Kilkenny comedy festival (Cat Laughs) decided to create an economics festival with sessions run by professional comedians questioning the economists. This is an utterly bizarre idea, so I accepted immediately. It turns out that professional Irish comics are every bit as quick and well read as you would have guessed by extrapolating from what you see on Jon Stewart’s Daily Show. (Irish angst and Jewish angst bear a strong resemblance.) There’s a long European tradition of the “fool” being able to mock the pretentious and powerful and bring out the truth. Talking to the comics and answering their questions forces us to speak clearly and bluntly – or be skewered. The public love it (both parts – getting clear answers to their questions or watching the comics skewer us) and the roughly 20 events have been sold out. Ireland was known as the “Celtic Tiger.” It shot to economic fame. From the poor man of Northern Europe, it was transformed into a nation with a reported per capita GDP equivalent to that of the United States. The old, true, and painful joke: “What’s Ireland leading export? (Answer: “the Irish”) was reversed as people began to move to Ireland. Unfortunately, the Celtic Tiger was ultimately revealed to be a Celtic Chimera. Irish bank supervision was so weak and Ireland’s banks so wild and crazy that the New York Times called Ireland the new “Wild West.” Ireland’s largest banks hyper-inflated twin bubbles in commercial and residential real estate. They grew massively. Fortunately, Lehman failed and the Irish banks’ ability to grow collapsed – which meant that the bubbles imploded in late 2008. Had it not done so, the Irish banks would have continued their staggering growth and caused almost incomprehensible losses (relative to the size of the Irish economy) when the (vastly larger) bubbles finally collapsed. Anglo Irish Bank was merely the worst an awful collection of large Irish bank. The Irish entity disposing of the Irish banks’ bad assets is now estimating 70% losses on Anglo’s (copious) bad assets. That percentage loss estimate is, bizarrely, mandated to be as of a year ago even though property values have fallen significantly since that date and are expected to continue to decline next year. Non-linear increases in losses are common when a bubble hyper-inflates. Therefore, any estimate of the increased losses that would have resulted had the collapse of the Irish bubbles come two years later should assume percentage losses on the new assets of well above 75%. The size of Irish bank losses that the Irish government claims its taxpayers should bear is contested, but has a lower bound of roughly 60 billion Euros. Had Dick Fuld’s avaricious heart not led to Lehman’s collapse, or had Treasury bailed out Lehman and prevented (delayed) its failure, Ireland (and Iceland) would have collapsed as nations. If their banks had continued their growth for even two more years, Ireland and Iceland’s per capita debts would have been so staggering (in the range of $50,000) that they would have sparked massive emigration, which would have pushed the per capita debt even higher. Both nations would now be occupied almost entirely by pensioners and non-nationals. The economists and finance practitioners that presented at the Kilkenomics Festival came from diverse streams of economic and political views. They, nevertheless, agreed on three points about the Irish crisis: (1) it was insane for the Irish government to provide and extend unlimited financial guarantees of virtually all debts of the failed Irish banks, (2) the Irish government had transformed a private banking crisis into a sovereign debt and budgetary crisis that imperiled Ireland’s recovery from the economic crisis and gravely stressed the EU and the Euro, and (3) that either the EU or IMF would bail out Ireland or Ireland would default. I’m going to write a series of columns about what I’ve learned by examining the Irish and Icelandic crises. I urge readers to take these two small islands’ experience seriously for at least five reasons. First, one of the key analytical issues has long been which flashpoint would spark the next stage in the ongoing, global financial crises. The leading candidates have been the EU periphery and the collapse of the still-growing Chinese bubbles. (Of course, they may occur simultaneously or the first crisis may quickly trigger the second.) Europe now looks like it will win the “next crisis” race. (I believe that the European Union (EU) is rich enough to paper over the crisis for several years, but European politics could scuttle that effort. Second, the EU is set up in a fashion that creates strong, perverse incentives for future financial crises. Third, the EU is set up in a fashion that is periodically strongly criminogenic in particular nations. These criminogenic environments will feed future epidemics of “accounting control fraud” — the leading cause of severe financial crises. Massive amounts of European money will move to fund these frauds, which will cause financial bubbles to hyper-inflate and produce catastrophic banking losses and severe recessions. Fourth, the EU is set up in a manner that makes it extremely difficult (and expensive) to attempt to respond to the severe recessions and debt crises that these perverse incentives generate. The EU “channels” IMF’s “let’s turn a financial crisis into a crisis of the real economy” strategy. Fifth, the Irish government’s response to their epidemic of fraudulent lending has been so exquisitely awful that it (A) demonstrates the catastrophic costs of deregulation, desupervision, and deifying finance, and (B) allows one to illustrate why it is essential to combine good analytics, skepticism, courage, and integrity in responding to such epidemics. One of the independent reports that the Irish government commissioned about the banking crisis was co-authored by Professor Karl Whelan of University College Dublin. That report has received moderate attention and I will discuss it in more detail in future posts. Professor Whelan, however, has provided a far more candid briefing paper for the European Parliament: “The Future for Eurozone Financial Stability Policy” (September 2010). His briefing paper makes clear why there will be an EU bailout of the Irish banks. One of his key conclusions is that sovereign defaults by EU nations are likely and that the EU must prepare now to deal with them. That fundamental candor is matched by his explanation for why the EU created a bailout fund earlier in 2010. “While the public discussion of this decision has largely focused on the idea that the agreement was aimed at preserving the Euro as the common currency, the truth was more prosaic: The European banking system was already in a fragile state and would not have coped with a series of sovereign defaults. The need to maintain financial stability, specifically banking sector stability, was what prompted the unprecedented announcement of the bailout funds.” “The health of the European banking system remains in question. The most likely trigger for sovereign defaults in the next few years is a prolonged period of slow growth or perhaps a double-dip recession.” Whelan is trying to make clear the great underreported fact of the Irish banking crisis — the broader EU banking crisis. (And, while Whelan does not emphasize this point, his discussion inherently means that there was a horrific failure of EU banking regulation.) He explains that the European “stress tests” were farcical because they assumed no sovereign defaults could occur and ignored all market value losses on the banks’ “held for investment” exposures to sovereign risk. He cites the OECD study that discussed these massive loss exposures. The OECD emphasized that the losses were lumpy. “Large cross-border exposures (defined as an exposure above 5% of Tier 1 capital) to Greece are present for Germany, France, Belgium (all with systemically important banks), Cyprus and Portugal. Large exposures to Portugal are present in Germany and Belgium; to Spain in Germany and Belgium; to Italy in Germany, France, Netherlands, Belgium, Luxembourg, Austria and Portugal; and to Ireland in Germany and Cyprus.” The alert reader will have noted the nation whose banks have large, unrecognized losses on debt among each of the PIIGS — Germany. German banks acted like drunken “Girls Gone Wild” as soon as they were approached by a foreign borrower. Germany’s Bank Gone Wild were hooked on yield — for a trivial increase in yield, without any meaningful due diligence, they made massive unsecured loans to many of the most fraudulent borrowers throughout Europe. Borrowers engaged in control fraud have two great attractions for bankers gone wild — they typically report extreme profitability (which makes them appear to be creditworthy to the credulous) and they are willing to promise to pay higher interest rates). Their promises, of course, have all the reliability of the producers’ of “Girls Gone Wild” promises that the girls will be able to launch a film career if they shed their clothes. Where were the German banking regulators? They seem to have believed that “What happens in Vegas (Dublin) stays in Vegas (Dublin).” Instead, their German banks came back from their riotous holidays in the PIIGS with BTDs (bank transmitted diseases). The German banks’ regulators continue to let them hide the embarrassing losses they picked up on holiday, but that cover up will collapse if any of the PIIGS default. The PIIGS will default if the EU does not bail them out, so there will be a bail out even though the German taxpayers hate to fund bailouts. All of this should put a very different interpretation on Chancellor Merkel’s insistence on unsecured creditors suffering losses when they lend to banks that fail. She has argued that it is essential that they suffer losses so that they will have the proper incentives to provide effective “private market discipline” and that it is fair that they suffer losses given the premium yields they received and their lack of due diligence. German banks would be the primary losers under her proposal, so her position is remarkable. She is apparently disgusted with the German “banks gone wild” that were the largest funders of the accounting control frauds that drove several of the epicenters of the European financial crises and helped push Europe into the Great Recession. This post originally appeared at Benzinga .

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Blackhawk Network Appoints Dan Dmochowski to President of International

November 16, 2010

PLEASANTON, CA–(Marketwire – November 16, 2010) – Blackhawk Network, a leading provider of prepaid and financial payments products for consumers and businesses, today announced the promotion of Dan Dmochowski to President of International. In his new role, Dmochowski will have full responsibility for all of Blackhawk’s International operations, including the development of both product distribution and card partnerships. To date, Blackhawk Network has successfully secured partnerships with leading retailers in countries such as Canada, Mexico, United Kingdom, France, and Australia.

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Bernie Madoff Auction Bidding Reaches Fever Pitch

November 14, 2010

NEW YORK — Anyone wanting to walk in the shoes of fallen financier Bernard Madoff was in luck Saturday: Thousands of belongings from his New York City penthouse, including his used shoes, went on the auction block. An anonymous bidder paid the highest price of the auction – $550,000 – for a 10.5-carat diamond engagement ring that belonged to Madoff’s wife, Ruth. The winning bid topped the $300,000 minimum pre-sale estimate. Ruth Madoff’s French diamond earrings fetched the next highest price. Valued at $100,000 to $137,500, they went for $135,000 to an undisclosed buyer. The man who became a symbol of greed and deceit on Wall Street also had a lavish collection of watches. One of his vintage steel Rolex “Moon Phase” watches sold for $67,500, topping a $60,000 minimum estimate. The sale started Saturday morning at the Sheraton New York Hotel & Towers, with an auctioneer from Texas-based Gaston & Sheehan rattling off lots at a tongue-twisting speed all day and into the evening. Buyers responded at fever pitch. They raised their hands to signal a bid – accompanied by bloodcurdling shouts from bid-spotters marking a winning price. Their swaggering style – as if herding bulls instead of selling Madoff’s artsy ones – seemed appropriate for an auction of the belongings of a Wall Street trader who cherished the winning bull in every form. He bought statues and paintings of them and even named his boats “Bull,” “Sitting Bull” and “Little Bull.” A leather bull foot stool – including a tail that had broken off – sold for $3,300, against a pre-sale estimate of $250 to $360. While many of the more than 400 lots included luxury items, the Madoffs’ penthouse did have touches of culture. A 1917 Steinway grand piano from their living room went for $42,000 – six times the minimum estimate of $7,000. The buyer was an 81-year-old Long Island real estate executive. “I’ve got loads of pianos, but this one has history – it’ll make an interesting conversation piece,” said John Rodger, an amateur pianist who will keep the Steinway in his home in East Islip. An oil painting by the late American artist Frederick Carl Frieseke sold for $47,500, against a pre-sale estimate of $20,000 to $45,000. The Manhattan sale is the last auction in New York of Madoff belongings. A third and final auction is to be held in Florida to sell off items from a Palm Beach home that went for more than $5.5 million last month. Madoff was arrested two years ago and quickly admitted his scheme. Investigators said he used billions of dollars in cash from new investors to pay old ones, cheating charities, celebrities and institutional investors. U.S. marshals seized everything in the Madoffs’ Manhattan apartment and Long Island beach house: worn socks, new monogrammed boxer shorts, Italian velveteen slippers bearing the initials “BLM” in gold embroidery. All of it was being sold – with morbid fascination for mundane articles from the couple’s daily life that also were on the block, from bed linens, clothing, cookware and luggage to intimate items like cuticle scissors and bottles of shampoo. Valued at $75 to $110, the lot with the slippers included Ruth Madoff’s monogrammed shirt. A young man paid $6,000 for all of it, saying he’ll never be able to wear the slippers because his shoe size is 13; Madoff wore a size 8. He declined to give his name. For $1,700, 11 pairs of boxers came with a pair of silk Armani pants and one of Prada pantyhose, along with dozens of pairs of used socks, in a lot estimated to be worth $960 to $1,370. Besides bulls and fine watches, Madoff loved shoes. He owned about 250 pairs, many never worn – made in Italy, France, Belgium and England. Ten pairs of Madoff’s used designer shoes sold for $900, against a minimum of $250. The disgraced 72-year-old trader is behind bars for life in a North Carolina prison, and his wife was ordered to leave their homes. Despite their vast wealth, the Madoffs didn’t seem to make much room for house guests. The auction included their early 19th-century bed with fabric hangings and “intense sun fading,” at a pre-auction estimate of $8,000 to $11,400. “Just $500?” the incredulous auctioneer, Bob Sheehan, said of the first bid, adding, “This was the only bed in the whole house, I’m not kidding! $500? My God, it’s not a pullout.” It sold for $2,250. Sheehan conducted the auction for the U.S. Marshals Service, which said it had grossed more than $2 million from the auction, far above the pre-sale goal of at least $1.2 million. Proceeds will go to more than 3,000 clients Madoff swindled in a multibillion-dollar Ponzi scheme. “All 489 lots of ill-gotten gains sold today and the proceeds will go towards something good for a change,” said Deputy U.S. Marshal Roland Ubaldo. Last year’s New York auction of Madoff’s property raised $1 million. The Manhattan penthouse went for $8 million, and his yacht and boats also were sold.

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French Women Lose Battle To Stop Renault From Calling Their Electric Car ‘Zoe’

November 10, 2010

PARIS — It could be the French version of “A Boy Named Sue” – a car named Zoe. A judge ruled Wednesday that the automaker Renault can call its new electric car Zoe, much to the chagrin of some French women and girls with that first name. Parents of two children named Zoe Renault (pronounced ZOH-eh ruh-NO) had argued in court that their children could end up enduring a lifetime of teasing and annoyance – just like the fictional youth named Sue in the famous Johnny Cash song. The families, who are not related to the car company, wanted Renault to choose another name for the model. “There’s a line between living things and inanimate objects, and that line is defined by the first name,” lawyer David Koubbi told The Associated Press in an interview. “We’re telling Renault one very simple thing: First names are for humans.” But a judge found against Koubbi’s clients in a fast-track proceeding, ruling that the parents would only have a case it they could prove that naming the car “Zoe” would cause the children “certain, direct and current harm.” Koubbi said he would appeal the decision. He insisted that while it’s clear the Zoe Renaults of the world would be most affected by the release of the car – slated for 2012 – all of France’s estimated 35,000 Zoes would feel the sting. “Can you imagine what little Zoes would have to endure on the playground, and even worse, when they get a little bit older and someone comes up to them in a bar and says, ‘Can I see your airbags?’ or ‘Can I shine your bumper?’” Koubbi said. The lawyer said Renault named it the Zoe ZE because of the electric-powered auto’s zero emissions. Renault, one of France’s two main carmakers, has already given several of its cars female first names – including its compact hatchback Megane and its mini Clio. Both are popular girls’ names in France, but there was no organized opposition to either name. The fight over Zoe, which means “life” in Greek, has gotten considerable media attention in France, where a petition on a Facebook page called “Zoe’s not a car name” has garnered more than 6,000 signatures. First names are a serious matter in France, which formerly restricted parents’ choices to a specific list of traditional names. The rules have since been loosened, but even today officials can oppose parents’ choices on the grounds that ridiculous names can hurt their future. In June, Renault CEO Carlos Ghosn said he was aware of the issue and wanted to avoid any controversy that could potentially hurt the car’s sales. “We don’t want our car to come on the market with a name which is a handicap,” he told Europe-1 radio. Still, a Renault official emphasized that there’s no plan to change the car’s name. “We ordered several studies that showed that it’s not a handicap for the car, so there’s no reason to make any changes,” said the official, who declined to give his name in accordance with company policy. “We’re very happy with the judge’s decision.” Attorney Koubbi said the two Zoes at the heart of the case are 2 and 8 years old and their parents were not seeking any damages. Koubbi, who has represented French celebrity clients, took the case on a pro bono basis. Why? Because his stepdaughter’s name is Zoe. ___ Associated Press writer Pierre-Antoine Souchard in Paris contributed to this report.

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Nissan Profit Quadruples To $1.26 Billion

November 4, 2010

TOKYO — Nissan’s quarterly profit quadrupled and the automaker raised its full-year forecasts as surging sales overcame the drag from a strong yen. Nissan Motor Co. said Thursday its second quarter profit totaled 101.73 billion yen ($1.26 billion), up dramatically from 25.53 billion yen a year earlier. Sales at the Japanese automaker, which makes the March subcompact and Leaf electric car, gained 21.4 percent to 2.269 trillion yen ($28.0 billion). But Chief Operating Officer Toshiyuki Shiga said the company’s performance in the October-March second half was unlikely to be as robust because of the rising yen and increases in raw material and engineering costs. Still, Nissan was upbeat, raising its forecasts for the full year through March to a 270 billion yen ($3.3 billion) profit from an earlier projection of 150 billion yen ($1.85 billion) profit. That would mark a sixfold improvement over the previous fiscal year. It now expects 8.77 trillion yen ($108.3 billion) in full year sales, better than the 8.2 trillion yen ($101.2 billion) estimated in May. Those revisions came despite unfavorable currency rates. Nissan had estimated the dollar trading at about 89 yen, but now expects 80 yen for the second half. The surging yen erodes the value of overseas earnings and hurts Japanese exporters such as Nissan. Nissan, allied with Renault SA of France, is vying for the spot of Japan’s No. 2 automaker against Honda Motor Co. after Toyota Motor Corp., the world’s biggest automaker by vehicle sales. Honda also has shown resilience when faced with a strong yen, reporting robust profit for the latest quarter. It also raised its profit forecast for the full year to 500 billion yen ($6.2 billion). That would mark an 86 percent jump from the previous year. Toyota reports earnings Friday. The expected increase in Nissan’s second-half costs will partly come from the introduction of 10 new models globally, including the zero-emission Leaf electric car, set for delivery in Japan and the U.S. in December, according to the company, based in Yokohama, a port city southwest of Tokyo. “Demand for the Leaf has been robust,” said Shiga. “Our zero-emission strategy is on track.” The big concern was the strong yen, which Shiga has repeatedly called a “serious crisis” that could drive manufacturing out of Japan. At the same time he said Nissan aims to keep annual production of a million vehicles in Japan. Nissan has taken the lead among Japanese automakers in shifting production abroad, moving production of the popular March for the Japanese market to Thailand this year. The latest model is the first time the March sold in Japan has been made elsewhere. The company sold 1.05 million vehicles worldwide for July-September, up 17.1 percent from a year earlier. It expects to sell 4.1 million vehicles for the year through March 2011, up 17 percent. Nissan’s quarterly sales improved across all major regions, led by a solid 38.5 percent increase in China. Although sales had suffered in North America amid the financial crisis and economic slump, they jumped 16 percent in October thanks to strong SUV, truck and crossover sales. Nissan is making electric vehicles a pillar of its growth strategy. Chief Executive Carlos Ghosn has said EVs will make up 10 percent of overall auto sales by 2020. The automaker also introduced its own gas-electric hybrid system this month in its luxury Fuga hybrid, sold as the Infiniti M abroad. Previously it had bought hybrid systems from Toyota. “Our balance sheet is strong, and our momentum is trending in the right direction,” Ghosn said. “In the second half, a wave of innovative product launches will continue to fuel Nissan’s profitable growth.” For the fiscal first half, Nissan posted a 208.4 billion yen ($2.6 billion) profit, nearly double what it earned the same period last year. First half sales surged 28 percent to 4.319 trillion yen ($53.3 billion). Nissan stock climbed 3.9 percent in Tokyo trading to 721 yen. Earnings were announced after trading ended.

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Nissan Shows Tiny Electric Concept Vehicle (VIDEO)

November 1, 2010

*Scroll down for video.* (YURI KAGEYAMA, AP/HUFFINGTON POST) YOKOHAMA, Japan — Nissan showed a two-seater electric vehicle resembling a go-cart Monday that isn’t ready for sale but spotlights the Japanese automaker’s ambitions to be the leader in zero-emission cars. Nissan Motor Co. is planning to produce 250,000 electric vehicles a year, starting with the Leaf electric car set for delivery in Japan and the U.S. in December, and next year in Europe. Its alliance partner Renault SA of France is planning to produce another 250,000 electric vehicles a year. The two companies together will produce 500,000 batteries for EVs a year, said Nissan, which makes batteries with Japanese electronics maker NEC Corp. “We don’t want EVs to be a niche product,” Corporate Vice President Hideaki Watanabe told reporters at the company’s headquarters southwest of Tokyo. He said Nissan boasts 18 years of development experience in lithium-ion batteries, which will power the Leaf, and the company developed its first electric vehicle in 1947. Lithium-ion batteries are common in devices like laptops but will be relatively new for autos. Then Watanabe zipped around — smoothly and silently as is characteristic of electric vehicles — Nissan’s showroom in the tiny electric vehicle called “Nissan New Mobility CONCEPT.” It has a range of a 100 kilometers (62 miles), and maximum speed of 75 kilometers (47 miles) per hour. The EV system was developed by Renault, but the car’s design was by Nissan. Some analysts are skeptical about the practicality of electric vehicles, noting they will make up only a tiny fraction of the overall auto market for some years to come. Watanabe did not give a price for the concept car. He said uses were still being studied, such as amusement parks and Yokohama city’s green mobility projects. Nissan said it is setting up charging stations for electric vehicles, and forging partnerships with governments and companies, now climbing to more than 80 around the world from 30 last year in an effort to make the move to electric successful. “That shows how interest in zero-emissions is growing,” said Watanabe. Nissan dealers in Japan will be equipped with battery rechargers with the goal of having 2 million chargers, and an additional 5,000 that recharge quicker, around Japan by 2020, according to the manufacturer of the March subcompact and Infiniti luxury models. Nissan has set up a company to recycle used EV batteries to reuse and repackage, as well as reselling for back-up and storage. Check out the video (below) to see the New Mobility Concept in action. WATCH: [via TechEBlog ]

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Eric Ehrmann: October Surprises Bring Drama to Brazil’s Presidential Race

October 23, 2010

Campinas, Brazil In a democracy that developed technology to protect the integrity of the popular vote and the social contract linked to it globalists aligned with the business-to-business values of the elitist World Economic Forum have added a sense of drama to Brazilian politics by seeking to influence the outcome of the October 31st presidential election. Similar efforts to work around social contract democracy are also an issue in the United States where president Barack Obama recently commented on foreign influence in the run up to next month’s mid-term elections. Brazil is a long way from London but The Economist has endorsed US-style neoconservative Jose Serra of the Brazilian Party of Social Democracy over Workers Party candidate Dilma Rousseff, arguing that Serra, who learned his “Chicago school” economics in Chile during the dictatorship of General Augusto Pinochet, would make a better president, and that president Lula’s Workers Party is monolithic and corrupt. This from a publication that failed to fully investigate the activities of Jack and Mark Thatcher during the government of Iron Lady Margaret Thatcher because doing so would have been bad for business. An item in The New York Review of Books has called into question Brazil’s obligatory voting system that gives blacks and indigenous people an opportunity to have an equal voice with the nation’s wealthy political class. And in Washington the once militant French socialist Dominique Strauss-Kahn, now preaching the gospel of free markets as managing director of the International Monetary Fund (IMF), has editorialized that Brazil faces a gloomy economic scenario if the government fails to open the banking system and privatize state companies… never mind that France hasn’t done too badly running an economy in which half the nation’s major banking institutions have been government owned since the days of president Georges Pompidou. In spite of its uneven income distribution, Brazil’s economy has been outperforming the United States and all the Euro zone nations, which is why it is attracting investment from so many globalist companies and speculators. Brazilian economist Paul Singer has pointed out that Brazil was less affected by the 2007-08 crisis and impending economic collapse precisely because around half the banking sector is government operated. As a result, Singer suggests, management from this perspective is focused on avoiding market turbulence and high risk speculation that led to the free market collapse of institutions like Fannie Mae, Freddie Mac, and even Lehman Brothers. Skewed media coverage of the Brazil election also carries a made in USA tag. CNN and Fox continue to demonize Dilma as an anti-business ex-urban guerrilla while ignoring the fact that Alfredo Sirkys, Green Party leader and handler of failed Green presidential candidate Marina Silva, is a former revolutionary who kidnapped more diplomats than anybody in Latin America outside the FARC. Although the Greens are supporting Serra in spite of his lackluster environmental record Sirkys has already entered Marina as a candidate in the 2014 presidential election. Marina has also become a propaganda asset for evangelical groups with globalist agendas. A member of the US-headquarted Assemblies of God church whose high profile influencers include retired US Army general Stanley McChrystal, she is no stranger to Washington. She visited with leading anti-abortion activists on Capitol Hill prior to kicking off her presidential campaign in Brazil. And because she uses her “green” issues as a cover for her broader faith-based agenda she continues to get equal time and prime time coverage from the media as if she was still a candidate. Just twelve hours after last Sunday’s presidential debate she was amping up her anti-abortion views — which view a woman’s right to choose as a crime worse than homosexuality — on a morning women’s talk show broadcast by the same network that hosted the debate. There’s yet another disquieting dimension to the “Marina factor” that could create moral consternation in the world’s largest Catholic country. As the standard bearer of the Green Party Marina’s anti-abortion views are supported by international elements of the US-based Verbo Baptist Church who are active in Brazil. Verbo’s top anti-abortion spokesperson in Latin America is former Guatemalan strongman and free market advocate Efrain Rios Montt. According to Nobel Laureate Rigoberta Menchu, Rios-Montt supervised a mini-Holocaust in Guatemala that took the right to life away from more than 60,000 Mayans, mostly Catholics. In a mature republic like France, socialist presidential hopefuls Martine Aubry, Segolene Royal and conservative finance minister Christine Lagarde can focus on reconciling social contract issues and economic restructuring because citizens have put a woman’s right to choose into perspective among the core values that project French national identity. In Brazil, however, US-based religious organizations supporting Marina’s anti-abortion crusade have made the issue denying women the right to choose another manifestation of the psychopathology of underdevelopment that keeps the role of most women — even the sexy samba dancing cariocas — reduced to that of second class citizens. Most evangelical Christian bookstores sell books that promote the concept of the man as lider (leader) of a Christian family unit, reinforcing the concept of the submissive alpha female and turning a blind eye to equal rights for women. Over 19 million citizens supported Marina in the first round, and polling now indicates that Dilma, not Serra, is starting to pick up a majority of those Marina votes. Polls indicate that even female evangelical voters see Dilma as a leader who can battle to improve the status of all women in Brazil’s male dominated society. In spite of Serra crying foul, all three major polling organizations predict that Dilma will become Brazil’s first woman president on October 31st. The only other big October surprise could come in the form of a cybersecurity issue that impacts the integrity of Brazil’s vote tabulating system much as a system problem caused large sections of the national power grid to shut down last November. Globalists are interfering in the internal politics of Brazil because the stakes are high. Brazil’s economic model, which features a strong government infrastructure to regulate the disruptive effects that free markets can have on social institutions, is a post-Bretton Woods system hybrid that features strategic alliances with France and China that countervail turbulent free market influences that have been the hallmark of more than 80 years of having the US as its major trade partner. And this, like its policy of using ethanol to offset costly oil imports, causes discomfort among the clubby, ensconced world economic order. Average consumer credit card interest rates in Brazil run 44 percent annually and foreign banks want a bigger share of that lucrative action. Serra’s backers want to privatize Petrobras, the huge national energy firm, a move that could turn the giant into the Enron of South America. And software companies like Microsoft, SAP and Oracle want government and business in Brazil’s economically disadvantaged Northeast to buy more of their high end products instead of shareware and Linux-based systems while tending to work around Brazil’s affirmative action policies that seek to provide high wage jobs that blacks and indigenous people need to be included in national life. One big wild card remains, notably the 28 million voters who the Federal Electoral Court says abstained, voted blank, or had their ballots nullified. Pollsters have a difficult time tracking the motives of this type of prospective voter, especially in a nation where voting is obligatory and respondents are known to lie to protect the privacy of their choice. Still, IBOPE and Datafolha , two of the large political polling firms, claim to have factored in the intentions of these voters and in this demolition derby — which Lula says has been the dirtiest campaign he’s seen since Brazil returned to democracy — predict that the winner will be the name at the top of the #13 ticket, Dilma.

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Robert K. Lifton: Jobs, Deficits and the Coming Test of America’s Democracy

October 18, 2010

In October 1988, during my term as President of the American Jewish Congress, in what I called an “Occasional Letter,” sent out to influentials in this country and abroad, I referred to the history of cities I had just visited — Istanbul, (Constantinople) Rome and Jerusalem. The history of each of these great cities of antiquity chronicles a pattern of events which I think has relevance for our own time. For thousands of years invaders took control of each of these cities at the moment of the invader’s maximum strength; ruled it for a time as their strength gradually ebbed-generally because of increasingly less talented rulers and a spoiled self-indulgent population; and finally succumbed to the next horde of invaders. …we Americans in our relative youth as a nation and with our natural optimism pay too little attention to historical perspectives. We believe that our world leadership will last forever. [But] we continue to gird up for a military war against an enemy that is already showing its own internal weakness. At the same time, our affluent citizens indulge their insatiable appetites to consume. As a result, our debts to other nations mount, our balance of payments worsens with other countries…is this the way history will recount how our once dominant nation lost its supremacy? Over the ensuing 22 years the patterns of conduct I decried have continued to the point of having brought our country to a terrible state. I have grave concerns for my children, my grandchildren and their generations. My first concern has to do with jobs. I don’t believe that this country will be able to create sufficient jobs to re-employ a significant portion of those presently unemployed and also provide employment for the younger job seekers coming out of school. The jobs were not lost just recently as a result of the bubbles bursting. These jobs were being lost over many years. The bubble economy only covered up the losses by providing home owners with large amounts of money to maintain their consumption through borrowing far in excess of the asset value of their homes and through providing funding to financial companies like banks, investment banks and brokers — both stock and real estate — based on the inflated values of the assets they were dealing with. The jobs were lost for two reasons. First, our businesses lost their ability to compete effectively with businesses in other countries. Whether you blame the non-competitive condition on the higher costs of labor, including huge health care and pension costs, the higher costs of management, including over-the-top rewards for corporate management, or the higher costs of government, including taxes and regulations, the fact is that step by step, year by year, manufacturing and production have moved out of America and continue to move out to other more competitive areas of the world. The second factor is related to the sharp increases in productivity made possible by the many new inventions that allow business to increase production with ever fewer workers. One can hardly think of a function whether directly related to production or indirectly, for example, through all the new means of communication, that has not reduced the need for workers. Millions of Americans who are facing job losses and reduced employment opportunities are also experiencing a drop in the value of their homes and in many cases loss of their homes to foreclosure. Yet, at the same time that so many Americans are suffering lower standards of living, we are faced with huge debt levels — national, state and city, and we are running the highest deficits as a percentage of GDP than almost any time in our history. And the situation is actually worse than reported. For example, if properly accounted for with a discount rate based on realistic earnings, the shortfall in states’ pension commitments would amount to $3.4 trillion, about one quarter of all federal debt. As a nation we face a terrible dilemma. It is possible to create more jobs by spending enormous money on rebuilding our aging infrastructure. It is possible to ease the burdens on the unemployed and under employed by continuing unemployment benefits and extending health benefits. But those actions will only exacerbate our deficits and increase our debt loads. Increased debt increases the interest costs of carrying that debt and the burden on future generations of repaying at least part of it. The decision of what to do is sharply dividing our country. The unemployed are demanding that their benefits continue and that large amount of funds be allocated to create jobs through building and repairing our national infrastructure. There is pressure to increase taxes on those more able to pay. On the other side, the employed and affluent are insisting that the nation can no longer afford to support the unemployed by increasing its deficits and debt load. Already, we are seeing rising anger by those who are worried about the deficits and debt levels and the possibility of increased taxes, expressed, for example, by the Tea Party movement. So far the discussion has been civilized, but that may be because the benefits have been continued and the unemployed still have hope of finding jobs. Once the flow of benefits stops, I would not be surprised to see massive demonstrations and maybe civil unrest of the kind we have seen in Greece and France as those nations struggle to find solutions to their economic issues. Three overwhelming issues must be addressed at the same time. The nation must finding a way to provide financial help to the huge number of people who have lost their jobs and those young people looking for jobs, many of who have amassed heavy debt for their education. The nation must find a way at least to start to reduce debt levels so our citizens and creditor nations will see a direction that gives them some confidence. And the nation must find a way to become competitive in producing products that can be sold in a globalized competitive world. Our competitive position may be based on inventing new products or like the car companies on cutting production costs of existing products that we once made and sold successfully. This cannot be accomplished without enormous sacrifices by every elements of our society. It will require that labor gives up hard earned health and pension benefits, that management very sharply reduce their salaries and benefits; that federal, state and city governments pare down costs across the board, including pension payments for retired employees; that taxes be raised far beyond merely eliminating the Bush tax cuts; that social security and Medicare benefits be adjusted to reduce costs. All will feel the pain of reduced standards of living – labor, management, the affluent, the old and the young. Can the American democratic system manage such painful changes? We have taken pride in our democracy and how well it has worked. But it worked under the optimum conditions. We started with a large land mass loaded with natural resources — oil gas, coal, forests of trees, huge areas of arable farm land and water. We have profligately used up a lot of those assets and lived well in the process. Until now, to get elected those governing us only had to grant to each constituency what it demanded. Now, is the true test. Can our democracy survive when it has to take away from each constituency something of great value? Based on how our governing system is operating currently, I am not sure. What do you think?

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Robert Zevin: Been Down So Long …

October 14, 2010

A glum consensus about the economic future has enveloped our collective minds like fog descending on the coast at sunset. It is now almost universally agreed that economies in the United States along with Europe and Japan are likely to grow at only about two percent a year or less for the next five to ten years or longer. Readers of our recent commentaries know that we are part of this collective mindset. The odd thing is that most who subscribe to this dim view of the future fail to realize that it is mainly a repeat of the past. For the last ten years the U.S., Europe and Japan have all grown at an average rate of no more than two percent a year and in the case of Europe and Japan this was true for another decade or more before that. Indeed, in the United States where the purchasing power of the median family’s income has barely increased since 1973, a majority have experienced no economic improvement for the last 37 years. Although the U.S. has grown faster than two percent since 1973, often at a much faster pace, most people have fallen behind because the top 1% have increased their incomes from about 9% of all incomes to above 20%, and the rest of the top fifth have also fared well. In effect, the top two deciles of income earners in the U.S. have increased their share of the pie by about the same amount as the pie has grown, leaving everybody else not much better off than their counterparts thirty-five or forty years ago. Once we take account of reduced and eliminated pensions, increased taxes for the poor; dramatically higher fees for public colleges and universities, decreased access to health care for many Americans, the diminished levels of educational achievement both absolute and relative to other countries, and the record high percentage of Americans who are in prison both in our history and compared with every other country in the world, it is apparent that most Americans are materially worse off than were their parents and in many cases their grandparents. Angry Planet So the new consensus forecast is a belated recognition of the long standing reality. As was true in the Great Depression, our recent financial crisis and its glum sequel have been lightning rods for the feelings of disappointment, frustration and intense anger that have been building for a long time. For the most part this anger has been mobilized and focused by the political right, much as in the 1930′s. Perhaps this is because left of center governments, which were widely in power at the beginning of the crisis, are perceived as complicit in the bailing out of the bankers and corporations responsible for the mess, while giving short shrift to its multitudes of poor and middle class victims. And, more to the point, it is because those governments were indeed and have continued to be much more sympathetic to the interests of the wealthy and powerful than to anyone else. Along with rising anger, international cooperation continues to decline. Most countries are now trying to increase their economic growth and reduce their unemployment by exporting more to and importing less from other countries, just like the “beggar thy neighbor” policies of the 1930′s. Countries try to do this by imposing tariffs or import restrictions on goods from elsewhere and by encouraging a fall in the value of their own currencies so that their exports will be cheaper for foreign buyers and their imports will be more expensive for domestic buyers. Currency depreciation is generally an ineffective remedy because differences in income, costs and quality tend to swamp all but the largest changes in currency exchange rates. Moreover, once one country succeeds in bringing down its exchange rate by lowering interest rates or promising to print more money to buy its own bonds or intervening in foreign exchange markets, it is easy enough for other countries to do the same, as Japan did recently with an intervention to punish traders less than a week after the United States brought the dollar down with promises of low interest rates and more money printing to buy bonds. In the end, it is simply impossible for every nation to lower its exchange rate versus every other nation, just as it is impossible for all countries to grow by exporting more to every other country while importing less. The contributions of currency and tariff “wars” to the global Great Depression have surely been exaggerated in history and economic textbooks as well as the editorial pages of the Wall Street Journal . It is undeniably true that when each nation went “off” the gold standard — the mother of all devaluations as it were — there was a large and rapid improvement in its economy. And it is undoubtedly true that Quantitative Easing, a new euphemism for printing money to buy bonds, and near zero interest rates for a prolonged time, are each pain-relief medicine for bruised economies in addition to the benefits that might come from a decline in a country’s currency. As a result it is usually difficult to say whether a country is pursuing an appropriate domestic policy or a pugnacious international policy. The more sinister aspect of the 1930′s was the spread of nationalism, xenophobia, persecution of immigrants, autocracy, militarism and ultimately a global conflagration of real wars that became World War II. All of this is painfully apparent in the world today: France expels the Roma in violation of the Declaration of Human Rights and the Charter of the European Union. Anti-immigrant parties have won recent victories in Australia, Austria, the Netherlands, France, and many other countries. The United States continues to build a wall on its Mexican border, reinforced by posses of vigilantes organized by local sheriffs. Violence against ethnic minorities, immigrant or otherwise, is on the rise in China, South Africa, Egypt, most of the countries on the periphery of the former Soviet Union and in many other places. In such a world military spending and weapons exports have the dual appeal of serving the national interest against the perceived enmity of a hostile world and of creating more jobs and economic activity. Here again examples abound from the United States to China and many countries in between. So while it is easy to dismiss the talk of currency wars and trade wars as political theater, it is equally easy to imagine a growing plague of the politics of hatred and insecurity leading to more repressive domestic regimes and more global warfare, however disguised it may be as defense against aggression, peacekeeping, upholding international law, the war on terrorism, or the war on drugs. Transcendent Stocks There is an understandable but incorrect tendency to assume that so much bad news for the health and well-being of human society must be bad news for the stock market and other investment areas. I have said before and say again that high unemployment, high inequality, low economic growth, low inflation and low interest rates are all logically and historically good for stock markets and for government and other relatively secure bond markets. The history of previous great financial crises and their aftermaths shows stocks recovering early and smartly as they did last year. The same history shows stocks and bonds earning decent returns, especially after adjusting for the small effects of inflation, during many years of slow growth and high unemployment following a crisis.

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France Retirement Age: Sarkozy Faces Showdown Over Retirement Reform

October 12, 2010

PARIS — Teachers, mail carriers, bus drivers and other French workers try to shut down France in a showdown with President Nicolas Sarkozy over his government’s attempt to raise the retirement age by two years to save money. The battle over the contested retirement reform has gone on for months, but this week could prove decisive. With the Senate expected to pass the pension reform bill by the end of the week, some unions have upped the ante by declaring open-ended strikes, meaning the walkout that begin on Tuesday could last for days or even weeks. Past walkouts lasted only one day. Train drivers launched an open-ended strike Monday night, and the work stoppages widened to other sectors on Tuesday. High school students were also joining the fray, with walkouts expected at hundreds of schools Tuesday. More than 200 street protests were planned throughout the country. Last month, similar demonstrations brought 1 million people onto the streets, according to police estimates, though union organizers insisted turnout was three times as high. The left-leaning Liberation newspaper ran a headline reading “What if the strike lasted?,” while the conservative Le Figaro ran a story about how strikes at French oil refineries could lead to shortages by the week’s end on its front page. Workers at France’s largest refinery overwhelmingly voted to join the strike, bringing the plant to a near standstill. Production Tuesday at Total SA’s Gonfreville-l’Orcher refinery in Normandy was “minimal,” and no fuel would enter or leave the refinery until further notice, a union spokesman at the plant said. With service on suburban trains and the Paris Metro and bus lines slashed by about half, commuters rolled into work on bikes, rollerblades and skateboards. The French capital’s free bike racks were empty as many took advantage of the brisk, sunny morning to cycle to work. Because strikes are frequent in France, commuters have become experts at dealing with transit issues and travelers at Europe’s largest train station, Paris’ Gare du Nord, appeared to be taking the latest walkout in stride. “I understand the strikers, I tolerate it,” said Fuad Fazlic, 38, a tailor at French luxury label Chanel, as he rolled his ten-speed bicycle out of the Gare du Nord on his way to work. Fazlic said the strike hadn’t disturbed his morning commute by train from Senlis, a town north of the capital, and with his bike to get around Paris, he wasn’t worried about slowdowns on the capital’s buses and subways. Fazlic said he’d learned his lesson after massive strikes in 1995 brought much of France to a standstill for about two months. “I have been biking to work ever since,” Fazlic said. Emmanuel Difom, 40, said he’d had no trouble catching a train from the Charles de Gaulle airport to central Paris. But Difom, an accountant who’d flown in Tuesday morning from Cameroon, said he was “very worried” about making the next leg of his journey, by train to Strasbourg. Both Paris’ main airports, Charles de Gaulle and Orly, had announced massive cancellations for Tuesday and urged travelers to check with airlines on their flights’ status. President Sarkozy’s conservative allies insist there is no choice but to buckle down and accept the reform. Faced with huge budget deficits and sluggish growth, France must get its finances in better order, the insist. Even with the two-year change France would still have among the lowest retirement ages in the developed world. Unions fear the erosion of the cherished workplace benefit, and say the cost-cutting ax is coming down too hard on workers. Outside Paris’ baricaded Lycee Lamartine high school, striking students said they also opposed the government’s retirement reform. “It’s about us, it’s about the youth. We don’t want to pay for the crisis and to pay for the actions of the big international ratings agencies,” said Victor Grezes, a member of the UNL national union of students. Sarkozy’s government has backed down from at least two reforms planned in education, opting not to incur students’ wrath. Potent student-labor coalitions have brought down many planned government reforms over the years in France. The Education Ministry predicted Monday that more than one in four elementary and pre-kindergarten teachers would stay home Tuesday, though one union representing those teachers countered that nearly half would. Sarkozy’s government is all but staking its chances for victory in presidential and legislative elections in 2012 on the pension reform, which the president has called the last major goal of his term. France’s European Union partners are keeping watch, as they face their own budget cutbacks and debt woes. The new nationwide strikes was the fifth since May, including two last month that coincided with protest marches that drew at least 1 million people into the streets. The lower house of parliament, the National Assembly, approved the reform last month. The Senate has approved the article on raising the retirement age from 60 to 62, but is still debating the overall reform. The bill also raises the age of eligibility for a full pension from 65 to 67. Sarkozy, in a small concession Thursday, offered to allow women born before 1956 and who had more than three children to receive full pensions at 65. That apparently did little to stem the strike plans. ___ Associated Press writers Jean-Marie Godard and Jamey Keaten and APTN producer Sylvain Plazy in Paris contributed to this report.

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Richard (RJ) Eskow: The French Connection: That Jailed Banker Raises US Issues

October 6, 2010

Remember 2003, when so many Americans hated France for refusing to participate in the Iraq invasion? The airwaves were filled with insults about “effete” and “cowardly” Frenchmen, the phrase “cheese eating surrender monkeys” was on many a pair of lips, and rich patriots were boycotting Rhône wine in the spirit of national sacrifice. Well, munch on a Freedom Fry and ponder this: Finally, after one stunning revelation of big bank lawlessness after another, a banker is going to jail… in France. That’s a bit of a national embarrassment, n’est-ce pas? Jerome Kerviel was sentenced today to five years in prison (with two years suspended), and was ordered to pay the equivalent in $6.7 billion US in damages. There are a number of questions about Kerviel’s case, including the fact that he never profited personally from his massive trades. That part of Kerviel’s psychology is incomprehensible to the Wall Street mind: He made his bank billions of dollars, and earned less than $200,000 US per year for his efforts. A true American shark would have nothing but contempt for a sucker like that. Guess who got off pretty much scott free in the whole deal? Société Générale, the bank that employed him. If the name sounds familiar, here’s why: SocGen was one of beneficiaries of the US taxpayers’ largesse when, as a counterparty to AIG, the government directed AIG to pay the French bank $11.9 billion. That’s 100 cents on the dollar for the money AIG owed SocGen for credit default swaps and CDS collateral postings. Newspaper reports about Kerviel say that he generated more than 1.4 billion Euros in profits during a single year. And yet there was so little curiosity about his activities that he was still able to bet more that $50 billion Euros, more than the entire market value of the bank that employed him, without getting caught. As an AP story reported , ” an internal report by the bank found managers failed to follow up on 74 different alarms about Kerviel’s activities.” They were shocked — shocked — to find out that gambling was going on in there. In that sense, the judge’s ruling was odd. While the French are to be applauded for their willingness to indict a banker, the court’s ruling bent over backward to exonerate and placate the bank itself. The court ordered Kerviel to pay back the entire amount the bank allegedly lost. While Kerviel will actually never be able to do that, it was the judge’s was of saying that the bank bore absolutely no responsibility for what occurred on its premises. It was also a repudiation of Kerviel’s assertion that other traders were doing the same things he was. Instead of reprimanding the bank for its horrible risk management practices — controls so sloppy that the entire bank could be put at risk by mid-level employee — presiding judge Dominique Pauthe praised the bank’s response to the crime once it had happened. If the bank had left the vault doors open, presumably the judge would have praised it for promptly sounding the alarm after it had been robbed. But then, Société Générale has a way of getting lucky where the authorities are concerned. The US decision to pay the bank the full value of its AIG obligations demonstrates that. Think about it: In the course of a year, an allegedly “rogue” trader wreaked so much havoc that it cost Société Générale $6.7 billion — and the US government honored an obligation for nearly double that amount. Had the US let AIG go down, or refused to honor this obligation, SocGen’s fate might have been very different. Instead it survived this incident pretty much unscathed. The French bank seems to have done well by its association with Goldman Sachs, which brokered a number of its arrangements with AIG. It’s important to remember the role those two firms played in the months preceding the financial collapse. As Bloomberg News reported : Banks that bought swaps as protection against losses on mortgage-linked assets demanded cash collateral as the market value of the securities plunged last year, overwhelming AIG’s ability to pay. “It was precisely that drain of liquidity to Goldman and SocGen that put AIG in a position of illiquidity and ultimately threw them into the government’s arms,” said Charles Calomiris, a finance professor at Columbia Business School in New York. In other words, they had already bled a lot out of AIG before it collapsed, and yet were still able to receive 100 cents on the dollar where others might have been forced to settle for less. As with the Kerviel affair, SocGen’s oversight appears to have been lax when it came to its AIG agreements. David Fiderer properly notes SocGen’s casual indifference to a major investment, deferring that task to Goldman. Not that Goldman didn’t work for its client (and itself): It’s been accused of engaging in serious gamesmanship over its valuation of some of the securities in question. Many Americans who are already outraged over AIG’s counterparty payouts may know that AIG believed it had overpaid Goldman $1.56 billion, or that Goldman had refused to have its valuations reviewed by a panel of independent firms. One of the open questions about l’affaire Kerviel is whether he acted alone. At the very least, there were enormous gaps in SocGen’s internal controls. At worst, the bank looked the other way while one or more of its traders generated huge profits. But the real question are for our country, not France: Where are the US indictments and convictions? We’ve already discussed the curious decision not to prosecute anyone at AIG. But then, the French don’t have our SEC, which has so often chosen to cut sweetheart deals that leave bank shareholders on the hook for the illegal behavior of bank executives, while letting the bankers themselves walk away with their freedom and their bonuses. Senators aren’t the only ones upset about that. Judges are furious with these slap-on-the-wrist SEC agreements. In fact, “sweetheart deal” was the phrase a judge used to describe the SEC’s agreement with Barclay’s Bank. The Barclay’s case was the fourth in a series of cases where banks violated international law only to be let off easy, prompting the judge’s comments. As the New York Times reports: “Judge Sullivan asked why the government had not indicted and prosecuted the foreign banks, rather than agreeing to the settlements. He also asked whether any individuals from Barclays were being held responsible, though no one else has been charged in the case. “One must wonder what the penalty is, said Judge Sullivan … Judge Sullivan’s comments was part of a litany of judges’ complaints along the same lines. These judges understand that criminal prosecution of banks — and bankers — has precisely the deterrent effect we need to protect society. We’ve seen rampant bank criminal behavior go unpunished, from stock fraud to forged mortgage documents to laundering drug money. The French court’s air kiss to SocGen was unacceptable, given that bank’s negligent or complicit role in Kerviel’s action. That means that, at least in one sense, Kerviel’s the fall guy (even if he’s not the hero some of the French seem to think he is). But at least Kerviel’s conviction and sentence might deter future bad bankers. The US bankers who engaged in criminal behavior are walking around free. They’re writing big checks to political candidates, whining that nobody likes them and, of course, drinking nothing but the best French wines. DISCLAIMERS: Two potential conflicts of interest here — I used to work for AIG, and I’m one-quarter French. When I was about 18 I mentioned that second fact to a very pretty young woman on a train to Paris, in my broken French, to which she responded in true Gallic fashion: “How nice for you.” _________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Video: Sanofi’s Viehbacher Says Genzyme Must Justify Higher Bid: Video

October 5, 2010

Oct. 5 (Bloomberg) — Chris Viehbacher, chief executive officer of Sanofi-Aventis SA discusses the company’s $18.5 billion hostile takeover offer for Genzyme Corp. Sanofi, France’s largest drugmaker, made its offer hostile without increasing an Aug. 29 bid that the U.S. biotechnology company spurned as too low after refusing to negotiate. Viehbacher talked yesterday with Bloomberg’s Carol Massar. (Source: Bloomberg)

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BP May Have Violated U.S. Sanctions On Trade With Iran, Says Government Audit

October 4, 2010

This story has been updated BP is one of 16 international companies that may have violated U.S. sanctions against selling gas to Iran, according to a new report by the Government Accountability Office. Under the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA) signed by President Obama in July 2010, companies or individuals that sell refined petroleum products to Iran in excess of $1 million during a year are subject to three or more out of a possible nine sanctions. Investigators at the GAO claim that BP sold the petroleum between January 1, 2009 and June 30, 2010, based on open sources, which includes trade publications and company statements. Though the GAO examined sales before the signing of the updated sanctions in July 2010, the report “highlights open source information that, following further investigation by the State Department, could contribute to the identification of persons of firms whose activities may be sanctionable under ISA [Iran Sanctions Act of 1996], as amended by CISADA.” Yet BP notified GAO that it stopped selling gasoline to Iran in October 2008 and maintains that information that reported “BP sold gasoline to Iran in 2009 or 2010 was inaccurate,” according to the report. The GAO stands by its research, emphasizing that “we required multiple corroborating sources of information for every entry in our tables of firms reported to have sold refined petroleum products to Iran at any time during the period between January 1, 2009, and June 30, 2010.” BP stopped selling gas to Iran in the second half of 2009, reported Time magazine in June. But it remains one of the most active Western oil companies engaged in energy projects in Iran — through a joint venture with Swiss-based NaftIran: In the last five years, BP has begun extracting around 4 million cubic meters per day of natural gas from a field in Britain’s North Sea in a 50-50 joint venture with Iran, worth $1 million a day at June 15, 2010 spot prices. And BP operates one of the world’s largest gas fields in Azerbaijan in a joint venture with Iran and other foreign oil companies, producing 8 billion cubic meters of gas per year, worth up to a reported $2.4 billion per year. BP was one of three companies, along with France’s Total and United Arab Emirates’ Emirates National Oil Company, which are reported to have sold gas to Iran and to have U.S. government contracts. According to the GAO, BP has almost $2.2 billion in contracts with the U.S. government, largely with the Department of Defense for the purchase of jet and turbine fuel. Firms that are reported to have sold gas to Iran in the 2009-2010 period “with no indication that they have stopped sales” include Emirates National Oil Company, Singapore’s Hin Leong Trading, China’s ChinaOil, Unipec and Zhuhai Zhenrong. BP did not return a call for comment in time for publication. READ the GAO report: d10967r

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French Pension Protests Draw Nearly A Million Marchers For Third Time In A Month

October 3, 2010

PARIS — Hundreds of thousands of protesters young and old demonstrated in France on Saturday, waving union flags and pressing conservative President Nicolas Sarkozy to drop plans to raise the retirement age from 60 to 62. It was the third day of protests in a month. Unions tried a new tactic, scheduling the protest for a Saturday instead of a weekday to draw families, youths and private-sector employees who don’t show up during the workweek. Pockets of students marched among the unions, and some parents carried children on their shoulders. France – one of many indebted European countries trying to scale back spending – says its money-losing pension system will collapse without reform. The government casts the plan as the only responsible course of action and insists people need to work longer because they are living longer. French unions, however, see retirement at 60 as a firmly entrenched right in a country attached to generous state benefits. Michelle Notte, a 68-year-old retiree, marched with her 9-year-old grandson in Paris. “I stand for my children, my grandchildren. It is for them that I demonstrate,” she said, adding that in retirement it’s “a joy to have free time, to take care of one’s grandchildren, to take care of others.” Police put nationwide turnout at 899,000, down 10 percent from protests Sept. 23. But unions said the movement was going strong: The CFDT union said 2.9 million protested, on par with last time. “There are more and more people who are against this injustice and want to send a strong message to the government – this is the last opportunity to change this draft reform and to make it more fair,’” said CFDT head Francois Chereque. Paris protesters marched past the site of the former Bastille prison, the famous revolutionary site. Several young protesters danced atop a van and led a call-and-response: “Retirement! At age 60!” “Young people are sick of seeing social benefits disappear,” said Thomas Roller, an 18-year-old high school student who marched in Paris. “France is becoming a country where it’s ‘every man for himself,’ and we don’t want that.” Organizers have counted on youth turnout to convince the government that even people who don’t generally think about old age are worried. But the spokesman of Sarkozy’s UMP party, Frederic Lefebvre, told France-Info radio that there wasn’t any significant youth participation and said the movement was on the decline. Two protests in September each drew around a million people throughout the country, according to the government, though unions gave much higher figures, up to 3 million. Those demonstrations were accompanied by broad strikes that hobbled train and commuter traffic, unlike Saturday, when there were few disruptions to public services. Dockers have been blocking the port in the southern city of Marseille, however, and 39 ships carrying oil, chemicals and other products were awaiting entry. France is among many European governments looking to cut costs and chip away at some cherished but costly benefits that underpin the good life on the continent. A euro110 billion ($140 billion) bailout for Greece has added to the sense of urgency this year. Conservative French lawmakers have already pushed the pension reform through its first legislative hurdle in the lower house of parliament. The Senate takes the measure up Tuesday, and protesters are planning to gather there too as debate gets under way. Another national day of protests is planned Oct. 12. The French government has expressed willingness to alter some language in the bill, but union leaders say their offers aren’t enough. The reform’s aim is make the money-draining pension system break even by 2018. Though the minimum retirement age would be 62, people would have to wait until age 67 if they want full pension benefits, up from age 65 today. France’s retirement age will still be lower than in comparable countries. Germany is set to raise its retirement age over the coming years from 65 to 67 to offset a shrinking, aging population, and the United States is gradually doing the same. ___ Associated Press writers Angela Doland, Nicolas Garriga and Paolo Santalucia in Paris contributed to this report.

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Video: Covance’s Herring Interested in Southern European Market

September 30, 2010

Sept. 30 (Bloomberg) — Joseph Herring, chief executive officer of Covance Inc., talks about a 10-year, $2.2 billion agreement with Sanofi-Aventis SA, France’s biggest pharmaceutical company, to carry out drug research. He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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William Lazonick: High Health Care Costs Emanate From Business, Not Government

September 23, 2010

At one of the town hall meetings that preceded the passage of the Affordable Care Act (ACA), President Barack Obama read an exhortation from a woman enrolled in Medicare: “I don’t want government-run health care. I don’t want socialized medicine. And don’t touch my Medicare.’” This woman should perhaps now count herself fortunate that the ACA is law. She will be eligible for preventive health care with no out-of-pocket expenses as part of an ACA program that will save tens of thousands of lives per year and generate huge health care savings. Long before the passage of the law, the government was highly involved in the US health care system. In 2008 public expenditure on health care was $3,507 for every man, woman and child in the U.S., and private expenditure was $4,031. The United States spends far more on health care than any other country, but the main discrepancy is in private spending, not public spending. Compared with France for example, in 2008 US public expenditures per capita were 22 percent higher, but private expenditures per capita were 391 percent higher. Yet, in contrast to France and other European nations which provide universal medical coverage, about 47 million Americans – some 16 percent of the US population – were uninsured in 2008. The United States clearly has a problem of out-of-control health care costs. The problem resides, however, in the business component of costs, not in the government component. What Americans should be worrying about is how to regulate the businesses that get rich when we get sick. The ACA takes steps to limit the boundless profiteering that has become customary in the U.S. health care system. By tackling key sources of waste, fraud and abuse, the law starts us on a road to cost containment. Here are some examples: Overcharging for health insurance. The leading health insurers in the United States deliver low-quality, high-cost coverage. The biggest among them use virtually all of their enormous profits to do enormous stock repurchases. That means that a significant percentage of an insurance premium goes simply to boost the insurer’s stock price, which in turn jacks up executive pay. During the past decade four of the biggest insurers — UnitedHealth Group, WellPoint, Aetna, and Cigna — did combined stock buybacks of $62.9 billion, more than their combined net income. States have two new tools to prevent health plans from gouging consumers. First, 46 states have received grants from the US Department of Health and Human Services to investigate premium rate increases. This funding will give states the resources to review the complicated actuarial explanations filed by insurance companies and to judge whether premium increases are justified. In addition, plans will now be required to devote a minimum percentage of their premium revenue to medical care instead of administration, executive salaries, profits, lobbying and administrative waste. Plans will owe their customers rebates if they fail to spend at least 80 percent (individual and small group) or 85 percent (large group) of premium dollars on medical expenses. Over-investment in expensive equipment. The U.S. has about 26 magnetic resonance imaging (MRI) units per million population, more than double the average of 11 units in all economically advanced nations. Japan has 43 units per million population, but under the country’s single-payer insurance system, the cost of a scanning session in Japan is about one-tenth the typical charge in the United States. The ACA addresses this problem by adding a new sales tax on the purchase of expensive equipment and changing the formula that Medicare uses to pay for imaging services in order to avoid overpayment. In addition, there are new disclosure requirements so patients will know if their doctor is rewarded financially for prescribing a particular imaging test. Overcharging for prescription drugs. The prices that Americans pay for drugs are about double the prices in other advanced countries. Since the 1980s, major pharmaceutical companies have successfully argued in Congress against the regulation of drug prices, claiming that high profits are needed to fund research and development. Yet a large portion of the profits of these companies is devoted to repurchasing their stock. For the decade 2000-2009, Pfizer bought back $50.6 billion, equivalent to 65 percent of its profits and 66 percent of its research spending, and Amgen repurchased $25.8 billion, about equal to its net income and R&D. While we await regulation to confront this troubling inconsistency, the ACA takes steps to reduce the cost of drugs. Already this year more than one million Medicare beneficiaries have received $250 checks to help offset drug costs after falling into the prescription drug donut hole, and starting next year, seniors will get a 50 percent discount on brand name drugs when they enter the donut hole. The ACA also expands access to a prescription drug discount program for children’s hospitals and other community providers. At the root of the high cost of health care in the United States is a highly financialized business system. The ACA is an important step toward significant health reform. Until we control the behavior of business corporations in the health care sector, as parts of the law begin to do, Americans will continue to grapple with extraordinarily high health care costs.

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EU Proposes Tougher Rules On Derivatives And Short-Selling

September 15, 2010

BRUSSELS — The European Union’s executive on Wednesday proposed tougher curbs on financial market practices seen to have contributed to the global market crisis that drove the world’s largest economies into recession. EU Services Commissioner Michel Barnier said Wednesday he wants to rein in the market for derivatives – financial instruments based on the value of other assets – and insisted regulators should have powers to restrict, and even ban, short selling. Barnier said the measures on the derivatives market would kick in in 2012 and bring Europe in line with restrictions the U.S. Congress passed over the summer to get a better grip on banks and Wall Street. “We have to limit the risks of this hyper speculation by shedding light, by forcing people to be transparent. We have to know on all of these markets, with the Americans and the other regions, who is doing what,” Barnier said. “No player, no market, no territory, must remain outside this supervision,” he said. “No financial market can afford to remain a Wild West territory,” Barnier said, arguing that lack of controls on specialized financial products compounded the global financial crisis. He said such specialized markets had been working too long as an entity unto themselves, without control or scrutiny. He said his proposals would increase transparency and make the markets safer. The proposals still need to be adopted by the EU member states and parliament before they become law. In Berlin, German Chancellor Angela Merkel renewed a call for tougher financial market regulation and welcomed a move to oblige banks to hold more capital. Merkel told parliament that Germany still believes “every product, every actor, every financial market participant must be regulated so that we have an overview of what is happening on the financial markets.” She also insisted Germany expects the EU “regulate derivatives markets properly.” Barnier said trade in the $600 trillion derivatives market will change, with over-the-counter contracts – those not traded through an exchange – reported to central databases where authorities will have access to find any potential trouble or excessively risky behavior. When it comes to short selling and credit default swaps, the proposal wants to increase transparency by forcing investors to report short positions in shares to regulators if they are above 0.2 percent in issued share capital and to the market if they are above 0.5 percent. The proposals won a mixed review from European legislators, who will have to rule on them. “These proposals should be welcomed as they will provide greater transparency which will help make the financial markets safer and more stable,” Kay Swinburne, a British legislator of the European Conservatives and Reformists group said. For the European Greens, the proposals did not go nearly far enough. “Given the central roles played by derivatives and short selling in the financial crisis, the Commission should have proposed far-reaching legislative measures that would fully address their flaws. Unfortunately, today’s proposals are not ambitious enough,” said France’s Green legislator Pascal Canfin.

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New Islamic finance instructions in France

September 6, 2010

New Islamic finance instructions in France

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Erich Origen and Gan Golan: Happy Labor Day to the Unemployed

September 2, 2010

As you watch the Labor Day parade this year (assuming your city hasn’t cancelled it due to lack of funds), you may be reminded of our national crisis of unemployment. Some people see the unemployed merely as laborers who failed in the labor market. If you (and millions of others) fail, that’s just what the market needs to stay healthy for that other class of people, investors. Forgotten is the idea that we all belong to a larger group called citizens. We all know the promise–America’s promise of unlimited social mobility. Nothing is stopping you from scaling the ladder, so get climbing! The American Dream is within anyone’s grasp! Yet in the last 30 years, the American Dream has grown increasingly out of reach for more and more people– unless they live in a country other than America . According to our nonpartisan friends at Measure of America , “A poor child born in Germany, France, Canada, or one of the Nordic countries has a better chance to join the middle class in adulthood than an American child born into similar circumstances.” Take THAT, you cheese-eating socialists! In contrast, the American economic ladder has broken down–these days, you have to be born above a certain rung if you want to climb at all. And that rung is getting higher by the year. The Nerve and The Thumb cut Everyman’s “entitlements” (image from the book The Adventures of Unemployed Man ) So what? We should let people disappear from the marketplace like a bad product or business idea, right? We’re not citizens, merely economic winners and losers–and we reward only the winners. That’s what makes America great. Except it isn’t what makes us great. We all contribute to the success of this country, even when we fail–and our failure often makes the winners that much better because they had to compete against us. College and professional sports leagues realize this–there, the winner does not take all, but rather is rewarded while also enriching the entire league . The point is to have a strong league in which great individual achievements are possible. Not so with the Just Us League of America. Their sinister plan? Any and all rewards go straight to the top (especially to CEOs who cut jobs and got richly rewarded ). Those at the top are held up as role models–ignoring the fact that the educational, economic, and social structures that would make a respectable level of achievement possible for more people are defunded, destroyed, or out of stock. Sorry. Ask yourself this: Can The American Dream be achieved by an individual in isolation? Do we want people to succeed at everyone else’s expense? Or is Everyman’s loss–sooner or later–every man’s loss? We must face that fact that even in America, the success we strive for and celebrate is never purely ” self-made .” We aim to foster success in America–for all. Labor Day is a celebration of American laborers. That’s worth celebrating. But let’s remember that we are not merely laborers. We are American citizens. And we are all in this together.

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Vodafone likely to sell assets in Poland, China, eventually France

August 28, 2010

Vodafone likely to sell assets in Poland, China, eventually France

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Sunil Sharan: Deregulation, the Forsaken Panacea for Climate Change

August 23, 2010

Congress has abandoned yet another climate bill. Gridlock in the august body looms large come November, dampening hopes of effective energy legislation in the foreseeable future. America is stuck. Yet deregulation, a concept all but renounced by the country a decade back in the wake of California’s energy crisis, holds the potential to unlock the gates to climatic heaven. Many American utilities have for long operated as virtual monopolies in their respective jurisdictions so much so that the service territory itself is quite often ingrained into their name. Georgia Power, Southern California Edison, Detroit Edison, Nevada Power, the list is seemingly endless. Aspiring utilities have traditionally found it prohibitive to enter the domain of incumbents. In such an uncompetitive environment, customers are relegated as “rate-payers,” with little choice of suppliers or services. Deregulation would herald competition and break down the bastions of utility protectionism. The European Union mandated liberalization (their term for deregulation) throughout the region four years ago. The fear of a behemoth like EDF of France coming into Italy and snatching a chunk of its customers made the Italian utility Enel roll out the largest grid modernization project in the world five years ago. It thereby transformed its one-trick energy delivery pipe into a multi-faceted platform for customer care. Countries like Germany and Spain have become global leaders in renewable energy. Competition has driven industry consolidation, with big fish such as EDF, Enel, E.ON, and Vattenfall snapping up smaller utilities and improving productivity through economies of scale. Choice now on tap, customers are finally able to dump dirty energy purveyors and switch to greener providers. No wonder Europe is far ahead of the rest of the world in deploying almost every type of clean energy. Currently only about a dozen states in the U.S. allow consumers a mostly-restricted form of choice of electricity providers, with Texas, the largest electricity market in the country, being the most free-wheeling. Deregulation there was phased in beginning in 2002 and is now implemented in over half the state. It is ascribed to have instigated large-scale deployments of smart-grid and wind-energy technologies. Companies like Green Mountain Energy that sell power generated purely from renewable sources have sprung up. Electricity prices in the state, after many years of hovering substantially above the national average, are trending downward, almost touching the mean this year, allaying the fear held by some that deregulation causes prices to rise unsustainably. Texas has become the bellwether for the rest of the country to open up electricity markets. What a contrast from how California went about deregulating itself in the late nineties. In fact, to even call its half-baked experiment as deregulation is a misnomer. The state allowed new entrants into electricity wholesaling while freezing consumer rates, setting the stage for wholesale prices to be manipulated by the likes of Enron when demand for electricity outstripped supply. For deregulation to succeed, both the retail and wholesale ends of electricity have to be opened up, just as Texas has done, so that demand and supply can track one another. Things went so awry for California that the entire nation stood spooked, effectively putting the idea of deregulation in cold storage. Some states still tinkered with the notion but Bush-era feds all but washed their hands off it. The Obama administration decided that clean energy in the country needed a jump start and proceeded to offer utilities a generous stimulus package. Deregulation would still remain off the agenda. Many utilities, already flush with cash, were now able to double dip into two set of pubic funds, the stimulus as well as “rate case” dollars, to enhance their operational infrastructure, without touching their own money. (A rate case transfers the cost of approved capital expenditure to rate-payers, typically as an ongoing monthly charge.) Most other industries have no such luxury; they have to leverage their cash flow for operational upgrades. With hopes fading for another round of clean energy stimulus, and other carbon-reduction schemes such as a capping of emissions or a federal standard for renewable energy generation subject to the vagaries of a squabbling Congress, America’s greening could soon grind to a halt. The stimulus provided utilities with a carrot, now it is time to pull up their socks. Deregulation, in effect, competition, would move the onus from already-strapped tax-payers squarely onto cash-rich utilities, and without the opprobrium that something like cap-and-trade seems to provoke. As has happened in Europe, deregulation in the US will make utilities more efficient, responsive, and hungry. It will release pent-up market forces, incentivizing fleet-footed utilities to thrive and forcing the dead-beats to mend their ways. It will transform rate-payers into customers, who would demand to be treated as such now that they would have the option of taking their custom elsewhere. With such obvious benefits, is it not high time that the US shed its fear of deregulation and brings it out of the closet? Europe, and at home, Texas, have both proven that it works, and that too on a large scale.

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