middle-east

John Sullivan: Fostering Democracy in the Middle East Through Entrepreneurship

by John Sullivan on March 13, 2012

Huffington Post…

It is now one year after the Arab Spring overturned the Middle East, opening channels for democracy in a once-solid map of autocracy. A region thought to be immune to democracy was transformed within the span of months, buoyed by a young population no longer willing to wait for change. In order for this nascent democracy to fully take root and flourish in the Middle East, popular calls for dignity must be answered with an expansion of opportunities for high-value employment. After the immediate crises abate, how will new governments ensure that they can provide their people with economic opportunity? Protests around the region have been and continue to be fueled by young people who have no jobs or income. Unemployment, which officially hovers around 10 percent regionally , is greater in the Arab world than in any other region. Arab youth are twice as likely as their counterparts in other regions to suffer from unemployment. With roughly 100 million Arabs about to reach employment age, their economies must create tens of millions of jobs over the next 10 years just to maintain the current unemployment rate — a rate that this year was high enough to spark regional revolt. In grappling with the question of persistent unemployment, an Egyptian financier recently argued that the root of the problem in the Arab world lies not in a lack of resources or wealth, but rather a lack of deal flow, a term that in financing describes the rate of opportunities for investment. Indeed, despite the economic dislocation associated with political unrest, there is no shortage of wealth in the Arab world today. Many countries in the region sit atop vast fields of oil. Others boast beaches and historical relics capable of attracting tourists the world over. Most importantly, Arab countries have approached a demographic sweet spot in which the average Arab, with a median age in the 20s, is ready to produce. And yet, despite these endowments, Arab private sectors have remained lethargic. A large part of the reason lies in a business environment that has restricted rather than facilitated business. Objective indictors from the World Bank and World Economic Forum consistently rank Arab countries near the bottom of the list for the health of their business environments. For the justice that the Middle East wants to arrive, entrepreneurship must be at the center of plans to bolster and remake economies around the region. As we have seen throughout the world, entrepreneurship is the great generator of jobs, which in turn creates income and wealth for individuals and families. It is a key to reinvigorating stagnant economies and transforming business sectors into true engines of growth. But what happens when the rules are rigged and existing institutions favor the already enriched? Beyond the indicators, the business environment has long made starting a business in the Middle East an extraordinarily risky proposition. In many countries in the region, entering the formal economy requires a prohibitive amount of time and capital. According to a study by Hernando de Soto’s Institute for Democracy and Liberty (ILD), Mohamed Bouazizi, the Tunisian fruit vendor whose self-immolation sparked the Arab Spring, would have needed to raise 12 times his monthly net income in capital and complete 142 days worth of administrative steps to register his business and join the formal economy. The authors of a recent Economist article estimate that starting up a firm in Syria or Yemen would require 20 times the average annual income. As much as half of the region’s entrepreneurs remain in the informal sector, a position that leaves them vulnerable and prone to failure. Some civil society organizations have been filling the gaps; for example, CIPE partner in Egypt, the Federation of Economic Development Associations, has been addressing the plight of street vendors as early as 2008, long before the Arab Spring drew world attention to the issue. But governments need to do more. In order to meet this daunting challenge, Arab countries must actively work to foster an inclusive culture of entrepreneurship. Only by encouraging those with potentially marketable ideas to start businesses and those with capital to finance them can the Arab world create the jobs needed to meet the demand for dignity. Doing so will require a revision of the rules of the game that have long set up a business climate that makes both starting a business and financing one extremely risky. Historically excluded groups, like women and youth, must be encouraged to use their ideas and abilities. Schools and universities must equip students with the skill sets required of successful business owners and employers. Companies must insist on internationally-recognized codes of corporate governance that will help them reach new markets and encourage investors from beyond the region. Governments must agree to focus on reducing opportunities for corruption, and on punishing those who actively engage in it. Governments in the region can immediately look at three distinct areas for reform: improving public-private dialogue, lowering the barriers to business and combating corruption. Members of the private sector must be encouraged to participate in the process of reform in order to turn the business environment into one that encourages entrepreneurs and financiers alike. By including small and medium-sized business owners and members of the informal sector in the conversation, public-private dialogue can become a critical component in developing participatory democracy. Regulatory reform, too, will be most likely to meet the goal of supporting entrepreneurs if it incorporates the voices of businesspeople who best understand the regulatory environment and its effect on business. Likewise, an anti-corruption campaign will be most likely to succeed if it includes the participation of those who have most often been solicited for bribes. The Arab world does not lack the wealth needed to transform its societies into incubators for dignified participation and employment. Instead, it needs the public-private dialogue that will expand opportunities for participation in policymaking and the institutional reform that will facilitate deals and empower a generation of Arab entrepreneurs. Abdulwahab Alkebsi, Regional Director for the Middle East and Africa at the Center for International Private Enterprise, contributed to this article.

Excerpt from:
John Sullivan: Fostering Democracy in the Middle East Through Entrepreneurship

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Wealthy More Likely To Cheat And Steal Than Poor: Study

by CP on February 27, 2012

Huffington Post…

MONTREAL – A new study says rich people are more likely to engage in unethical behaviour than their poorer counterparts. That’s the finding from researchers at the University of California and the University of Toronto, published today in the Proceedings of the National Academy of Sciences of the United States of America. In two tests, researchers found that upper-class drivers were more likely to cut off other cars and pedestrians at crosswalks. The researchers used age, vehicle make and appearance to assess drivers’ social class. In another series of tests involving undergraduate students and adults, researchers found that those who consider themselves “upper class” were more likely to take valued items from others, lie during negotiations and cheat to increase their chances of winning a prize. The authors of the study say the differences in ethical behavior can be explained, at least in part, by the upper-class participants’ more favourable attitude toward greed. But they also stress that this is not a universal trend, arguing that there are many examples of ethical behaviour amongst more affluent people, such as philanthropic work. The authors also point out that unethical behavior is not absent from lower-class individuals, as has been demonstrated by numerous studies on the relationship between the concentration of poverty and violent crime. The findings in the tests conducted on undergraduates and adults were consistent across age, gender, ethnicity, religion and political orientation of the participants.

See original here:
Wealthy More Likely To Cheat And Steal Than Poor: Study

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

David Isenberg: Why PMSC Can’t Use Kant

January 24, 2012

Sometimes, when listening to the arguments of private military and security contractors about how the actions of their industry helps make the world a more stable, and ultimately peaceful world, I almost think that Immanuel Kant , the 18th century German philosopher, has been reincarnated. In his 1795 essay ” Perpetual Peace: A Philosophical Sketch,” he detailed his proposed peace program. Of course, he was not arguing for an increased role for the private sector. In fact, all the steps he laid out were to be taken by sovereign states, what today we call the private sector. Still, Private Military Security Contract (PMSC) advocates, in their constant refrain — or is that repetition? — that, to paraphrase the old U.S. army recruiting slogan, if only we would let the PMSC sector be all that it can be, the world would be a better place, strikes me as very Kantian. But is it true? It seems that most of the time people are so busy fighting over the PMSC pro and con trees that they can’t see the national interest forest so let’s try and look at the big picture for a moment. For the sake of argument let’s imagine a very utopian future year when most of the current arguments about PMSC have been settled. Everyone agrees that PMSC are not mercenaries. Everyone agrees on what the appropriate level of regulation and oversight for the PMSC industry should be. Such issues as possible human rights violations, circumventing legislative constraints on the use of force, and lack of an effective system of international law have all been settled. How? Don’t ask me; after all, this is a utopian time we’re talking about here. Still, the question then becomes would increased use of PMSC be a good thing? That brings us to James Pattison , lecturer in politics, at the School of Social Sciences, University of Manchester. In his article “Deeper Objections to the Privatization of Military Force,” published in the Journal of Political Philosophy in 2010, he considers the moral justifiability of the private military industry more generally, including whether private force should be entrusted to the market. To cut to the chase, Pattison argues: Although I reject the claim that the use of PMSCs undermines the social contract, I assert that the use of private force potentially undermines both communal bonds and a state’s ability to fight just wars. In the third section, I argue, further, that there is something morally amiss with having military services as a commodity to be traded on the market. Overall, then, I claim that, even if PMSCs were well regulated, there are reasons to eschew the use of private force. Since I can hear various PMSC firms screaming, how dare you say we undermine an ability to fight a just war, Pattison writes: First, none of the objections that I make require there to be an absolute prohibition on, or a complete rejection of, the use of PMSCs. Rather, they provide reasons against the use of these firms, to be taken into account in the overall assessment of the justifiability of private force. There may be cases where the hiring of PMSCs would still be morally acceptable, despite the problems that I will highlight, because the potential benefit of their use outweighs the potential drawbacks. He makes a number of interlocking, reinforcing arguments for not using PMSC. The first of them might be called the illegal alien argument. He argues that individuals do something wrong by being employed as a private contractor. So it follows that those employing private contractors, such as states, are complicit in the individual contractor’s wrongdoing, regardless of whether there are any further problems. So, PMSC workers could sort of be considered like Mexican migrant workers. Yes, some people think they shouldn’t be doing the work but the real problem is with the people who hire them. So, in this analogy, the State and Defense Departments are no different than, say, squash, lettuce, and almond farmers. That reminds me; given the way many third country nationals employed by PMSC in Iraq or Afghanistan have been treated I can’t wait for the day when PMSC workers get their own César Chávez . Pattison also argues that there are moral problems with the employment of private force by states. The other agents involved, such as individual contractors and the PMSCs, are also implicated to the extent that their willing participation enables states to employ private force. But it is his third argument that really interests me. He says that treating military force as a commodity has morally undesirable implications. He writes, “It follows that individuals, states, and other agents commit wrongdoing by using private military force in as far as they are morally required to avoid contributing to the collective action problem of treating military force as a commodity.” Much of what he writes in this part challenges the pro-PMSC dogma one so often reads and hears so let’s dwell on this. The essence is though “there may be certain goods and services that can be entrusted to the market, I will argue that military provision is not one of these.” Of course, that is not to say the public sector is perfect. One has only to look at almost any GAO report regarding Pentagon procurement programs to see that. But Pattison believes the problems with the private provision of military services do not seem to be innate to public provision. The consequentialist case for privatizing military force is based on two assumptions. First, military services are a ‘good’ that should be maximized. Hence, the industry employs the rhetoric of humanitarianism, selling itself as a ‘peace and stability industry’ vital for the protection of human rights worldwide. It is claimed that PMSCs improve the international community’s abilities to undertake humanitarian intervention, can train troops in peacekeeping, and, by providing protection to NGOs, can facilitate humanitarian assistance in danger zones. The second assumption is that the market is a more efficient provider of military services. It provides states and other agents with a readily available pool of highly-trained, experienced military professionals that can be brought together at short notice. It also allows for a high-level of expertise (for instance, in technical support and training), which allows states and other agents to extend their current capabilities, and which would not otherwise be available without significant expenditure. By the way, if you think he is writing about trade groups like ISOA you’d be right. So what is the problem with this, ahem, logic? This consequentialist justification is problematic. To start with, the savings and efficiencies of PMSCs are questionable. There is not adequate competition for contracts, given the specialization in the market, and it is often left up to the PMSC to determine whether (the often vague) contract terms have been met, if their contract should be renewed, and even extended. That said, many of these problems might be contingent – they might be dealt with by stringent regulation and the close monitoring of contracts and performance. But, more fundamentally, it is doubtful whether military services are an unmitigated ‘good’ that should be maximized, despite the industry’s attempts to sell itself as a ‘peace and stability’ industry vital for humanitarianism. So, even if it were true that the market is a more efficient provider of military services, this is not necessarily a good thing. As Andrew Alexandra points out, “when what is being produced is the capacity to inflict violence… greater productive efficiency is actually undesirable” Or consider this: In addition, there is something pervasive about the market providing military force since PMSCs have a vested interest in international instability. International stability is jeopardized further by the fact that the privatization of military force increases the number of agents that can use military force, such as otherwise militarily weak states. PMSCs also make using military force easier for militarily capable states: many of the barriers for using military force, such as the fear of casualties, can be circumvented by the employment of these firms. Accordingly, these problems for national and international security when military provision is entrusted to the market provide further reason to be concerned with the increased prevalence of the private military industry. It seems that military provision should generally be in public hands.

Read the full article →

Carina Kamel: Egypt’s Economic Crisis: Where Are the Promised Billions and What Will It Take for Investors to Return?

January 24, 2012

Alarm bells are ringing inside Egypt and outside as the country faces an economic crisis nearly one year after the revolution. Growth has stalled, foreign direct investment has dried up, tourists have stayed away, the country’s safety net of foreign exchange reserves has nearly bottomed out and only a fraction of promised aid has materialized. Experts fear this could threaten an already fragile and fraught political transition. Back in the spring of 2011, after the fall of Mubarak, there was no shortage of goodwill for Egypt. The international community pledged billions of dollars in aid and the world’s richest nations promised Egypt and its Arab Spring neighbors $20 billion in funding under the so-called G8 Deauville Partnership. To date, no actual funds have been received from G8 nations. Thomas Mirow, president of the European Bank for Reconstruction and Development or EBRD, one of the banks tasked with funneling funds to Egypt, told me the money was awaiting ratification by donor nations and could be available by June of this year. “We could spend something like 2.5 billion euros a year in terms of investment in Arab Spring countries,” Mirow said. “Every one euro we spend is normally accompanied by two euros from the private sector because we bring along foreign investors.” Mirow said that up to 1 billion euros of that amount could be made available for Egypt and that “technical cooperation” had begun on the first project, providing business advice to a transportation services company in Cairo and Alexandria. Arab nations pledged a total of $7 billion, but according to Egyptian officials, only $1 billion has been received so far, from Saudi Arabia and Qatar. The African Development Bank or AFDB, also part of the funding effort, has yet to agree any new loans. The head of the bank’s North Africa division, Jacob Kolster, told me discussions have been ongoing since March but “so far that has not materialized into concrete new lending operations.” He said the AFDB has $1.5 billion of disbursed loans that were approved before the revolution. Egyptian officials have been reluctant to sign on to any international loans because of the strings usually attached. But with cash running out, little or no income from investment and tourism, and the cost of borrowing from the local markets increasing, officials are running out of options. So this month, the IMF is back in Cairo to negotiate a $3.2 billion loan, more than six months after it was turned away. “I think it’s highly unfortunate that Egypt didn’t take the [IMF] loan early,” Angus Blair, a Cairo-based executive at investment bank Beltone told me. “It was cheap and came with so few conditions, now you’re having to pay more with greater conditionality.” The amount is only a drop in the ocean and will do little to plug the gaping hole in Egypt’s budget. The cash also comes with the IMF’s tarnished legacy of a deeply unpopular structural adjustment and economic reform program imposed in the 90s. There’s also the IMF supported — but notoriously corrupt — privatization program that made billionaires out of Mubarak’s cronies. Still, investors see it as a positive signal. “It is an encouraging step.” said Jean-Michel Saliba an economist at Bank of America Merrill Lynch. “What the government is trying to do is reassure investors that with the IMF stamp they will pursue more prudent fiscal measures.” Investors took flight when unrest broke out last year and have yet to return. Foreign direct investment or FDI evaporated last year after reaching $6 billion in 2010. Investors are worried they don’t have a credible partner to work with and fear investing in a project only for it to be scrapped a few months later. They also want the reassurance of a transparent legal framework for dispute resolution. “Egypt is being seen increasing by a number of multinationals as anti private sector,” Blair said. “Until this changes you’re not going to see a change in FDI.” Investors are also eyeing the ticking time bomb of Egypt’s foreign exchange reserves. They plunged from $36 billion in December 2010 to $18 billion last month and are expected to hit $15 billion this month. That’s only enough to cover two months of import costs, according to an Egyptian military official. With no foreign investors to pump money into the economy and tourism revenues down by a third, the interim rulers have resorted to draining Egypt’s foreign exchange reserves to keep the government ticking over, finance subsidies, and pay for imports. Foreign exchange reserves are also being used to prop up the local currency. Preserving the value of the Egyptian Pound is a priority for Egypt’s military rulers. It is a matter of national pride but it is also about inflation, which would soar if the currency devalued, making basics like food and fuel more expensive for the millions of Egyptians living below the poverty line. Analysts predict that without a serious influx of aid or investment — and fast — the government may have no choice but to devalue the Egyptian pound. But perhaps the elephant in the room is the issue of subsidies. Egypt spends a whopping $20 billion a year on petrol, food and electricity subsidies, with fuel subsidies alone accounting for a quarter of total state spending. Although these provide vital support to Egypt’s poor, experts agree they are not sustainable and are often doled out to industries that could do without them. Dr. Gouda Abdel Khalek, Egypt’s minister in charge of subsidies, told me an overhaul of the program is underway with the aim of reducing fuel subsidies by 20-30%. It’s a tricky balance for those in charge. They need to lure investors back, restore growth and support the private sector, but in an inclusive, sustainable and socially-just way. “There’s a lot of anger in Egypt over the kind of liberal economic models that led to the level of corruption which in the end led to the revolution,” Dr. Claire Spencer, head of the Middle East program at UK think tank Chatham House, said. She said it’s up to Egyptians to decide what type of economy they want and that they must ensure it is capable of employing the millions of jobless. Time is not on Egypt’s side. Along with the dangerously low cash reserves, Egypt’s youth, faced with 25% unemployment and unfulfilled revolution goals, are running out of patience. But some say they might just have to wait a bit longer. “After revolutions things get worse before they get better.” Mirow of the EBRD said. “I hope young people in Egypt show patience and understanding that the very deep structural changes that are needed will not happen in a month.”

Read the full article →

Europe’s Revenge? After Downgrade, EU Mulls Restrictions On Ratings Agencies

January 16, 2012

Standard & Poor’s credit rating downgrades of nine euro zone countries will fuel attempts by European Union lawmakers to slap stricter curbs on sovereign ratings.

Read the full article →

C. M. Rubin: How Will We Read: On Main Street?

December 13, 2011

“Independent book stores create interest by selecting a mix of products that the community is interested in seeing.” — Oren Teicher Main Street is off to a promising holiday season, with online and in-store results indicating that sales in independent book stores are well up for 2011 over 2010. Nielsen BookScan for Thanksgiving week showed an increase of 15.5% over the same week in 2010, and in-store websites powered by ABA IndieCommerce increased by 60% for Thanksgiving weekend (Black Friday through Cyber Monday) over 2010. The challenges that independent book stores face this holiday season are the same challenges that most brick and mortar retailers will face. The good news is that independent book stores can always be relied upon for extraordinary entrepreneurship. As a result, many are already redefining their role for the future by finding new and compelling ways to differentiate themselves from online retailers. I had the pleasure of chatting with Oren Teicher, CEO of the American Booksellers Association, to talk about the key factors responsible for the resurgence of the Main Street book store, among other things. How will we read in the future? First of all, I absolutely believe that with all of the changes we are seeing in publishing, we will grow the number of readers. What we know about book buyers is that they behave differently at different times. They buy books in different places. They read different titles. If you’re a reader, you don’t read one kind of book nor do you buy your book from only one retailer. The anxiety that exists in certain circles about the book business that the digital format is going to make print books obsolete is nonsense. We think the formats are going to complement each other. In fact, we believe the formats will not only complement each other but will help each other grow and become stronger. An analogy that is often used is the movie business: back in the 1950′s, people thought that television was going to put movies out of business. Why would anyone go to the movies when you could watch television in your living room? Fast forward sixty years, it’s clear there’s a pretty strong movie business in America and a pretty strong TV business. These are different formats, and they do complement each other. What trends are you seeing in terms of categories of books moving more quickly towards the digital format? There are obvious categories that lend themselves to the digital format. I think genre fiction (mystery, romance, and science fiction) lends itself to the electronic format because people are much more interested in immediate access to the latest titles and far less concerned about having a physical copy of the title on their shelves. In non-fiction you’ve got travel books, which is another example of a category for which there is a real advantage to having the content in an electronic format. However, I think we should be careful about drawing too many conclusions from the current trends. We don’t have enough data to really know what is going to happen. Last holiday season, millions of readers got iPads, Kindles, and Nooks. In January and February 2011, we saw a significant decline in sales in book stores. Time passed and some people still loved their new devices, but in addition, after playing with them for a while, others decided e-readers weren’t for them, and now those devices are collecting dust in their drawers. We expect this holiday season there will be another avalanche of e-readers. And a certain number of people are going to consume books in a digital format, but I think it is too early to know how many. In the end, I think a very large number of readers will end up reading books in both formats. How will the ABA participate in the e-book revenue opportunity? For almost a year we have had a partnership with Google. There are around 350 member stores that use our e-commerce platform to sell digital content, and we are selling Google eBooks across the network of participating indie book stores. What we have learned is that it’s a lot more about the device than we originally thought. We’re aggressively in the process of trying to develop a device that our members can sell as well. There are of course many devices, and we will work with anyone who can assist our stores to sell digital content. As you know, the major publishers have adopted the Agency Model (in the agency model the publishers set the price and designate an agent — in this case the bookseller — who will then sell the book and receive a commission on that sale). With regard to the sales of digital content, under the agency model the publishers are setting the price. If you search for an e-book title on an ABA member’s website and then you search for the same title on another retailer’s website, you will find in very many cases that the price for content is the same. The agency model has leveled the playing field. “A growing number of Americans understand that supporting their local businesses is good for the local economy” — Oren Teicher How did the loss of Borders affect your members? There are millions of customers who were shopping in Borders who don’t have a store today. Clearly for our members that was an opportunity. And despite all the quantum leaps forward with technology, nothing beats a physical bricks-and-mortar store to browse and discover new titles. Independent book stores pride themselves on being interesting and exciting places to shop, where you can meet knowledgeable and passionate booksellers. It’s an environment people like to come and hang out in. Independent book stores create interest by selecting a mix of products that the community is interested in seeing. They also are very active in hosting in-store events, which attract people to the stores. In addition, they may form associations with local coffee shops, restaurants and art galleries. These are the things that book stores do to connect to their customers. Also, a growing number of Americans understand that supporting their local businesses is good for the local economy. What do you believe are the major challenges facing a large chain of book stores such as a Barnes & Noble? I think it always makes more sense to talk about one’s own strategy, but I think that does speak to your question. In today’s world, bigger is not necessarily better. The advantages that our members have are that they are able to be nimble and can adapt quickly to change. They are not saddled with massive square footage of stores that are expensive to operate. In this area I think we have a competitive advantage. Also, technology 20 years ago was a problem for independent booksellers. The large national chains could afford systems and we couldn’t. However the cost of technology has come down dramatically. We now operate websites for 350 stores. We use state of-the-art point of sale systems and tracking systems. We’re able to get books to our customers within 48 hours. The book business is changing so fast. Being smaller allows you to adapt quickly and change more easily. Oren Teicher and C. M. Rubin Photos courtesy of American Booksellers Association. C. M. Rubin is the author of the widely read online series, The Global Search for Education , and is also the author of three bestselling books, including The Real Alice in Wonderland.

Read the full article →

Blood Diamonds Aren’t Gone, Says Global Watchdog

December 5, 2011

An International NGO at the forefront of investigating the illicit trade of blood diamonds has announced it will be leaving the United Nations-backed Kimberley Process . Global Witness said in a statement Monday that the group is pulling out of the conflict-free diamond certification program due to what they called its inability “to evolve and address the clear links between diamonds, violence and tyranny.” Launched January 2003 and named after a UN meeting in Kimberley, South Africa , the Kimberley Process program aims to trace the illicit trade of blood diamonds, with governments certifying that shipments of rough diamonds aren’t fueling wars or other violence. Nevertheless, Reuters reports the program can’t guarantee diamonds are conflict-free, pointing to several abuses across Africa where companies still mine for rough diamonds despite reported human rights abuses. In announcing their departure from the program, Global Witness Founding Director Charmian Gooch wrote on specific shortcomings: “The scheme has failed three tests: it failed to deal with the trade in conflict diamonds from Cote d’Ivoire, was unwilling to take serious action in the face of blatant breaches of the rules over a number of years by Venezuela and has proved unwilling to stop diamonds fueling corruption and violence in Zimbabwe.” Despite Human Rights Watch and Global Witness citing abuses in Zimbabwe’s mines , the Kimberley Process still gave the green light in November for two companies to export diamonds from the Marange diamond field in Zimbabwe, according to the BBC. Global Witness has long played a key role in monitoring conflict, corruption and natural resources. In 1997, the unknown NGO first discovered that diamonds were fueling war in West Africa. In late 1998, it launched a campaign that first drew the world’s attention to the blood diamond issue.

Read the full article →

Ohio Tea Party Turns To New Anti-Union Measure

November 11, 2011

COLUMBUS, Ohio — Just two days after Ohio voters overwhelmingly rejected a state law curbing collective bargaining rights, a tea party coalition said it will push an amendment to the state’s constitution that would prevent workers covered by union contracts from being required to join unions or pay dues. Chris Littleton, the co-founder of the Ohio Liberty Council, told reporters Thursday the group has submitted an initial 1,000 signatures and the proposed wording for its right-to-work amendment to the state’s attorney general. The group needs state officials’ approval of the phrasing and signatures before it can start collecting the roughly 386,000 valid signatures needed by July to get the question on 2012 ballots. If the group fails to get the question before voters during next year’s presidential election, it would continue its push in 2013, Littleton said. “We’re in this for the long haul,” he said. The proposed amendment comes on the heels of Tuesday’s election, when more than 61 percent of voters rejected a law that restricted the collective bargaining rights of Ohio’s more than 350,000 public workers. Forty-six percent of registered voters turned out, setting a 20-year record in terms of voter percentage and an all-time high in total people voting in an off-year general election. Labor groups and opponents of the law poured more than $24 million into the repeal campaign. The defeat of the Ohio union law marked one of the biggest victories in decades for the labor movement. Tim Burga, president of the Ohio AFL-CIO, said in a statement that the proposed amendment was “an even more broad assault on workers’ rights” than the union law, and that the union wouldn’t shy away from defending workers’ rights once more. Democrats at the Statehouse immediately criticized the proposal. “Right-to-work doesn’t guarantee rights to the worker,” said state Rep. Tracy Heard of Columbus, contending unions have made it easier for women and minorities to earn a better wage. Littleton said the ballot initiative is about freedom of choice in the workplace, not collective bargaining. The proposal would amend the state’s constitution to say that no law, rule or agreement should require employees to join a union or pay dues, as a condition of their employment. “This has everything to do with freedom for the worker,” Littleton said. “It doesn’t address anything else except for the idea that you should be free to choose whether or not you want to participate in a labor organization.” The union law rejected by voters included a provision to prevent nonunion employees affected by contracts from paying so-called “fair share” fees to union organizations. That part of the overhaul didn’t receive as much attention during the repeal effort compared with other parts that banned public worker strikes and prevented unions from negotiating health care or pension benefits. Republican Gov. John Kasich and GOP leaders in the Legislature had urged voters to keep the collective bargaining law in place, contending that it would help local governments and communities better control their costs. Following Tuesday’s election results, they said they would spend time contemplating how best to take the state forward. With the announcement of the right-to-work amendment effort, the Kasich administration, Senate President Tom Niehaus and House Speaker William Batchelder repeated the need to reflect on the election’s outcome. “Now’s not the time to be taking up or considering these types of issues,” said Kasich spokesman Rob Nichols. Niehaus said in a statement that lawmakers needed to work to build consensus for what steps to take next. “We just finished a very divisive and contentious election, and Ohioans made it clear they want us to be more deliberate in our approach to major reform,” Niehaus said. The Ohio Liberty Council, a coalition of more than 60 tea party groups, sees a chance for success based on Tuesday’s election results. Nearly 66 percent of voters supported their amendment to let the state opt out of a provision of the 2009 federal health care overhaul, which mandates that most Americans purchase health care. “People don’t like the idea of compulsory participation – that I’m mandated or forced to do something against my will,” Littleton said. The Columbus-based 1851 Center for Constitutional Law and Associated Builders and Contractors of Ohio, which represents nonunion construction firms, have joined with the Ohio Liberty Council in the effort. Twenty-two states have right-to-work laws that prohibit union fees from being a condition of employment.

Read the full article →

PENSIONPALOOZA: Voters Approve Major Overhaul To City’s Retirement Program

November 11, 2011

By Jason Dearen, Associated Press SAN FRANCISCO (AP) — Resounding voter support this week for pension reform measures in San Francisco and Modesto offered some reassurance to leaders of other California cities also struggling to deal with ever-tightening budgets partly due to the costs of generous retirement plans for their employees. More than two-thirds of San Francisco voters in Tuesday’s election supported Proposition C, which would increase contributions by some city workers and raise the minimum retirement age for some others to save $1.3 billion over the next decade. San Francisco faces a $4 billion obligation over the next decade for tens of thousands of current and former employees under its system, which was created in better economic times. In Modesto, voters supported three nonbinding advisory measures that asked voters there if they agreed that pensions for city workers should be reformed. Support for the measures, while not creating new city law, increased pressure on city leaders to enter into serious reform discussions. “I think the results show strong public support for pension reform, and I think it’s reassuring to those of us trying to make reforms in order to control skyrocketing costs of pensions,” said Mayor Chuck Reed of San Jose, whose own negotiations with public employees’ unions are at an impasse. San Jose, the nation’s 10th largest city, is planning to put a reform measure on the March ballot regardless of how negotiations result, Reed said. Without pension reform, the city is facing closure of all branch libraries and community centers, as well as further cuts to police and firefighters. Even with higher revenue projections, San Jose is facing its 11th consecutive year of general fund deficits, and has a projected shortfall of $80.5 million in 2012-2013, largely due to retirement costs. “We’re going to have a reasonable proposal on the ballot in March, and we believe the people of San Jose will overwhelmingly support it,” Reed said. “(People) are very aware we are draining money from services and pouring it into retirement costs.” In San Diego, officials have collected more than enough signatures to qualify an initiative to change the city’s charter on pension calculations. If it qualifies, it would appear on the June ballot. Pension reform is an issue in cities throughout California and at the state Capitol, where on Wednesday a group of Republican state lawmakers also urged Gov. Jerry Brown to convene a special legislative session on his pension reform proposal. Brown unveiled his plans last month calling for increasing the retirement age to 67 for new, non-public safety employees and having local and state workers pay more toward their retirement and health care. It also would put new workers in a hybrid plan with a 401(k)-style vehicle. Although the changes would not solve the state’s unfunded pension and retiree health liabilities, a report released this week called it a bold starting point. “The Senate Republican Caucus believes it is critically important to engage the entire Legislature on pension reform now,” wrote Senate Republican leader Bob Dutton of Rancho Cucamonga in a letter to the Democratic governor. Concessions by public employees will be needed to fix ongoing budget crises at all levels in California, and supporters of San Francisco’s Proposition C described it as a way forward: a consensus measure endorsed by diametrically opposed groups — business and labor unions. While critics charged that would not save enough, proponents said it’s a good start. Labor advocates said Tuesday’s election result in San Francisco also shows that, politically, a measure will only succeed at the ballot box with union support. The second reform measure on the city’s ballot, Proposition D, sought deeper concessions by police, fire and employees’ unions, and did not fare well. “Every poll I’ve seen, voters want reform but when you talk about robbing police and firefighters of retirement benefits it goes the other way,” said Steve Maviglio, a spokesman for Californians for Retirement Security. “If it’s going to go on the ballot, it is going to need union support to be successful.” Still, the pension dilemma is not only centered in large cities or the state capitol. Modesto City Councilman and mayoral candidate Brad Hawn said the city has cut services like police and fire as much as is prudent, and will still face a $10-to-12 million deficit if retirement and compensation concessions are not agreed to by city workers. He said the three ballot measures were reminders that there is public support for reform, and he hoped the vote would spark serious discussions with unions. “Now that the election is over we need to start sitting down and see what we can do to share liability with the employees in a way that honors them as employees but also in a way that’s sustainable for the city,” Hawn said. ____ Associated Press Writer Judy Lin in Sacramento contributed to this report.

Read the full article →

In Wake Of MF Global Bankruptcy, Regulator Orders Review Of All Futures Firms

November 11, 2011

WASHINGTON — Federal regulators have ordered a review of all U.S. futures trading firms after hundreds of millions of dollars in client funds went missing from MF Global, a firm run by former New Jersey Gov. Jon Corzine. The Commodity Futures Trading Commission says it wants to make sure that firms are complying with federal rules that require customers’ money be kept separate from the firms’. The CFTC also said that Commissioner Jill Sommers will lead the agency’s investigation of MF Global. There are roughly 120 U.S. firms that trade futures. The CFTC will conduct audits of the biggest firms, which include major Wall Street banks. The futures exchanges will review the rest.

Read the full article →

WATCH: Donald Trump On Gaddafi’s Death: ‘Big Deal’

October 20, 2011

Hearing the news of Muammar Gaddafi’s death on Thursday, many American leaders released statements on what the end of the Libyan dictator’s run meant for the world. “The dark shadow of tyranny has been lifted,” said President Barack Obama. “I think people across the world recognize that the world is a better place without Muammar Gaddafi,” said Republican presidential candidate Mitt Romney. But businessman Donald Trump? He needed only two words: “Big deal.” After hearing of the death , Trump, the business magnate perhaps best known for his role on the NBC reality show The Apprentice , took to his webcam for an installment of “From The Desk Of Donald Trump” to discuss the political ramification ( h/t Mogulite ). Trump, who’s recently been labeled the “GOP kingmaker” by the Boston Globe , quickly launches into a criticism of the Obama administration’s decision-making during the Libyan uprising, specifically that the president should have bartered with the rebels for oil pending their victory in exchange for U.S. military support. The Obama administration did officially endorse the primary rebel group, the Transitional National Council, in July , and later pledged U.S. allegiance to the multinational coalition in aid of the uprising. “The rebels would have given us everything if we had some leader who knew how to negotiate,” Trump said in the video. “The rebels were being routed four months ago, absolutely routed by Gaddafi and his men. If four months ago we would have said, ‘We want 50 percent of the oil,’ they would have said, ‘Absolutely, we have a deal. Help us, help us. Please, you have a deal.’” That Trump takes issue with Obama is well documented. In the spring, he demanded that President Obama release his birth certificate . He’s also more recently criticized President for going too easy on the Occupy Wall Street protesters . But “the Donald” has his fair share of history with Gaddafi as well. As Mogulite points out, Trump once bragged to FOX News’ Fox and Friends that he “screwed” the Libyan dictator by renting him a plot of land at a hugely exorbitant rate. “Then I didn’t let him use the land,” Trump added. WATCH “From The Desk Of Donald Trump: Gadhafi”

Read the full article →

G20 Finance Ministers To Back Big Bank Capital Surcharge

October 15, 2011

PARIS/LONDON (Francesca Landini and Huw Jones) – Finance ministers and central bankers from the world’s top economies are set to back a mandatory capital surcharge on big lenders of up to 2.5 percent to be phased in from 2016. A draft communique from a meeting of G20 finance chiefs endorses a 1-2.5 percent capital surcharge on top banks like Goldman Sachs, HSBC, Deutsche Bank and JPMorgan Chase. The aim is to make sure they have enough capital to withstand market turbulence so that taxpayers won’t have to rescue banks again in the next crisis. A summit of the G20 leaders in Cannes, France in early November is set to give final approval to the surcharge plan and name the banks affected, known as global systemically important financial institution or G-SIFIs, G20 sources said. “Now that the framework applicable to G-SIFIs is agreed, we urge the Financial Stability Board to define the modalities to extend expeditiously the framework to all SIFIs,” the draft communique obtained by Reuters said. Insurers are battling against a surcharge as second tier banks. The charge — which will be in addition to a 7 percent minimum core capital buffer being phased in for all banks from 2013 — is part of a wider package the G20 ministers are set to endorse on Saturday. The other elements include common “tools” for supervisors to wind up ailing banks, compulsory “living wills” or resolution plans for every big bank, and more intensive supervision for large lenders, the communique said. The FSB, which formulates and coordinates financial regulation on behalf of the G20, has already drawn up criteria to determine which banks face a surcharge. It has said 28 banks would be affected if the regime was introduced immediately but G20 sources said the Cannes summit may name up to 50 lenders. POSITION LIMITS The FSB is also expected to update ministers on its work to define the so-called shadow banking sector before thrashing out recommendations next year to regulate it. Supervisors fear that as banks face tougher rules, risky activities could migrate to other parts of the financial system such as money market funds and special vehicles. G20 presidency France appears to have lost its battle to introduce tough curbs on what it sees as speculation in food and energy commodity markets by imposing limits on the size of positions a trader can hold at any given time. G20 sources said the group was expected to approve a report from the International Organization of Securities Commissions, which groups national market watchdogs, on the benefit of imposing trading limits but it would remain “optional.” The U.S. Commodity Futures Trading Commission is set to discuss fixed limits on Tuesday but in Europe there is no consensus, with Britain opposed to such permanent curbs. STRONGER FSB Bank of Italy Governor Mario Draghi is expected to propose strengthening the FSB, which he chairs, in order to ensure proper implementation of a welter of new rules the G20 has pledged to introduce, including the bank capital surcharge. Draghi, who steps down as chairman this month to become president of the European Central Bank, is expected to propose more members from emerging markets and developing countries on the FSB’s agenda-setting steering committee. Some Asian and Latin American countries feel the regulatory measures now being finalized plug supervisory holes in European and U.S. markets and want their circumstances to shape future G20 regulatory work. Draghi also wants representatives of finance ministries on the steering committee to add political clout. “Draghi will also discuss the possibility to give FSB a legal personality and to allow it to receive resources from more diversified sources,” a G20 source said. Saturday’s meeting will also touch on who will replace Draghi. Bank of Canada Governor Mark Carney is seen by some G20 officials as the main contender so far that the Cannes summit will endorse. G20 ministers are also expected to look at proposals to reinforce non-binding draft principles on financial consumer protection authored by the OECD which have been criticized for being too weak. (Additional reporting by Daniel Flynn in Paris, editing by Mike Peacock) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

U.S. Ducks Recession For Now

October 15, 2011

WASHINGTON (Lucia Mutikani) – Consumers and businesses pulled the sickly U.S. economy back from the brink of recession in the third quarter but don’t pop the champagne just yet. After wobbling early in the quarter, the economy regained some footing, with retail sales rising solidly in September and labor market conditions improving. Business spending has held up despite volatility in financial markets and factory activity has kept expanding. Economists now estimate U.S. gross domestic product grew at an annual pace of between 2.3 and 2.7 percent in the July-September period, a sharp step up from the 1.3 percent logged in the first quarter and a far cry from what some feared just a few weeks ago. “The economy held up surprisingly well in the third quarter but it’s too early to celebrate,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. Much of the re-acceleration in growth reflects the fading of disruption to motor vehicle production and sales after the big March earthquake in Japan. A surge in auto sales contributed to a solid 1.1 percent rise in retail sales in September. Declining gasoline prices, which stretched household budgets in the second quarter and crimped consumer spending, are also seen supporting third-quarter economic growth. But those factors should prove temporary, and with Europe’s economy likely to slow as it battles its debt crisis and the U.S. labor market still weak, economists believe the fourth quarter will prove weaker, with some fearing a contraction in the first half of 2012. “The euro zone debt crisis is still playing out. That remains a dark cloud on the horizon that can present a direct hit to the U.S. economic recovery,” said Anthony Karydakis chief economist at Commerzbank in New York. Although European leaders sound determined to come to grips with the debt crisis and could announce a bold plan in the next couple of weeks, analysts worry they might once again move too slowly for jittery financial markets. A DAY LATE “A bold plan would require some form of centralized fiscal policy, which means years of voting and changing the treaty and voting in individual parliaments,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “It’s not clear whether financial markets will have the patience for them to execute on it because you don’t have the ability in Europe to move as quickly on it and they have always been a day late in dealing with the crisis.” U.S. exports to the euro zone account for only about 2 percent of U.S. gross domestic product, but a worsening of the debt crisis could lead to a financial panic, with ripple effects on American banks and consumers. The euro zone turmoil has already led to tightening in credit availability, weighing on spending and employment. Economists at Goldman Sachs see U.S. growth slowing to a pace between 0.50 percent and 1 percent in the next two quarters, with the risk of a recession at about 40 percent. Others, however, think another recession is far fetched. “The economy is not in great shape but it is hardly falling apart,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “We are in a slow, steady, grinding recovery that is not creating lots of jobs.” Naroff, like many other economists, draws solace from the solid rise in retail sales in September reported on Friday and the need for auto manufacturers to replenish inventories after production was disrupted early this year. “Some of the momentum in final demand growth could carry into the fourth quarter. Early indications suggest that auto sales, which were an important element in third-quarter growth, are holding up well in October,” said Michael Feroli, an economist at JPMorgan in New York. “And while energy prices have backed up in recent days it should still be the case that moderation in headline inflation could give some lift to consumer spending power.” Much as Europe’s shadow looms large over the U.S. economy, belt tightening at home also poses a risk to growth, with a payroll tax cut and an extension of emergency unemployment benefits scheduled to expire in December. While economists expect the payroll tax cut to be extended, many doubt whether the emergency jobless benefits will be renewed, which would undercut already weak household income. “If political parties are unable to agree on any of these measures, that could be the straw that breaks the camel’s back,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “The spending cuts would impact growth not only directly via lower disposable incomes, but also indirectly via a massive loss of confidence in the ability of policymakers to steer events in the right direction in these critical times.” (Editing by James Dalgleish) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

Tom Doctoroff: Food in China: Survival and Success

September 1, 2011

China’s relationship with food is a window into basic instincts. The country’s cuisine is a manifestation of a civilization that has never taken survival for granted. An understanding of what and how Chinese want to eat is a quick way to know China. With the ever popular dim sum of Guangdong province literally meaning “touch the heart,” it’s fair to say that food is a window into the Han soul. In most categories, local brands including Mengniu, Yili (both dairy companies) and COFCO (everything from chocolate to pork) rule the roost. Although Chinese cravings differ to those of Westerners — noodles, not burgers, are comfort food — it is a myth that people reject foreign food brands simply because they are foreign. Western marketers were slow to enter China and made huge mistakes. Kellogg, for example, launched cold cereal, an alien category, at prohibitively high prices. Since then, many others have made significant progress. From Kraft to Nestle and Dove to Coca-Cola, brands have tailored products to suit Chinese tastes. Recent successes — Lipton milk tea, Danone fortified calcium biscuits, Pizza Hut’s seafood lover’s pizza -0 are testaments to the power of empathetic insight. Yum! Brands’ KFC menu localization has been particularly impressive. Hot wings and chicken burgers are the biggest sellers, but the menu also includes products like Beijing Chicken Roll, Golden Butterfly Shrimp, Four Seasons Fresh Vegetable Salads, Fragrant Mushroom Rice and Tomato Egg Drop Soup. The following are a few basic principles of marketing food in China. Delicious balance. Chinese cuisine is tremendously varied — Shanghai food is sweet and oily, while Sichuan dishes are hot and spicy — but the balance of yin (cooling) and yang (heating) is important everywhere. From stir-fried beef with broccoli to sweet and sour pork, dishes should be “harmonious.” Yin foods, not necessarily low in temperature, include toast, bean sprouts, cabbage, carrots, cucumber, duck, tofu, watercress and water. Yang foods include bamboo, beef, chicken, eggs, ginger, glutinous rice, mushrooms and sesame oil. China will never be a coffee culture because beverages should be cooling, but Nestle three-in-one coffee is a hit because sweetness balances bitterness. Illness is perceived to spring from yin and yang imbalance. “Heat patterns” (e.g. headaches, bleeding) are remedied with cooling foods while excessive yin (e.g. runny noses, night sweats) are cured with heating foods. Chinese aren’t lactose intolerant, but dairy products, including ice cream, are perceived to be “damp.” Even today, milk sales increase if accompanied by something “dry” like bits of wheat. Safety: Never assumed. Counter-intuitively, international brands are preferred to local brands, assuming compatibility with local taste and acceptable price. This is because Chinese never take safety for granted. Prior to the 2009 tainted milk scandal, local dairy brands were known for purity. But dairy manufacturers, in cahoots with local officials, abused this trust by adulterating products with illegal ingredients. That’s why all leading brands of infant formula are foreign, despite price premiums of up to four hundred percent. That’s also why endorsement from central government organizations — such as national dental and medical associations — are highly sought after for any item that goes inside the body, from toothpaste to orange juice. Protection is king. Chinese fear invasive elements, hence the appeal of germ-kill products in many categories including soap (Safeguard), toothpaste (Colgate, Crest, Zhonghua), mouthwash (Listerine), air conditioners (Midea) and even dishwashers (Little Swan). It is, therefore, not surprising that foods that promote “immunity” are embraced. Infant formula, again, is a case in point. Every brand must demonstrate resistance to disease before moving on to performance benefits. Physical transformation, on the other hand, has less appeal. “Bigger, stronger, taller” babies are not objects of admiration; every mother wants her child to be “perfectly normal.” Emotion protection is important too. Breakfasts are warm and soft, nourishing hugs moms give families before they dive into a cold world — the Chinese don’t “crunch” before noon, so cold cereal will always be niche. Special K would be most effectively positioned as a woman’s energy bar. Advancement always. Once physical safety is a given, food becomes a weapon in the game of life. First, most nutritional benefits ladder up to academic excellence. Energy is closely linked to intelligence or, more specifically, concentration and quick-witted resourcefulness. Calcium strengthens both bones and brains. In a dog-eat-dog society, a sharp mind, not a buff physique, is the difference between success and failure. Second, convenient foods are means to an end. They provide the “fuel”needed start every day with a kick, so every indulgent food must also be “good for you,” a sugar-coated pill. Third, transformation benefits have growing appeal for the mature market. Dietary supplements, particularly in first tier cities, help the older man perform on the basketball court and at the office. Osteoporosis scare mongering is old school. In the hyper competitive business world, the comfort of food lubricates trust and transactional gain. Partnerships are tested in Chinese restaurants at round tables in private rooms. Dishes are meticulously choreographed. Proper seating must be respected, with the guest of honor placed directly opposite the door, flanked by his hosts. Serving oneself prematurely is faux pas. Leaving before the fruit comes is bad. Familiarity at home. A glance through any city’s expat guide gives an impression Chinese are culinary adventurers. Shanghai’s restaurant scene rivals any American or European city. Mexican, tapas, Japanese, Western brunches, Asian-French fusion, Johnny Walker parties, glamour clubs, wine bars… the list is endless. But, deep down, the Chinese are restrained about foreign food or new tastes. Inside the home, a refuge from the outside kaleidoscope, they are loath to experiment. Pizza Hut will receive delivery orders for office parties, but rarely for consumption at home. Despite Starbucks, roast and ground coffee is not purchased in supermarkets. Italian restaurants are ubiquitous in all major cities, but few enjoy pasta with the family. In public, anything goes. People pay a premium to project internationalism, hence Haagen-Dazs’ success as an ice cream parlor but failure as an overpriced in-home treat. With professional acquaintances, the world is a stage.

Read the full article →

DSK May File Civil Charges Against Maid

August 24, 2011

NEW YORK — Former International Monetary Fund leader Dominique Strauss-Kahn might take legal action in civil court against the hotel maid who accused him of sexually assaulting her in a now-dismissed criminal case and in her ongoing civil suit, one of his lawyers said Tuesday. Strauss-Kahn, a former French presidential candidate, could file his own claims to counter housekeeper Nafissatou Diallo’s lawsuit, “and that’s certainly a consideration,” lawyer Benjamin Brafman said in an interview with The Associated Press. “Because she did lie, and he has suffered enormous damages as a result of those lies.” A court Tuesday dismissed the attempted-rape and other charges against Strauss-Kahn, who resigned his IMF post, spent five days in jail and then spent about six weeks on high-priced house arrest before being freed from it July 1. The dismissal came after prosecutors said they couldn’t pursue the case because of doubts about Diallo’s credibility and a lack of other evidence to prove a forced sexual encounter. Diallo wasn’t truthful with prosecutors about several aspects of her life and changed her account of what she did right after when she claims she was attacked, prosecutors said. Strauss-Kahn’s lawyers have long said the encounter at a luxurious Manhattan hotel, though brief, was consensual. But while Diallo’s account of it has been recounted in interviews, in her lawsuit and in the now-defunct prosecution, the married Strauss-Kahn doesn’t want to detail his version of what happened, Brafman said. “What happened in that room, so long as we have now confirmed that it wasn’t criminal, is really not something that needs to be discussed publicly,” Brafman said in the AP interview. “You can engage in behavior that you’re not proud of, and maybe some people might consider it inappropriate – it doesn’t mean that you committed a crime. And it’s not something that you may want to discuss, at the end of the day.” Diallo’s lawyer, Kenneth Thompson, didn’t immediately respond to an email inquiry about the possibility of Strauss-Kahn filing his own claims in civil court. Thompson has said it’s “utter nonsense” to say the encounter was consensual. Earlier Tuesday, he blasted the dismissal of the case, saying prosecutors “would not allow a woman to have her day in court.” Diallo says Strauss-Kahn chased her down in his hotel suite on May 14, grabbed her crotch, propelled her to the ground and forced her to perform oral sex. His semen was found on her uniform, and a gynecological exam found a mark that her lawyer holds up as evidence of an attack but prosecutors say could have resulted from a number of other things. From the start, Strauss-Kahn’s lawyers considered her account implausible, partly because neither she nor Strauss-Kahn had bruises reflecting a forceful attack, Brafman said. The Associated Press does not usually name people who say they are victims of sexual assault unless they come forward publicly, as Diallo, an immigrant from Guinea, has done. ___

Read the full article →

Raymond J. Learsy: Mexico’s Oil Informs the Arab Spring

August 23, 2011

Something transpired in Mexico that might well have passed unnoticed at another time, but given the events in the Arab world it becomes an omen of hope and healing. Pemex, the Mexican state oil monopoly, for the first time in well over 50 years awarded private production contracts to two companies, thereby fundamentally changing a national policy long held as received gospel — Mexican oil to be developed by a Mexican national enterprise, period. It is a policy analogous to the development of oil resources held as holy writ in much of the Arab world. Think Aramco and Saudi Arabia, as but one example. And herein lies the cause and effect of much of the underlying distortion of Arab society, and which the manifestations of the Arab Spring have rebelled against. Namely the centralization of power and corruption resulting from the control of the riches of oil by a few to the detriment and totalitarian subjugation of the many. Almost always resulting in economic stagnation and grievous lack of entrepreneurship that comes under governance sated by oil’s easy money. Mexico, by inviting private capital to help develop their national resources is broadening the entire spectrum of shared risk, entering an age of a new openness to cooperation and harnessing a new potential for their countrymen. Additionally there will be a new transparency which will inculcate an even more powerful mandate to work for the greater good of all its citizens. Would, that the aspiring voices of the Arab Spring take due note.

Read the full article →

UBS To Cut 3,500 Jobs

August 23, 2011

GENEVA — Swiss bank UBS AG said Tuesday it is cutting 3,500 jobs worldwide as part of an effort to save 2 billion Swiss francs ($2.5 billion) annually by the end of 2013. The Zurich-based bank said the cuts would be achieved “through redundancies as well as natural attrition.” UBS had announced plans for a headcount reduction last month, without specifying exact numbers, after acknowledging that it wouldn’t achieve the target it set for itself in 2009 for a pretax profit of 15 billion francs a year by 2014. News of the cuts pushed shares in UBS up 2.7 percent to 10.82 francs (13.72) on the Zurich exchange. Analysts at Zuercher Kantonalbank said employee payouts would likely depress an already weak third quarter for UBS, as the bank is hit by charges of 450 million francs. UBS said almost 1,600 of the jobs lost will come from its investment bank unit. More than 1,200 will be in its wealth management and Swiss banking business, while about 700 will be split between its global asset management and its wealth management Americas units. A spokesman for UBS, Yves Kaufmann, declined to say how the jobs cuts will be distributed geographically. The bank currently has 65,000 employees in more than 50 countries around the world.

Read the full article →

Martin Cheek: Oil Comes With Hidden Costs

August 22, 2011

The oil industry recently marked a milestone. This month, the world’s oldest operating oil well celebrated 150 years of on-going production. On August 16, 1861, oil men drilled the McClintock Well No 1 in northwestern Pennsylvania to a depth of 620 feet and struck black gold. A century and a half later, the McClintock continues to pump out petroleum, although it now operates every other month at a rate of about 10 barrels a day. The McClintock Well serves as a historic reminder of the pioneering days of petroleum production, showing us how far the industrial world has come as oil evolved into a multi-billion dollar energy industry that drives the world’s economy. Oil helped build America into the world’s economic and military superpower. Americans now use about 20 million barrels of oil a day, 71 percent of it for transportation, and 23 percent for industry and manufacturing, according to the U.S. Energy Information Administration . Most of us tend to look only at the cost of oil in relation to a fill-up at the local gas station. But our nation’s high dependence on petroleum comes with a price far steeper than what consumers pay at the pump. Oil, along with coal and natural gas, comes with what economists call externality costs, the indirect expenses widely shared by human society. These externalities include the toxins released into America’s environment from oil production and consumption which add considerably to our nation’s health care costs. And pollution-related illnesses reduce worker productivity. Buying foreign oil slowly strangles American jobs and industry by weakening the value of our dollars. Ironically, as dependence on foreign oil deteriorates our economic security, Americans bear the burden of paying to protect overseas oil. According to the Institute for the Analysis of Global Security , American taxpayers fund a bill of more than $50 billion a year for our military to protect our access to Middle East oil. Also tally into the total of our oil addiction the expenses that come from changes to Earth’s climate. We’re now seeing more extreme weather events such as hurricanes, blizzards, floods, and mega-droughts, which are related to global warming resulting from burning fossil fuels. These meteorological events place a heavy toll on state and local economies. If we truly wish to revitalize our economy and preserve our quality of life, let’s honestly face the hidden and high price of our nation’s fossil fuel dependence. That will motivate us to take the burden of oil’s externality costs off the shoulders of Americans consumers and taxpayers. Instead let’s make fossil fuel corporations pay their fair share as they benefit by gaining the billions of dollars every year from oil, natural gas, and coal production. To achieve this, an innovative idea called “fee and dividend” is emerging as a hot topic of discussion in U.S. energy policy. If implemented, it would empower the American public with financial incentives to reduce our nation’s externality costs from fossil fuels and thus secure our economic and energy freedom. This market-driven mechanism works by placing a fee on fossil fuels at their point of entry into the American market (such as at an oil well, a coal mine, or a supertanker). This fee is raised gradually over time based on scientific and economic measurements. One hundred percent of this cost on carbon is divided among American citizens on a monthly basis as an offset to the higher prices households will pay from rising energy costs induced by the fee. Each household gets to spend the fee as it wishes, thus letting ordinary people (and not politicians) decide in which direction to grow America’s energy economy. If the American public spends dividend money on non-fossil fuel energy sources, we will enjoy growth in entrepreneurship and innovations leading to new industries in renewable energy and fuel efficiency. These industries will create millions of new jobs that will provide a solid economic foundation and broad revenue-generating base for America. The cardinal rule of economics it is that money motivates. So long as Americans fail to see the external costs of oil and other fossil fuels and mistakenly perceive them to be “cheap” in comparison to renewable energy resources and energy efficient consumption, the U.S. economy will continue to weaken as we waste fossil fuels and deplete our limited supply of hydrocarbon resources. When we as a people face reality and honestly acknowledge that we pay too much in our taxes, our health costs, and our quality of life because of our fossil fuel chemical dependency, we will start moving forward to upgrade America’s economy with innovative clean energy technology. Hopefully, a century and a half from now, the historic McClintock Well No 1 might serve as a reminder of the dirty and dangerous fossil fuel age we left behind.

Read the full article →

This Year’s Kings Of Corporate Layoffs

August 10, 2011

From 24/7 Wall St. : Financial markets have been reeling as investors grow more concerned about the economy: An S&P downgrade of the full faith and credit of the United States, dismal GDP data, and ongoing weak employment data trends are just some of the issues contributing to the recent turmoil. What has so far received very little attention in 2011 are the incidents of corporate layoff announcements, especially this summer. The announcements are almost always tied to restructuring of companies, but you can’t have that many big companies simultaneously hiding behind this excuse. What is obvious as a sore thumb is that the weak economy is continuing to hurt business fundamentals, forcing companies to pare down their head counts. Economists also know that there is a difference between furloughs and layoffs. Layoffs generally imply that businesses are anticipating a longer period of slowness. When you see this many layoffs at this many companies at once, the obvious answer is that a system wide weakness is not just present — it is building. This trend comes at a time when corporate balance sheets are stronger than ever, with many buying back stock and increasing dividends. Interest rates are close to record lows again. The gridlock over the debt ceiling and budget deficits further motivated companies to sit back and not hire. The growing sense is that the new round of layoffs at the major companies may be followed by more layoffs at rival companies. How long can that last if the economy keeps sliding? From Borders to Research In Motion, to Cisco, pharmaceutical companies, banks, and Wall Street firms — all are getting pushed out the door. Meanwhile, economic indicators are getting worse rather than better. If the numbers get any softer, don’t be surprised by more layoff announcements. At a minimum, this will keep the larger corporate employers from having to make new hires. Read more at 24/7 Wall St. Here are the layoff kings of 2011 by number of layoffs according to 24/7 Wall St :

Read the full article →

Donald Blinken: Privatization Helps: The Hungarian Example

July 31, 2011

As Greece works itself out of financial crisis, it should look to Hungary fifteen years ago for part of the answer. Far too large a segment of the Greek economy remains locked up in public hands. Their sale to the private sector, as Hungarians discovered, while not a panacea, will help reduce catastrophic public debts, and salaries and pensions will become the responsibility of private owners rather than the government. The Greek Parliament’s austerity plan would raise 70bn euros from privatization by 2015. The government will sell stakes in banking, airports, water utilities, motorway concessions, port operations, state land, and mining rights. Selling assets to the private sector will also improve managerial know-how, increase transparency, and encourage confidence in a Greek recovery. There is a precedent for this, although on a much smaller scale, in the similar challenges Hungary faced in the mid-1990s. In 1995 Hungary’s economy was in a dangerous free-fall. Its foreign debt, which Hungary had refused to disown after the fall of communism, was approaching $30 billion, the highest per capita debt in all of Central and Eastern Europe. A quick look at Hungary’s dilemma revealed that there was no easy solution in sight. The country’s annual budget, bloated with social program spending, was $3 billion in the red; most of that would have to be borrowed, causing the debt burden to balloon further. The balance of payments showed a $4 billion deficit, largely due to the long-deprived Hungarians’ rush to buy luxury foreign goods. The really frightening number, however, was the rate of inflation. We grow concerned in the United States if inflation runs a few percent a year. In Hungary, the inflation rate had skyrocketed to 30 percent annually! That meant the average Hungarian could buy only two-thirds the groceries and household goods with forints as they could in the previous year. The sharp decline in the forint’s value was a catastrophe for consumers and prospective outside investors alike. Both the U.S. government and the International Monetary Fund concurred that Hungary’s economic problems could result in a crash and perhaps necessitate a costly bailout by the United States. A similar economic disaster had developed in Mexico the year before, which had turned to us for massive economic aid to avoid defaulting on its loans and going bankrupt. The numbers told the story. Nearly 70 percent of Hungary’s economy was still controlled by the government. Although more than $10 billion had been invested in Hungary from abroad since the end of the Cold War, much more restructuring needed to be done. Selling state-owned industries to foreign entities that would pay dollars, marks, or yen to buy and upgrade Hungarian factories and facilities were seen as ways to transform Hungary’s lagging economy and outmoded industrial sector and boost the country’s financial position. As a result of U.S. and IMF warnings and advice, Hungarian Prime Minister Gyula Horn made crucial new economic decisions in early 1995. He replaced the finance minister and the interim head of the central bank with two Western-trained bankers: Lajos Bokros as finance minister and Gyorgy Suranyi as president of the National Bank of Hungary, both highly respected by their counterparts in many Western capitals. Dubbed the “Dream Team,” a term the press picked up on, and the new appointees didn’t disappoint when they immediately stressed the necessity of reducing Hungary’s large deficits. The new financial team made the privatization of Hungarian industry a top priority; they agreed that the importation of new capital into the Hungarian economy and the infusion of Western managerial experience brought to privatized companies was the soundest way for Hungary to jump-start itself out of its financial dilemma. From that point on, the pace of privatization accelerated. With U.S. urging and consultation, the Hungarian privatization agency, given the green light in 1995, sold forty-two companies in its first four months, which brought in about $620 million of new capital. Most of that money went to repay foreign debt, putting the country on a stronger financial footing. The Hungarian government’s signal that foreign investment was welcome resulted in additional direct foreign investments of $10bn by 1997, reducing government ownership of industry to less than 30%. The size of Greece’s current financial crisis and its potential devastating impact, if not resolved, are much greater than those challenging Hungary or Europe in the 1990s. Hungary’s default would not have threatened European governments or financial institutions. And like Hungary in the 1990s, the need for Greece to reschedule its foreign debt, reduce its public employment, and take unfortunate, but necessary, austerity measures, all take precedence. But, privatization, long overdue, will complement these measures and, most importantly, establish a healthier climate for sustainable recovery and the ultimate restoration of confidence in Greece’s future.

Read the full article →

Sarwar Kashmeri: The European Union’s Fort Sumter Moment

July 28, 2011

In 1776, the founding fathers of the United States made a grand bargain to ensure the birth of a new republic. They agreed to sideline the new country’s black population, even though the Constitution they were about to endorse proclaimed that all men are created equal. This compromise ensured approval of the constitution and the emergence of the United States, but it also left unresolved the existential issue of racial equality which would eventually light a fuse that would explode at Fort Sumter and launch the American civil war. Likewise, the architects of the European Union launched their single currency, the euro, with a grand bargain — currency union without a matching fiscal union. The first ever single currency zone in which monetary policy would be centrally controlled by a European Central Bank, but fiscal policies — prudent matching of revenue and expenses, budgetary responsibility with central oversight, and the ability to intervene if a euro-zone country ran into trouble — were left out of the euro equation. That bargain too left a festering sore — a half-baked single currency — and ensured a day of reckoning. Now, with the economic collapse of Greece, that day of reckoning has arrived. The EU stands at the brink of its Fort Sumter moment. The problems of Greece are truly Olympian. The gentleman’s agreement that underpins the euro requires euro-zone countries to keep their budget deficits to under 3% of their GDP. Greece’s stands at 150%. And that’s just the tip of the iceberg. Tax collection systems are virtually non-existent, its infrastructure is in shambles and the unemployment for Greeks under 25 is a staggering 43%. The country’s economic growth is moving backwards. Its productivity is among the worst in Europe, so its products are uncompetitive, and it is incapable of paying its huge debt or growing out of its present situation. Putting it bluntly, just lending Greece money will not accomplish much. Unless the markets sense a collective EU will to stand behind it, Greece is on track to become the European Union’s first failed state. Greece doesn’t just need loans, it needs help in re-building its infrastructure, in creating jobs, it needs governmental guidance, budgetary and tax oversight. It needs a prolonged period of expensive hand-holding. Greece needs to become a ward of the euro-zone whose members must collectively nurse the patient back to health by setting up European Union level organizations not just to prescribe the medicine, but ensure that it is taken. And that is the crux of the matter. The European Union’s currency union did not envisage using the wealth of well to do parts of the euro-zone to bail out a failing euro-economy. There is only one alternative for the EU, if it wishes to save the euro — a progressively deeper fiscal union. The EU’s success is directly related to the willingness of its member countries’ to give up pieces of their sovereignty for the common European good. 17 EU countries gave up their national currencies to establish the euro. Now it is time for them to finish the job with a fiscal union. The other alternative is to continue to transfer money from richer euro countries’ taxpayers to Greece through loans with little chance of being repaid. And then stand ready to do the same for the other countries such as Portugal, Spain, and Italy, that may soon be on the EU dole. I do not believe European taxpayers from wealthy, largely northern countries will allow this to happen. When they put on the brakes it will mean the end of the euro. And what then? The EU is the product of treaties between sovereign countries. It is not a Federal Republic like the United States was at the time of Fort Sumter. President Lincoln could rally the North with all its industrial might to help preserve the Union. A European Fort Sumter would see the EU melt away like ice on a summer’s day. The EU is arguably the most important geopolitical development of our time. The breakup of the EU would be a disaster for Europe, and for the world. Let’s hope the EU’s leaders use their August recess to think about Fort Sumter, and come back determined to continue on their path of an ever closer European Union.

Read the full article →

WATCH: IMF Chief Discusses Organization’s Shifting Role

July 26, 2011

The International Monetary Fund’s newly-appointed chief sat down for an exclusive Reuters interview to discuss growing concerns over U.S. and Eurozone debt as well as the shifting role of her organization. Christine Lagarde, who stepped into her new role after Dominique Strauss-Kahn’s resignation in May, says that “fiscal consolidation needs to take place” both in the U.S. and elsewhere around the world. “The IMF is extremely relevant in times of crisis,” she notes. “It has to constantly enhance its services…its ability to serve the membership.” Watch Lagarde’s Reuters interview, courtesy of the Council on Foreign Relations , below:

Read the full article →

Corbin Hiar: Stolen State Money: Trillions Lost Annually, Only Billions Have Been Recovered

July 25, 2011

By Corbin Hiar , iWatch News 6:00 am, July 25, 2011 The uprisings of the Arab spring have brought renewed attention to long-standing accusations that kleptocratic regimes throughout the Middle East have plundered their nations’ assets. But recovering those assets — though crucial to the future of these impoverished nations — remains a daunting challenge, according to a recently released report. Crime, corruption, and tax evasion by the global elite cost between $1 trillion and $1.6 trillion and hit poor countries especially hard, says the study, ” Barriers to Asset Recovery .” Yet in the past 15 years, only $5 billion in stolen assets have been repatriated. The report offers advice to policymakers aimed at increasing that lowly rate of return. It was produced by the Stolen Asset Recovery Initiative (StAR), a joint project of the World Bank Group and the Office on Drugs and Crime at the United Nations (U.N.). Like iWatch News’ World coverage on Facebook and get the latest news instantly. The problem, says Raymond Baker, the director of Global Financial Integrity, a Washington watchdog group, is that even in nations like Switzerland that have changed procedures and rules to reduce bank secrecy, “it’s not entirely clear” how foreign governments can get stolen assets back. The first efforts to put the spate of new rules to the test, Baker says, “will probably come from Egypt or Tunisia.” For the impoverished people of both these countries, who recently toppled long-standing authoritarian governments, the stakes are substantial.  U.S. intelligence officials estimate that deposed Egyptian President Hosni Mubarak accumulated between $1 billion and $5 billion during his 30-year reign. London’s Telegraph newspaper reported ex-Tunisian President Zine el-Abidine Ben Ali’s personal wealth at £3.5 billion.That’s the equivalent of $5.7 billion, more than an eighth of Tunisia’s annual gross domestic product . Even those estimates of ill-gotten wealth “[do] not capture… the societal costs of corruption,” the report adds. “Theft of assets by corrupt officials, often at the highest levels of government, weakens confidence in public institutions, damages the private investment climate, and divests needed funding available” for investments in public health, education, and infrastructure. And “there are many obstacles to asset recovery,” said Kevin Stephenson, a senior financial sector specialist at the World Bank and the lead author of the study, in a press release . “Not only is it a specialized legal process filled with delays and uncertainty, but there are also language barriers and a lack of trust when working with other countries.” The StAR report, released in late June, documents the few multilateral international legal instruments dispossessed governments have at their disposal. Chief among them: the U.N. Convention against Corruption, the U.N. Convention Against Transnational Organized Crime, and the Financial Action Task Force (FATF) on Money Laundering, an intergovernmental organization that develops policies to combat illegal cash flows. But they’re not worth much, according to Baker. “So you walk into a bank with those two treaties and the task force’s 40 recommendations and plunk them down, and say, ‘I want to recover money stolen by my corrupt former head of state.’ Then the banker raises his eyebrows and says, ‘You want to do what?’ ” As Baker suggests, financial institutions may be reluctant to honor international standards that are not even followed by many of the governments who seek to enforce them. The compliance rate for one important FATF recommendation is troublingly low, as the U.N. Office on Drugs and Crime pointed out in a 2009 report for the StAR Initiative. More than three-fifths of the 124 jurisdictions evaluated were not monitoring accounts held by politically powerful people. This is a challenge for regulators, even in the U.S., according to Sen. Carl Levin (D-Mich.). “Weakness in our financial regulations have allowed these [politically powerful people] to move millions of dollars into or through U.S. bank accounts, often by using shell company accounts, attorney-client accounts, escrow accounts, or other accounts, or by sending wire transfers that shoot through the system before our banks react,” he said in a 2010 hearing on international corruption. Often times, strong domestic legislation coupled with effective bilateral communication has proven to be a more powerful tool than multilateral international agreements. The report, which was largely scrubbed of specific names and jurisdictions, gives the example of a Swiss law that in 2005 allowed authorities “to declare that a former head of state, his family, and associates constituted a criminal organization” and could therefore have their property confiscated. The example sounds similar to the case of the late dictator General Sani Abacha , whose fortune was seized by the Swiss at the behest of the Nigerian government and then returned to Nigeria for use in poverty-reduction programs there. The World Bank did not respond to iWatch News’ requests for comment. The report may yet go some ways towards improving the implementation of international agreements to repatriate stolen national assets and encourage the spread of effective national legislation and cooperation. But for now Baker believes closing the loopholes that allow corrupt government officials to get away with it in the first place is more important than trying to recover what’s already been lost. For example, authorities in India, from which he he recently returned, have been “all exercised about recovering stolen money , but they’re not going to get very much. By all means, go for it,” Baker said, “but it’s far more important to curtail the outflow.” Read more investigations at iWatch News

Read the full article →

Census Bureau: GOP Budget Guts Economic Data

July 15, 2011

WASHINGTON — The House Republican budget plan will do “irrecoverable” damage to the nation’s economic data, the Census Bureau warned in a harsh internal assessment obtained by The Huffington Post. Economists and statistics experts had already sounded the alarm over a 25 percent cut to the Census budget after an Appropriations subcommittee proposed it, warning it would endanger the nation’s economic census — the benchmark for nearly all the country’s financial measurements. But the full committee went ahead approved the $294 million reduction this week as part of a Commerce, Justice and Science budget bill that cuts other agencies far less dramatically. “These cancellations would be irrecoverable and would force the complete abandonment of the economic census for the 2012 cycle,” the Bureau warned in an uncharacteristically strong statement leaked to The Huffington Post. “We would hinder our nation’s ability to measure its economic growth and well-being,” the bureau said. “These statistics are critical to the competitiveness of U.S. businesses and industries.” The economic census surveys some 85 percent of the country’s economy and provides the data for determining the Gross Domestic Product. The bureau also releases monthly, quarterly and annual reports on retail, trade, manufacturing, construction and other parts of the economy. “Without the economic census, it would be difficult for the Census Bureau and other federal agencies to provide timely and accurate information on the health and strength of the U.S. economy,” the bureau warned. An Appropriations Committee spokeswoman responded that the bureau was pulling a Chicken Little act. “Bureaucratic government agencies will almost always claim the sky is falling when their budgets are cut,” said spokeswoman Jennifer Hing. “Contrary to this misleading statement by the Census Bureau, businesses and industries will not be adversely affected by this proposed cut.” “The Census Bureau just completed a costly census that was riddled with questionable management decisions, and will not have to complete another decennial census for nine more years,” Hing added. “The Committee believes that the funding level in the bill is adequate for the Census Bureau to maintain core operations for the next fiscal year, while saving tax-dollars that can be used on higher priority programs and to reduce the nation’s crushing deficit.” The bureau’s budget for 2011 is $1.15 billion. President Obama recommended cutting it to $1.02 billion for 2012, but the committee went even deeper, settling on $855 million — $169 million more than the president’s cut. The economic census alone costs $124 million, meaning that even after cutting that, the bureau would have to find other things to eliminate. Committee Democrats found the proposed slashes indefensible. “The economic data the bureau provides is critical,” said Ryan Nickel, a spokesman for the committee minority. “Republicans are once again kicking expenses down the road for somebody else to deal with. This ‘cut-at-any-cost’ budgeting is incredibly short-sighted.” Observers suspect that in normal times, the Senate would restore enough of the cuts so that the economic data could still be collected. But with such turmoil around the nation’s spending, some worry that anything could happen. If the cut goes through, the Census Bureau noted that businesses and decision makers would lose one of their best tools at a time when the economy is in especially bad shape. “Businesses would lose an important tool to make investment and production decisions, and communities would lose a critical source of information for economic forecasting and planning,” the bureau said. “Trade associations, companies, and researchers use the statistics for economic planning, market analysis and investment and production decisions.” Such data has been collected for some 200 years, except for when the Eisenhower administration caused a furor in 1953 by suspending Census collection. The outcry by business leaders then led to a commission that reinstated the data collection. The U.S. Chamber of Commerce has come out against the proposed cuts.

Read the full article →

John McCain Takes Issue With Michele Bachmann

July 15, 2011

Sen. John McCain (R-Ariz.) took issue with Republican presidential candidate Michele Bachmann’s unwavering opposition to raising the debt ceiling in an interview with National Review Online released on Thursday. The conservative congresswoman has already voted against lifting the deficit limit and has signaled she has no intention of shifting her position on the issue. The AP recently reported that Bachmann said during a stop in Iowa that she’s not concerned about the nation defaulting on its debt. “There are Republicans who are committed, like Michele Bachmann, to vote against raising the debt limit under any circumstances,” said McCain on the state of debate on the deficit issue in the U.S. House of Representatives. He suggested that Bachmann is acting “sort of like Senator Obama did.” Then-senator Barack Obama cast a vote against raising the debt ceiling in 2006. White House spokesman Jay Carney said earlier this year that the president now considers the vote “a mistake.” Back in April Carney explained , “He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration’s policies, you can play around with.” Around the same time, Obama himself addressed his past opposition to raising the debt ceiling in an interview with ABC’s George Stephanopoulos. “I think that it’s important to understand the vantage point of a Senator versus the vantage point of a president,” he said. “That was just a example of a new Senator, you know, making what is a political vote as opposed to doing what was important for the country. And I’m the first one to acknowledge it.” Below, video of Bachmann’s first television campaign ad of the election season in which she says, “I will not vote to increase the debt ceiling.” WATCH:

Read the full article →

Moisés Naím: Malthus, Marx, and Markets

July 7, 2011

I’ve just got back from China. Like most other regular visitors, I am amazed at the lightning speed of the changes in that country. My last visit was not that long ago and yet this time I noticed further enormous changes. This is what happens when a giant economy grows by 10 percent every year. I visited China for the first time in 1978, when its economic reforms were just being introduced. Cars were rare and the streets were packed with swarms of cyclists, all dressed in a uniform of either navy or olive green. Today those same streets are lined with skyscrapers with the world’s boldest architecture, crammed with cars, and people are dressed in every color and style imaginable. On my first trip, China’s economy was only 40 percent of that of the Soviet Union. Today it is four times larger. While it remains to be seen how sustainable China’s economic boom ultimately is, some of its consequences will endure. The most fundamental change is that millions of Chinese have escaped poverty, thus joining a middle class that while much poorer than in Europe or the United States, has for the first time the means to consume more food, medicine, electricity, cell phones, or toys. While an economic crisis or a slowdown will shrink it, it will not wipe it out completely. This is not a China-only phenomenon: the expansion of the middle-class in fast-growing poor countries is a global trend . India, Turkey, Vietnam, and Brazil are just a few in a long list of nations that now have a middle class larger than ever before. But will the ascent of the new middle class come with unbearable environmental and social pressures? There are three ways to answer this question. The first was offered by Thomas Malthus. In 1798 he argued that if the population grows faster than food production, inevitably famine, disease, and wars will “rebalance” the situation. A 1972 book titled The Limits to Growth predicted that oil would be exhausted by 1992 and a major Malthusian catastrophe would occur around 2000. Obviously, Malthus and his followers underestimate the impact of new technologies. The green revolution in agriculture, for example, meant that grain production in poor countries doubled in just 20 years. In general, more food per capita is produced today than ever before and more technologies enable the exploitation of natural resources that until recently were inaccessible. The second answer is that the problem is not about production but distribution. A minority consumes far too much and the majority of the world consumes too little. For example, the United States, with only 4.6 percent of the world’s population, consumes 25 percent of the yearly global energy output. Each German uses nearly nine times more energy than every Indian, and 30 times more than a Bangladeshi. From this perspective, Marx was right: consumption should be more equitably distributed and the state has to intervene to ensure that this happens. The third is a market-based response: prices and incentives will solve the problem. If there are shortages, prices go up and consumption is thus forced to go down as less people can afford the same quantities as they did when prices were lower. Moreover, higher prices create incentives to both be more efficient and to invent technologies that enable more production at a lower cost. If the price of oil continues to rise, wind, sun, and sea can compete with hydrocarbons for the generation of energy . If cotton prices go up, more farmers will be stimulated to plant more cotton. This, in fact is already taking place and in many areas we have witnessed almost miraculous growth of supply. And new technologies are creating more efficient and environmentally friendly manufacturing processes. The problem, however, is that market adjustments are brutal and are a threat to the poorest consumers for whom any decrease in consumption (forced by higher prices) means going hungry. Neither does it solve the problem of global market failures: the oceans are deteriorating at an unprecedented rate due to overfishing and their indiscriminate and largely unregulated exploitation. And we know what is happening with the CO2 emissions warming up the planet. Markets alone will not solve these problems. Neither Malthus nor Marx nor the market give us adequate answers to the difficult questions posed by the explosive growth of countries like China, the expansion of the middle-class in many of them, and the resulting increase in global consumption. Technological responses stimulated by the market may be too late to avoid serious social and environmental damage. Excessive state intervention to correct inequalities can end up fatally distorting markets and stifling the innovations we badly need. And, without state intervention, market failures may make the planet unlivable. Rigid ideological attachments will not help us find the solutions. We must draw on all the ideas, invent new ones, and give free rein to pragmatism and experimentation. In the past, humans managed to find solutions to unprecedented problems. There is no reason to assume that we will not be able do it again. Moisés Naím is a senior associate in the International Economics Program at the Carnegie Endowment for International Peace. He tweets at @moisesnaim.

Read the full article →

Gregory C. Pappas: What Greece Really Needs From Us Right Now

July 1, 2011

An article I read on CNN.com prompted me to take stylus to iPad and begin writing this commentary. The article talked about Greek Americans to the rescue — organizing to help the homeland in her time of need.

 The headline was intriguing enough to warrant a click through from my Facebook newsfeed. Unfortunately, the story itself was not. Instead of a story about Greek American innovators, investors, entrepreneurs and old fashioned business people organizing to use their knowledge, resources and skills to help, I read about people planning their summer holidays to “go and spend their dollars in Greece” and not elsewhere. 

That’s just baloney. Or in the spirit of this story, loukaniko.

 A couple of thousand Greek Americans flying USAirways, Continental or worse yet Lufthansa… Staying with yiayia or Theia Marika in the village outside Tripoli, and dropping a few hundred euros (and later complaining about the cost) for a bottle of whiskey at the bouzoukia isn’t going to help Greece. 

No. Greece needs more than that right now.

 For starters, you can stop feeding the stereotype beast. And we are all guilty. Your cousin Niko might be lazy and sit in coffee shops all day drinking his frappe (or freddo if he’s hip) — but this is not a fair description of the vast, vast majority of Greeks.

 In fact, the Organization for Economic Cooperation and Development (OECD) ranks the Greeks second in the world — that’s right, the entire world and that includes the USA in it — as the second hardest working people after the South Koreans. If you don’t believe me, take it from Forbes .

 That would make your cousin Mitso in Astoria or on Halsted Street much lazier than cousin Niko — the one in the village back in Greece.

 Secondly, I’ve heard over and over again that the “coffee shops are full and the bouzoukia are jammed.” Yes, they very well might be — and no one’s saying that everyone in Greece is suffering and that some people can’t afford a cup of coffee or a night out, but the simple truth of the matter is there are less coffee shops today than there were a year ago. 

And with regards to the ubiquitous bouzoukia… At one time in Greece’s recent memory, a night out on the town could have meant a weekday. Today, you’re lucky to find open bouzoukia even on a Friday night, making the few clubs that are still operating full and “jamming” on a Saturday — the only night of the week they are probably working.

 Finally, enough with the jokes about Greeks not paying taxes. The truth is (and statistics prove it) that it’s the richest of the rich Greeks who don’t pay their taxes, not the average citizen. Unfortunately, the violations of these doctors, lawyers, nightclub singers and others in high society are so egregious that it’s their antics that make the front pages of the New York Times and soon — we all start fanning the rumors and start to believe that no Greeks pay taxes.

 Besides, let’s see what happens when the role of the IRS is diminished in this country. Watch — just watch — how law-abiding taxpayers quickly become tax-evading lawbreakers. And how about all those Greek-owned cash businesses… Diners in New Jersey, restaurants in Chicago, donut shops in Boston… Are we naive enough to believe that all (Greek) Americans pay all of their (our) taxes? Who are we kidding? Furthermore — remove highway patrol from America’s roads and see how quickly they turn into the autobahn. It’s human nature, folks — Greeks are breaking the law because they can. They are evading taxes, and driving like madmen, and parking on sidewalks, and smoking in no-smoking areas — because they can. Because they know there is no fear of prosecution. I’m not becoming an apologist for Greece and Greeks. There are definitely problems and I’ll be the first to admit that Andreas Papandreou started a huge party that is now coming to an end and someone’s got to pay for it. Napoleon Linardatos talks about the party eloquently here. It’s definitely worth a read. And yes — the public sector is out of control, the entitlements, pensions, retirement age requirements are insane — to the point that an entire generation of people have been indoctrinated (brainwashed) into believing that this is normal that the government is there to take care of its citizens from cradle to grave. But again — I don’t blame the average citizenry. I blame the corrupt politicians vying for votes and the corrupt union bosses who lobbied for more, more, more to fuel their populist flames and increase their own unions’ membership ranks and power. It’s a sick and vicious cycle that ensnared common people by feeding them a sweet tasting fruit that was too good to say no to. That fruit was a job for life — stability for a son or daughter in exchange for a vote in an uncertain world. It’s a fruit that any vulnerable person would taste — Greek or non-Greek.

 What Greece really needs right now from the Diaspora — (and I’m tugging at your philotimo strings right now) — is a series of serious initiatives that are both possible (given our ingenuity and success), and realistic. A trust fund for our cultural heritage. Let’s gather the wealthiest Greeks in America and the world and the financial whiz kids that populate Wall Street — there are about a dozen billionaires I can name off the top of my head right now — and engage their expertise to create a revenue-generating fund to serve both as collateral and support for the Parthenon, the Palace of Knossos, the Akrotiri settlement on Santorini and other sites critical to Greece’s cultural heritage. A $100 million fund (owned and managed by the donors) per site could generate $5 million annually at 5% interest — enough to preserve the sites, keep them open with experienced, private staff — and out of the grasp of the public sector that is often subject to civil strife, strikes and shortages in staff and resources. A venture capital fund to support Greek entrepreneurs. Israel does it. India does it. And their diaspora communities are nothing compared to ours and the passion, love and dedication we have for our homeland. Let’s gather some of the nation’s top Greek American venture capitalists–and here too, I can name a dozen or so — to create a fund called Greece Future — because we believe in the future of Greece and we want to invest in the future of Greece. This fund could seek out the great Greek innovators and encourage them to stay and build their businesses in Greece and not be forced to re-locate to Silicon Valley or London. A real Diaspora Bond mechanism for low and high level investors to support the future of Greece Again, other diaspora communities of nations like Israel and India have a bond mechanism that allows average citizens to support their homelands with shares as low as $1,000. Why can’t we do this? The truth is, it was proposed already — by the Greek Government. The problem is that it’s the same, corrupt Greek government bureaucrats that got the country into this mess in the first place that want to the run this proposed “Diaspora Bond.” Message to the Ministers who propose this: When hell freezes over I’ll give you my hard-earned money to build your villa and buy your apartment overlooking the Acropolis. (You know who you are). What I propose is something like Israel Bonds. Supported primarily from U.S.-based Jews, the Development Corporation for Israel/State of Israel Bonds is one of the world’s most dependable economic financial vehicles with 60 years of success. Worldwide sales have exceeded $30 billion and proceeds have played a vital role in transforming Israel into a regional superpower with unparalleled infrastructure. The key to the success of this proposal: diaspora involvement in the investment and management of the fund. *** These are but three ideas — and certainly there are others. Of course, in order for any of these ideas to materialize, you need stability in Greece and a government willing to support the change that is necessary. Although I have a lot of faith in the conviction and dedication of the country’s current Prime Minister George Papandreou, it is those around him who I fear will be most resistant to change. What I know about Papandreou is that he cares about his country deeply. When he speaks, his passion for Greece is evident. Unlike his father, he appears not to have a corrupt bone in his body. I may be wrong — or I don’t know enough to offer a valid opinion. Of course, it’s easy for me to speak (or write this) from my apartment on Michigan Avenue in Chicago, where I look out the window and see the streets bustling with traffic, people on their way to work.

It’s easy for me to speak about Papandreou — without feeling the pain that so many Greeks have felt from the austerity measures that his government has passed; or to feel the burning of the tear gas that his police forces have lobbed at crowds who were merely there expressing their inalienable democratic rights. And I do apologize to the Greeks who might be offended by my simplistic opinion of their Prime Minister, which is based solely on what I see and read — primarily in the international media — that he is a forward-thinker, an internationalist and a product of a global upbringing who has a big picture approach to Greece and is making important decisions today, that will be written about in the history books a century from now. I want to believe that his decisions will be right for Greece — albeit a difficult pill for many already impoverished citizens to swallow. I should also note that my opinion is not one that is supporting the political party Pasok, or its socialist tendencies and policies, which I believe were the cause of Greece’s demise. My opinion is in support of an individual who I believe is “big” enough to realize that it was his own father’s policies that resulted in the Greece of 2011 and that he must stare the ghosts of the past in the face, tell them he is no longer afraid of them and create the new Greece. Something else I believe in is the spirit of Greece and the ultimate force that brings her people together in times of crisis and need. Anyone who doubts me need only read the last hundred years of this tiny nation’s history and its ability to not only reinvent itself, but to play an important role in the history of the entire world. Furthermore, I do believe that what Greece faces today is child’s play compared to the trials and tribulations of the earth-shattering events of 1922 when the humanitarian crisis in Asia Minor spilled into the Greek islands and mainland and millions of impoverished Greeks who fled war were sleeping amidst the ruins of the Parthenon and housed temporarily in theaters and other public buildings. Furthermore, Greece was again tested a few decades later during the German occupation and ensuing Civil War during which time one eighth of the entire population perished and over 3000 towns and villages were burned to the ground. Mark Mazower, the Columbia University historian and expert on Modern Greece said it much more eloquently than I ever will in his New York Times editorial . Yes, these are trying times, but Greece will prevail.

Read the full article →

Greek Parliament Approves Austerity Bill

June 29, 2011

ATHENS, Greece — Greece’s lawmakers approved a key austerity bill Wednesday needed to avert default, despite a second day of rioting on the streets of Athens that left dozens of police and protesters injured. The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors due from last year’s financial rescue. Another bill has to be passed Thursday for the government to secure the money. The bill to cut spending and raise taxes by euro28 billion ($40 billion) over five years has provoked widespread outrage, coming after a year of deep cuts that have seen public sector salaries and pensions cut and unemployment rise to above 16 percent. While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. Authorities and emergency services said 21 police and 15 protesters were injured and transferred to hospitals, while 26 people were detained. The European Union and International Monetary Fund have demanded both bills pass before it releases euro12 billion of bailout funds – without the money, Greece was facing defaulting on its debts by the middle of next month, potentially triggering a banking crisis, particularly in Europe, and turmoil in global markets. “We must avoid the country’s collapse with every effort,” Prime Minister George Papandreou said in his speech prior to the vote. “Outside, many are protesting. Some are truly suffering, other are losing they privileges. It is their democratic right. But they and no one else must never suffer the consequences and for their families of a collapse. We must do everything so that there is no freeze in payments.” The Greek vote was greeted by a sense of relief in Europe’s capital cities, who have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself. “That’s really good news,” German Chancellor Angela Merkel said when told of the outcome of the vote on her way out of an economic forum in Berlin. Germany is Greece’s biggest creditor. Equally, relief was the main response in markets too. Soon after the vote, the euro was trading at a fairly elevated level around the $1.44 mark while stock markets around the world were posting big gains. In Greece, the main Athens stock market closed up 0.5 percent at 1,264, while borrowing costs eased some 80 basis points from a morning high, with the yield on 10-year bonds settling at the still high 16.55 percent. “The fact that the Greek parliament has passed the government’s medium-term fiscal plan clearly reduces the chances of a near-term disaster,” said Ben May, European economist at Capital Economics. The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted “present” – a vote which backs neither side. A sole deputy from the governing socialists, Panayotis Kouroublis, dissented over government plans to sell a further stake in Greece’s state electricity company and was soon expelled from the parliamentary group by Papandreou. In a dramatic vote, socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against the bill, overturned his decision at the last minute and backed the package, saying he had been swayed by the prime minister’s comments in parliament. A conservative deputy broke ranks with her party’s line to also vote in favor, bolstering the government’s majority of five seats in the 300-member parliament. In the run-up to the vote, violence engulfed the square outside for the second day, while services across the country ground to a halt in the last day of a 48-hour general strike. Riot police fired volleys of tear gas at swarms of young men who were hurling rocks and other debris as well as setting fire to trash containers. After a lull in the fighting around the time of the vote, the riot started up again with intensity. Protesters threw flares and orange and green smoke bombs, and a few sprayed fire extinguishers at police, who picked up rocks and tossed them back. Heavy clouds of tear gas wafted over the chaotic scene in front of parliament. ____ Christopher Torchia, Demetris Nellas and Menelaos Hadjicostis in Athens and Geir Moulson in Berlin contributed.

Read the full article →

Companies Moving Jobs To U.S. From China To Avoid Inflation

June 28, 2011

MILWAUKEE (Scott Malone) – On a recent morning at Master Lock’s 90-year-old factory in Milwaukee, a cluster of machinery was whirring, every 2 seconds spitting out one of the combination locks used by American high schoolers as the company readied for the back-to-school rush. The seven-day-a-week, three-shift-per-day whirlwind of activity marked a change from two years ago, when the machine normally ran for just a few hours a day because the unit of Fortune Brands Inc was ordering more padlocks from suppliers in China instead of making them. Why move production from the world’s low-cost workshop back to a unionized U.S. factory where wages are six times higher than in China? Efficiency: The machine in Milwaukee is about 30 times as fast as the Chinese factories the company had been buying from, more than making up for the difference in wages. “I can manufacture combination locks in Milwaukee for less of a cost than I can in China,” said Bob Rice, a senior vice president at the largest U.S. padlock manufacturer. The factory has added about 78 workers over the past two years, boosting its workforce to 440. That is a small bit of good news for the long-suffering U.S. manufacturing sector, which shed about 2 million jobs, or some 14.6 percent of its employees, in the last recession. It has not recovered since and now employs 11.7 million people, down 34,000 from the recession’s official end in June 2009. Master Lock is not alone. General Electric Co and Boeing Co are also part of the small group of U.S. companies that are boosting production at their U.S. factories. A variety of factors are driving the shift, including rising wages in parts of Asia, surging fuel prices and the complexity of transporting goods across the Pacific. (Reuters Insider show: “Made in USA” Making Comeback as U.S. Manufacturers Expand: link.reuters.com/nuf42s ) ECONOMIC IRONY “What you’re starting to see is the economics shifting more into the United States’ favor regarding sourcing from the United States versus sourcing from a low-cost country,” said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a Washington trade group. There is an element of irony here. The United States’ sluggish economic recovery, coming at a time when emerging economies including China and India are enjoying brisk growth, is helping its manufacturers to close the cost gap on their foreign rivals. China’s inflation rate hit 5.5 percent in May, well ahead of the United States’ 3.6 percent headline rate. With Chinese wages rising at 15 to 20 percent per year, the labor costs of manufacturing in the two countries could pull even by 2015, a Boston Consulting Group study predicted in May. Rising oil prices, which drive up the cost of shipping goods by boat or plane, are also eating in to China’s edge. Automation also helps tilt the balance toward the United States. Bruce Crass, the Master Lock plant’s general manager, estimated that his plant — where the average worker oversees the operation of six high-speed machines — produces 24,000 locks a day with about one-sixth the number of workers needed by the company’s Chinese suppliers and rivals. Master Lock today makes about 55 percent of its padlocks in North America — in Milwaukee and at a satellite location in Nogales, Mexico — with the rest made in China. That is down from a 50-50 split two years ago. To be sure, these companies are the exception in the U.S. economy, where businesses from Apple Inc to Nike Inc focus on design and marketing, leaving production to independent contractors. Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

World Bank Will Provide $1 Billion For Insurance In Mideast Investment

June 27, 2011

WASHINGTON – The World Bank’s political risk guarantee agency said on Monday it would mobilize about $1 billion for insurance coverage for countries in the Middle East and North Africa to encourage foreign direct investment. The Multilateral Investment Guarantee Agency, or MIGA, said its underwriters were in Egypt, Jordan, Morocco and Tunisia for discussions with the private sector, regional agencies and state-owned enterprises. “Restoring investors’ confidence is critical to the medium- to long-term economic and social development of the Middle East and North Africa,” said Izumi Kobayashi, MIGA’s executive vice president. Countries across the region are trying to attract more foreign investment to help create jobs following mass protests earlier this year that toppled rulers in Egypt and Tunisia and sparked unrest across the region. Foreign investors use political risk insurance to cover themselves against loss of assets through political unrest, violence, expropriation, nationalization and other government actions. (Reporting by Lesley Wroughton; Editing by Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

IHOP To Expand In The Middle East

June 22, 2011

GLENDALE, Calif. — DineEquity Inc., which owns the IHOP chain of restaurants, said Monday it plans to open 40 new IHOP stores in the Middle East with Kuwait-based franchiser M.H. Alshaya Co. in its first major expansion outside of the U.S. The restaurants will begin to open over the next 12 months in Kuwait, Saudi Arabia, Jordan, Lebanon, Qatar, the United Arab Emirates, Oman, Bahrain and Egypt. No financial terms were disclosed. DineEquity, which also operates Applebee’s Neighborhood Bar and Grill, has previously only opened stores in the U.S., Canada and Mexico. But it has been looking further afield lately, opening stores in Puerto Rico, the U.S. Virgin Islands and Guatemala. The company plans to open 55 to 65 new restaurants in 2011, the majority in the U.S.

Read the full article →

I.M.F. Hit By Sophisticated Cyberattack

June 11, 2011

WASHINGTON — The International Monetary Fund, still struggling to find a new leader after the arrest of its managing director last month in New York, was hit recently by what computer experts describe as a large and sophisticated cyberattack whose dimensions are still unknown.

Read the full article →

China Sees No End To Rule Of Communist Party

June 9, 2011

BEIJING (Reuters) – China’s Communist Party sees no reason why it cannot stay in power indefinitely, having made the nation into the envy of the world with its economic success, one of the Party’s top official historians said on Thursday. Li Zhongjie, a deputy head of the Party’s History Research Center, made it clear that China will use the impending 90th anniversary of the Party’s founding as a time for rousing pride, rather than reflection on a history that has spanned war, revolution, mass famine and deadly purges. Under the Party’s rule, China had made leapfrog developments, Li told a news conference, and he said it was foolish to expect any party to want to give up power. “Over the last 90 years, especially the last 30 years of reform and opening up, we have made major achievements. This is something the world basically recognizes,” Li said, ahead of the Party’s anniversary of its 1921 founding on July 1. “I could ask, ‘Mr. Obama, does your Democratic Party still want to contest the election’? Do you still want to stay in power? They would think that a weird question. Of course our Party hopes to remain in power. “…Objectively, the issue is rather: how is your rule, and how effective is it? Is it welcomed by the people? Are you running the country well, or into the ground? The Communist Party has built China to what it is today. Many countries in the world are extremely envious. So why can’t we carry on? It’s a very simple question.” His impassioned answer drew applause from the audience, made up mainly of state media and Chinese academics, with a smattering of foreign reporters. While the Party’s rule has seen China become the world’s second-largest economy, lift millions out of abject poverty and put men in space, critics say it has come at the expense of individual freedoms, with the Party brooking no dissent. Under the late Mao Zedong, China went through disasters such as the 1958 Great Leap Forward campaign to catapult it to prosperity, but ended in a three-year famine in which an estimated 30 million people starved to death. “Objectively speaking, Comrade Mao made some mistakes later in his life, which created major damage,” Li said. “But looking at Mao’s whole life, his achievements should be put first, and his mistakes second … He established ‘New China’ and socialism’s basic system. “We should ‘seek truth from the facts’ in analyzing and researching the lessons from Mao’s mistakes,” he added. “What Mao hoped to do, we should ensure we do even better.” Pressed after the news conference on whether China would one day set up a public memorial to those who suffered during the Great Leap Forward, or the chaos of the 1966-76 Cultural Revolution, Li answered cryptically: “We are making overall plans. It’s being considered.” But there would be no atonement for the bloody crackdown on pro-democracy demonstrators around Tiananmen Square in 1989, which the Party these days labels a “political disturbance.” “We have already reached a solemn conclusion,” Li said. “There’s really nothing more to say.” (Editing by Nick Macfie)

Read the full article →

Controversial Crude Pipeline Springs Second Leak

May 31, 2011

(The Canadian Press) — TransCanada Corp. is grappling with another pump station leak that has shut down its Keystone pipeline, as it seeks to convince U.S. authorities that a controversial expansion will be environmentally safe. The Calgary-based company (TSX:TRP) said Tuesday it has suspended crude oil shipments along Keystone while it completes repairs and cleans up oil that spilled at a Kansas pumping station. The latest spill comes just 2 1/2 weeks after the major energy shipper experienced a similar problem at a pumping station in North Dakota. The failure of a three-quarter inch fitting in early May was responsible for a leak of 500 barrels of crude at that pumping station. The more recent leak spilled only a about 10 barrels of oil, although TransCanada had originally said Tuesday that as much as 40 barrels were released onto the pump station’s property. “Unfortunately, on this weekend (in Kansas), it was a half-inch fitting — a different type of fitting — that broke, resulting in some crude oil being released onto our property,” said TransCanada spokesman Terry Cunha. Keystone normally carries between 400,000 and 450,000 barrels per day of Alberta crude to refineries in Illinois and a major storage hub in Oklahoma. It has capacity to carry 591,000 barrels per day. “We don’t expect (the disruption) to have any impact on our ability to deliver for our customers,” Cunha said. News of the Keystone closure was one of the reasons the price of benchmark West Texas Intermediate crude for July delivery gained US$1.82 to US$102.41 per barrel on the New York Mercantile Exchange Tuesday afternoon. The energy industry has been under increased scrutiny recently, with a series of high-profile spills grabbing headlines — from the huge BP offshore well blowout in the Gulf of Mexico more than a year ago, to the Enbridge Inc. (TSX:ENB) pipeline rupture in Michigan last summer, to a major spill on the Rainbow pipeline in northern Alberta a month ago. Environmentalists and landowners in several U.S. states oppose TransCanada’s US$7-billion plan for Keystone XL, which will double the system’s capacity and extend its reach further south to refineries in Texas. The U.S. State Department is expected to decide on Keystone XL later this year. The chief executive officer of the Canadian Chamber of Commerce is set to speak to the Calgary Petroleum Club later Tuesday on the need for a Canadian energy strategy. “Where we really need a lot of action right now is in the United States, particularly with Keystone XL,” Perrin Beatty said in an interview ahead of the speech. He said this would potentially allow for Canadian oil to displace about 40 per cent of crude imported from the Middle East into the U.S. “And it’s not only a matter of economic security for the United States, but a matter of national security as well, because today it is dependent on oil from regions of the world which are unstable and where the source of supply is far from assured.” All major construction projects are going to encounter some degree of NIMBY — Not in My Back Yard –attitudes from the public, but pipelines are by far the safest way to transport crude, Beatty said. “In terms of the environmental impacts, they’re far easier to control and to mitigate by pipeline than by moving it in any other way, and what the Canadian pipeline companies have demonstrated is that where there has been a problem, they’ve acted very quickly to try to clean it up.”

Read the full article →

Gemma Godfrey: Russian Investment Opportunities: The Drivers and the Hidden Gems

May 31, 2011

From the world’s best performing index in the first three months of this year, to a laggard this quarter, the Russian index has offered dramatic returns as well as downside risk. What has driven investor sentiment and what are many investors missing? The World Leader Slips to World Laggard Russia’s RTS Index was the world’s best performing index in the first three months of this year but has now fallen by around 11% in value so far this quarter (Source: Bloomberg). Moves in this market are often attributed to sentiment over the oil price due to the significant revenues generated by the country exporting this commodity. Therefore speculation over economic growth (read: oil demand) is highly influential. This year has been no different. Turmoil in the Middle East can be attributed as one of the main drivers of a strong rally in oil in the first quarter and concerns over economic growth has caused a reversal since that time. However, is this too simplistic a view and aren’t there other factors to which an investor in Russia should be paying attention? Beyond Oil It is clear to see why investors place so much emphasis on the oil price as a dictator of Russia’s financial health. Supplying some 11.4% of the world’s oil supply last year, Russia is the ” biggest single source outside the OPEC cartel .” Although official figures calculate its contribution to Russia’s GDP at 9% , it is important to be aware that speculation over tax avoidance suggests the value may be nearer to 25% . Nevertheless, what is often overlooked is the specific oil price factored into their budget. For this year, a price above $75 /barrel will produce a deficit reduction. With Brent currently standing at $115 /barrel, a fall in the Russian Index in reaction to a fall in the oil price to anything above $75/barrel may be missing the point. Boosting Ties with Iraq With Russian oil fields maturing and production growth resting heavily on foreign investment , the country is looking externally for new sources. Iraq offers potential opportunities and TNK-BP , Russia’s 3rd largest oil producer and BP Plc’s 50-50 joint venture, isn’t holding back. The relationship between the two countries dates back many years and in 2008 Russia wrote off most of their $12.9bn debt mainly generated pre-gulf war from the Saddam Hussein government purchases of Soviet weapons . Interestingly, last October the Russian President, Dmitry Medvedev announced his country was ready to strengthen co-operation with Iraq, the same month TNK-BP gained the right to bid for 3 natural gas areas in the region, Mediating the Exit of Qaddafi Within the political arena, Russia has been just as active. In addition to fighting for a stronger developing market influence at the IMF, Russia has offered its services to facilitate the exit of Qaddafi from rule in Libya. This is the first time it has shown support for the NATO-led military campaign after abstaining from UN Security council vote in March which authorised the intervention and accusing NATO of violating the resolution by backing anti-Qaddafi rebels and causing civilian casualties from air raids. Due to the belief that Qaddafi has ” forfeited legitimacy “, they are willing to negotiate his fate with members of his entourage. Evidence of the country’s powerful network, the value of their political clout has been highlighted. Driving the Agriculture Market Back to commodities but from a different angle, the Russian weather is an influencer to watch for investing in the agriculture markets. Fine weather has prompted an upward revision of Russian grain production with the Federal Hydrometerological Center reporting the warmer weather has improved the prospects for crops. This has led to speculation that Russia’s ban on grain exports may be lifted on 1 July . Wheat future prices saw double digit losses. The Chinese Buyer One particular potential buyer of Russia’s resources is China, state media reported last Monday. China Investment Corp (CIC), the country’s $300bn sovereign wealth fund, was set up in 2007 to invest some of the country’s massive foreign exchange reserves. With the world’s largest foreign capital resource, at $3.0tn , they are keen to find better sources of return and commodities to fuel their rapid economic growth. G-8 Bullishness Boosting Appetite for Risk Despite these many factors which may influence Russia’s outlook, financially, economically and politically; its index continues to exhibit a strong correlation to the oil price. This week we’ve seen oil (and Russian equities) respond positively to the declaration by the Group of Eight that the global recovery is strengthening . But to differentiate between short-term over-reaction and more logical fundamental moves, being aware of all the issues will equip you with the insight to navigate this volatile but potentially profitable market.

Read the full article →

Japan, EU Set To Talk Free Trade Agreement

May 28, 2011

BRUSSELS — Japan and the European Union agreed at a summit meeting Saturday to begin negotiations on a free trade agreement that would deepen economic ties between two of the world’s largest economies. As a bloc, the EU is the world’s largest economy; Japan is number four. Negotiations will be preceded by what the leaders called a “scoping exercise” to ensure that both side share the same goals and level of ambition for the negotiations. At the summit, held in the picturesque Castle of Val-Duchesse, the leaders also agreed to work toward greater nuclear safety worldwide and to create closer political ties. The meeting was attended by Japanese Prime Minister Naoto Kan; Herman Van Rompuy, president of the European Council; and Jose Manuel Barroso, president of the European Commission. “Radiation does not stop at national borders, and neither should our collective responsibility,” Barroso said at a joint press conference after the meeting. “So when we talk nuclear, we talk global.” Japanese officials are sensitive about being stigmatized by the nuclear accident that followed the devastating earthquake and tsunami of March 11. They believe that some tests on imports of Japanese food are too stringent, even when the food is produced far from the site of the disaster. And they say the loss of tourism, even in areas far from any contamination, will hurt the country’s economy. Barroso sought to allay those concerns Saturday. “We firmly believe that Japan is safe and open for business,” he said. But the negotiations on a free trade agreement may be difficult. The European Union imposes a 10 percent tariff on goods imported from Japan while Japan imposes no tariff on those imported from the European Union. Japanese officials told The Associated Press before the meeting they see the issue as relatively simple. But EU officials see it as more complex, and they insisted successfully that the talks also take into account non-tariff barriers to trade and investment. They say, for example, that in the EU public procurement is open and they want to make sure that is the case in Japan, as well. EU officials also say that, while foreign investment is equal to 30 percent of gross domestic product in the EU, in Japan the figure is only 3 percent, and the reasons for that must be explored in the talks to come. Still, all three leaders said the benefits of successful negotiations would be very significant. Kan said the outcome “would be important for the global markets.” Van Rompuy agreed. “The potential economic and political results are huge, in terms of jobs, growth and a shared destiny,” he said. The leaders said that, in the political sphere, Japan and the European Union share the same values, including support for democracy and human rights, and should work together in resolving problems from Middle East and North Africa to North Korea. They also said they would cooperate in showing leadership on the issue of climate change. Van Rompuy is fond of writing haiku, a form of Japanese poetry, and he ended his post-summit statement with one that referred to the earthquake, the tsunami and the nuclear disaster. “The three disasters/Storms turn into a soft wind/A new humane wind,” Van Rompuy wrote. The Japanese prime minister liked it. “This is a haiku which really touches your heart,” he said.

Read the full article →

Week Ahead: May Jobs Report Takes Center Stage

May 27, 2011

In a week shortened by the Memorial Day holiday, all eyes will be on the monthly employment report for May due on Friday. Economists expect May nonfarm payrolls to show an increase of about 200,000 and for the unemployment rate to drop slightly to 8.9% Stubbornly high unemployment has been a thorn in the side of the U.S. economic recovery. The high jobless rate bleeds into virtually every other facet of the economy, affecting consumer spending, which makes up 70% of the U.S. economy, and cutting into another long-suffering sector, housing. The modest improvements expected in the May numbers continue to confirm what economists said months ago — the economic recovery is going to be a long, slow slog. Other job-related economic indicators due next week include the ADP National Employment Report for May on Wednesday. Coming ahead of the government’s monthly job report, the ADP numbers frequently offer a preview of what’s likely to come. Also due on Wednesday is the Challenger report on layoff intentions for May. While hiring has been spotty for months as companies question whether the economy is strong enough to expand, the number of companies actually slashing payroll has fallen, according recent Challenger reports. That trend is expected to continue in May. Weather could play a role keeping weekly initial jobless claims at a high level. The report, due Thursday, could be impacted by the flooding of the Mississippi River and the tornadoes that have destroyed towns and wreaked havoc across the Midwest. Those natural disasters could impact jobless claims for several weeks to come. The Conference Board’s Consumer Confidence Index for May is due Tuesday. Confidence is expected to have risen in May as political turmoil in Middle East has eased, lowering concerns for fuel shortages. Gasoline prices, soaring through most of the spring, leveled off ahead of the Memorial Day weekend and the unofficial kickoff of summer. “There is some relief for consumers and retailers, since gasoline prices started falling in the latter part of May after briefly crossing over and then dipping below the $4 per gallon mark. This has boosted consumer confidence and will help increase spending as we enter the summer season,” said IHS Global Insight economist Chris Christopher. Housing data in the form of the S&P/Case-Shiller Home Price Index for March is due Tuesday. Home values continue to decline due to bloated inventories. It’s a bit of a self-fulfilling prophecy as buyers delay purchases, hoping prices will fall even further. And prices continue to fall. The severe weather could also affect economic reports due from the Institute for Supply Management, which will release its data for manufacturing and non-manufacturing on Wednesday and Friday, respectively. Flooding and tornadoes around the country have disrupted supply chains, making it harder for factories to distribute their goods.

Read the full article →

John Levin: Four Ways to Cut the Price of Oil and Keep the Savings in the U.S.

May 24, 2011

NEW YORK — With all the partisan debate over spending cuts in the U.S., energy policy seems to be pretty far down on everyone’s agenda. That’s a shame because there is probably no other single area that could have a bigger impact on the country’s finances. Think of it this way: Every 10 percent reduction in the price of oil represents a $36 billion tax cut for America. The United States imports 10 million barrels of oil a day. At a price of $100 per barrel that’s $365 billion a year that the country is being “taxed” by foreign suppliers. It is an urgent national priority to reduce this cost both in financial terms and for national security. And, no, the recent drop in oil prices and promised relief at the gas pump projected for the summer doesn’t change a thing. If anything, it should inspire the U.S. to act more aggressively to drive prices down further. Fortunately, the means are at hand to make a meaningful impact on this cost and keep the savings home. Here four ways it can happen. Hold Mideast allies to their word — Some of the current cost may be temporary and described as a risk premium for uncertainties in the Middle East, particularly Libya. Libyan production is 1.9 million barrels per day of high quality oil, which is roughly 2.5 percent of world output of 84 million barrels a day. Eventually there is every reasonable expectation that Libyan production will come back, as Col. Qaddafi will be ousted and the oil will be quickly produced (Qatar has already indicated that they would help with the transshipment) or he will somehow survive or some kind of compromise be reached, in which case Iran or some other country will undoubtedly facilitate the sale of the oil. In the meantime, Saudi Arabia has indicated that it would increase production by 3.5 million barrels a day and Kuwait has indicated they would increase production by 500,000 barrels per day to offset any shortfall from Libyan production. It is unclear whether such added supply has come on the market but it is clear that one way or the other, adequate supply and lower prices are at hand if Saudi Arabia and Kuwait keep their word. We should put the pressure on to see they do and that the markets acknowledge it. Start leveraging natural gas to electrify vehicles — The United States can take its massive natural gas reserves and supply them to our utilities, which are underutilized at night, to produce electric power to drive electric and hybrid vehicles. This is a multi-year program that will not be achieved instantaneously, but starting it can materially affect the current expectations and behavior of those who own oil. Historically those expectations have been for ever-increasing prices because of worldwide demand and an increased number of autos. But should those expectations be changed sellers would tend to sell. Cheating by OPEC members would tend to increase and it would be extremely difficult for the cartel to enforce its quotas. A significant failure of United States policies over the last 40 years since the first OPEC embargo has been inaction on our part to reduce demand and as a consequence expectations. There are major side benefits to this approach. We would create a major worldwide auto industry with advanced technology and real jobs for our labor force. Much of this technology and know-how could be exported for the benefit of our companies and our country. Of course much of the natural gas would come from shale and we must carefully identify what risks that poses to the water supply and to the environment. Increase gasoline taxes –There is little doubt a gas tax would lower demand. Any regressive aspect could be moderated by either income tax benefits or rebates to the lowest income segment of the population. Tax benefits to businesses that reduce their gasoline consumption could help ease the burden on commercial users. Stop throwing good money after bad — Counterproductive policy such as those involving ethanol should be abandoned. Not only do these approaches not reduce the demand for imported oil but they raise the price of corn and other food imports. The consequence of the latter plus the price of oil is an income squeeze on the lowest income parts of not just the United States but the world. The subsidies would be better spent on alternative energy sources like wind and solar that could cut demand for oil. The fact that the U.S. is more obsessed with cutting taxes that it pays to itself than with cutting the “taxes” it pays to OPEC is a situation that must be corrected. Energy policies that address supply and demand for gasoline are the answer.

Read the full article →

Cross-Border Transactions Increase in 1Q11

May 23, 2011

Global sales of significant properties rose 23 percent year-over-year to $180.6 billion in 1Q11, maintaining YOY growth for a sixth consecutive quarter, according to

Read the full article →

Video: Graham on Middle East Peace: Political Capital With Al Hunt

May 21, 2011

May 20 (Bloomberg) — U.S. Senator Lindsey Graham, a Republican from South Carolina, talks with Bloomberg’s Al Hunt about the outlook for a peace agreement in the Middle East, the U.S. debt ceiling and spending cuts. Bloomberg’s Julianna Goldman and Julie Davis discuss the Mideast peace process, the outlook for a deal to cut the federal deficit and U.S. ties with Pakistan. Sandrine Rastello talks about possible candidates to lead the International Monetary Fund following the resignation of Dominique Strauss-Kahn as managing director. Commentators Margaret Carlson and Kate O’Beirne discuss Newt Gingrich as a potential candidate for president in 2012, and the debate over Medicare and its impact on a special election to fill a House seat in upstate New York. (Source: Bloomberg)

Read the full article →

Gemma Godfrey: IMF Revelations: The End of European Dominance & the Rise of Emerging Markets?

May 20, 2011

As ” super-injunctions ” are labelled ” pointless ” by the rise of ‘new’ social media sites, the world seems a smaller place for those wanting to hide potential transgressions. Indeed, such accusations can have broad ramifications, as the head of the International Monetary Fund this week steps down from his leadership position. Could this trigger the end of European dominance at the IMF and even pave the way for Emerging Market leaders to acquire a more appropriate size of the power pie? Jurisdiction Arbitrage: The Super-Injunction Flaw Last week, an anonymous twitter user exploited a ‘jurisdiction arbitrage’ to name celebrities whose identities are being protected by a series of ‘gagging-orders’. The Twitter site is based in the U.S. and therefore ” outside the jurisdiction of the British courts “. Furthermore, not only would the user himself be ” difficult to trace ” but the number of other users who forwarded on the names and could be charged represented a ” mass defiance ” and ” unlikely ” any of them would be pursued. Therefore potential wrong-doers can, for the moment at least, be named and shamed in some form of media. Just how dangerous can these revelations be? The IMF Revelation This week, legalities are once again in the headlines as Dominique Strauss-Kahn, (now the former) head of the International Monetary Fund, stands accused of politically damaging indiscretions . Regardless of the outcome of the case, the political impact has been made, and focus is on identifying his potential successor. The European Bias Historically the IMF Managing Director has been European and the World Bank President American but nowhere in the ” Articles of Agreement ‘ is this mentioned. So where did this bias come from? It dates back to the Bretton Woods conference, where the fund was formed and this informal agreement struck. In the aftermath of World War II, European economic stability played a large part in the health of the world’s economy and voting power reflected the balance of power. The U.S. has a 16.7 percent share, Germany 5.9 percent and the UK & France 4.9 percent each; leaving the ‘door open’ for ‘behind the scenes’ negotiations . Unsurprisingly, since this time, there have been 10 Managing Directors, all of them European. Flaws of a European Successor Proponents of a continuation of European dominance point to the IMF’s crucial role in stemming the European Sovereign Debt crisis. A German government spokesman, Christoph Steegmans, maintains that the leader needs to understand ” Europe’s particularities .” Interesting then that there has been no talk of electing an official from the Middle East as Egypt requests a $4bn loan to ‘ fill its budget gap .’ With all the turmoil, doesn’t a leader need to understand the ‘particularities’ of this region too? Instead, focus is on German candidates (including Axel Weber, the former head of the Central Bank who recently withdrew from the race to succeed Trichet as head of the ECB). A favourite amongst pundits is French finance Minister Christine Lagarde. Bank of Canada Governor, Mark Carney has even been given odds of 10-to-1 by a British bookmaker. Gordon Brown’s name has even been thrown into the ring but was quickly opposed by our PM Cameron, due to the record budget deficit which continued to build during his tenure. Here lies the crux of the issue, since the EU and ECB have yet to solve the debt crisis, is it time for someone else to have a go? Opportunity for Developing Markets The economic balance of power is changing. China has overtaken Japan as the second largest economy and it has been argued that it will surpass the U.S.’s share of global GDP in a decade . Back in 1973, the developing nations asserted more of their power as a group led by Indonesia and Iran vetoed the nomination of a Dutch candidate (seen as too closely aligned to the interests of wealthy nations). With this in mind, candidates from South Africa , Turkey , Singapore , Indonesia , Mexico and a Chinese official who advises the IMF already have been mentioned in the press. Brazil too has contributed to the discussion, as their Finance Minister argues for a ” new criteria “. Indeed changes to IMF governance were decided in 2008 and last year, shifting 5.3 percent of the voting share to emerging markets. Although nothing has yet taken effect. However, with the increased contribution of funding coming from these regions and the negativity within these countries expressed against too much focus on the developed world, change is warranted. Investment Conclusion As ever, economic issues can often lie opposed to equity market movement. But changes (or continuation) of dominance could affect short-term sentiment for various country’s financial markets. Exploit any over-reaction in the short-term whilst remaining focused on quality in the longer-term. The shift of economic power is well underway, let’s see if the political powers play catch up….

Read the full article →

High Oil Prices Hit Wallets As Consumers Are Forced To Spend More On Fuel

May 19, 2011

The price of oil eroded Americans’ spending power over the last several months, according to new post from the Commerce Department. The pain will likely continue, the department warned. As oil prices have shot up and gas prices at the pump have followed, consumers and businesses have been forced to pay more for fuel. The average household monthly motor fuel expenditure increased by more than 22 percent between October and March, the post by Commerce Department Chief Economist Mark Doms showed. Even though oil prices abruptly dropped earlier this month, crude has since pared some of its losses, and pump prices remain high, suggesting that fuel will continue to sap household finances. From the Commerce Department At this rate, the net amount of money the nation pays to other countries for oil is on track to reach about $3,000 per household in 2011, an increase of 25 percent from last year, the note said. This fuel trade deficit per household grew by two-thirds between October and March, and in the first quarter of the year, petroleum-related products made up nearly 60 percent of the total U.S. trade deficit, the note showed. From the Commerce Department Faced with higher gas prices, some Americans have reported cutting back on driving . But people need to get to work and shop for food — they can only cut back so much. Every penny increase in the cost of gasoline tears more than a billion dollars from the economy yearly, economists say. As conflict in the Middle East has stoked commodity investors’ fears of a supply disruption in recent months, oil prices have skyrocketed. Even after the price of crude dropped by 10 percent in one day earlier this month, prices are still at levels that recall the summer of 2008, when months of record-high fuel prices helped drag the economy into recession. The price of Brent crude, an international benchmark, is now more than 50 percent higher than it was this time last year. Nationwide, the average cost of a gallon of regular gasoline is now $3.91, according to the American Automobile Association . Go to the Commerce Department website for more charts.

Read the full article →

Biamp Systems Appoints Matthias "Mex" Exner Regional Director of Europe

May 19, 2011

BEAVERTON, OR–(Marketwire – May 19, 2011) – Biamp Systems today announced that Mex Exner has assumed the position of Regional Director of Europe. In his role as Regional Director, Exner will be headquartered in the U.K. and will oversee all sales and operations in Europe, Middle East, India, and Africa. Exner will continue working closely with distributors and consultants to ensure that they continue to receive the same high-quality service that they have come to expect from Biamp.

Read the full article →

Revenues Down At Biggest Investment Banks, Report Finds

May 17, 2011

Revenues at the world’s biggest investment banks fell 5 percent to $52 billion in the first quarter of 2011, hit by Middle Eastern unrest, natural disasters, volatile commodities and economic uncertainty, a consultancy said in a report on the industry. The survey of the world’s top 10 banks by London consultancy Coalition attributed much of the decline from a year earlier to an 11 percent slump in revenues from fixed income, the biggest contributor to the banks’ earnings. However, fixed income had ‘held up well’ given the macro challenges, the report said. The asset class was the dominant driver of revenues over the last four years and contributed $31 billion in the first three months of 2011. “Performance was impacted by political turmoil in the Middle East and North Africa, natural disasters in Asia, rising inflation and commodities prices, as well as ongoing concerns in Euro periphery countries. Unsurprisingly, therefore, fixed income was the weakest asset class,” the report said. Credit saw the biggest fall in its contribution to total fixed income revenue, down 4 percentage points to 20 percent. Emerging markets-related revenues in fixed income were 2 percentage points lower than a year ago at 15 percent, following over-valuation and soaring inflation concerns, the report said. The ‘origination’ business, which includes fees from mergers and acquisitions and debt and equity capital markets business, saw revenues of $10 billion in the quarter, one billion more than last year. M&A contributed an extra percentage point making up 26 percent of revenues, benefiting from ‘ongoing confidence in the global recovery.’ Debt capital markets remained the ‘primary driver’ with 47 percent of origination revenues due to ‘strong volumes’ of high yield issuance, particularly in the Americas. Equity capital markets were down 1 percentage point from a year earlier, at 27 percent. Coalition, an independent research firm for the investment banking industry, tracks Bank of America Merrill Lynch (BAC.N), Barclays (BARC.L), Citi (C.N), Credit Suisse (CSGN.VX), Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N), JP Morgan (JPM.N), Morgan Stanley (MS.N), Royal Bank of Scotland (RBS.L) and UBS (UBSN.VX). (Reporting by Cecilia Valente, Editing by Chris Vellacott and Jane Merriman) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

Soros Dumps His Entire Stake Of Gold

May 17, 2011

NEW YORK/BOSTON (By Frank Tang and Aaron Pressman) – Billionaire financier George Soros, who called gold “the ultimate bubble,” dumped almost his entire $800 million stake in bullion in the first quarter, well before a commodities slump blamed partly on reports he was liquidating his holdings. Famed gold bull John Paulson held his ground, but Soros was joined in the retreat by several other big names, including Eric Mindich and Paul Touradji, according to 13-F filings with the U.S. Securities and Exchange Commission that provide the best insight into where hedge funds are placing their bets. Soros, who has been bullish on gold in the past several years, cut his holdings in the SPDR Gold Trust (GLD.P: Quote, Profile, Research, Stock Buzz) to just $6.9 million by the end of first quarter, compared with $655 million in December, becoming the most high-profile investors to turn his back on one of the market’s best-performing assets. He also liquidated a 5 million share stake in the iShares Gold Trust (IAU.P: Quote, Profile, Research, Stock Buzz), the filings showed. His total holdings in gold-backed ETFs was $774 million as of December. Gold rose for a tenth consecutive quarter in the three months to March, hitting record highs above $1,400 an ounce, buoyed by political turmoil in the Middle East and North Africa and lingering worries about indebted European countries. The gains accelerated in April, but peaked at the start of this month, reaching a record $1,575 an ounce on May 2. Prices have since fallen more than 5 percent amid the biggest commodities slump since late 2008, a move partly triggered by a Wall Street Journal report that Soros’ $28 billion fund was selling precious metals — and felling fears other big funds were also seeing a peak. Eric Mindich, who runs the Eton Park Capital Management, nearly halved his stake in the SPDR gold trust to $326 million for the first quarter, a filing showed on Monday. Mindich’s fund also owned $839 million worth of call options by the end of first quarter, compared with $1.1 billion worth of put options at the end of the fourth quarter. Touradji Capital Management, one of the world’s largest commodities-oriented hedge funds run by Paul Touradji sold 173,000 shares in the SPDR Gold Trust during the quarter. Those shares would be worth about $25 million at current prices. But John Paulson, who notched the industry’s biggest ever payout last year, kept his 31.5 million share or $4.4 billion stake in the SPDR fund, remaining the biggest shareholder of the world’s largest gold-backed exchange traded fund for the quarter, according to regulatory filings. DEFLATION THREAT RECEDES The sales make sense given that Soros said he had bought gold because he was worried about deflation, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Pittsburgh. “It’s pretty hard to make the case for deflation right now so if that was a reason you were buying gold, you should take this signal from Soros,” he said. Inflation is now the greater concern, Luschini said. So most investors should still keep about 3 percent to 5 percent of their assets in gold to protect against inflation and possible further problems in the world financial system. Soros also slashed stakes in gold and silver mining companies during the first quarter. The firm owned 1.4 million shares of Kinross Gold (K.TO: Quote, Profile, Research, Stock Buzz) at the end of the quarter, down from 4 million shares three months earlier. Holdings in Novagold Resources (NG.TO: Quote, Profile, Research, Stock Buzz) dropped to 3.5 million shares from 12.9 million. Gold ended the first quarter little changed, as the spot gold prices were only $10 higher to end at $1,430 an ounce on March 31, and the SPDR Gold Trust was up 1.3 percent. In the second quarter, gold hit a record high $1,575.79 an ounce on May 2 fueled by the outlook of low U.S. interest rates. So far in the second quarter, SPDR Gold Trust’s bullion holdings gained only about 1 percent to 1,229 tonnes as of Friday, well below its record high at 1,320.436 tonnes set on June 29 last year. Institutional investment managers are required to file form 13-F with the SEC within 45 days after the end of each quarter. (Reporting by Frank Tang, editing by Andre Grenon) Copyright 2010 Thomson Reuters. Click for Restrictions .

Read the full article →

Sony Begins Restoring PlayStation Network

May 15, 2011

Following a data breach that exposed the personal information of 100 million users and shut down access to the PlayStation Network for weeks, Sony has announced that access to the PlayStation network is being restored. Sony wrote in a blog posted Saturday evening that the process of restoring access to the network would begin in a select number of countries, then expand further, with all locations worldwide back online by the end of May. The Americas, Europe, Australia, New Zealand, and the Middle East will see their access restored first, while users in Japan and other Asian countries will be forced to wait longer. “While we understand the importance of getting our services back online, we did not rush to do so at the expense of extensively and aggressively testing our enhanced security measures. Our consumers’ safety remains our number one priority,” said Sony executive deputy president Kazuo Hirai in a video released by the company (see below). “We want to assure our customers that their personal information is being protected with some of the best security technologies available today, so that everyone can feel comfortable enjoying all that PlayStation Network and Qriocity services have to offer.” Some states in the U.S. are seeing their access to the PlayStation network restored earlier than others, and Sony has posted a map that it will update as additional locations go back online. The company says all U.S. users should be able to get back online within several hours. Sony requires PS3 users to update their firmware prior to going back online, and also recommends that users change their passwords. Technologizer notes that in terms of the potential loss of data and the downtime suffered by users, Sony’s PlayStation outage seems likely to rank among the worst ever. “Okay, it’s close to three weeks later. The PlayStation Network outage continues, it involves the leakage of personal data, and we don’t know when it’ll end. Anyone want to argue that it’s not the single worst fiasco of this type ever?” writes Technologizer. Though the network is — according to Sony — secure, it remains to be seen whether it can recover from the lengthy outage and data breach in order to retain its users and prevent them from defecting to competing services. “It’s hard to say what’s worse for gamers: this lengthy outage – one of the worst on record – or the compromise of their personal data,” notes ReadWriteWeb . “Either way, Sony will have a long road ahead to win back the trust of gamers, who have a wide variety of options for other console or handhelds games.” According to Reuters , “some users have said the prolonged outage has prompted them to switch to rival Microsoft’s Xbox Live games service.” “Please know that we are doing everything we can to fully restore network services around the world and to regain your trust over the days weeks and months to come,” said Hirai. According to Joystiq , the Sony services that will be up and running by May 31 include the following: Sign-in for PlayStation®Network and Qriocity services, including the resetting of passwords Restoration of online game-play across PS3 and PSP Playback rental video content, if within rental period, of PlayStation Network Video Delivery Service on PS3, PSP and MediaGo Music Unlimited powered by Qriocity, for current subscribers, on PS3 and PC Access to 3rd party services such as Netflix, Hulu, Vudu and MLB.tv ‘Friends’ category on PS3, including Friends List, Chat Functionality, Trophy Comparison, etc PlayStation Home WATCH:

Read the full article →

Gemma Godfrey: Gold May Glitter But Can It Deliver?

May 13, 2011

The classic ” safe-haven ” investment has seen a strong uptrend in its value since the autumn of 2008. Risk aversion , inflation fears , falls in the dollar and demand from the east have all been credited as drivers of this move. But just how supportive are these factors going forward — what is the risk gold could lose its luster? A Hedge against Inflation The fear of inflation is heating up as on Wednesday the Bank of England suggested that ” there is a good chance ” inflation will hit 5% later in the year, far above the target rate of 2% . Elsewhere, on the same day, Chinese inflation figures surprised on the upside. However, is gold an adequate hedge? It can be shown graphically that it is not. Charting the inflation rate (CPI change year on year) against the gold price, we can see that over the past decade the relationship breaks down. Indeed, if the gold price kept up with increases in general price levels, it would be valued at $2,600 an ounce instead of around the $1,500 level. How about if instead of actual inflation, we look at the market’s expectation of inflation? Even in this case, the relationship does not hold . Instead, there are other factors at play. As previously discussed, investors may be more focused on the sustainability of the economic growth rate and allow for some inflation. Inflation alone may not provide sufficient support. A Beneficiary of Risk Aversion So — could upcoming economic, fiscal or political disappointments sufficiently boost the gold price? Here the case looks stronger. From sovereign debt crises in Europe, to the tragic tsunami in Japan and the turmoil in the Middle East , there has been enough newsflow to stoke fears and flows into gold (a “whopping” $679m of capital was invested in precious metals in one week alone at the beginning of April). Furthermore, a lack of confidence in the dollar further boosted investment for those looking for a more reliable base. Demand from the East and Central Banks In addition to jewellery demand , central bank purchases may provide much support for gold as we move forward. Russia needs to acquire more than 1,000 tons and China 3,000 tons to have a gold reserve ratio to outstanding currency on parity with the U.S. This is even likely to be an understatement with China stating publicly they would like to acquire at least 6,000 tons and there are unofficial rumors that this may go as high as 10,000 tons . A bubble with no clear end George Soros described gold as the ” ultimate asset bubble ” and with sentiment driving the price as much as fundamentals, it’s unclear when the trend will reverse. An increasing monetary base is looking for a home. As Marcus Grubb, MD of Investment at the World Gold Council was quoted as saying at a ‘WealthBriefing’ Breakfast on Thursday: “In the next 10 minutes the world’s gold producers will mine $3m of gold, while the US prints $15m.” However, an often-overlooked drawback in investing in gold is its lack of yield. With some stock offering attractive dividend yields and investors wanting their investments to provide attractive returns during the life of their investment , capital flows may wander. Investment Conclusion Remain wary of relying on one driver of returns; it can often be overshadowed by another. Instead build a complete picture and continuously question your base case scenario. Gold is a more complex asset than many give it credit for and as always, it pays to be well diversified.

Read the full article →

Stephen Herrington: Retiring the National Debt by Not Destroying the Economy

May 9, 2011

The GOP proposes social spending cuts in order to fund tax cuts as a solution for our national debt. They, and the Beltway press, are undeterred by the OMB finding that their Paul Ryan-authored plan will do nothing of the sort. They are also undeterred by economists’ warnings that social spending cuts are the worst possible cuts in terms of economic impact, that they will shrink the economy and thus actually shrink revenues and make the deficit worse rather than better. Retiring the national debt shouldn’t even be an issue. The national debt as a percent of GDP has been higher in the the past and we survived. The key to that survival was to grow the economy. What we should be talking about instead of debt is how to grow the economy and create jobs. In a growing economy, the extraordinary debt of two wars and corporate banking disasters will essentially take care of itself over time. As Simon Johnson ably points out in his recent New York Times article , the U.S. has always been in debt and the only real issue, now or ever, is which political perspective on debt works, conservative or progressive. For the last thirty years, U.S. levels of spending, taxation and borrowing have been unusual, but a consistent theme has emerged. The Republicans run up the debt while they are in charge and blame the Democrats for it when the Democrats are in charge. Reagan exploded the debt with tax cuts and doubling of defense spending. Then, when Clinton took office, the GOP howled about the debt being too high. Bush took the Clinton surplus and blew it on more tax cuts and another doubling of defense spending. Now Obama is getting the same treatment that Clinton got from the GOP, being blamed for GOP’s own fiscal and regulatory irresponsibility. The pattern is obvious and obviously political. There is no analytical basis for the debt hysteria that has infected both Capitol Hill and the press reporting on it. We have had huge amounts of debt before. By the end of WWII the national debt was 120% of GDP compared to an estimated 90% now, and if intergovernmental debt, the money owed to the Social Security Trust fund, is discounted, the current debt to GDP ratio is about 60%. In the fifteen years following WWII, the debt was reduced back to 40% of GDP, where it had been before the war. Some of the debt was paid down, but mostly the ratio of debt to GDP was reduced by economic growth. GDP grew so the debt became smaller as a percent of GDP. While the dollar amount of it didn’t change a great deal, the scariness of it was reduced dramatically. This may seem like accounting gimmickry, but in practical terms it’s equivalent to going from owing more than you make to owing less than half of what you make. You are much more comfortable with carrying the debt. WWII was, by anyone’s criterion, a national emergency. Few argued that indebtedness should not be undertaken to win the war. So, too, an emergency is the Great Recession. In recession, the enemy is economic stagnation and unemployment. If government spending is effective to improve economic conditions, then spend we should. We put an additional $750 billion on the credit card and pulled out of the economic crash landing. We spent, but the spending we did was not enough to grow the economy, just to stop the tailspin. Achieving real economic growth will change the ratio of debt to GDP and effectively retire the debt both in perception and in dollars as economy sourced tax revenues grow. Now it’s possible that we need not borrow and spend more in order to grow the economy and retire the debt. We just need to be smarter about eliminating some of the things that are dragging the economy down and spending that is not doing the economy any good. The Wealth Gap is an issue of more than just seeming fairness. The richest 5% of Americans hold 65% of the nation’s wealth. In old school economic theory, that just means that there is more capital available to invest than ever before. In practical terms though, it’s not being invested. Bureau of Economic Analysis data shows that Gross Private Domestic Investment, money that is actually invested in the real economy, dropped 32% between 2006-09. With a significant reversal in 2010, it is still down 22% from 2006 while the amount of capital available for investment is up 30%. We do not need tax cuts to build more capital. We need taxes to force that accumulated capital back into the economy through either tax collections or direct business investments structured to defer taxes. Inducing just the historic level of real Gross Private Domestic Investment ratio to GDP into the real economy will grow the economy by 15%. Trade imbalance is wiping out American jobs and lowering the wages paid for jobs that we still have. With a huge consumer product trade imbalance, stimulus money finds its way into offshore profits and not our own economy. These factors make the economy smaller and so tax revenues smaller. Wage differentials are the driver of our trade imbalance. When we don’t protect American-based industry, we lose American jobs and tax revenue. Education and training are only a temporary answer. What ever an American can be trained or become educated enough to do, so can a foreign worker who will work for less. Cutting business incentives to outsource through taxation and tariffs could grow the economy by 5%. Health care cost increases are distorting the economy. 17% of GDP is now dedicated to health care whereas the amount could reasonably be 9%, more comparable to every other industrialized nation. Showing where that extra 8% of GDP we spend on health care ends up in the economy is an enormously complex undertaking. Profits after taxes and expenses of for-profit insurers and hospitals, and even non-profits, are meaningless statistics. Excessive margins, markup for health care services and equipment, outright fraud, monopolistic practices and profiteering business models likely account for the 8% of GDP seemingly wasted on health care. Those excess costs are single-handedly driving the argument that government spending is out of control, when it’s actually health care product profit margins that are out of control. Diverting the excess profit of the health care industry into lower profit margin industries could boost the economy by as much as 5% given distributed income multipliers of lower margin industries. Defense industry profit margins, like those of health care, are largely undocumented. The Middle East wars, excessive margins, fraud, unnecessary procurements and duplicate programs could account for half of the $685 billion defense budget. Defense is 5% of GDP. Cutting it to 2.5% of GDP and diverting those funds to lower margin industries could boost the economy by 1.5%, again considering economic multipliers. Taken together, correcting these fiscal and economic ills could put the debt on a path to resolution by boosting the economy as much as 26%. We would have an $18 trillion economy instead of $14 trillion economy. That would make the debt-to-GDP ratio 70% instead of 90% and grow tax revenues to $2.5 trillion (with repeal of Bush tax cuts) instead $1.4 trillion (without repeal of tax cuts). The budget would be balanced. These are, admittedly, highly rose-colored numbers for a short term solution. Growth compounds though, and in the longer term it could do to our current debt what growth did for the WWII war debt: make it go away. A solid economic shot in the arm would speed up the process. Speeding up real economic growth would create jobs. The business community, the “job creators,” are uncertain. They are not hiring. They are not hiring because taxes are too low and profits can be taken with historically low tax rates, the lowest rates on the highest incomes since the Gilded Age. Removing that uncertainty is important, but in the opposite sense of what Republicans imply. Business is not hiring because they think taxes will remain the same, rather than going up. Raise taxes and business will hire in order to defer realized profits. The political will to clean the fiscal house with anything like stringency doesn’t exist on Capitol Hill, even though all the measures mentioned above get resounding support in public polling. This while the Republican austerity proposals go down in public opinion flames. Seems like the public intuitively knows what needs doing and the GOP and Blue Dogs are just hell bent to ignore them. It also seems that the administration and Democrats are just going along playing at compromise, but why compromise with the GOP when it accomplishes less than nothing?

Read the full article →

McDonald’s Sales Jump Thanks To Higher Prices

May 9, 2011

LOS ANGELES/CHICAGO (Lisa Baertlein and Jessica Wohl) – McDonald’s Corp posted a better-than-expected 6 percent rise in April sales at established restaurants, helped by menu price increases that helped offset higher costs for beef and other ingredients. Shares in the world’s biggest hamburger chain rose almost 1 percent in early trading on Monday, after it reported that April sales at restaurants open at least 13 months were up 4 percent in the United States. Same-restaurant sales rose 6.5 percent in Europe and 6.5 percent in its Asia/Pacific, Middle East and Africa (APMEA) unit, reflecting strong results from China and Australia and a surprise rebound in Japan — which is still recovering from a massive earthquake. Analysts were expecting U.S. sales to rise 3.3 percent. They also expected a 5.1 percent rise in Europe and a gain of 2.7 percent in APMEA, Jefferies & Co analyst Andy Barish said in a client note. The company in March put through a 1 percent menu price rise in the United States, where it plans additional increases. Prices in Europe are up by the same amount, and the company plans to raise prices in China. “McDonald’s top line momentum is going to hold up just fine,” especially with the price increases, said Morningstar analyst R.J. Hottovy. The bigger question, he added, is how much the aggressive rise in food costs will pressure margins. McDonald’s expects food costs to rise between 4 percent and 4.5 percent in the United States and Europe this year. Europe is McDonald’s biggest market, contributing roughly 40 percent of sales, and the United States is a close No. 2 at around 35 percent of sales. McDonald’s generally has an edge over rivals when it comes to raising prices because it attracts a higher-income diner than other fast-food chains — particularly in Europe. Analysts say it would have the least resistance if it boosted prices on premium burgers and McCafe drinks that appeal to those customers. In addition to advertising pricier products such as new beverages, McDonald’s has been catering to budget-conscious diners with its value menu. The chain’s broad appeal may give it an edge over smaller chains, such as Wendy’s/Arby’s Group Inc or Jack in the Box Inc, Hottovy said. Many analysts believe that the company’s top priority is getting more customers through the door. “We believe the company will be judicious with menu pricing and focus on traffic gains,” Barish said. McDonald’s shares were up 68 cents at $79.38 in morning trading on the New York Stock Exchange. (Reporting by Brad Dorfman, Lisa Baertlein and Jessica Wohl; Editing by Derek Caney and John Wallace) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

U.S. Becomes Net Exporter Of Fuel For First TIme In Nearly Twenty Years

May 3, 2011

While some Americans cut back on driving as gas prices soar, the U.S. has become a net exporter of fuel for the first time in nearly 20 years. According to data from the Energy Department, starting last November — with the exception of the month of January — the U.S. began exporting more petroleum products than it imported. In February, the U.S. exported 54,000 more barrels of petroleum products each day than it purchased abroad, with diesel and finished petrol leading the increase. According to the American Petroleum Institute, an industry group, U.S. refined product exports rose in the first quarter of 2011 to 2.49 million barrels per day, a 24.4 percent year-over-year increase, the Financial Times reports . In the first quarter of 2011, imports dropped to 2.26 million barrels a day, a 14.4 percent year-over-year decline, according to the FT . Analysts attribute the increase in exports to a combination of overlapping factors: unrest in the Middle East leading to higher oil prices, a weak U.S. dollar and increased spending power abroad, particularly in Latin America. “The U.S. is exporting quite a bit now to Latin American because the market’s quite lucrative there and the reality is that they can get a better price by exporting it,” said Nariman Behravesh, chief economist of IHS. “It’s a free market, and if refiners can get higher prices in other parts of the world, they’ll sell it. It’s just the reality. It’s the free market at work.” The chart below tracks the rise and fall of monthly U.S. net imports of total petroleum products since 1993. The data paints a grim picture of the role of the weakening U.S. dollar in the world. “It’s a sign that the dollar has gotten weak enough that it’s actually starting to stimulate demand for the goods we produce here,” said Scott Anderson, Senior Economist at Wells Fargo. “We’re more of a price taker right now in the gasoline market than a price setter and that means we’re at the whims of global growth and global demand.” Last week , President Obama criticized oil companies for profiting from rising pump prices and pushed congress to end $4 billion in annual tax breaks for the oil and gas industry. The president’s plan will not affect gas prices, but he said that the money saved ending the subsides would be invested in developing new energy resources and research.

Read the full article →

← Previous Entries