| NEWS TO PONDER, SHARE AND WONDER ||
February 21, 2013
COURTESY SOCHA FAAL
Heads up from AntiMullah. Separate vacations and Obambi brings Reggie Love back with him. If you do not know what this is, you need to visit/view AntiMullah.com more often to keep up with latest developments.
Tone and content reflects information not normally provided by Lame Stream Media's love fest with Obambi. And worldwide events that discredit his claims and motives for anti-American, pro-Moslem Brotherhood policies and actions.
Read and become knowledgeable and stop believing the incredible lies Obama feeds us at every opportunity. Lies his own Democrats increasingly have a problem swallowing and are intentionally leading our nation into certain fiscal and political destruction.
GOP Resists Obama's Push for Tax Rise to Head Off Cuts
Obama Fleshes Out Plans for Infrastructure Projects
Obama considers urging the Supreme Court to overturn Californiaâs ban on gay marriage
White House announces online espionage response policy
US issues final word on essential benefits under "Obamacare"
Anonymous thrown into China-US cyberwar scandal
Pentagon informs Congress of plans to furlough 800K civilian workers
In wake of Benghazi, rapid response Marine unit heading to Europe
US issues worldwide caution to its citizens of terror threats
Body found in restaurant rubble after Kansas City explosion
Why Americans Might Be Better Off If Their Burgers Were Made Of Horsemeat
Sex-Change Surgery Available Through Many US Colleges
Majority of US citizens say illegal immigrants should be deported
Hundreds of thousands march in Puerto Rico against gay rights
Putin Invites G20 Leaders to St. Petersburg Summit
Migrant workers call on Putin for amnesty
Lavrov: Time to end the war in Syria
Moscow: N. Korea sanctions can only impact nuclear program
IMF warns of higher inflation, slower GDP growth in Russia
Russia's missing billions revealed
Russia Tries To Remove Images of New Drone From the Internet
Russian Military to Develop Anti-Meteorite Defenses
Russia investigates 25 cases of Defense Ministry fraud - Prosecutor General
MP resigns after bloggers disclose his Florida property
Russia escalating attacks on free expression a year on from Pussy Riot protest
âAmple Evidenceâ Linking Ukraine Ex-President to Journalist Murder
French Specialists Resume Work at Chernobyl Disaster Site
Ukraine: Embezzlement At State Orphanages
Belarus Phases Out Russian Warplanes, Radars
Xi Jinping's campaign to purge Communist Party 'won't be easy'
Incumbent cabinet holds final meeting
China's central banker skips retirement bar to stay on
Manila to tackle sea row 'with or without China' at UN
Attacks originating from US rank 1st among overseas hackings in China
Photos show new activity at N Korea nuclear site
Spy agencies scrounge for details on North Korean nuclear test
North Korea: A nuclear 7-Eleven?
N Korean propaganda video shows Obama in flames
US Envoy Opposes S Korean Nuclear Armament
Rise in online fan clubs extolling China's party leaders
After China's multibillion-dollar cleanup, water still unfit to drink
Smog in Pearl River Delta 'worse than in Beijing'
Maoists Block Deal to Break Nepal's Long Political Deadlock
Cameron to pay respects to victims of Amritsar massacre
Cameron's India trip hits wobble with concern over helicopter deal
Sars-like virus death reported in UK
New coronavirus can infect human lungs as easily as cold virus
Magdalene laundries: Ireland to apologise to survivors
Iranian torture guard refused UK citizenship
Britain expands "bigger than burgers" horsemeat tests
Regulator warns Britain 'on the brink' of energy crisis
Scotland 'faces EU funding cut'
Tanker drivers in Scotland vote to strike
Belfast Orange Order warns members over flag protests
One in four Africans attacked in Ireland
Berlusconi accused of trying to buy votes days before election
After Bulgarian Protests, Prime Minister Resigns
Greek police fire tear gas on anti-austerity protesters
Greece welcomes Hollande with ânews blackoutâ
Dutch experiment in legalised prostitution a disaster
Thieves in Belgium pull off most spectacular and dramatic diamond heist in years
Iceland considers dropping its currency
Lawmakers Threaten to Veto Tightened Budget
EU reinforces sanctions against DPRK
To Revive Honey Bees, Europe Proposes a Pesticide Ban
Anti-austerity strike to bring Greece to a standstill
Italy politicians make final drive for votes before poll
Berlusconi's possible comeback a nightmare for Angela Merkel
Merkel's Rainbow Problem: On Gay Rights, Chancellor Still a Conservative
German Officials Signal Berlusconi Isn't Their Man
Germany Sends Troops to Mali
German police raid firms over Ponzi scheme
Germany: Court Backs Adoption by Same-Sex Couples
Net activists slam Germany's open data portal
NSU victims' families want more than sympathy
Security staff at Hamburg airport to strike Wednesday in pay dispute
Swiss mayoral candidate 'pro-Hamas, pro-Iran'
Outgoing chairman of Switzerland's Novartis foregoes $78 million golden parachute deal
Norway is Afraid of Foreign Spies
Hollande: French soldier killed in northern Mali
Hollande confirms seven kidnapped in Cameroon
Hollande urges investment in Greece, growth in Europe
Hollande: France will miss 2013 growth target
French Kidnapped in Cameroon Were Taken Into Nigeria
France saw 58 percent rise in anti-Semitic attacks in 2012
Man arrested for serial attacks on Paris Chinese
France to unfreeze development aid to Mali
France Charges 11 In Alleged Kurdish Extortion Ring
|War For Global Energy Supremacy-World War III|
Syrian rebels threaten Hezbollah with 48-hour deadline
Syrian military reportedly shoots down Israel drone
US direct military support to Mali likely to continue after elections
Mortars Explode Near Assad Palace in Damascus
Missile kills more than 30 in Syria
Typhoid breaks out in rebel-held eastern Syria
Foreign Arms Supplies to Syrian Rebels Expanding
Pro-Assad militia now key to Syrian governmentâs war strategy
Russia's double dealing on arms to Assad regime leaves UK isolated over Syria
Syrian Rebels Threaten to Attack Lebanon Over Border Dispute
|Insight Into Todayâs News|
Billionaires Continue To Dump Stocks
G20 issues empty declaration against currency wars
Norway Enters The Currency Wars
The Second-Mortgage Shell Game
The Last Liberal Branch of Government
US/NATO occupation of Afghanistan unraveling
Goodbye? Weâve Lost Who We Are?
US Schools Go Into Full Prison Mode
Hornady Addresses Ammo Shortage: Weâre working 24/7
US Media Yet Again Conceals Newsworthy Government Secrets
Former foreign minister Livni joins Netanyahu coalition
Prisoner X: Benjamin Netanyahu adds to mystery
Secretary Kerry to skip Israel in first trip
Turkey, Israel Cut 1st Defense Deal Since Freezing Ties
Israel Seeks to Curb Weapons Flow to Gaza
West Bank protesters rally for release of deteriorating prisoners
Palestinian Prisoner's Hunger Strike Reaches 211th Day
Fatah Official Warns of Violence if Prisoners Aren't Freed
'Iron Dome' may be instrumental in peace process
Head of Israeli IVF unit arrested in Romania
Security deteriorating in Egypt due to political instability
Opposition Sets Conditions For Dialogue With Morsi
Morsi's advisory team less diverse after months of walkouts
Morsi Issues Presidential Decree to Appoint New Mufti
Strike, Protests Hit Egypt's Port Said for 3rd Day
Egyptians protest at Libyan border over new visa rules
Egypt ministry appeals against order to block YouTube
Egypt files new charges against Mubarak's last premier
2 Sunni groups halt roles in Bahrain crisis talks
A Palace Rift in Bahrain Bedevils Key US Navy Base
Iran to Conduct Military Drills Over 3 Days
Reformists Meet Khamenei To Improve 'Internal Climate'
Rivals Forced to Apologize to Supreme Leader
Ahmadinejad threat to cancel Iranian poll
Iran Pushes Nuclear-Free Mideast Plans
Syrian Prime Minister Claims Iran is Now âOccupyingâ Syria
MPs say sovereignty over three Persian Gulf islands is non-negotiable
Iran protests Berlin film award for banned Jafar Panahi
Fatwa Issued Against 3G Internet Operator in Iran
Iran FM Spurns Western 'Gold Trade' Offer
Stung by 'Argo,' Iran Backs Conference Denouncing 'Hollywoodism'
Two Freemasons: Ex-IMF Pres. Bro. Dominique Strauss Kahn and Ex-France Pres. Bro. Nicholas Sarkozy
France’s presidential race headed into its home straight Saturday as ex-IMF boss Dominique Strauss-Kahn, a Socialist once tipped to win the vote, blamed Nicolas Sarkozy for his spectacular downfall.
The claim came as the battle between Sarkozy and the front-running Francois Hollande grew ever more bitter, with the incumbent accusing the Socialist of subjecting him to a “Stalinist trial” over his bid to woo the far right.
Strauss-Kahn, in his first major newspaper interview since his disgrace a year ago, told The Guardian that his fall was orchestrated by opponents to prevent him from standing as the Socialist candidate in the election.
The ex-International Monetary Fund boss had been favoured to win the vote until May last year, when he was arrested in New York and accused of sexually assaulting a hotel maid, Nafissatou Diallo. The charges were later dropped.
Strauss-Kahn said that although he did not believe the incident with Diallo was a setup, the subsequent escalation of the event into [...]
| Greece's Latest Drama Imperils Banks' Baby Steps Toward Recovery |
The timing for when Greece is next due to run out of money represents a serious inconvenience for Angela Merkel’s re-election campaign, At the end of July, the European silly season will be in full swing, millions of people will be getting ready for holidays and by the time they get back in September it will be difficult to get anyone to change their minds ahead of the election in October. Against that background it is Germany’s interests for the EU to come to an agreement with the IMF about what to do about Greece’s debt and ability to repay sooner rather than later. That’s quite apart from the Dutch election later this month and the French election next month.
| Tory Lord tells peers about a weird Internet scam at great length |
On February 16th, Lord David James of Blackheath (a Conservative life peer) spoke for 11 minutes in the UK House of Lords about a supposed $15 trillion federal reserve conspiracy that involved more gold than has ever been mined. It turned out he had fallen for a widespread scam.
âMr. Riyadi has sent me a remarkable document dated February 2006,â Lord James continued, âin which the American Government have called him to a meeting with the Federal Reserve Bank of New York.â That meeting, he said, âwas witnessed by Mr Alan Greenspan, who signed for the Federal Reserve Bank of New York of which he was chairman, as well as chairman of the real Federal Reserve in Washington. It is signed by Mr Timothy Geithner as a witness on behalf of the International Monetary Fund. The IMF sent two witnesses, the other being Mr Yusuke Horiguchi.â
âThese gentlemen have signed as witnesses,â he continued, âto the effect that this deal is a proper deal. There are a lot of other signatures on the document. I do not have a photocopy; I have an original version of the contract.
âUnder the contract, the American Treasury has apparently got the Federal Reserve Bank of New York to offer to buy out the bonds issued to Mr Riyadi to replace the cash which has been taken from him over the previous 10 years. It is giving him $500 million as a cash payment to buy out worthless bonds. That is all in the agreement and it is very remarkable.â
Riyadi, as the tale continues, supposedly had 750,000 tons of gold backing the $15 trillion the United States took from him to prop up the U.S. dollar.
The World Gold Council, however, estimates the only 165,000 tons of gold have been mined in the history of the world.
British Lord fell for $15 trillion federal reserve scam
| Take To The Sky |
Sie kommt aus dem Jazz und hat sich dennoch an die ganz groÃen Pop-Klassiker gewagt: ein Album voller altbekannter Hits - von Kat Edmonson neu interpretiert.
Das Prinzip ist bekannt. Man nimmt bekannte Songs, entschleunigt sie, dichtet vielleicht auch frische eigene Aspekte hinzu und lÃ¤sst sie somit in neuem Licht erstrahlen. Nouvelle VagueÂ machen das Ã¤uÃerst erfolgreich und konsequent oderÂ The Mike Flowers PopÂ gaben mit dieser Taktik - nicht gÃ¤nzlich humorfrei - dem Genre Easy Listening Mitte der Neunziger Jahre neuen Auftrieb.
Kat Edmonson widmet sich Evergreens von Sinatra bis zu den Cardigans und covert sie sanft und behutsam. Sicherlich, keine neue Idee, keine groÃe Tat, eventuell sogar etwas abgestanden und beliebig. Aber man hÃ¶rt, dass Ms. Edmonson einen besonderen Bezug zu diesen StÃ¼cken hat, geradezu liebevoll scheint sie den Tracks neues Leben im wahrsten Sinne des Wortes einzuhauchen.Â
Ihr Talent hat ihr bereits Vergleiche mit Billie Holiday oder Peggy Lee eingebracht. Das mag vielleicht etwas hoch gegriffen sein, in der Jazz-Szene gilt Edmonson allerdings in der Tat als hochkarÃ¤tige Newcomerin. Und die TÃ¼r zum Pop hat sie sich mittels der groÃen Vorlage von The Cure soeben mehr als nur einen Spalt breit geÃ¶ffnet.Â
| European Stranglehold Over the IMF Has Become a Curse |
Most Eurozone economies show some signs of stabilising, following ECB President Super Mario Draghi’s record stimulus and more recent purchases of corporate bonds, in addition to Christine Lagarde’s earlier generous lending (my emphasis above). Let’s hope this stimulus aids an actual recovery, including for the EU’s Southern European countries. If not, less benign terms will be available when the IMF moves away from European control as Christine Lagarde’s second 5-year term expires in July 2021, and more importantly, Mario Draghi’s 8-year term at the ECB ends in October 2019.
A PDF of AEP’s column is posted in the Subscriber’s Area, along with a further article.
| NAB Show 2011 - Day 7 - April 17, 2011 |
Here's the seventh in our series of Special Reports.
Join host Larry Jordan, live from our booth on the show floor, as he talks with:
Peter Crithary, Marketing Manager, Sony Electronics, is responsible for marketing most of Sony's professional cameras in the U.S. He joins us to talk about a variety of new camera announcements - and solid state recording devices - that Sony made at NAB. Then, Vincent Maza, Marketing Manager, Avid Technology, joins us to talk about the new ability within Avid Media Composer to edit HDCAM SR video natively to more tightly integrate production with post.
Alexis Van Hurkman, Principle of Van Hurkman Productions, is a full-time colorist and a regular guest on The BuZZ, joins us to discuss the latest news from the creators of a variety of color-grading software; including DaVinci Resolve, LightWorks, and Assimilate.
Interviewed by Michael Kammes, Kimball Thurston, Lead Scientist,
Reliance MediaWorks, explains new technology they are showing at NAB that allows better image processing and cleaner up-resing of SD to HD images.
Fraunhofer IIS is Europe's leading research institutes. At NAB, they introduced MPEG compression for 5.1 surround sound, a real-time encoder for surround audio on the web, and a utility that lets you hear the results of audio compression in real-time, while you are mixing your audio. Matthias Rose, Head of Marketing Communications for Audio and Multimedia, Fraunhofer, explains.
Tom Vice, VP and General Manager, NextLab
FotoKem. NextLab has developed an on-set hardware and software kit that can be used during production to simplify the process of working with tapeless media, which Tom calls "file-based workflows." Listen as he explains his new system.
Michael Kammes interviews Jerry Pierce, Senior Vice-President, Hollywood Post Alliance, about its push to standardize IMF (Interoperable Mastering Format) and why this standardization is important to the professional side of the industry.
Bruce Devlin, Chief Technical Officer, Amberfin, explains their ICR software, which grew out of research at Snell and Wilcox, which is software for file and standard conversion, technical analysis, and conversion automation.
| Pankaj Mishra : The 'People's War' ||[from London Review of Books: Vol. 27 No. 12 dated 23 June 2005 ]|
In Kathmandu this March, I met a Nepalese businessman who said he knew what had provoked Crown Prince Dipendra, supposed incarnation of Vishnu and former pupil at Eton, to mass murder. On the night of 1 June 2001, Dipendra appeared in the drawing-room of the royal palace in Kathmandu, dressed in combat fatigues, apparently out of it on Famous Grouse and hashish, and armed with assault rifles and pistols. In a few frenzied minutes, he killed his parents, King Birendra and Queen Aishwarya, a brother, a sister and five other relatives before putting a pistol to his head. Anointed king as he lay unconscious in hospital, he died two days later, passing his title to his uncle Gyanendra.
Dipendraâs obsession with guns at Eton, where he was admired by Lord Camoys as a âdamn good shotâ, his heavy drinking, which attracted the malice of the Sun, his addiction to hashish and his fondness for the films of Arnold Schwarzenegger â all this outlines a philistinism, and a potential for violence, commonplace among scions of Third World dynasties (Suharto, Nehru-Gandhi, Bhutto). And it is not so hard to believe the semi-official explanation for his actions: that his parents disapproved of his fiancÃ©e. However, the businessman, who claimed to know the royal family, had a more elaborate and intriguing theory.
We sat in a rooftop cafÃ© in Thamel, Kathmanduâs tourist centre, a few hundred feet from the royal palace. March, the businessman said, was a good season for tourists in Nepal. âBut look,â he continued, pointing to the alleys below us, where the bookshops, trekking agencies, cybercafÃ©s, bakeries, malls and restaurants were empty. In recent years, the tourist industry has been damaged by news in the international press about the Maoist guerrillas, who model themselves on the Shining Path in Peru, and whose âpeopleâs warâ has claimed more than 11,000 lives since 1996. Even fewer tourists have ventured to Nepal since 1 February this year, when King Gyanendra, citing the threat presented by the Maoists, grounded all flights, cut off phone and internet lines, arrested opposition politicians and imposed censorship on the media.
A portly man wearing a cotton tunic, tight trousers and a cloth cap, the businessman had the prejudices of his class, the tiny minority of affluent Nepalese whose wealth comes largely from tourism and foreign aid; and that morning â the spring sun growing warm and burning off the smog over the Kathmandu Valley; the vendors of carpets, Gurkha knives, pirate DVDs and Tibetan prayer flags sullenly eyeing a stray tourist in tie-dye clothes â he aired them freely.
He said that Maoists had bombed the private school he sent his children to; he worried that his servants might join the guerrillas, who controlled 80 per cent of the countryside and were growing strong in the Kathmandu Valley. He said that he was all for democracy â he had been among the protesters demanding a new constitution in the spring of 1990 â but peace and stability were more important. What the country needed now, he declared, was a strong and principled ruler, someone who could crush the Maoists. He said that he missed Dipendra: he was the man Nepal needed at this hour of crisis.
According to him, Dipendraâs three years as a schoolboy in Britain had radicalised him. Just as Pandit Nehru had discovered the poverty of India after his stints at Harrow and Cambridge, so Dipendra had developed a new political awareness in England. He had begun to look, with mounting horror and concern, at his homeland. Returning to Nepal, he had realised that it would take more than tourism to create a strong middle class, accelerate economic growth, build democratic institutions and lift the ninth poorest country in the world to the ranks of modern democratic nations. As it turned out, he had been thwarted at every step by conservative elements in the royal palace. He had watched multi-party democracy, introduced in 1991, grow corrupt and feeble while enriching an elite of politicians and bureaucrats; equally helplessly, he had watched the new rulers of Nepal fail to tackle the Maoists. Frustration in politics rather than love, the businessman claimed, had driven Dipendra to alcohol, drugs, guns and, finally, to regicide.
Itâs often hard to know what to believe in Nepal, the only Hindu kingdom in the world, where conspiracy and rumour have long fuelled a particularly secretive kind of court politics. Independent newspapers and magazines have been widely available only since 1990, and though intellectually lively, the press has little influence over a largely illiterate population easily swayed by rumour. In December 2000, news that a Bollywood actor had insulted Nepal incited riots and attacks on Indians and Indian-owned shops across the country. Little is known about Dipendra, apart from his time at Eton, where his fellow pupils nicknamed him âDippyâ. There is even greater mystery surrounding Pushpa Kamal Dahal, or Prachanda, the middle-aged, articulate leader of the Maoists, who has been in hiding for the last two decades.
King Gyanendra appeared on national television to blame the palace massacre on a âsudden discharge by an automatic weaponâ. A popular conspiracy theory, in turn, blamed it on the new king himself, who was allegedly involved in smuggling artefacts out of Nepal, and on his son, Paras, much disliked in Nepal for his habit of brandishing guns in public and dangerous driving â he has run over at least three people in recent years, killing one. More confusingly, the Maoists claimed that they had an âundeclared working unityâ with King Birendra, and accused Gyanendra, and Indian and American imperialists, of his murder.
This atmosphere of secrecy and intrigue seems to have grown murkier since February, when Gyanendra adopted the Bush administrationâs rhetoric about âterrorismâ and assumed supreme power. Flights to Nepal were resumed after only a few days, and the king claimed to have lifted the emergency on 30 April, but most civil rights are still suspended today. When I arrived in Kathmandu, fear hung heavy over the street crossings, where soldiers peeped out from behind machine-gun emplacements. Men in ill-fitting Western suits, with the furtive manner of inept spies, lurked in the lobby of my hotel. Journalists spoke of threatening phone calls from senior army officers who tended to finger as Maoists anyone who didnât support the king. Many of the people I wanted to meet turned out to be in prison or in exile. Appointments with underground activists, arduously made, were cancelled at the last minute, or people simply didnât turn up.
Sitting in her gloomy office, a human rights activist described the routine torture and extra-judicial killing of suspected Maoists, which had risen to a startling average of eight a day. Nothing was known about the more than 1200 people the army had taken from their homes since the beginning of the âpeopleâs warâ â the highest number of unexplained disappearances in the world. She spoke of the âmassive impunityâ enjoyed by the army, which was accountable only to the king. She claimed that the governments of India, the US and the UK had failed to understand the root causes of the Maoist phenomenon and had decided, out of fear and ignorance, to supply weapons to the Royal National Army: 20,000 M-16 rifles from the US, 20,000 rifles from India, helicopters from the UK.
She said that the âinternational communityâ had chosen the wrong side in a conflict that in any case was not likely to be resolved by violence. Though recently expanded, and mobilised against the Maoists in 2001, the army was no more than 85,000 strong, and could not hold the countryside, where, among the high mountains, ravines and rivers â almost perfect terrain for guerrillas â it faced a formidable enemy.
She spoke with something close to despair. Much of her work â particularly risky at present â depended on international support. But few people outside Nepal cared or knew enough about its human rights record, and the proof lay in her office, which was austerely furnished, with none of the emblems of Western philanthropy â new computers, armed guards, shiny four-wheel drives in the parking lot â that I had seen in December in Afghanistan.
âPeople are passing their days here,â she said as I left her office, and the remark, puzzling at first, became clearer as I spent more time in Kathmandu. In the streets where all demonstrations were banned, and any protest was quickly quashed by the police, a bizarre feeling of normality prevailed, best symbolised by the vibrant billboards advertising mobile phones (banned since 1 February). Adverts in which companies affirmed faith in King Gyanendra appeared daily in the heavily censored newspapers, alongside news of Maoist bombings of police stations, unverified reports of rifts between Maoist leaders, promotional articles about Mercedes Benz cars and Tag Heuer watches, and reports of parties and fashion shows and concerts in Kathmandu.
Thamel opened for business every day, but its alleys remained empty of tourists. Months of Maoist-enforced blockades and strikes were also beginning to scare away the few foreign investors who had been deceived by the affluence of Kathmandu into thinking that Nepal was a big market for luxury consumer goods. Interviewed in a local newspaper, a Dutch investor described the Nepalese as an âextremely corrupt, greedy, triple-faced, myopic, slow, inexperienced and uneducated peopleâ, and declared that he was taking his hair-replacement business to Latvia. Western diplomats and United Nations officials â darting in their SUVs from one walled compound to another â speculated about a possible assault on the capital by guerrillas.
But it is the middle-class Nepalese, denounced by the Maoists as âcomprador capitalistsâ, who appear to live most precariously, their hopes and anxieties echoed in the newspapers by royalist journalists who affirm daily that Nepal needs a strong ruler and Gyanendra is best placed to defend the country, by means of a spell of autocratic rule, from both Maoist âterroristsâ and corrupt politicians.
Often while listening to them, I would remember the businessman I had met in Thamel and what he had told me about Dipendra; and I would wonder how the crown prince, if he had indeed been sensitised to social and economic distress during his three years in Thatcherâs England, had seen his strange inheritance, a country where almost half of the 26 million people earned less than $100 a year and had no access to electricity, running water or sanitation; a country whose small economy, parasitic on foreign aid and tourism, had to be boosted by the remittances of Nepalese workers abroad, and where political forces seen as anachronisms elsewhere â monarchy and Communism â fought for supremacy.
Histories of South Asia rarely describe Nepal, except as a recipient of religions and ideologies â Buddhism, Hinduism, Communism â from India; even today, the countryâs 60 ethnic and caste communities are regarded as little more than a picturesque backdrop to some of the worldâs highest mountains. This is partly because Western imperialists overlooked Nepal when they radically remade Asia in the 19th and 20th centuries.*
While a British-educated middle class emerged in India and began to aspire to self-rule, Nepal remained a country of peasants, nomads and traders, controlled by a few clans and families. Previously dependent on China, its high-caste Hindu ruling class courted the British as they expanded across India in the 19th century. As in the so-called princely states of India, the British were keen to support despotic regimes in Nepal, and even reward them with territory; it was one way of staving off potentially destabilising change in a strategically important buffer state to Tibet and China. The country was also a source of cheap mercenaries. Tens of thousands of soldiers recruited by the British from the western hills of Nepal fought during the Indian Mutiny, the Boxer Rebellion in China, and in the two world wars. The Gurkhas also helped the British suppress political dissenters in India, and then, more violently, Communist anti-colonialists in Malaya in the 1950s.
As the movement for political independence grew in India, Nepal came to be even more strongly controlled by Hindu kings and the elites they created by giving land grants to members of the high castes, Bahun and Chhetri, which make up less than 30 per cent of the population. The end of the British Empire in Asia didnât lead to rapid change in Nepal, or end its status as a client state. Indian-made goods flooded Nepalese markets, stifling local industry and deepening the countryâs dependence on India. In the 1950s and 1960s, as the Cold War intensified, Nepal was the forward base of the CIAâs operations against China.
American economists and advisers trying to make the world safe for capitalism came to Nepal with plans for âmodernisationâ and âdevelopmentâ â then seen as strong defences against the growth of Communism in poor countries. In the Rapti valley, west of Kathmandu, where, ironically, the Maoists found their first loyal supporters in the 1990s, the US government spent about $50 million âimproving household food production and consumption, improving income-generating opportunities for poor farmers, landless labourers, occupational castes and womenâ.
Modernisation and development, as defined by Western experts during the Cold War, were always compatible with, and often best expedited by, despotic rule. Few among the so-called international community protested when, after a brief experiment with parliamentary democracy in the 1950s, King Mahendra, Dipendraâs grandfather, banned all political parties. A new constitution in 1962 instituted a partyless âPanchayatâ system of âguided democracyâ in which advisers chosen or controlled by the king rubber-stamped his decisions. The representatives of the Panchayat, largely from the upper castes, helped themselves to the foreign aid that made up most of the state budget, and did little to alleviate poverty in rural areas. The king also declared Nepal a Hindu state and sought to impose on its ethnic and linguistic communities a new national identity by promoting the Nepali language.
Such hectic nation-building could have lulled Nepalâs many ethnic and linguistic communities into a patriotic daze had the project of modernisation and development not failed, or benefited so exclusively and egregiously an already privileged elite. During the years of autocratic rule (1962-90), a few roads were built in the countryside, infant mortality was halved, and the literacy rate went up from 5 per cent in 1952 to 40 per cent in 1991. But Nepalâs population also grew rapidly, further increasing pressure on the countryâs scarce arable land; and the gap between the city and the countryside widened fast.
What leads the sensitive prince to drugs and alcohol often forces the pauper to migrate. Millions of Nepalese have swelled the armies of cheap mobile labour that drive the global economy, serving in Indian brothels, Thai and Malaysian sweatshops, the mansions of oil sheikhs in the Gulf and, most recently, the war zones of Iraq. Many more have migrated internally, often from the hills to the subtropical Tarai region on the long border with India. The Tarai produces most of the countryâs food and cash crops, and accommodates half of its population. On its flat alluvial land, where malaria was only recently eradicated, the Buddha was born 2500 years ago; it is also where a generation of displaced Nepalese began to dream of revolution.
In Chitwan, one of the more densely populated districts in the Tarai, I met Mukti Raj Dahal, the father of the underground Maoist leader, Prachanda. Dahal was one of the millions of Nepalese to migrate to the Tarai in the 1950s. His son was then eight years old. He had travelled on to India, doing menial jobs in many cities, before returning to Chitwan, which American advisers and the Nepalese government were then developing as a âmodel districtâ with education and health facilities. In Chitwan, Dalal bought some land and managed to give his eight children an education of sorts. Though he is tormented by stomach and spinal ailments, he exuded calm as he sat on the verandah of his two-roomed brick house, wearing a blue T-shirt and shorts under a black cap, a Brahminical caste mark on his forehead.
He had the serenity of a man at the end of his life. And, given the circumstances, he had not done too badly. I had spent much of that day on the road from Kathmandu to the Tarai, shuffling past long queues of Tata trucks from India, through a fog of dust and thick diesel smoke, ragged settlements occasionally appearing beside the road: shops made of wooden planks, selling food fried in peanut oil and tea in sticky clouded glasses, mud houses with thatched roofs â a pre-industrial bareness in which only the gleaming automatic guns of young soldiers and the tangle of barbed wire behind which they sat spoke of the world beyond Nepal.
The jittery soldiers who approached the car with fingers on their triggers were very young, hard to associate with stories I had heard in Kathmandu â stories no newspaper would touch â of the army marching men out of overcrowded prisons and executing them. My companion, a Nepalese journalist, was nervous. He knew that the soldiers in the countryside attacked anyone they suspected of being a Maoist, and journalists were no exception. Many of the soldiers barely knew what a journalist was.
There are few places in Nepal untouched by violence â murder, torture, arbitrary arrest â and most people live perpetually in fear of both the army and the Maoists, without expectation of justice or recompense. Dahal, however, appeared to have made a private peace with his surroundings. He told me that he spent much of his day at the local temple, listening to recitals of the Ramayana. He said that he still believed the king had good intentions. He appeared both bemused by, and admiring of, his famous son, whom he had last seen at the funeral of his wife in 1996. The ideas of equality and justice, he thought, had always appealed to Prachanda, who was a sensitive man, someone who shared his food with poor people in the village. He couldnât tell me how his son had got interested in Mao or Marx in such a place as Chitwan, which had no bookshop or library. But he did know that Prachanda had got involved with Communists when he couldnât find a good job with the government and had to teach at a primary school in his native hills of Pokhara.
In his speeches, which claim inspiration from Mao and seek to mobilise the peasants in the countryside against the urban elite, Prachanda comes across as an ideologue of another era: heâs an embarrassment to the Chinese regime, which is engaged in the un-Maoist task of enriching Chinese coastal cities at the expense of the hinterland, and feels compelled to accuse Nepalese Maoists of besmirching the Chairmanâs good name.
In the few interviews he has given, Prachanda avoids answering questions about his background and motivation, which have to be divined from details given by Dahal: the haphazard schooling, the useless degree, the ill-paid teaching job in a village school, all of which seem to lead inexorably to a conflict with, and resentment of, unjust authority.
The âmodernisationâ and âdevelopmentâ of Nepal during the 1950s and 1960s created millions of men like Prachanda, lured away from their subsistence economies and abandoned on the threshold of a world in which they found they had, and could have, no place. Nepalâs agricultural economy offered few of them the jobs or the dignity they felt was their due, and they were too aware of the possibilities thwarted by an unequal, stratified society to reconcile themselves to a life of menial labour in unknown lands, and an old age spent in religious stupor. Educated, but with no prospects, many young men like Prachanda must have been more than ready to embrace radical ideas about the ways that an entrenched urban elite could be challenged and even overthrown if peasants in the countryside were organised.
Growing up in Nepal in the 1960s, Prachanda watched these ideas grow in the Naxalbari movement in India. Communist activists lived and worked secretly in parts of Nepal during the Panchayat era â in the 1950s, a famous Communist leader called M.B. Singh travelled in the midwestern hills and acquired followers among the Magars, one of Nepalâs more prominent ethnic groups now supporting the Maoists. But Prachanda says that the âhistoric Naxalbari movementâ of India was the âgreatest influenceâ on the Communists of Nepal.
In the late 1960s, thousands of students, many of them middle-class and upper-caste, joined an armed peasant uprising led by an extremist faction of the Communist Party of India (Marxist) in West Bengal and Bihar. Known as Naxalites, after the Naxalbari district where the revolt first erupted in 1967, they attacked âclass enemiesâ â big landlords, policemen, bureaucrats â and âliberatedâ territories which they hoped would form bases for an eventual assault on the cities, as had happened in China. The Indian government responded brutally, killing and torturing thousands. Driven underground, the Naxalite movement splintered, and remained dormant for many years.
In the 1990s, when India began to move towards a free market, the Naxalite movement revived in some of the poorest and most populous Indian states. Part of the reason for this is that successive Indian governments have steadily reduced subsidies for agriculture, public health, education and poverty-eradication, exposing large sections of the population to disease, debt, hunger and starvation. Almost three thousand farmers committed suicide in the southern state of Andhra Pradesh after the government, advised by McKinsey, cut agricultural subsidies in an attempt to initiate farmers into the world of unregulated markets. In recent years, Naxalite movements, which have long organised landless, low-caste peasants in Bihar and Andhra Pradesh, have grown quickly in parts of Uttar Pradesh and Madhya Pradesh â where an enfeebled Indian state is increasingly absent â to the extent that police and intelligence officials in India now speak anxiously of an unbroken belt of Communist-dominated territory from Nepal to South India.
The Naxalite uprising in the late 1960s invigorated the few Communists in Nepal, who, like the members of the Nepali Congress, the main underground political organisation, sought guidance and encouragement from India. In 1971, some Nepalese Communists living across the border from Naxalbari declared a âpeopleâs warâ against the monarchy. They killed seven âclass enemiesâ before being suppressed by the king. As fractious as their Indian counterparts, the Nepalese Communist parties split and split again over petty doctrinal or personality issues. In 1991, after the restoration of multi-party democracy, several of them contested elections, and even did well: a Communist coalition became the biggest opposition party, and briefly held power in 1994. In the early 1990s, however, few people in Nepal could have predicted the swift rise of Prachanda and the obscure faction he led.
The Maoists under Prachanda resolved as early as 1986 to follow Maoâs strategy of capturing state power through a âpeopleâs warâ. They did not start the war until the mid-1990s, however, when disillusionment with parliamentary democracy created for them a potentially wide popular base in the countryside. Still, hardly anyone noticed when on 4 February 1996 the Maoists presented the government with a list of 40 demands, which included abrogating existing treaties with India, stripping the monarchy of all power and privileges, drafting a new constitution by means of a constituent assembly, nationalising private property, declaring Nepal a secular nation and ending all foreign aid. These demands were not likely to be met; and as though aware of this, the Maoists began their âpeopleâs warâ by attacking police stations in six districts four days before the deadline.
For the next five years, the Maoists forced their way into the national consciousness with their increasingly bold tactics. They financed themselves by collecting âtaxesâ from farmers, and they exacted âdonationsâ from many businessmen in the Kathmandu Valley. They indoctrinated schoolchildren; they formed peopleâs governments in the areas they controlled and dispensed rough justice to criminals and âclass enemiesâ. But much of the new power and charisma of the Maoists came from their ability to launch audacious attacks on the police and the army.
The military wing of the Maoists initially consisted of a few ill-trained men armed with antique rifles and homemade weapons. But they chose their first target cannily: the police, almost the only representatives of the central government in much of Nepal. Poorly armed, often with little more than sticks and .303 Lee Enfield rifles, the police retreated swiftly before the Maoists, who also attacked roads, bridges, dams, administrative offices, bridges, power plants â anything they felt might aid the counter-insurgency efforts of the government.
In recent years, the Maoists have grown militarily strong, mostly through conscription in the countryside, and regular training â allegedly provided by Indian Naxalites. They have acquired better weapons by looting police stations and buying from the arms bazaars of India; they have also learned how to make roadside explosives, pipe and âpressure cookerâ bombs. In November 2001, the Maoists launched 48 attacks on the army and the police in a single day, forcing the Nepalese government to impose a state of emergency. More than 5000 people died in the next 15 months, the bloodiest period in Nepalâs modern history.
But violence is only a part of the Maoistsâ overall strategy. In an interview in 2000, Prachanda criticised Indian Communist groups for their lack of vision and spoke of the importance of developing âbase areasâ. Since 1996, the Maoists have spread out from their traditional home in the midwestern hills of Rolpa and Rukum districts. Their cadres â estimated to number as many as 100,000 â travel to deprived areas, addressing, and often recruiting from, the large and growing mass of people deeply unhappy with Nepalâs new democratic dispensation.
Some measure of democracy was inevitable in Nepal by the 1980s. In previous decades, the stateâs half-hearted efforts at development had produced many low-level bureaucrats, small businessmen, teachers, students and unemployed graduates. This new class resented the continuing dominance of upper-caste clans and families. The conflict between the old elite and its challengers was aggravated by a series of economic crises in the late 1980s. In 1985-86, Nepal had negotiated a loan with the IMF and World Bank. The bankâs euphemistically named (and free-market oriented) âstructural adjustment programmeâ, which was then causing havoc in Latin American economies, forced the Nepalese government to cut farm subsidies and jobs in the public sector. GDP grew as a result but the gains were cancelled out by inflation of up to 10 per cent and a trade and transit embargo imposed by India in 1989, which caused severe fuel shortages and price rises.
The protesters who filled the streets of Kathmandu in the spring of 1990 were convinced that the decaying Panchayat system could not deal with the shocks of the new world and needed to be reformed. In acceding to demands for multi-party democracy, the king appeared to acknowledge the strength of the new educated class and to recognise that the old political system needed a degree of popular legitimacy if it was to survive. Itâs clear now that what happened in 1990 was less a revolution than a reconfiguration of power, sanctified by elections, among the old royalist oligarchy and an emerging urban middle class. Many courtiers and sycophants of the king managed to reinvent themselves as parliamentary politicians, often joining the Nepali Congress, the political party that ruled Nepal for all but one of the next 13 years. There were few ideological differences between the Nepali Congress and the main opposition party, the radical-sounding Communist Party of Nepal (United Marxist-Leninist), both of which continued to be led by upper-caste men motivated largely by a desire for money and power. Elections were held frequently, and a procession of governments â 13 in as many years â made Nepalese democracy appear vibrant. But the majority of the population, especially its ethnic communities, went largely unrepresented.
In 1992, when democracy still promised much, and Maoism was no more than another rumour in the streets of Kathmandu, Andrew Nickson, a British expert on Latin America, wrote prophetically:
The future prospects of Maoism in Nepal will . . . depend largely on the extent to which the newly elected Nepali Congress government addresses the historic neglect and discrimination of the small rural communities which still make up the overwhelming bulk of the population of the country. As in the case of Peru, this would require a radical reallocation of government expenditures towards rural areas in the form of agricultural extension services and primary healthcare provision.
Needless to say, this didnât happen. In 2002, Dalits, low-caste Hindus, had an annual per capita income of only $40, compared to a national average of $210; fewer than 10 per cent of Dalits were literate. The upper-caste men who dominated the new democratic regime were competing among themselves to siphon off the money pouring into Nepal from foreign donors. A fresh convert to the ideology of the free market, the Nepalese government dedicated itself to creating wealth in urban areas. Trying to boost private investment in Kathmandu, it neglected agriculture, on which more than 80 per cent of the population depend for a living. Not surprisingly, absolute poverty continued to increase in the late 1990s, even as Kathmandu Valley benefited from the growth in the tourist, garment and carpet industries, and filled up with new hotels, resorts and villas.
In such circumstances, many people are likely to be attracted to violent, extra-parliamentary groups. The Maoists in Nepal had their first ready constituency among rural youths, more than 100,000 of whom fail their high school examination every year. Unemployed and adrift, many of these young men worked for other political parties in the countryside before becoming disillusioned and joining the Maoists.
Mohan was one of the young men who joined a newly legitimate political party after 1990 and then found himself remote from the spoils of power. He then worked with the Maoists for almost five years, living in jungles, once travelling to the easternmost corner of Nepal, before deciding to leave them. He couldnât return to his village, which lay in the Maoist-dominated region of Rolpa, and had gone to India for a while. He was now trying to lie low in Kathmandu, and although he didnât say so, he seemed to be âpassing his daysâ and making a living through odd jobs, like so many other people in the city.
We had arranged to meet in Boudhanath, Kathmanduâs major Buddhist site. Sitting in the square around the white stupa, among monks in swirling crimson robes and often with white faces, Mohan spoke of âfeudal forcesâ and the âbourgeoisieâ: their corruption had paved the way for the Maoists, whom he described as âanarchistsâ. He used the foreign words with a Nepalese inflection. He said that he had picked them up while accompanying a Maoist propagandist on tour; and it occurred to me, as he described his background, that he still used them despite having left the Maoists because he had no other vocabulary with which to describe his experience of deprivation and disappointment.
He was born and brought up in a family of Magar shepherds in a corner of Rolpa district that had no proper roads, schools or hospitals. Educated at a school in Palpa, a walk of several miles from his village, he had joined the Nepali Congress in 1992, when still in his late teens, and become a personal aide to a prominent local politician. There were many such young men. They received no money for their services, but slept in the politicianâs house, ate the food prepared for his family, and travelled with him to Kathmandu. Mohan said that it was a good time, the early years of democracy. He liked being in Kathmandu, especially with someone who had a bit of power. But he couldnât fail to notice that the politician returned less and less often to his constituency in the hills and often refused to meet people who came to his door asking for jobs, money and medical help. He was surprised to hear that the politician was building a new house for himself in Kathmandu. Soon, he felt he was not needed, and one day the politicianâs wife told him to eat elsewhere.
Clashes between Nepali Congress activists and the Maoists were common in his area; he felt that he could be useful to the Maoists with his knowledge of politics. He was also attracted to the idea of ethnic autonomy that the Maoists espoused. He had seen in his time with the politician how the upper-caste-dominated government in Kathmandu possessed an unjust share of the countryâs wealth and resources. Many people he knew had already joined the Maoists, and in 1995, one of his friends introduced him to the Maoist âsquad commanderâ in the region.
As he spoke, I wondered if this was the whole truth, if he hadnât joined the Maoists for the same reason he had joined the Nepali Congress, the reason many young men like him in India joined political parties: for food and shelter. In any case, he joined the Maoists at a bad time: it was in 1995 that the Nepalese government launched Operation Romeo.
This scorched-earth campaign is described as an instance of âstate terrorâ in a report by INSEC (Informal Sector Service Centre), Nepalâs most reliable human rights group. The police, according to the report, invaded villages in the Rolpa and Rukum districts, killing and torturing young men and raping women. When I mentioned this to Mohan, he said that things werenât as bad as they were made out to be by the âbourgeoisâ intelligentsia in Kathmandu, who, he thought, were soft on the Maoists. He said the Maoists were simply another opportunistic political group; this was why he had left them. They were interested in mobilising ethnic communities only to the extent that this would help them capture âstate powerâ; they werenât really interested in giving them autonomy. He had also been repelled by their cruelty. He had heard about â if not actually seen â instances of Maoists punishing people who refused to pay taxes, defied their alcohol ban or were suspected of being police informers. Using rocks and hammers, they often broke all the bones in their victimsâ bodies before skinning them alive and cutting off their tongues, ears, lips and noses.
Many of these stories appear in reports by Nepalese and international human rights groups. The Maoist leaders were, I often heard in Kathmandu, riding a tiger, unable to prevent their angry and frustrated cadres from committing torture and murder. Criminals had infiltrated their movement, and some Maoists now made a living from extortion and kidnapping. When confronted with these excesses, Maoist leaders deny or deplore them. They probably realise that that they are losing many of their original supporters, who are as tired of the organisationâs growing extremism as of the years of indecisive fighting. Nevertheless, these leaders can often seem constrained in their political thinking by revolutionary methods and rhetoric created in another time and place. Prachanda, for instance, is convinced that âa new wave of revolution, world revolution is beginning, because imperialism is facing a great crisis.â
When the subject is not world revolution but the specific situation of Nepal, he can be shrewdly perceptive. A police officer in India told me that many of the Indian Communists he interviewed confessed to learning much from the Maoists in Nepal, who were not as rigidly doctrinal as Communists in India and Afghanistan. As Prachanda put it:
The situation in Nepal is not classical, not traditional. In the Terai region we find landlords with some lands, and we have to seize the lands and distribute them among the poor peasants. But in the whole mountainous regions, that is not the case. There are smallholdings, and no big landlords . . . How to develop production, how to raise production is the main problem here. The small pieces of land mean the peasants have low productivity. With collective farming it will be more scientific and things can be done to raise production.
It is not clear how much collective farming exists, or what non-military use the Maoists make of the taxes they collect. In fact, there is little reliable information about what goes on in the countryside. Few journalists venture out of their urban bases, and the Maoists arenât the only obstacle. Most of the very few roads outside Kathmandu are a series of large potholes, and then there are the nervous soldiers at checkpoints. And once you move away from the highway, no soldiers or policemen appear for miles on end. In Shakti Khor, a village in the Tarai region populated by one of the poorest communities in Nepal, a few men quietly informed us that Maoist guerrillas were hiding in the nearby forest, where no security forces ever ventured and from where the Maoists often escaped to India. At a small co-operative shop selling honey, mustard oil, turmeric and herbal medicines, two men in their mid-twenties appeared very keen to put in a good word for the Maoists â who the previous night had painted red anti-monarchy slogans on the clean walls.
In the other Maoist-dominated regions I visited, people seemed too afraid to talk. At Deurali Bazaar, a village at the end of a long and treacherous drive in the hills near Pokhara, a newly constructed bamboo gate was wrapped with a red cloth painted with a hammer and sickle and the names of Maoists either dead or in prison. The scene in the square appeared normal at first â women scrubbing children at a municipal tap, young men drinking tea, an old tailor hunched over an antique sewing-machine, his walking stick leaning against his chair â but the presence of the Maoists, if unacknowledged, was unmistakable. When I tried to talk to the men at the teashop, they walked away fast, one of them knocking over the tailorâs stick. The shopkeeper said that he knew nothing about Maoists. He didnât know who had built the bamboo gate; it had simply appeared one morning.
When I got back to Pokhara that evening, the news was of three teenage students killed as they tried to stop an army car on the highway. The previous day I had seen newspaper reports in which the army described the students as âterroristsâ and claimed to have found documents linking them to the Maoists. But it now seemed clear that they were just collecting donations for Holi, the Hindu festival of colours. There were eyewitnesses to the shooting. The parents of the victims had exhumed their corpses from the shallow graves in which the army had quickly buried them and discovered that two of them had been wearing their school uniforms. Like much else in Nepal, this would not appear in the newspapers.
The bloody stalemate in Nepal may last for a long time. The army is too small and poorly equipped at present decisively to defeat the Maoists. In some areas it has recently tried arming upper-caste villagers and inciting them to take action against the Maoists. In the southern district of Kapilavastu, vigilante groups organised by a local landlord and armed by the government claim to have killed more than fifty Maoists in February. Such tactics are not only likely to lead to a civil war but also to increase support for the Maoists in areas where the government is either absent or disliked.
Though unlikely at present, talks may offer a way forward. The Maoists have shown themselves willing to negotiate and even to compromise: in July 2001 they dropped their demand that Nepal cease to be a monarchy. More recently, Prachanda hinted at a flexible stance when he called for a united front of mainstream political parties against the monarch. He probably fears that the guerrilla force might self-destruct if its leaders fail to lead their more extreme cadres in the direction of moderate politics. But any Maoist concessions to bourgeois democracy are unlikely to please Gyanendra, who clearly wants to use the current chaos to help him hold on to his power.
If he periodically evokes the prospect of terrorists taking over Nepal, Gyanendra can count on the support of India, the US and the UK. In late 2001, the US ambassador to Nepal, Michael Malinowski, a veteran of the CIA-sponsored anti-Soviet jihad in Afghanistan, said that âthese terrorists, under the guise of Maoism or the so-called âpeopleâs warâ, are fundamentally the same as terrorists elsewhere â be they members of the Shining Path, Abu Sayaf, the Khmer Rouge or al-Qaida.â The then Hindu nationalist government in Delhi, just as eager to name new enemies, also described the Maoists as âterroristsâ.
The present Indian government has a more nuanced view of Nepal. But it is worried about Indiaâs own Communist rebels and their links with the Nepalese Maoists, and it believes that, as Malinowski put it, âall kinds of bad guys could use Nepal as a base, like in Afghanistan.â Responding to fears that the army in Nepal was running out of ammunition, India resumed its arms supply this year, partly hoping to contain the Maoists and wanting too to maintain its influence over Nepal in the face of growing competition from the US.
There is no evidence that bad guys, as defined by the Bush administration, have flocked to Nepal; the Maoists are far from achieving a military victory; and the Communists in India are unlikely to extend their influence beyond the poverty-stricken districts they presently control. The rise of an armed Communist movement in a strategically important country nevertheless disturbs many political elites, who believe that Communism died in 1989 and that history has arrived at the terminus of liberal-capitalist democracy.
A European diplomat in Kathmandu told me that although Western countries hoped the political parties and the king would put up a joint front against the Maoists, they knew they might at some point have to support the king and his army if he alone was left to protect the country from the Maoists and keep alive the prospects for democracy. I did not feel that I could ask him about the nature of a democracy that is protected by an autocrat. Perhaps he meant nothing more by the word âdemocracyâ than regular elections: the kind of democracy whose failure to contain violence or to limit systemic poverty and inequality does not matter so long as elections are held, even if, as in Afghanistan and Iraq, under a form of martial law, and in which the turnout of voters does nothing but empower and legitimise a native elite willing to push the priorities of its Western patrons.
Such a form of democracy, which is slowly coming into being in Pakistan, could be revived again in Nepal, as the king repairs his relationship with the mainstream political parties. It is possible, too, that the excesses of the Maoists will cause them to self-destruct. Certainly the international revolution Prachanda speaks of will prove a fantasy. Yet itâs hard to wish away the rage and despair of people who, arriving late in the modern world, have known its primary ideology, democracy, only as another delusion â the disenchanted millions who will increasingly seek, through other means than elections, the dignity and justice that they feel is owed to them.
* For an accessible account of the beginnings of modern Nepal, see John Whelpton's A History of Nepal, Cambridge, 2005. Some recent scholarship on the Maoists is collected in Himalayan 'People's War': Nepal's Maoist Rebellion, ed. Michael Hutt, Hurst and Co, 2004. The Nepalese novelist Manjushree Thapa provides an engaging personal account of Nepal's recent turbulent years in Forget Kathmandu: An Elegy for Democracy, Penguin India, Delhi, 2005'
| Jokowi Tolak Kepentingan Asing, Gresik Juga Pasti Bisa |
Poro konco iki baru bener-bener menginspirasi kito bahwa warga Gresik juga pasti bisa menolak kepentingan asing DEMI KEMANDIRIAN BANGSA koyo sing di contohaken Pak Jokowi, niki contoh sing bagus gawe warga Gresik khususe poro pemimpin lan poro kepolo poro guru, niki beritane :
REPUBLIKA.CO.ID, JAKARTA -- Setelah menyatakan akan membatalkan proyek utang Bank Dunia senilai Rp 1,2 triliun, menolak menerbitkan obligasi daerah, Gubernur DKI Jakarta Joko Widodo (Jokowi) juga berencana untuk membatalkan kontrak dengan perusahaan air asing yang menguasai Jakarta sejak lama.
Terkait langkah yang dilakukan oleh Jokowi, pengamat kebijakan publik, Andrinof Chaniago, angkat bicara. Berikut pernyataan Andrinof saat bertemu ROL di kawasan Tebet, Jakarta Selatan, Senin (8/4).
Sumber : http://www.republika.co.id/berita/video/berita/13/04/09/mkz0ks-jokowi-tolak-kepentingan-asing-bisakah
Jokowi Melawan Asing, Saatnya Menegakkan Kemandirian Bangsa!
Jakarta (8/4) â Koalisi Anti Utang (KAU) dan Lingkar Madani Indonesia (LIMA) mengadakan Serial Diskusi Kemandirian Bangsa Ke-5 yang diselenggarakan pada hari . Diskusi ini mengambil tema âJokowi Melawan Asing, Saatnya Menegakkan Kemandirian Bangsa!, dengan narasumber: Andrinof Chaniago (Akademisi UI), Ray Rangkuti (Direktur LIMA), dan Dani Setiawan (Ketua KAU)
KAU dan LIMA menyatakan bahwa menengakkan kemandirian dan kedaulatan bangsa merupakan harga yang tidak bisa ditawar. Hal tersebut telah menjadi dasar-dasar diperjuangkannya kemerdekaan nasional dan merupakan amanat Undang Undang Dasar 1945. Dalam bidang ekonomi, kemandirian dan kedaulatan ekonomi dilakukan dengan cara penguasaan dan pengelolaan negara atas sumber-sumber kekayaan alam bagi sebesar-besarnya kemakmuran rakyat. Sebagaimana diutarakan oleh Ketua KAU, Dani Setiawan, âPengaturan tentang peran negara dalam ekonomi sebagaimana tercantum dalam pasal 33 UUD 194 merupakan pernyataan tegas bahwa negara ini tidak menganut sistem ekonomi liberal dan dengan sadar ingin membatasi pengaruh modal asing sebagai pelaku dominan dalam perekonomian nasional,â tegasnya.
Atas dasar itu, Pasal 33 seharusnya menjadi landasan bagi pemerintah untuk mengambil alih penguasaan dan pengelolaan wilayah pertambangan mineral yang dikuasai PT. Freeport, Newmont, Rio Tinto, Eramet, dll. Atau wilayah pertambangan Migas yang dikuasai oleh Total seperti di Blok Mahakam, Chevron, Shell, dll. Atau membatasi kepemilikan asing di dalam sektor keuangan seperti perbankan dan sektor pertanian.
Akan tetapi, Direktur LIMA, Ray Rangkuti menilai bahwa kekuasaan Orde Baru dan rezim-rezim pasca reformasi yang berkuasa, dengan dukungan lembaga keuangan internasional seperti IMF dan Bank Dunia telah membelokkan arah kebijakan ekonomi nasional. Kekayaan nasional Indonesia ditukar dengan uang receh melalui pinjaman Bank Dunia dan IMF untuk memperkaya diri dan kepentingan politik. Dan yang paling menyakitkan adalah, harga diri bangsa digadaikan melalui syarat-syarat utang untuk menyerahkan pengelolaan ekonomi nasional ke tangan investor asing dan modal swasta domestik yang a nasionalis.
âSemoga kepemimpinan Jokowi menjadi inspirasi pemerintah daerah yang lain untuk berani tegas terhadap pihak asing dan lembaga asingâ, ungkap Ray.
Di tengah gugatan rakyat terhadap para pemimpin yang kerap menjual bangsa, Gubernur DKI, Joko Widodo, menunjukan kepeloporan dalam menegakkan kemandirian bangsa dan melawan dominasi asing dalam perekonomian nasional. Jokowi menyatakan akan membatalkan proyek utang Bank Dunia senilai Rp1,2 triliun untuk proyek Jakarta Emergency Dredging Initiative (JEDI) yang digagas gubernur sebelumnya. Bahkan Jokowi juga menolak untuk mengeluarkan obligasi daerah yang menggiurkan. Sikap ini patut diapresiasi di tengah miskinnya contoh dan gejala para Kepala Daerah, Menteri, hingga Presiden justeru dilanda kecanduan utang. Hal tersebut menyebabkan menumpuknya utang negara hingga Rp2000 triliun dan memperbesar intervensi asing dalam perekonomian nasional.
Perlawanan Jokowi juga ditunjukan atas ketersetujuannya untuk segera membatalkan kontrak perusahaan air minum asing yang telah lama meraup keuntungan dari bisnis air bersih di DKI Jakarta. Sebuah kebijakan langka dari seorang kepala daerah yang biasanya berbondong-bondong menarik investor asing.
âAda 200-an PDAM di Indonesia punya utang sekitar Rp. 6 trilyun, ini terjadi karena rekomendasi Bank Dunia untuk perbaikan manajemen tapi akhirnya justru akumulasi utangâ, ungkap Andrinof Chaniago yang juga menjadi pembicara dalam acara diskusi tersebut.
Koalisi Anti Utang dan Lingkar Madani Indonesia mengapresiasi ketegasan Jokowi untuk menghentikan upaya pihak asing terus mengontrol dan mengintervensi kebijakan di Indonesia, khususnya di wilayah DKI Jakarta. Langkah ini harusnya menjadibenchmarks bagi Kepala Daerah lainnya di Indonesia agar mengambil langkah-langkah tegas menegakkan kemandirian bangsa bagi kemakmuran rakyat, dengan cara menolak intervensi asing melalui penyaluran utang luar negeri dan membatasi modal asing dalam pengelolaan ekonomi di daerah.
âMakin banyak bukti bahwa utang luar negeri maupun bentuk kerjasama pemerintah dan swasta yang merugikan rakyat, dari kasus Freeport dan kasus PDAMâ, lanjut Andrinof.
KAU dan LIMA menilai, sebaliknya sikap Jokowi ini merupakan pukulan telak bagi pendirian neoliberal presiden SBY yang memilih lebih bersikap koperatif dengan pihak kreditor dan lebih ramah bagi investor asing. Sikap Jokowi juga bertolak belakang dengan Presiden SBY yang suka menumpuk utang negara, memberi konsesi-konsesi tambang mineral dan migas kepada investor asing ketimbang perusahaan negara, tunduk kepada negara-negara besar seperti AS, China, dan Uni Eropa untuk membuka pasar domestik, dan lebih suka mengurus partai daripada rakyatnya yang terus menjadi korban dari agenda-agenda neoliberal di Indonesia.
Karena itu, sikap yang ditunjukan Gubernur Joko Widodo harus jadi momentum untuk menegakkan kemandirian dan kedaulatan bangsa! Mengkoreksi kebijakan neoliberal yang bertentangan dengan cita-cita proklamasi dan konstitusi.
Sumber : http://kau.or.id/jokowi-melawan-asing-saatnya-menegakkan-kemandirian-bangsa/
| Sejarah Freeport di Indonesia ||AYO BELAJAR SEJARAH SUPOYO GAK DI BUJU'I|
YA 4JJI SELAMATKAN NEGARA DAN BANGSA KAMI INDONESIA
Poro konco eson nemu tulisan iki teko http://www.ekonomikabisnis.com/1358/sejarah-freeport-di-indonesia.html
Apakah anda tahu sejarah freeport di Indonesia? Mengapa perusahaan raksasa asing melilih Indonesia sebagai wilayah ekspansinya? Jawabanya sangat lah mudah, yaitu emas, sebuah logam mulia yang sangat melimpah, Tepatnya di Irian Jaya( Indonesia). Ada perbedaan sangat besar terkait pengelolaan kekayaan alam Indonesia di zaman Soekarno dengan zaman Harto dan para pewarisnya. Soekarno bersikap, âBiarkan kekayaan alam kita, hingga insinyur-insinyur Indonesia mampu mengolahnya sendiri.â Sedangkan Harto dan para pewarisnya hingga sekarang bersikap, âBiarkan kekayaan alam kita dijarah oleh orang-orang asing, silakan Misterâ¦â
Merupakan fakta sejarah jika di awal kekuasaan Harto, kekayaan alam Indonesia yang melimpah-ruah digadaikan kepada blok imperialisme Barat yang dipimpin Amerika Serikat. Sebelumnya Harto dan Washington agaknya telah memiliki âMOUâ bahwa jika Soekarno berhasil dikudeta maka Harto yang menggantikannya akan âmembalas budiâ kepada Washington berupa penyerahan negara dan bangsa ini tanpa syarat agar bisa dieksploitasi sepuasnya oleh para tuan bule di Washington.
Tragedi pertemuan Mafia Berkeley dengan Rockefeller dan kawan-kawannya di Jenewa-Swiss di bulan November 1967 menjadi bukti tak terbantahkan tentang permufakatan iblis tersebut. Di saat itulah, rezim Jenderal Harto mencabut kemerdekaan negeri ini dan menjadikan Indonesia kembali sebagai negeri terjajah. Ironisnya, penjajahan asing atas Indonesia diteruskan oleh semua pewarisnya termasuk rezim yang tengah berkuasa hari ini yang ternyata âjauh lebih edanâ ketimbang Jenderal Harto dulu.
Sampai sekarang, hampir semua cabang produksi yang amat vital bagi negara dan bangsa ini telah dikuasai asing. Banyak buku yang telah memaparkan dengan jujur kenyataan menyedihkan ini. Beberapa di anaranya adalah buku berjudul âDi Bawah Cengkeraman Asing: Membongkar Akar Persoalannya dan Tawaran Revolusi untuk Menjadi Tuan di Negeri Sendiriâ (Wawan Tunggul Alam: 2009), dan âAgenda Mendesak Bangsa: Selamatkan Indonesia!â (Amien Rais, 2008). Dengan bahasa jurnalisme yang sangat mengalir namun amat kaya data, Wawan memaparkan dengan lugas hampir seluruh fakta yang patut diketahui generasi muda bangsa ini, agar kita bisa sadar sesadar-sadarnya jika Indonesia itu, negeri kita ini, sekarang masih merupakan negeri terjajah!Dan untuk buku yang kedua yang ditulis oleh Amien Rais, isinya benar-benar bagus dan sangat anti dengan neo-liberal. Namun dalam faktanya sangat ironis, karena entah dengan alasan apa, Amien Rais sekarang malah jelas-jelas menjadi bagian dari kelompok NeoLib dengan berterus-terang menyatakan dukungannya pada rezim yang berkuasa sekarang. Disadari atau tidak, dia sekarang telah menjadi part of problem bagi bangsa ini dan menjadi salah satu penghalang bagi gerakan pemerdekaan negeri ini dari cengkeraman imperialisme asing.
Jika Imperialisme dan Kolonialisme Kuno (Spanyol, Portugis, VOC, Fasis Jepang, dan NICA) menggunakan senjata api untuk menjajah suatu negeri, maka sekarang, Imperialisme dan Kolonialisme Modern (Neo Kolonialisme dan Neo Imperialisme, Nekolim) lebih pintar dengan tidak lagi memakai senjata api namun mempergunakan kekuatan uang (baca: kekuatan utang).
JFK, CIA, dan Freeport
Di atas telah disebutkan, hanya beberapa bulan setelah secara de-facto berkuasa, Jenderal Harto menggadaikan nyaris seluruh kekayaan alam negeri ini kepada blok imperialisme asing. Salah satu cerita yang paling menyedihkan adalah tentang gunung emas di Papua Barat. Gunung emas yang sekarang secara salah kaprah disebut sebagai Tembagapura, merupakan sebuah gunung dimana cadangan tembaga dan emas berada di atas tanahnya, tersebar dan siap dipungut dalam radius yang amat luas.
Lisa Pease menulis artikel berjudul âJFK, Indonesia, CIA, and Freeportâ dan dimuat dalam majalah Probe. Tulisan bagus ini disimpan di dalam National Archive di Washington DC. Dalam artikelnya, Lisa Pease menulis jika dominasi Freeport atas gunung emas di Papua dimulai sejak tahun 1967, namun kiprahnya di Indonesia sudah dimulai beberapa tahun sebelumnya. Freeport Sulphur, demikian nama perusahaan itu awalnya, nyaris bangkrut berkeping-keping ketika terjadi pergantian kekuasaan di Kuba tahun 1959. Saat itu Fidel Castro berhasil menghancurkan rezim diktator Batista. Oleh Castro, seluruh perusahaan asing di negeri itu dinasionalisasikan. Freeport Sulphur yang baru saja hendak melakukan pengapalan nikel produksi perdananya terkena imbasnya. Ketegangan terjadi. Menurut Lisa Pease, berkali-kali CEO Freeport Sulphur merencanakan upaya pembunuhan terhadap Castro, namun berkali-kali pula menemui kegagalan.
Di tengah situasi yang penuh ketidakpastian, pada Agustus 1959, Forbes Wilson yang menjabat sebagai Direktur Freeport Sulphur melakukan pertemuan dengan Direktur Pelaksana East Borneo Company, Jan van Gruisen. Dalam pertemuan itu Gruisen bercerita jika dirinya menemukan sebuah laporan penelitian atas Gunung Ersberg (Gunung Tembaga) di Irian Barat yang ditulis Jean Jaques Dozy di tahun 1936. Uniknya, laporan itu sebenarnya sudah dianggap tidak berguna dan tersimpan selama bertahun-tahun begitu saja di Perpusatakaan Belanda. Van Gruisen tertarik dengan laporan penelitian yang sudah berdebu itu dan membacanya.
Dengan berapi-api, Van Gruisen bercerita kepada pimpinan Freeport Sulphur itu jika selain memaparkan tentang keindahan alamnya, Jean Jaques Dozy juga menulis tentang kekayaan alamnya yang begitu melimpah. Tidak seperti wilayah lainnya di seluruh dunia, maka kandungan biji tembaga yang ada di sekujur Gunung Ersberg itu terhampar di atas permukaan tanah, jadi tidak tersembunyi di dalam tanah. Mendengar hal itu, Wilson sangat antusias dan segera melakukan perjalanan ke Irian Barat untuk mengecek kebenaran cerita itu. Di dalam benaknya, jika kisah laporan ini benar, maka perusahaannya akan bisa bangkit kembali dan selamat dari kebangkrutan yang sudah di depan mata.
Selama beberapa bulan, Forbes Wilson melakukan survei dengan seksama atas Gunung Ersberg dan juga wilayah sekitarnya. Penelitiannya ini kelak ditulisnya dalam sebuah buku berjudul The Conquest of Cooper Mountain. Wilson menyebut gunung tersebut sebagai harta karun terbesar yang untuk memperolehnya tidak perlu menyelam lagi karena semua harta karun itu telah terhampar di permukaan tanah. Dari udara, tanah di sekujur gunung tersebut berkilauan ditimpa sinar matahari.
Wilson juga mendapatkan temuan yang nyaris membuatnya gila. Karena selain dipenuhi bijih tembaga, gunung tersebut ternyata juga dipenuhi bijih emas dan perak! Menurut Wilson, seharusnya gunung tersebut diberi nama Gold Mountain, bukan Gunung Tembaga. Sebagai seorang pakar pertambangan, Wilson memperkirakan jika Freeport akan untung besar dan dalam waktu tiga tahun sudah kembali modal. Piminan Freeport Sulphur ini pun bergerak dengan cepat. Pada 1 Februari 1960, Freeport Sulphur menekan kerjasama dengan East Borneo Company untuk mengeksplorasi gunung tersebut.
Namun lagi-lagi Freeport Sulphur mengalami kenyataan yang hampir sama dengan yang pernah dialaminya di Kuba. Perubahan eskalasi politik atas tanah Irian Barat tengah mengancam. Hubungan Indonesia dan Belanda telah memanas dan Soekarno malah mulai menerjunkan pasukannya di Irian Barat.
Tadinya Wilson ingin meminta bantuan kepada Presiden AS John Fitzgerald Kennedy agar mendinginkan Irian Barat. Namun ironisnya, JFK malah sepertinya mendukung Soekarno. Kennedy mengancam Belanda akan menghentikan bantuan Marshall Plan jika ngotot mempertahankan Irian Barat. Belanda yang saat itu memerlukan bantuan dana segar untuk membangun kembali negerinya dari puing-puing kehancuran akibat Perang Dunia II terpaksa mengalah dan mundur dari Irian Barat.
Ketika itu sepertinya Belanda tidak tahu jika Gunung Ersberg sesungguhnya mengandung banyak emas, bukan tembaga. Sebab jika saja Belanda mengetahui fakta sesungguhnya, maka nilai bantuan Marshall Plan yang diterimanya dari AS tidak ada apa-apanya dibanding nilai emas yang ada di gunung tersebut.
Dampak dari sikap Belanda untuk mundur dari Irian Barat menyebabkan perjanjian kerjasama dengan East Borneo Company mentah kembali. Para pimpinan Freeport jelas marah besar. Apalagi mendengar Kennedy akan menyiapkan paket bantuan ekonomi kepada Indonesia sebesar 11 juta AS dengan melibatkan IMF dan Bank Dunia. Semua ini jelas harus dihentikan!
Segalanya berubah seratus delapan puluh derajat ketika Presiden Kennedy tewas ditembak pada 22 November 1963. Banyak kalangan menyatakan penembakan Kenndey merupakan sebuah konspirasi besar menyangkut kepentingan kaum Globalis yang hendak mempertahankan hegemoninya atas kebijakan politik di Amerika.
Presiden Johnson yang menggantikan Kennedy mengambil siap yang bertolak-belakang dengan pendahulunya. Johnson malah mengurangi bantuan ekonomi kepada Indonesia, kecuali kepada militernya. Salah seorang tokoh di belakang keberhasilan Johnson, termasuk dalam kampanye pemilihan presiden AS tahun 1964, adalah Augustus C. Long, salah seorang anggota dewan direksi Freeport.
Tokoh yang satu ini memang punya kepentingan besar atas Indonesia. Selain kaitannya dengan Freeport, Long juga memimpin Texaco, yang membawahi Caltex (patungan dengan Standard Oil of California). Soekarno pada tahun 1961 memutuskan kebijakan baru kontrak perminyakan yang mengharuskan 60 persen labanya diserahkan kepada pemerintah Indonesia. Caltex sebagai salah satu dari tiga operator perminyakan di Indonesia jelas sangat terpukul oleh kebijakan Soekarno ini.
Augustus C. Long amat marah terhadap Soekarno dan amat berkepentingan agar orang ini disingkirkan secepatnya.
Mungkin suatu kebetulan yang ajaib. Augustus C. Long juga aktif di Presbysterian Hospital NY di mana dia pernah dua kali menjadi presidennya (1961-1962). Sudah bukan rahasia umum lagi jika tempat ini merupakan salah satu simpul pertemuan tokoh CIA.
Lisa Pease dengan cermat menelusuri riwayat kehidupan tokoh ini. Antara tahun 1964 sampai 1970, Long pensiun sementara sebagai pimpinan Texaco. Apa saja yang dilakukan orang ini dalam masa itu yang di Indonesia dikenal sebagai masa yang paling krusial.
Pease mendapakan data jika pada Maret 1965, Augustus C. Long terpilih sebagai Direktur Chemical Bank, salah satu perusahaan Rockefeller. Agustus 1965, Long diangkat menjadi anggota dewan penasehat intelijen kepresidenan AS untuk masalah luar negeri. Badan ini memiliki pengaruh sangat besar untuk menentukan operasi rahasia AS di negara-negara tertentu. Long diyakini salah satu tokoh yang merancang kudeta terhadap Soekarno, yang dilakukan AS dengan menggerakkan sejumlah perwira Angkatan Darat yang disebutnya sebagai Our Local Army Friend.
Salah satu bukti adalah sebuah telegram rahasia Cinpac 342, 21 Januari 1965, pukul 21.48, yang menyatakan jika kelompok Jenderal Suharto akan mendesak angkatan darat agar mengambil-alih kekuasaan tanpa menunggu Soekarno berhalangan. Mantan pejabat CIA Ralph Mc Gehee juga pernah bersaksi jika hal itu benar adanya.
Awal November 1965, satu bulan setelah tragedi 1 Oktober 1965, Forbes Wilson mendapat telpon dari Ketua Dewan Direktur Freeport, Langbourne Williams, yang menanyakan apakah Freeport sudah siap mengeksplorasi gunung emas di Irian Barat. Wilson jelas kaget. Ketika itu Soekarno masih sah sebagai presiden Indonesia bahkan hingga 1967, lalu darimana Williams yakin gunung emas di Irian Barat akan jatuh ke tangan Freeport?
Lisa Pease mendapatkan jawabannya. Para petinggi Freeport ternyata sudah mempunyai kontak tokoh penting di dalam lingkaran elit Indonesia. Mereka adalah Menteri Pertambangan dan Perminyakan Ibnu Soetowo dan Julius Tahija. Orang yang terakhir ini berperan sebagai penghubung antara Ibnu Soetowo dengan Freeport. Ibnu Soetowo sendiri sangat berpengaruh di dalam angkatan darat karena dialah yang menutup seluruh anggaran operasionil mereka.
Sebab itulah, ketika ketika UU No. 1/1967 tentang Penanaman Modal Asing (PMA) yang draftnya dirancang di Jenewa-Swiss yang didiktekan Rockefeller, disahkan tahun 1967, maka perusahaan asing pertama yang kontraknya ditandatangani Suharto adalah Freeport. Inilah kali pertama kontrak perminyakan yang baru dibuat. Jika di zaman Soekarno kontrak-kontrak dengan perusahaan asing selalu menguntungkan Indonesia, maka sejak Suharto berkuasa, kontrak-kontrak seperti itu malah banyak merugikan Indonesia.
Untuk membangun konstruksi pertambangan emasnya itu, Freeport menggandeng Bechtel, perusahaan AS yang banyak mempekerjakan pentolan CIA. Direktur CIA John McCone memiliki saham di Bechtel, sedangkan mantan Direktur CIA Richards Helms bekerja sebagai konsultan internasional di tahun 1978.
Tahun 1980, Freeport menggandeng McMoran milik âJim Bobâ Moffet dan menjadi perusahaan raksasa dunia dengan laba lebih dari 1,5 miliar dollar AS pertahun. Tahun 1996, seorang eksekutif Freeport-McMoran, George A. Maley, menulis sebuah buku berjudul âGrasbergâ setebal 384 halaman dan memaparkan jika tambang emas di Irian Barat itu memiliki depost terbesar di dunia, sedangkan untuk bijih tembaganya menempati urutan ketiga terbesar.
Maley menulis, data tahun 1995 menunjukkan jika di areal ini tersimpan cadangan bijih tembaga sebesar 40,3 miliar pon dan emas sebesar 52,1 juta ons. Nilai jualnya 77 miliar dollar AS dan masih akan menguntungkan 45 tahun ke depan. Ironisnya, Maley dengan bangga juga menulis jika biaya produksi tambang emas dan tembaga terbesar dunia yang ada di Irian Barat itu merupakan yang termurah di dunia.
Istilah Kota Tembagapura itu sebenarnya menyesatkan dan salah. Seharusnya Emaspura. Karena gunung tersebut memang gunung emas, walau juga mengandung tembaga. Karena kandungan emas dan tembaga terserak di permukaan tanah, maka Freeport tinggal memungutinya dan kemudian baru menggalinya dengan sangat mudah. Freeport sama sekali tidak mau kehilangan emasnya itu dan membangun pipa-pipa raksasa dan kuat dari Grasberg-Tembagapura sepanjang 100 kilometer langsung menuju ke Laut Arafuru di mana telah menunggu kapal-kapal besar yang akan langsung mengangkut emas dan tembaga itu ke Amerika. âPerampokan legalâ ini masih terjadi sampai sekarang.
Kisah Freeport merupakan salah satu dari banyak sekali kisah sedih tentang bagaimana kekayaan alam yang diberikan Allah SWT kepada bangsa Indonesia, oleh para penguasanya malah digadaikan bulat-bulat untuk dirampok imperialisme asing, demi memperkaya diri, keluarga, dan kelompoknya sendiri. Kenyataan memilukan ini masih berlangsung sampai sekarang hingga rakyat menjadi sadar dan menumbangkan penguasa korup.
| IMF revises Botswana's 2017 growth forecast as diamond demand rises ||The International Monetary Fund (IMF) has revised Botswana's 2017 and 2018 economic growth forecast due to rising diamond demand, investment in the water and power sector and reforms to attract investment. The IMF on Wednesday lifted diamond-producer's 2017 and 2018 economic growth forecast to 4.5% and 4.8% respectively.|
| A wholly inefficient and ownerless "Hinny" Government |
The Sri Lankan economy almost 15 months under the present Sirisena-Wickramasinghe rule is in no good form. Defeating Rajapaksa at the 2015 January 08 presidential polls was not meant to merely abolish the Executive Presidency that wasn't done, but was also to lift the country out of the economic abyss. Addressing that social need Common Candidate Maithripala Sirisena's election manifesto promised ;
[Quote] I will put right development priorities that are now upside down. I will suspend all wasteful expenses and establish a NationalEconomic Planning Council comprising learned personnel, who would act not on pecuniary considerations but out of love for the countryâ¦. [Unquote ; No.2 Development Economy â page / 20]
While that is yet to see daylight, the economy during the Rajapaksa era wasn't limping this bad. But it certainly needed serious repair despite the Rajapaksa bragging and propping up by China. A lopsided economy, it was nevertheless having heavy infrastructure projects running with huge Chinese funding and was also pepped up by India, Russia and Iran. This economy was providing space for a new middle class emerging especially in an increasingly urbanising society very much Colombo centred. Rest of the society, the larger majority, was no doubt left on the wayside. But there were no accusations the economy was hitting rock bottom. Mega corruption and massive frauds were of course the life, at every level in society.
Those advocates for "change" who backed Common Candidate Maithripala Sirisena wished to call the "Rajapaksa outage" a "Rainbow Revolution". Stepping into the 15th
month with the "Rainbow Revolution", the Sri Lankan economy is identified as a collapsing economy. On March 03 this year (2015) the Island newspaper had a write up by a Special Correspondent titled "Government should get its act together to avert economic collapse
". The caption itself was very revealing. The article said, "The Fitch Rating Agency has stated that the 2016 Budget has done little to address government revenue concerns and predicted continued fiscal slippage over 2016 and 2017. It explained that Sri Lankaâs government debt has increased to more than 75 percent of GDP by end 2015 up from 71 percent at the end of 2014."
(emphasis added). Put in a nutshell what it means is, this "Yahapalana" leadership had completely failed in managing the economy. During the whole of 2015 when the 100 Day programme was let loose and then with a compromised government in power since August, this "Rainbow Revolution" with its "Interim Budget" adopted in February 2015 wasn't able to manage the economy out of the rut.
The present economic crisis was accepted by PM Wickramasinghe in parliament on 08 March (2016) though with a different use of language. He moved parliament to amend his own government's budget for year 2016. Presented in parliament only 03 months before by his Finance Minister and adopted by a 2/3 majority, it was being chopped and chewed by the President and by the cabinet of ministers immediately after it was passed. There were also differing opinions on how the economic decline could be arrested by the CB Governor and the Finance Minister. Two, who are not clean and credible with the yet to be cleared Bond scam. Much or all blame for this economic debacle is pinned on the Rajapaksa clan by PM Wickramasinghe. He told parliament that his government was not aware of the total debt the country is facing, when the 2016 budget was being made. By now the government has managed to uncover a massive debt of 9.5 trillion rupees he said, adding that it could even go beyond 10 trillion. The Rajapaksa regime was accused of even crediting loans as income. The debt picture painted was frightening. PM went on to say they are incapable of digging out all the debts and therefore have discussed with the IMF to have their expertise to conduct a "Forensic Audit". Although he did not then realise, the implied meaning is, Rajapaksa regime had been far smarter than this government that cannot even investigate power outage without foreign assistance. Wickramsinghe and his men accepted they cannot even think of finding the Rajapaksa loot he hid on his own. Meanwhile PM Wickramsignhe said his government is amending tax proposals to improve on State revenue. With the massive debt the country is burdened with, most national resources have to be channelled to settle foreign loans he said. His government is now held responsible for these massive unwanted loans, is what he told the parliament and the people. That was PM Wickramasinghe explaining his and his government's plight in managing a rotten economy blamed on Rajapaksa. But this was not what he said in 2013 February, about the same "staggering debt so incurred". A lengthy explanatory letter written exclusively to Sunday Times "On betraying public trust" Wickramasinghe then as Leader of the Opposition and the UNP said, when voted to power, his government would not honour any of those loans. Detailing "Latimer House Declaration" and quoting Justice Mark Fernando and Justice Shirani Thilakawardne, then LoOp Wickramsignhe argued at length, [Quote] The staggering debt so incurred will have to be paid back by the next two generations. Fortunately, our Constitution does not allow the inalienable sovereignty of the people to be subordinated to the financial markets and the insatiable greed of racketeers. As pointed out, these loans, if incurred, will be invalid and we are not obliged to repay them. (Sunday Times / 24 February, 2013 â emphasis added) What then is the problem with Rajapaksa loans now? Why don't Wickramasinghe as PM now stick hard and firm to his much argued position (as Leader of the Opposition then) of not repaying loans? Wickramasinghe has been that always. He argues big on Latimer House Principles and Public Trust Doctrine that he rarely adheres to. He is one who dodges taking clear political positions on sensitive issues. In 2007 he had the UNP abstaining at the vote on Emergency Regulations. In 2014 June the UNP abstained at the vote on OHCHR probe. So was it with the 18A and with the impeachment on CJ Shiranee Bandaranayake. A leader who avoids making serious decisions, his present lament on meeting debt responsibility is clearly a big excuse for his government's incapacity in turning the economy round. His government created budgetary history in moving heavy amendments to its own revenue proposals within 80 days of its adoption in parliament. Proof of an incapable, inefficient leadership that fumbled and tumbled on its first full budget. The budget was no good enough piece of "development economics". One of our major issues in economics is making the 65% plus rural folks worthy of their life. The government did not prove nor show it had rightly identified the problems of this rural society. Breakdown of rural life is not simply about farming and marketing. It's more about the exodus of young women to ME to toil as housemaids for a paltry wage of 150 dollars. It's about families in rural society not having any economic worth in the village to lead a family life with basic human needs. It's about youth who previously was recruited in large numbers as soldiers, but has no alternate employment for the present youth. It is also about battle hardened young soldiers back in the village after the war loitering around, leading to increased crimes. The almighty MoD Secretary Gotabhaya Rajapaksa never thought re socialising of soldiers returning from the war is a serious necessity. Nor does this Wickramasinghe government think it is a major requirement in curbing crime. Not even the President who is Chief of Staff and Minister of Defence. If with all that and the loud rhetoric about creating 01 million jobs in 02 years which is nothing big anyway is removed, the government has nothing on the ground for rural people to hope for. The government had thus paved space for farmer protests over patchwork done on fertiliser subsidy that in fact serves no purpose for farmers. Meanwhile President Sirisena is on his own, totally ignorant of what the Wickramasinghe government says and does. Three days before PM Wickramasinghe announced his tax proposals, President Sirisena launched his agriculture programme to rid Sri Lanka of toxic chemical use in 03 years. He promised to stop all chemical fertiliser, pesticides, weedicides and insecticides used in agriculture and to have a nontoxic agri Sri Lanka. There are no serious alternatives discussed or proposed as to how harvesting volumes necessary for this population could be sustained and from where and how substitutes for chemical fertiliser will be supplied in adequate quantities right round the year. Except highlights on adverse impacts of using chemicals, a cheap popular platform created by Sinhala extremism, there seems no actual alternate programme for agriculture that includes plantations as well. But this sure will be a counter campaign for Wickramasinghe's approach in market economics that leans on large scale commercial agriculture. The 19A was heavily compromised, with the only objective of telling the world they adopted the 19A, an election promise. Content and provisions were no concerns. PM and the UNP demanded LG elections before this March after they were dragged on from year 2015. President Sirisena fears such electoral challenge with lower ranks in the SLFP and 46 out of the 95 MPs openly revolting against him. PM Wickramasinghe went dumb when President Sirisena thus postponed LG elections to 2017. So is it with Constitutional Reforms. President says he is not sure if what he needs is the 20A on electoral reforms or complete abolition of the presidency. UNP and PM Wickramasinghe moved for a completely new Constitution with a 29 member committee to be established as the Constituent Assembly. But PM had to give into the dissident Rajapaksa group in the Opposition to completely change course. He could not have his Resolution adopted on time, delayed by over 06 weeks. Now it is no "New" Constitution that would be worked on. Now the whole parliament would sit as the Constituent Assembly. For sure, the final Constitution will be what the Rajapaksa group as the Joint Opposition would prevail upon. Worst is this government's indecision and thus its duality in addressing the requirements of the UNHRC (OISL) Resolution with transitional justice required and reconciliation. President is firm in keeping out any probe, even domestic, with his guarantee of safety given to the military on war crime investigations. Thus his consistency on keeping out foreign involvement at any level. He said it again at the recent Law Forum in Wadduwa. He has also backtracked on his promise to the TNA on releasing Tamil detainees held under the PTA for many years without charges. His politics is peasant "Sinhala" and no different to Rajapaksa. He seems to believe that all he should do is visit North once in a way and dole out something to the Northerners. That he believes makes him different to Rajapaksa. A few patches of land handed over now and then to people in North, his compassionate heart that gave amnesty to his supposed LTTE assassin sounds enough for reconciliation with the National Anthem sung in Tami at independence celebrations. Contradicting the President, Foreign Minister goes public here and internationally on the necessity of having foreign expertise for war crimes probe. He decides on a Task force on public consultation in developing a mechanism for a transitional justice process. A government that pulls apart in differing directions on serious, major issues especially on one that involves a heavily polarised society on ethnic differences could never serve the people other than with rhetoric. Nor will it be stable and popular for long. Add to all these contradictions the factor of a duplicate Rajapaksa in Polonnaruwa. Hambantota is being replicated in Polonnaruwa. In July last year, "Yahapalana" government decided to spend Rs.16,650 million in developing Polonnaruwa as a "Metro City". Two months later in October President Sirisena launched his 05 year development programme for Polonnaruwa, "Pibidemu Polonnaruwa" (Awakening of Polonnaruwa). Recently there was a guided tour of over 30 diplomats in Polonnaruwa, organised with the aim of providing aid for development of Polonnaruwa. On 14 March this year, presided over by President Sirisena, Polonnaruwa development committee proposed expanding the old Hingurakgoda airport into a modern airport, another "Mattala". There was also a proposal to construct an "international cricket stadium" that could stand with the Sooriyaweva stadium. Apart from copying and imitating Rajapaksa, this government with no people's mandate to be in power (they represent opposing vote blocs) have no authority and a will to govern. Closing in on 15 months, they prove they cannot still have the State machinery moving under their writ. The second island wide power outage within 17 days proved them quite impotent. This incapability, this impotency gave Rajapaksa the courage to get on stage and shout "if you can't, give it back to me. I will show you how to run the country". The whole issue is about political will and direction. With two totally incompatible political leaderships, and with no common programme identified and adopted to work on, no government could command respect and authority. It is an endemic flaw in this "Yahapalana" outfit. This crossbred dual headed government that knows not where to head or where it is heading to, will have to compromise for its life in government. It thus leaves the whole society grappling with more issues in the next year or two to come. Far worse, this impotency allows Rajapaksa to claim he does the job better and the larger frustrated society mostly outside the Colombo middle class wanting to believe Rajapaksa's strong leadership once again. Sadly this faltering, incompatible cross-bred r(m)ule would lead the people back to zero, to where Rajapaksa began.
A "Hinny" is a domestic equine hybrid that is the offspring of a stallion (male)
and a donkey (female), is a rarity and is sterile.
[Excerpted from Encyclopaedia Britannica]
| Congress locked over Ukraine aid standoff |
There should be an embedded item here. Please visit the original post to view it.
The Senate and House appear headed for a standoff over competing bills to authorize sanctions on Russia and provide aid to Ukraine, potentially prolonging Congress’ inaction over the two weeks since Russian President Vladimir Putin’s military intervention in the Crimean peninsula.
The Democratic-controlled Senate advanced its legislation in a 78-17 procedural vote Monday, sparing President Barack Obama an embarrassing setback while he uses his weeklong overseas trip to lobby allies to punish Moscow. But Senate Majority Leader Harry Reid seemed in no mood to compromise with Republicans who oppose changes in the bill relating to the International Monetary Fund.
Reid focused his ire on GOP senators who delayed his bill before lawmakers went on a break March 14. He urged them to consider “how their obstruction affects United States’ national security as well as the people of Ukraine” and said their delay of any congressional action “sent a dangerous message to Russian leaders.”
“Since a few Republicans blocked these important sanctions last work period, Russian lawmakers voted to annex Crimea and Russian forces have taken over Ukrainian military bases,” the Nevada Democrat said. “It’s impossible to know whether events would have unfolded differently if the United States had responded to Russian aggression with a strong, unified voice.”
Full passage of the Senate bill is likely later this week. But members of the Republican-led House are preparing to write their own Russia sanctions bill at a meeting of the Foreign Affairs Committee on Tuesday, supplementing the aid legislation they passed earlier this month. Neither includes any reference to IMF reforms, which House Speaker John Boehner has called unnecessary.
At issue are changes that would increase the power of emerging countries in the IMF and shift some $63 billion from a crisis fund to a general account the lending body can use for economic stabilization operations around the world.
Republicans have long spurned the administration’s attempt to ratify the IMF revisions, saying they would increase the exposure of U.S. taxpayers in foreign bailouts. Making the shift now, opponents argue, also would marginally increase Russia’s voting power over the fund’s finances.
The Obama administration and Democrats counter that unless the U.S. approves the new rules, Washington will lose its influence at the IMF and hamper the body’s ability to avert economic meltdowns in places precisely like Ukraine. The U.S. is the only major country that has yet to sign off.
Reid’s charge came despite widespread bipartisan support for providing Ukraine with aid and hitting Putin’s government with sanctions. GOP congressional aides noted the House has passed different legislation, meaning the Senate bill could not have become law before recess anyhow. They blamed Reid and Democrats for blocking the Senate from taking up the House legislation.
Reid “sounds completely unhinged,” fired back Michael Steel, spokesman for House Speaker John Boehner, R-Ohio. “The House has acted, and is continuing to act, in a reasonable and responsible way to give the White House the tools it needs to hold President Putin accountable.”
The Senate bill includes a proposal from one of Obama’s fiercest critics, Republican Sen. John McCain, enabling the president to impose economic penalties on Russian government officials for corruption even within Russia’s own borders. The broadness of the authorization is unprecedented for Russia, even if applying the sanctions would be at Obama’s discretion.
“If we do not send this message now,” Republican Sen. John McCain said, “Putin will be encouraged to enact further acts of aggression against Crimea and in the region.”
With American officials warning Russia could opt to expand farther into Ukraine, McCain urged his colleagues to look beyond the IMF provisions. He stressed the need for Congress to pass the Senate bill quickly.
“If we do not send this message now,” McCain said, “Putin will be encouraged to enact further acts of aggression against Crimea and in the region.”
The post Congress locked over Ukraine aid standoff appeared first on PBS NewsHour.
| The Ukraine Blues |
One feels frighteningly disoriented, hearing an American president support deadly mob violence for what is, essentially, counter-revolutionary change (in the form of IMF austerity). The president's message may be directed at unknown people far away but the effects are certain to be felt here, possibly for generations, as the bindings of what relative peace we have come undone. I was extremely fortunate to be able to talk with Dr. Stephen F. Cohen about the crisis in Ukraine. He's in a tiny minority willing to discuss what's really happening. This is an unscheduled podcast on breaking news. [Audio file reposted at The Nation, here.] Total runtime forty eight minutes. Vae victīs.
| Modigliani and Miller at the IMF ||In a paper on tax policy, leverage and macroeconomic stability published on 10 November, the IMF staff address the issue of excessive leverage or the so-called “debt bias” that poses risks for financial and macroeconomic stability. The “debt bias” has been largely created by more favorable tax treatment of debt relatively to equity. In most […]|
| The Russian Economic Crisis: How Severe and How Long? ||The economy of Russia contracted by almost 4% last year and is expected to decline further this year, according to the IMF (Economist 2016a). Russia being a resource driven economy and one of the top oil exporters globally, a large part of the downturn can certainly be explained by the collapse in oil price. Western […]|
| An Important Step for China and the World ||On 30 November the Board of the IMF decided to include the Chinese RMB in the Special Drawing Rights (SDR) basket from 1 October 2016. SDR is the unit used in transactions between IMF member states and the Fund. RMB will thus become the fifth currency in this basket of global reserve currencies, joining the […]|
| ....And another question..... ||So, we've answered the big question- what is the NBN. Anyone who would like some more detail, please feel free to comment and I'll try to answer any questions, or, there are some great websites out there that will give you some detailed looks into the technology involved in the NBN. The main government site, NBN.gov is quite good in the information it delivers. Although as usual when dealing with governments, the information is delivered in quite a syrupy rhetoric and is relatively simple in its' nature. NBN Co's website is also relatively basic and its' overview is skewed more towards information about the company and its' goals as well as the actual rollout of the NBN. There are some interesting "Case Study" sections which look at how the NBN will affect individuals, schools and businesses on a one-by-one basis. Obviously, these are overwhelmingly positive, as one would expect of any company trying to hock their own goods and services. But it at least gives an idea of what individuals can do with their new connection. There is also an older site (not updated now) that gives a few good analyses of the NBN here.|
This is a link to the National Broadband Network Implementation Study, done by the government just before the rollout of the NBN began on a trial basis. This is the study that brought about alot of political contention as to whether it was an achievable goal to have an FTTH NBN that reached over 90% of premises. The study was, of course, paid for by the Labor Federal Government, commissioned by then PM Kevin Rudd and done by McKinsey & Company and KPMG. One interesting point of note on this study, if we look at the overview page, is the last 2 points (quoted directly from the site):
1- NBN Co can build a strong and financially viable business case with the Study estimating it will be earnings positive by year six and able to pay significant distributions on its equity following completion of the rollout; and
2- The Government can expect a return on its equity investment sufficient to fully cover its cost of funds
This is interesting to note, as the vast majority of infrastructure a government builds and maintains is either fiscally neutral or a tax payer burden. In this case, the money NBN Co. receives will be funnelled back to the Federal Government once costs and maintenance have been taken out and the profits will, presumably (although this is, of course, up to the Government of the day) be used to pay back the debt borrowed to build the NBN. This leads me to my next question:
Is the NBN worth the money?
People might say this is an inherently subjective question. But in real monetary terms, IS the NBN worth what it is giving Australia?
It's estimated the NBN will have a final cost around $37 Billion, down from the originally, and much debated, $43 Billion. This includes $27.5 Billion invested (and borrowed) directly by the Government. The remainder will be paid for by private investment (shares in NBN Co.). So, the direct government cost will be $27.5 Billion, assuming, of course, NBN Co. can actually raise the $10-13 Billion odd of private investment; this seems likely, as such a large project, once underway, would limit the high risk of investment. $27.5 Billion is alot of money, no matter where you're from (unless you're Apple, who seems to sneeze and have that much money). But it is not, by any means, an insurmountable, nor particularly large single amount of money for a Government of Australia's size and economic standing. Obviously, some explanation is needed.....I'm afraid this will be quite dry..... Australia's current GDP (PPP adjusted- read up) is hovering at just under the $1 Trillion mark, around $925 Billion (US). Now, GDP is not ACTUALLY a particularly useful measure in todays economics as it is only a measure of a countries goods and services produced WITHIN a country. In a globalised world, this does not take into account companies that are international, both owned BY Australians and by other countries working IN Australia. Mining companies are a good example. It is only a measure of all companies and services inside of a country. It is also NOT a measure of living standards or income. However, it IS used to determine an economies health, as a general rule. The idea being, a healthy growth in GDP (usually 2%) shows an increase in trade overall and therefore a corresponding increase in income, wealth and capital. For this reason, it is usually also used as a measure of debt.
International debt has been in the spotlight since the 2008 GFC. More recently, the European debt crisis has shown how sovereign debt (that is debt of a government, not private debt, as in the GFC) can destabilise not only the country who owns the debt, but also its' trading partners. A country MUST have room to move fiscally. A government needs borrowing power for the adjustments of budget, building and essential maintenance of infrastructure and the general running of the country. Governments usually borrow money for infrastructure by issuing Government bonds. These are bonds that are issued with a specified annual return interest at a specified maturity date in the future, that other countries governments and private companies can buy as investments. The higher risk the investment in the country (ie. the more unstable the economy) the higher the interest rate for the bonds usually are. There comes a point where the risk is such that other governments and companies refuse to buy the bonds and the issuing government runs into trouble as they cannot borrow enough money. This is the position countries such as Italy and Greece have found themselves in. This is, of course, a generalisation, as there are MANY variables and also other ways governments borrow money. But for our purposes, it is good enough.
The level of national debt a country has is usually measured as a percentage of GDP (hence using GDP as an economic measure). The lowest levels of debt in the world (using IMF statistics) are countries like Estonia, Saudi Arabia, Chile and Brunei. These countries do not necessarily have good, healthy economies, they simply do not borrow heavily internationally. Partly because they may not want to (in the case of North Korea, which doesn't even rank) or because they can't (Estonia, Chile) as other countries consider them too big an investment risk due to instability. There are countries that have healthy economies in this bunch though too, such as Saudi Arabia, Brunei and Luxembourg. Australia, if you look in terms of healthy economies, is just above Luxembourg for ranking in highest debt, about 1/5 of the way up and just below the United Arab Emirates. We have a %GDP debt of 20%. But once you take into account all sorts of corrections like net debt, PPP etc, in monetary terms, this means we have a debt of around $100 Billion dollars. The US has a %GDP debt of 94%, UK 75%, Europe 80% and Italy and Greece, 119% and 142% respectively. Of course, all these are significantly different MONETARY amounts. The US GDP is $14.6 Trillion (US). So it's monetary debt is nearly $14 Trillion. But the US also produces much more, and therefore has greater cash flow, so, technically better ability to pay back. I won't get into the nitty gritty, but suffice to say, lower levels of %GDP debt for a healthy economy are better. But, while no debt is excellent, it is rarely possible, nor likely. So low levels are considered normal and healthy. It varies widely what IS considered "healthy" debt, but in general anything under 50% is considered reasonable and healthy, depending on the economy. Here is a global map of %GDP debt (reference).
This map will be slightly different to one made from the %GDP debt I was quoting as it is made from rankings done by the CIA not the IMF. But the principle is illustrated.
Australia's debt, at 20% is considered very healthy and is among the lowest in the Western world. Our government does not live beyond its' means, although it has done in the past and will probably do so in the future, should our economy be mismanaged at some point again. To give an example of dubious relevance, but easy to understand, Australia's income is $100 000 a year. We want to buy a block of land that costs $20 000. It would not be difficult to get financing for said land, nor would it be inadvisable to do so, assuming the land will appreciate (which it almost certainly will). It is a reasonable investment. This is an example of our current debt in one lump sum.
When it comes (finally) to the NBN, we want to build a national network that will cover the country (or 93% of it fixed line) with fast, reliable, cheap (I'll get to this in a following post) and essential communications. The NBN will cost the government $28 Billion dollars, which it will borrow;
Note- this does NOT come from the budget as some media outlets have reported. This is government debt (or government capital debt) and only the interest is paid from the budget. Obviously interest, even at an average 3.5% (Bloomberg) on $28 Billion dollars is significant, but this is only accumulated until NBN Co. begins to turn revenue and pays back to the Government. Bond maturities (interest payouts) are calculated and taken into account in the National budget. They are planned, as each bond can have a different maturity time, and contingencies are in place for early terminations of maturity. See here for an interesting article about the politics surrounding these issues. So the $28 Billion the Government ponies up for the NBN is approximately 25% of our current debt or 5% of %GDP debt. All that JUST to explain that single sentence?? Well yes, and it is even more complex than that (here's an interesting piece on CBA or Cost Benefit Analysis of the NBN usually done on infrastructure and how difficult and often useless they are). We haven't yet taken into account the monetary return the NBN will provide for the Government (NBN Co. are predicting 7% returns by 2020) the ongoing returns from revenue and cash flow and the possibility (hopefully not in my opinion) of the sellout of the NBN after it is complete and a lump sum return. And THAT doesn't even include the actual, tangible economic growth gain the NBN will provide! There is a great Blog article by Google Australia which shows how much the Internet contributes to the Australian economy. It's estimated it will "boost GDP by $27 Billion in 2011." So the Internet, at its' current demand, will boost the Australian economy by almost the same amount estimated the Government will spend on the NBN.....and that's BEFORE we take into account the increased economic activity the NBN will provide once built.
Now some might say this is a narrow view, "blinkered" if you like, by a love of technology and all cats playing the piano videos on youTube. But the fact is, there is measurable, quantifiable data that shows the Internet is, quite literally, revolutionising the way we live. There is anecdotal evidence, such as the verb "to Google" something being entered in the Oxford Dictionary. There is the observable consumer evidence which shows Australia has the 2nd fastest uptake of smartphones in the world (behind only Singapore) and more than 50% of us are now using them. There is personal evidence; when was the last time you looked up an address in the Yellow Pages? Or even a phone number for that matter? And if you did, was it in the paper book, or online? Did you REALLY get that idea to see The Hunger Games from TV, or was it on an Ad next to your email? Businesses like JB HiFi, Harvey Norman and Myer have been realising in the past 2 years they've been late getting on the band wagon of online and their plummeting revenues reflect this. Why would your average consumer pay $100 for something from Harvey Norman, when they can buy the same from an Australian selling on eBay for $75 including postage if they know what they want?
The fact is, we have only been living with the commercial Internet for around 20 years (and that's being optimistic, global information traffic on the Internet was around 1% in 1993) and we are only beginning to see the potential it has. Currently, Australian demand bandwidth is at between 10 and 20Mbps. By 2016 it is predicted to be close to 100Mbps and by 2025 to be close to 1 Gbps. Even if Telstra were to roll out HFC in massive quantities, it would not be able to afford to do it to even half the country by 2021, around the time the NBN is due for completion. The Internet is ever expanding and ever consuming. The only way for Australia to grow, both nationally and internationally, is to keep pace with growing Internet demand. The NBN is a golden opportunity to allow and encourage this growth. It is large national infrastructure. But, considering the growth of Australia since the late 1940's (7.5 Million) compared to now (~23 Million), it is not much more expensive than building the original CAN (Customer Access Network) that we still have now for the increased population (Â£42 Million- or $10 Billion in todays money). And this is not counting the life of the network, pegged at 50 years in its current form, but with upgrades to the hardware, but not the lines, well beyond that. And if we were to cancel it now? Cut our losses and go with the cheaper option (explained next!) Well, I won't go into detail, many people have done that already. Suffice to say, it'll save us.....about $1 Billion. Sounds like alot. What would that get us? Well, in the 2011 budget, $1.1 Billion was saved with "Public service efficiency." It is also about 1/8 of the budget of Community Services and Culture, our lowest budget category. Or 1/120 of Welfare, our highest budget spender. $28 Billion is about twice the current yearly infrastructure budget. That's BUDGETED infrastructure, such as upgrades of major highways and motorways like the M5 and Pacific Highway. So for twice the annual budget we spend on infrastructure, we have an almost entirely new network of cables in the ground and hardware to run them at current speeds of 100Mbps, rising to 1 Gbps in 10 years......now if that's not bad, tell me what isn't?
| Mission: Impossible - Ghost Protocol (2011) |
Brian De Palmaâs Mission Impossible started a series that has not managed to live up to its basic identity of an intelligent espionage thriller. The series stumbled with John Wooâs stylized slowmo romanticism and continued to slide when JJ Abramsâ pushed it further into soppy revenge realm. With Brad Bird, a director known more for his animation work such as The Incredibles and Ratatouille, Mission: Impossible - Ghost Protocol sees a revival of sorts as it goes back to being an espionage thriller, but misses the intelligence of the first and gets stuck in the Russia bashing stereotype of the cold war.
The story revolves around a now single Ethan Hunt, who is out to save the world again. This time, a Kremlin bombing which took place at the same time as that of Huntâs mission there, sees the IMF being disbanded because of Ghost Protocol, which the President has initiated. Hunt is told that the blame for the US-Russia standoff and the bombing is blamed on him and is offered a helping hand by the IMF secretary when he is handed a mission to stop the perpetrator of the Kremlin bombing, Cobalt from arming and deploying a Russian nuclear missile.
Hunt has the help of a new crew â a vengeful chick, an Englishman and a remorseful ex-agent and a basic set of supplies that he needs to use to chase Cobalt and prevent him from getting all that he needs â launch codes and a Russian satellite to relay the codes to a Russian nuclear capable submarine. How he goes about completing this âimpossibleâ mission is what we get to see.
First up, the thrill is back. The screenplay is racy, the action-inventive and pulsating. Then there are the Burj Khalifa stunts and car chases in a desert storm that are breathtaking. But the writers, Josh Applebaum and Andre Nemec have a serious problem with logic and imagination when it comes to the story as they rely on clichÃ©s such as rogue Russian satellites and chances of nuclear apocalypse. Birdâs direction misses drama in the subtext which involves Huntâs team having an ex-agent who was careless enough to cause the death of his wife and the lady-agent becoming an avenging angel for her agent-boyfriend who is killed. Dramatic moments fall flat and the post-climactic mushiness is tremendously irritating.
The characters are bland â the English pencil pusher turned agent, the penitent ex-agent turned chief analyst and the avenging angel just donât grow on the viewer. They donât visibly progress much in the course of the story either, a key ingredient of good story telling. Neither does Cobalt, whose views seem to be loosely modeled on Kubrickâs Dr. Strangelove. He is portrayed as just another trigger happy thug and that takes away the balance of the story.
Tom Cruise is back as the man of action, a departure from some of his dramatic efforts in recent years. He is as convincing as Hunt as he was in the first leg and does a very good job with a character that is thankfully more about the mission than about romancing a gal or protecting a wife. Jeremy Rennerâs acting intensity is wasted as he sleep walks in analyst cum agent mode. Simon Pegg as the lovable pansy does not endear himself and neither do his Brit jokes. Paula Patton has a perennial frown on her face which forms her standard response to anything that is thrown at her, including an incredibly wasted Anil Kapoor, as a billionaire playboy who also has access codes to a Russian satellite. Kapoor should have signed on a David Dhawan film and stayed in character than do this.
Watch MI4 for the thrills, but if you want the real deal, go back to the first one.
| Middle East Today: Libya --- At Least 25 Killed in Clashes Between Protesters and Government-Backed Militia |
See also Syria Today: Opposition Repeats --- No Participation in International "Peace" Conference br>
Saturday's Syria Today: UN Appeal on "Record" Aid for Syrians --- Significant Step or Meaningless Gesture?
Turkey: Massive Istanbul Anti-Government Rally as PM Erdogan Addresses Supporters in Ankara
A visual story of the competing rallies for and against the Erdogan Government --- first, Sunday's large gathering in Istanbul's Taksim Square, where mass protests began nine days ago:
Meanwhile, Prime Minister Recep Tayyip Erdogan told supporters in Ankara tonight, "How can you attack my police?...We are going to show patience, but patience has a limit as well":
Yemen: 1 Dead in Fighting
One protester has been killed and 10 people injured, including four guards, in clashes with Houthi demonstrators who were demanding the release of political detainees.
An official said the Houthis, who have been demanding autonomy in the north of the country, fired at guards while trying to storm intelligence headquarters in Sanaa on Sunday. He claimed some protesters were arrested for smuggling weapons and drugs.
Meanwhile, hundreds of supporters of former President Ali Abdullah Saleh demonstrated in Sanaa against the release of 17 men who were detained in connection with a June 2011 explosion that injured Saleh in his palace mosque.
Saleh stepped down in early 2012 as a transitional Government was put in place.
Tunisia: IMF Approves Major Loan
The International Monetary Fund has approved a two-year, $1.74 billion loan for Tunisia, giving Tunis access to foreign currency urgently needed to help balance its budget.
The Tunisian Government has devoted 1/3 of its 2013 budget to infrastructure projects, which it says will create short-term job opportunities for youth as well as helping private businesses.
However, Tunisia is running a 6% budget deficit this year, and political tensions over a draft Constitution have prevented Parliament from debating legislation allowing the government to apply for Islamic finance instruments.
The IMF money, like most loans from the Washington-based organization, comes with strings
The IMF has set conditions on the loan, including restructuring of Tunisiaâs banking sector. Analysts believe that non-performing loans on the books at state-owned banks amount to billions of dollars.
Turkey: Protests Continue, But PM Erdogan Defiant Over "Handful of Looters"
Moving through the country to gather support against nation-wide protests, Prime Minister Recep Tayyip Erdogan has refused to concede any ground. He told supporters who had greeted him at Adana airport:
We won't do what a handful of looters have done. They burn and destroy. ... They destroy the shops of civilians. They destroy the cars of civilians. They are low enough to insult the prime minister of this country.
He urged his supporters to avoid violence themselves and predicted that he would defeat his opponents during local elections in March: "As long as you walk with us, the Justice and Development Party administration will stand strong. As long as there is life in my body, your prime minister and your party chairman, God willing, will not be deterred by anything."
He then traveled to the city of Mersin to make a similar speech and to open new sports facilities.
Later Sunday, Erdogan will speak to his supporters in the capital Ankara.
On the 10th day of mass protests against the Government, demonstrators near Istanbul's Taksim Square yell to Erdogan, "Tayyip, Resign!"
Libya: Deadly Clashes in Benghazi
At least 25 people have been killed in Benghazi in eastern Libya in clashes during Saturday's protests outside the headquarters of the Libya Shield Brigade, which is working with the Ministry of Defence.
Dozens more were wounded, according to medical officials.
Demonstrators had gathered outside the headquarters of the Brigade demanding the disbanding of militias, including those which fought during the overthrow of Muammar Qaddafi in 2011. They specifically called for the Brigade t leave its premises.
One witness said he had seen around 200 protesters. While most of them were unarmed, a few had AK-47 rifles, although he said he did not see them used.
A spokesman for the Libyan's Army Chief of Staff, Ali al-Sheikhi, described the Libya Shield Brigade as "a reserve force under the Libyan army." He said an attack on the brigade "is considered an attack against a legal entity".
| Italian property tax cancelled ||Umming and ahhing over Italy's controversial property tax has come to an end with prime minister Enrico Letta's decision to cancel the levy. In a bid to save the fragile coalition government and mend relations with Silvio Berlusconi, Mr Letta announced Italian property will no longer be taxed if it is a primary residence. However, a municipal levy will be introduced in 2014 to replace the outgoing tax.|
Whether in favour or against scrapping the tax, a conclusion to the debate will be welcomed, as Italian stocks began to slip on August 19th as talks stalled. Rafaella Tenconi, an economist at Bank of America Merrill Lynch in London, told Bloomberg that "any deal is good". The verdict on the tax has also demonstrated that there is cooperation within the coalition, easing the minds of investors concerned over volatility.
Unsurprisingly, following confirmation that the tax will be abandoned, the FTSE MIB Index went up 0.8 per cent in Milan. Nevertheless, the decision to scrap the Italian property tax poses questions of how Italy will be able to keep its budget deficit below three per cent of gross domestic product. Prior to the recent decision the International Monetary Fund (IMF) had advised against it, claiming it would create cash problems for the country and take equality out of the market.
Mr Letta claims spending cuts, levies on gaming and value-added tax receipts will compensate for the lost revenue. However, German chancellor Angela Merkel has criticised the Italian government for cancelling the levy, claiming it threatens the stability former prime minister Mario Monti brought to Italy.
To improve the Italian property market further, the IMF has also called for a review of cadastral values, which are used as an assessment basis for all types of property. The body claims the review will help to ensure fairness in the market but Italy will still need to overcome its economic challenges. Growth prospects remain "weak", thanks to high unemployment and dovish market sentiment.
Article by +https://plus.google.com/113107350172679406191?rel=author on behalf of Propertyshowrooms.com
| Italian property tax report ruffles feathers ||A new report by the Italian Treasury on property tax has ruffled the feathers of those that claim it should be abolished. Introduced by minister of the economy Fabrizio Saccomanni, the study looked at how local property tax (IMU) could be reformed and concluded it would be regressive if it were abolished altogether. This has thrown a spanner in the works for Enrico Letta's government, as former premier Silvio Berlusconi required the tax to be scrapped.|
A delay in the first IMU payment has already been put in place for September 16th, pending a total reform of the tax, which is expected at the end of this month. However, the jury is still out on whether or not the tax should be removed. The International Monetary Fund is just one body claiming Italy must keep the tax and the recent Treasury study has jumped on the bandwagon too. It examined nine hypotheses for reform but rejected its total cancellation, claiming it "would not seem to be fully justifiable on the grounds of equity or tax efficiency".
If the property tax was scrapped on first residences for the entirety of 2013, it would cost the government around €4 billion (£3.4 billion approximately). Italy is not in a financial position to absorb such a deficit and would need to find an alternative source of revenue. As a middle ground, it has been suggested IMU could be cancelled on lower-value homes only. However, this may not satisfy calls on either side of the fence.
The IMF is adamant the tax must be reinstated to ensure equity and efficiency in the market, while a review of cadastral values must be accelerated to ensure fairness. Cadastral values are calculated by multiplying the cadastral revenue by a fixed coefficient, based on the type of property. The result acts as an assessment basis for all types of tax that occur when buying property in Italy. According to the IMF, only through its recommendations can Italy survive the strong headwinds on the way to recovery.
Article by +https://plus.google.com/100585359199579398168?rel=author on behalf of Propertyshowrooms.com
| Unpopular Italian property tax could be scrapped by autumn ||An unpopular tax on Italian property could be scrapped for good by autumn, according to the country's industry minister. Flavio Zanonato told newswire Ansa: "I think that at the start of autumn it will be possible to announce that there will not be a point increase in VAT, and there will not be IMU (Imposta Municipale Propria - Italian property tax) on primary houses." Value added tax will also remain at current levels, with the government abandoning plans to introduce changes to bolster Italian finances.|
Mr Zanonato's statements come as the government faces further pressure to get rid of IMU. Prime minister Enrico Letta has already delayed the VAT hike and suspended IMU payments. The premier had also pledged to reform the tax by the end of August. However, Mr Letta is balancing calls to scrap the tax with demands to stick within European Budget limits, Reuters reported. Abandoning the IMU would cost around €4 billion (£3.4 billion). With the country in no position to lose any more money, the government would have to cut public spending and take money earmarked for other projects.
Nevertheless, the International Monetary Fund is adamant that the tax should be maintained in order to ensure equity and efficiency in the Italian property market. In a statement the body also called for the review of cadastral values to be accelerated to ensure fairness. In Italy, cadastral values act as an assessment basis for all types of property tax. The value is calculated by multiplying the cadastral revenue by a fixed coefficient, based on the type of property.
The IMF explained that while "bold steps" have been taken in the country since late 2011 to correct the damage done by the crisis, growth prospects are "weak". "Unemployment is unacceptably high, and market sentiment is still fragile, underscoring that the task is far from complete," the IMF said. This means that any further blow to the government's coffers could have lasting ramifications on the Italian recovery.
Article by +https://plus.google.com/117987778295738303451?rel=author on behalf of Propertyshowrooms.com
| IMF calls for Italian property tax reinstatement ||The International Monetary Fund (IMF) has called for the reinstatement of an unpopular Italian property tax. According to the body, the levy on primary residences must be returned to ensure equity and efficiency in the market. The tax has already gained much publicity, as former premier Silvio Berlusconi made the suspension of the charge a condition of his support for Enrico Letta's government. Current prime minister Letta claims his administration will decide later in the year whether or not to revive the tax, but bringing it back could lead to political backlash.|
However, the tax isn't the only change to the property market recommended by the IMF. In a statement the organisation claimed a review of cadastral values must be accelerated to ensure fairness. These values act as an assessment basis for all types of tax that occur when buying a property in Italy . The value is calculated by multiplying the cadastral revenue by a fixed coefficient, based on the type of property. Nevertheless, the current system has been deemed to be unfair.
The extent to which Italy will adopt the recommendations remains to be seen but, to turn the overall economy around, action needs to be taken. The IMF has said that despite the fact "bold steps" have been taken in the country since the late 2011 crisis, growth prospects are "weak". In a statement the body said: "Unemployment is unacceptably high, and market sentiment is still fragile, underscoring that the task is far from complete."
Domestically this doesn't bode well for Italian property and unlike Spain, foreign investors aren't overly active. With the IMF claiming there are "strong headwinds" on the way to recovery, there is undoubtedly cause for some concern. Yet, the government is building on steps taken to address Italy's structural problems and kick start growth. Europe's position will also play a part and the IMF claims it has to "address the financial fragmentation and strengthen further the currency union". This will help to loosen the restraints on private spending.
Article by +https://plus.google.com/109065039197462640663?rel=author on behalf of Propertyshowrooms.com
| IMF Cuts Global Economic Forecast ||The IMF (International Monetary Fund) is planning to cut its global economic forecast. The risk of the slowdown is extremely high as there are policy uncertainties in the United States and across Europe. Global growth is expected to reach 3.3 percent for the year 2012. For 2013, growth is expected to increase to about 3.6 […]|
| Comment on World Peace: Still the most important challenge for the U.S. President by Khalid AlMubarak ||The speech is remarkable because it was delivered during the cold war when confrontation was normal and suspicion had the upper hand in diplomacy and intelligence.There is no cold war now,no USSR.China's challenge in the economy and markets not in war.Indeed Chinese success is closely associated with US trade and exchange.But there are now influential voices in the US that seek "manufacturing"a new cold war with Russia or China.Kennedy spoke about the "safety" of the weak. Some US Presidential hopefuls talk about bullying the weak and discriminating against them.
Neo-liberalism is forced upon the weak nations despite the admission of IMF experts that the policy was probably "oversold".
McCarthyism did not last long in US democracy.Vietnam was also seen as a flaw ;the invasion of Iraq is no longer considered an achievement(except by Tony Blair -the current US president was against the invasion as a senator)
There are grounds for hope ,based on the memory of Kennedy's speech and US role against Nazi Germany.|
| Comment on Sudanâs Hydrocrats â Book Review by Khalid AlMubarak ||There is another point of view.I am surprised to read statements by the most distinguished Sudan watcher Alex de Waal that are based on hearsay and gossip .To say that Osama Abdalla was dismissed because"of overreach in dispensing political funds"without providing any evidence is a departure from the method that elevated Dr De Waal's contributions above less objective Sudan critics.The same goes for strange statements like alleging that the main aim of DIU was" to launder political funds".
The Merowe Dam was first suggested by the colonial administration(together with other projects).It was endorsed by Sadiq AlMahdi's 1986 government.President Bashir's government should be praised for making it a reality.Dams were built in the UK and US as part of industrial progress .Why isn't the same true of the Sudan?
A comment on the Civilisation Project.I prefer to put it the way I have written in both Arabic and English articles:It is unfair and clearly biased to say that the coup of 30 June 1989 has continued until today.That coup was based on Turabi's delusional International Project that saw the Sudan as leader of all Arabs and Muslims against the West.The split that removed Turabi put paid to that project.The moderates continued along a modest Sudanese project (without which the Western -brokered Comprehensive Peace Agreement of 05 would not have happened.)
I liked the comment on the Gezira scheme. It is the melting pot at the heart of the Sudan.The labourers mentioned have gradually become Sudanese and intermarried.
The observation about Western academics Following humanitarian agencies is true.The Sudan has lost by not being more open;but who can blame bureaucrats who saw evidence of bias, lying and broken promises even from heads of government,if they became excessively suspicious of all Khawajat?
Hamdi's triangle is given too much weight.It was not an official Islamist document.Hamdi ,whom I know fairly well, is a neo-liberal economist and loyal supporter of IMF and world Bank policies.His triangle was never adopted as policy;but has been quoted by Andrew Natsios and others.
Lastly.The Islamists in the Sudan did not descend from the moon.They are Sudanese nationals and patriots.Among them are some of our finest and dedicated citizens.There are cases of corruption and nepotism and errors of inexperience(as is the case in many Western countries and parties).Their real project is building roads,bridges,dams railways schools and universities.This is the raw material of modernity.It unites them with other patriots.They should also be judged in comparison to the hapless lobby-controlled Sudan Revolutionary Front .The West is actually undermining moderation in the Sudan by suffocating the government and pushing young men and women towards the arms of ISIS.They quite forcefully ask:what has President Bashir's moderation and Statesmanship vis a vis the West earned us?|
| Comment on On corruption and mass atrocities by Alex de Waal ||Dear Michael,
It is interesting that three cases of successful major long-term sanctions have been targeted at the nuclear programs of Libya, Iraq and Iran. This warrants special attention. I will only raise the question here.
I wouldn't claim that U.S. sanctions were the major reason why the Islamist-security cartel stayed in power. But they contributed to the criminalization of the regime. The criminalization of the government began under Nimeiri (as you note) and stayed that way, in slightly different incarnations, subsequently. My argument is that when sanctions--starting with the 1986 suspension from the IMF and continuing in the 1990s and 2000s--didn't help with reform. This is a complicated issue. To begin with, sanctions that were imposed with one goal in mind, such as ending state sponsorship of al Qaida, were sustained even when Sudan had ceased supporting AQ. Similarly, promises of lifting sanctions when the CPA was signed or the UN was permitted into Darfur, or the South was allowed peacefully to secede, were not met. So the Sudanese government has no confidence that the US will ever lift any sanctions for any action short of regime change, removing any incentive for reform.
But the more substantive argument is that normalization of state finance through debt relief under HIPC, and opening up Sudan to regular financial flows and FDI, would be a first step towards normalizing the country's financial politics. It would be a modest step, as the last thirty years of corrupt and criminalized political financing cannot easily be undone. But putting more sanctions in place is not going to help.|
| Shouldn't Anti-Globalization Activists [Heart] Trump? |
For years, anti-globalization protesters have gone out to all sorts of notable economically-related gatherings worldwide, be they G-7, G-8 or G-20 summits; World Economic Forum gatherings; World Bank and IMF meetings; WTO ministerial conferences, and so on and so forth. The boilerplate accusation is that world leaders betray the interests of the common people in favor of a faceless global capitalist class. To this, the common people must stand up for what they believe in. So far, nothing is new here.
|G-20 Hamburg protests: why the hate for anti-globalization champion Trump?|
What's interesting with the emergence of Donald Trump in world politics is that he espouses much of the same rhetoric: the [American] working class has been hurt by globalization, and therefore globalization should be rolled back to protect the common people from the ravages of world trade. As such, it's always struck me how vehemently opposed anti-globalization campaigners are to Trump when he's actually done much more to stop further economic integration than all of them combined. From single-handedly dooming the Trans-Pacific Partnership to oblivion to refusing to agree that trade protectionism is to be avoided during economic summits, he should be the man of anti-globalization writer Naomi Klein's dreams. But alas, he is not. This Canadian who likes meddling in Yanks' affairs just cannot stop blathering about how awful Trump is. (It's a form of globalization I don't appreciate when some foreigner thinks she's "active" in US domestic politics.)
There are, of course, all sorts of wrinkles here. Coming from the left, the anti-globalization vision of eliminating world trade is complemented by replacing it with folks being self-sufficient in small, sustainable communities. Meanwhile, the Trumpian vision is instead a triumph of American industry making everything that those in the United States wish for and more--to the exclusion of considering everyone else's welfare. Another line of argument is that Trump is only masquerading as a champion of the working class and is actually globalizer in disguise.
Then you also have a panoply of leftist causes that are the exact opposite of what Trump champions. These include climate change, racial tolerance, and so on. But, if you really think about it, Trump may be the one who is *really* anti-globalization in outlook here if the criteria is sheer isolationism. Consider:
Abhorrent as those ideas may be, they're arguably more consistent with extricating ourselves from the rest of the world. In this sense Trump is the true anti-globalist, whereas those championing all sorts of progressive causes are not, really.
- You don't want international cooperation on climate change since, well, it involves representatives of different nations discussing things. A global elite should not be dictating what the free peoples of the world do to their piece of the planet;
- You don't want tolerance of other people with different creeds, colors, or races. If the opposite of "globalist" is "nationalist," then you cannot have a nation-state which when it is largely indistinguishable from all others.
If anti-globalization means going it alone no matter what everyone else thinks, Trump is its best representative.
Anti-globalization activists should therefore celebrate Trump's arrival, full stop, wherever in the world he shows up. The attention he brings to the cause is unrivaled--especially compared to a ragtag group of anarchists and flunky writers like Klein.
| One Belt, One Baloney? PRC's Silk Road Revival Doubts |
Over the weekend, Chinese President Xi Jinping hosted an elaborate event in Beijing concerning the PRC's idea of reviving the historical Silk Road. Spanning much of Asia and the Middle East besides, this trade route epitomized many of the things China wants to be today: (1) at the center of world trade, (2) involved in infrastructure, and (3) a prime mover of international relations. This, of course, stands in contrast to the retrograde "America First" stylings of the racist-protectionist-isolationist American president, Donald Trump.
Some hackles were raised about the invitation being extended to North Korea, of all nations, but certainly we'd rather have it peacefully trading with the rest of us than firing missiles to draw attention to itself?
More to the point, though, how realistic is this plan? A few months ago, an op-ed appeared in the Hong Kong-based South China Morning Post (usually a Communist Party-friendly outlet) placing the "One Belt, One Road" project's viability in question by way of Japan's example from only a few years back of doing something similar: using infrastructural might to extend not only diplomacy but also trade with its neighbors:
Facing a deep slowdown after years of investment-fuelled growth that culminated in a huge property and stock market bubble, the leaders of Asiaâs largest economy [China] come up with a cunning plan. By launching an initiative to fund and construct infrastructure projects across Asia, they will kill four birds with one stone.However, the author Tom Holland delivers the punch line that, actually, the Japanese tried all this stuff before and failed:
They will generate enough demand abroad to keep their excess steel mills, cement plants and construction companies in business, so preserving jobs at home. They will tie neighbouring countries more closely into their own economic orbit, so enhancing both their hard and soft power around the region. They will further their long term plan to promote their own currency as an international alternative to the US dollar. And to finance it all, they will set up a new multi-lateral infrastructure bank, which will undermine the influence of the existing Washington-based institutions, with all their tedious insistence on transparency and best practice, by making more âculturally sensitiveâ soft loans. The result will be the regional hegemony they regard as their right as Asiaâs leading economic and political power.
[I]tâs actually a description of a strikingly similar plan rolled out by Japanese prime minister Keizo Obuchi in the 1990s. That too promised to provide work for Japanâs recession-hit construction sector by building Japanese-funded infrastructure projects around Asia. And it even included a proposal â never realised â to establish an Asian Monetary Fund to lend to regional governments on easier terms than either the IMF or World Bank. The rest of the editorial notes that rampant corruption elsewhere siphoned funds away from projects, and those bits that actually did get built ended up as "white elephant" projects: transport initiatives that cost so much to maintain that they could not be sustained and were eventually shelved. Certainly, the OBOR and New Silk Road tags characterize some grandiose initiative. (See the map pabove.) Whether the Chinese have the actual sense to scale these to reality-based bits is another question since linking the Middle East all the way to the Far East is not a vision based on modesty.
Unfortunately for Beijing, the precedent is hardly encouraging. From the start the scheme was plagued by bickering over conditions and allegations of corruption. A handful of infrastructure projects did get built, but the reality fell woefully short of Tokyoâs grandiose dreams. Far from cementing Japanâs economic ascendancy across Asia, the project left a legacy of bad blood, and marked the beginning of a financial retreat from around the region that Japan has only recently begun to reverse.
Scaling it appropriately to meet local needs of the countries involved is key. That is, participating countries will plump for maintaining infrastructure built (with Chinese support) insofar as they can benefit from it going forward. However, if benefits are not evident--or mainly serve the purpose of transit through a country instead of serving the citizens of the countries in question first and foremost--the Japanese example provides ample cautions.
UPDATE: A warning is that investment in OBOR countries has, actually, dropped off in recent times, though there are caveats associated with this as a gauge:
Foreign direct investment from China to countries identified as part of the BRI fell 2 per cent in 2016 year on year and has dropped an additional 18 per cent so far in 2017, according to commerce ministry data. Non-financial FDI to 53 BRI countries totalled $14.5bn last year, comprising only 9 per cent of overall outbound FDI...
Chinese experts counter that published figures do not paint a complete story. Jia Jinjing, chief researcher at the Renmin Universityâs Chongyang Institute for Financial Studies in Beijing, said much outbound FDI passes from China through an intermediate country before reaching its final destination, making the commerce data an unreliable gauge of total BRI investment.
| Trois femmes, trois histoires, trois projets Ã financer Ã Managua, Nicaragua â partie 2 ||Voici la deuxiÃ¨me partie du rÃ©cit de Sen Rey, notre volontaire au Nicaragua, qui nous raconte son expÃ©rience Ã Managua et sa rencontre avec 3 micro-entrepreneuses. PremiÃ¨re partie, TroisiÃ¨me partie Fatima a dÃ©butÃ© son projet il y a trois ans. La maison de Fatima est modeste mais suffisamment spacieuse pour amÃ©nager une Ã©picerie. Elle y vend quelques produits alimentaires, ainsi que des produits cosmÃ©tiques. Fatima a besoin du soutien des Babyloniens pour un deuxiÃ¨me emprunt en cours. Elle a bÃ©nÃ©ficiÃ© dâun premier prÃªt quâelle a investi dans lâachat dâun rÃ©frigÃ©rateur. Elle explique que le microcrÃ©dit accordÃ© par notre IMF partenaire fut une opportunitÃ© dâaugmenter les bÃ©nÃ©fices de son investissement. Le taux dâintÃ©rÃªt accordÃ© parÂ Afodenic est, en effet, infÃ©rieur aux taux octroyÃ©s par les banques. Son prÃªt est, de ce fait, plus facilement supportÃ© Ã un moindre coÃ»t, ce qui lui permet de rÃ©investir une partie de ses gains au dÃ©veloppement de son Ã©picerie. Plus tard, elle aimerait amÃ©nager une petite boutique de vÃªtements dans sa maison. En voyant augmenter ses revenues, Fatima se sent beaucoup plus indÃ©pendante. Retrouvez la derniÃ¨re partie des aventures de Sen Rey la semaine prochaine sur notre blog.|
| Youth jobs proposal would guarantee placement for graduates |
The Broadbent Institute is proposing a ânew deal for young peopleâ that involves business relinquishing a fraction of the âdead moneyâ it is hoarding to offer jobs for young graduates.
The institute says an injection of $670 million from business and an equivalent amount from the federal government could lead to the creation of 186,000 full-time jobs to help young Canadians begin their careers.
It proposes a Youth Job Guarantee â a promise for every person under age 25 of a co-op position, apprenticeship or job offer within four months of leaving formal education or becoming unemployed. Jobs would last 12 weeks and pay about $15 an hour.
This would help reduceÂ the 13.3 per cent unemployment rate among Canadians aged 15 to 24 and diminishÂ the risk of these young people becoming âdiscouraged workersâ who no longer seek employment, the institute said.
Executive director Rick Smith said the federal government has failed to show leadership on youth job creation, reducing spending on its Youth Employment Strategy to $335.7 million in 2014 from $397.9 million in 2011.
"Canadaâs approach to youth unemployment at the moment is not working. Youth are the only demographic that has not recovered their employment since the recession," he said in an interview with CBC News Network'sÂ The Lang & O'Leary Exchange.Â
The government estimates its program helps about 49,748 youth, while 380,600 young Canadians are out of work.
Smith proposes a scheme in which government money would support placements with small private-sector employers and not-for-profit organizations, while bigger businesses would pay the full cost of a co-op placement.
Cheaper than income-splitting
"This is a government thatâs talking about blowing $3 billion next year on an income-splitting scheme for richer Canadians that donât really need it," he said, pointing out that this proposal would cost much less at $670 million.
The BroadbentÂ Institute plan is based on an EU guaranteed youth jobs plan, which funnels graduates into co-op and apprenticeship positions at the start of their careers.
Canadian business was criticized by then Bank of Canada governor Mark Carney in 2012 for sitting on âdead moneyâÂ rather than using it to invest in the business or return to shareholders. The IMF also pointed to the large pool of unused capital held by private corporations, estimating it $630 billion in the first quarter of 2014.
"Weâre challenging the private sector to step up. Thereâs an enormous amount of dead money out there in the private sector, a fraction of which if applied to this problem of youth unemployment could have a big impact," Smith said.
Meanwhile, Canadian youth face a future in which they are less likely than their parents to earn a decent wage, have a secure job, or own a home, Smith said. Many are stalled at the beginning of their careers because they have no experience and cannot get a first job.
Not developing young talent has a cost to the economy, Smith said, both in lack of skilled labour and in diminished earnings later in their careers for young people who cannot get a first job.
"Parents are worried about their kids. The job prospects of millennials are worse than their boomer parents at the same age," he said.Â
| Great Graphic: Italy--It is Not Just about Legacy |
A little while back I was part of a small exchange of views on twitter. It was about Italy. I was arguing against a claim that Italy's woes are all about its past fiscal excesses. It is not just about about Italy's legacy.
It is true that Italy runs a primary budget surplus. The primary budget surplus has averaged in excess of 2% for nearly two decades. Over this period, Italy debt has soared. I took exception with a reporter claiming that Italy is among the most fiscally sound countries in Europe. The fiscal condition of a country is not just about its budget balance (flow) but also its debt (stock).
It debt is not simply a legacy of past fiscal profligacy. The debt burden has increased because Italy is unable to grow faster than its interest rates. The Italian economy has expanded by an average of 0.6% in the 2014-2016 period. Over the past 17 years it has averaged 0.3% growth (since birth of EMU). It averaged 2.1% growth in the previous 17 years.
This Great Graphic comes from the IMF.
It shows that real wage growth in the four largest member of EMU. Italy (red line) is the obvious outlier. It moved in tandem with Germany (black line) until around 2007. The timing of the break down suggests that it is not a function of EMU or Italy's pass fiscal excesses. The IMF warns that it could take Italy another decade for its average take home pay to recoup the ground that has been lost since 2007.
Part for the issue, according to the IMF, is that Italian wages have grown faster than productivity for the past two decades.
That is what this second chart shows--unit labor costs relative to Germany (100). The red line shows that in terms of labor, a unit of output in Italy's factories is considerably higher than the other major European countries. In turn, the IMF argues this adversely impacts, investment, employment, and growth.
The IMF argues that Italian wages should be tied to productivity at the firm level rather than on the national level. The IMF estimates that this would boost employment by 4%, as well as boost other macro economic performance measures. Of course, the IMF has other reform proposals in the area of government spending and taxation.
A full three-quarters of Italy's revenues go to wages, pensions, health care, and debt servicing. It has little room to finance public investment. The traditional approach has focused on Italy's debt burden and the NPLs at banks. This is the creditor's narrative. The response is not to dismiss Italy's problems as having been caused in the past, but the debtor's narrative is to boost growth. The failure of Italy to grow is not simply the austerity (primary budget surplus) but its willingness not to challenge rent seeking behavior by the private as well as the public sectors.
| Cool Video: Dollar Drivers on Bloomberg |I had the privilege to be at Bloomberg today and discussed with Vonnie Quin and Mark Barton.
A clip to the Cool Video can be found here.
There were three talking points. First was the observation that while the President took credit for the record stock market, the strength of the economy, the low unemployment rate, and business confidence, there was no mention of the dollar, which poised to close lower for its seventh consecutive month.
There have been no fresh legislative initiatives, and although many executive orders have been signed, the economic performance appears to be largely doing what is has done since the middle of 2009. Moreover, the IMF recently revised down this year and next year's GDP forecasts for the US. The continued improvement in the labor market seemed to well in tow last year.
The rise of the stock market seems to be a function of broad considerations. Earnings growth in Q1 and Q2 helped, but the underlying driver seems to be low interest rates and share buybacks. Many economists, and some Fed officials are concern about the heights the stock market has reached on valuation grounds. The risk of seeing equity gains are a a favorable assessment of a particular official is what happens when the market corrects, which it eventually will do. Earlier the rising dollar was cited as a vote of confidence.
The second talking point was about the ECB. At the press conference following the recent ECB meeting, when asked Draghi indicated that officials were aware of the euro's rise. At the time, we noted that it was not much of a protest. The market realized this and continued taking the euro higher. If the euro continues to rise, is beyond $1.20 at the September ECB meeting, and the pace appears to be accelerating, Draghi may be more forceful. This may be more difficult to signal especially if the ECB also announces that starting next year, it will reduce the amount of assets it buys.
The third talking points was this week's MPC meeting. I suggest there may be a trade off between the vote on rates and the Quarterly Inflation Report, which is released at the same time. If Haldane who has warned he may favor a rate hike, does make good on threat, I suspect that Carney would seek to soft the blow by having a more dovish inflation report, that would play up the transitory factors (oil and past slide in sterling). On the other hand, if Haldane continues to vote with Carney, then the statement can be more hawkish. I suggest that sterling's strength is being exaggerated by the dollar's weakness and that sterling remains weak against the euro.
In the big picture, I suggest that while the dollar is likely to weaken further, I continue to view the gains as corrective in nature, after the large rally since mid-2014. I still do not think we have seen peak divergence and neither the euro, sterling, other major currencies, and the Dollar Index, have surpassed levels that are commonly associated with technical corrections. Disclaimer
| Palm Beach types among delegates at Davos ||
The four-day World Economic Forum in Davos, Switzerland kicked off today, with more than 2,600 people invited to participate in the prestigious conference.
Among the business leaders, political figures, academics, artists and other prominent elites converging on the Alpine ski resort are, naturally, a few familiar Palm Beach faces.
Attending the forum for the fourth time is local real estate investor Jeff Greene.
He arrived in Davos Tuesday, along his wife Mei-Sze and their two sons, Malcolm and Brandon.
Perhaps the wife and kids will be hitting the slopes while dad meets Russian Prime Minister Dimitry Medvedev, Italian Prime Minister Monti and IMF head [More]
| Desire Modification in the Attention Economy ||The Future of (Post)Capitalism - "Paul Mason shows how, from the ashes of the recent financial crisis, we have the chance to create a more socially just and sustainable global economy." (previously; via) "Learning how to think really means learning how to exercise some control over how and what you think. It means being conscious and aware enough to choose what you pay attention to and to choose how you construct meaning from experience." --dfw, this is water
Albert Wenger helps set the stage a bit...
Land, Capital, Attention: This Time It Is the Same
Only 1% of the global population now controls about 50% of all capital. And in another critical historical parallel, the ruling elites everywhere directly or indirectly represent the interests of capital. Capital has replaced land as the factor against which policies are measured. Take quantitative easing for example, which is aimed at reducing the cost of capital on the belief that this will continue to create jobs.
But the new technological disruption has already arrived and it is digital technology. This is a new set of machines and networks. Unlike their earlier predecessors they are universal machines which as they get better can eventually do anything. And the results are that capital and labor are no longer long-term complements which has been driving down labor's share of the economy and depressing wages. Digital technology even means that less and less capital is required for most endeavors (see for instance how much cheaper it is to start a new company today than it was even a decade ago). Capital is no longer scarce and labor even less so.
Where is the new scarcity? It is human attention. With birth rates thankfully decelerating almost everywhere, peak population is finally a possibility. We all have only 24 hours in the day and we need to work, eat and sleep. That puts a hard limit on how much human attention exists. At the same time digital technologies are producing unprecedented amounts of information that we could pay attention to. On Youtube alone 100 hours of video is uploaded every minute. Increasingly you can measure how valuable something is by how much attention it controls (e.g., Google, Facebook, etc).
And just like previous scarcities one of the reasons that attention is scarce is that we are bad at this new technology. As society we have lots of information locked up through copyright and patents instead of making it available to everyone. As individuals we too often lack a purpose other than making money and we will happily watch another cat video in our limited free time than read a challenging book. Over time we will get better at all of this and it will let us achieve amazing things as humanity, including free education and healthcare for everyone and cleaning up the mess we have made of the planet. But none of that will happen as long as we keep ourselves trapped in a belief that capital is scarce and that everyone needs a job.
So yes, this time is the same. Once again technology is fundamentally shifting scarcity and the ruling elites are controlled by the prior scarcity, this time capital, which is trying hard to maintain its power. The sooner we all begin to understand this, the better our chances of a peaceful transition. The longer we wait, the more we will be like the land owners who didn't get industrialization and led us down a path of violent change.
So broadly speaking, in a nutshell, the politics of the attention economy amounts to: Shock the middle class - "The basic structure of politics is that the median voter's income is below the national average income, so redistribution is popular. The job of the anti-redistribution party is to stand up for popular positions on other issues. Ronald Reagan was against Communism and 'welfare queens' and George W Bush 'kept us safe' and defended traditional marriage."
As Mason mentions, capitalism is adaptive; how might it adapt? To maintain inherited class hierarchies in a burgeoning global social network â to extend the 'enclosure movement' from land and capital to attention itself â requires the cultivation of productive identities and the advertising of tribal affinities[*] (to justify one's existence ;) through 'brand management' of one's reputation and social credit 'score': How Companies Are Reducing Consumers to Single Numbers [1,2,3,4,5,6,7]
Policymakers should discourage the expansion of credit scoring into life scoringâor, at the very least, require disclosure of all the data and algorithms behind the scores to the people being scored. There needs to be a recognition that scoring can be "highly reductionist[,] atomizing complex, contingent relationships into simplified, one-dimensional measures that cannot provide a full and multidimensional picture" of individuals. It's not necessarily an innovation to celebrate. Rather, it can be a prelude to the discrimination that's rightly condemned. And before succumbing to the voyeuristic thrill of submitting friends or strangers to the consumer-facing versions of these scores, everyone should carefully consider the reliability of their sources.
Moving from 'markets' to 'algorithms' just shifts the problem unless they are beneficent 'machines of loving grace' out there that look beyond the efficient frontier.
"Imagine it has data tentacles everywhere, reaching into browsing and buying records; game worlds; chats; texts; friend networks; phone conversations; airline, banking, utility, and entertainment records; GPS locations; surveillance cameras; whatever. It could know more about us that a spouse or lover knows. It could figure out who we really are, and what we really wantâdown to the dreams we won't admit to ourselvesâand then steer us in that direction, onto new paths that optimize who we are, that lead us toward the lives we're best suited to live." --Linda Nagata, The Red: First Light
Machines for thinking
A terrific balance between delightful stories and thoughtful analysis is found in Jerry Kaplan's relatively short book, "Humans Need Not Apply". An entrepreneur and AI expert (he is one of the personalities in Mr Markoff's story), Mr Kaplan has done some serious thinking about how AI will transform business, jobs and most interestingly, the law. The book glimmers with originality and verve...
To the problem of skills not being well matched to the needs of businesses, he proposes a "job mortgage". Companies would agree to hire a person in future in return for a tax break; the person would take out a loan against the future income to pay for the training. This way, educational institutions get clearer economic signals about what skills they should teach.
To lessen income inequality, Mr Kaplan gets even more inventive. Companies would get tax breaks if their shares are broadly owned, using a measure he bases on the Gini coefficient. The American government would let people choose the firms where some of their Social Security (national pension) funds would be invested. Spreading stock ownership, Mr Kaplan reckons, will diffuse the gains from companies that, using AI, make oodles of money but employ few.
- The trust machine - "The notion of shared public ledgers may not sound revolutionary or sexy. Neither did double-entry book-keeping or joint-stock companies. Yet, like them, the blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate." [1,2,3]
- Don't Automate, Obliterate - "All of this kind of thinking is premised on the principle of 'don't automate, obliterate' â too much of what is currently being debated in the policy realm is about automating existing processes and further enshrining categories that made sense historically but no longer do. It is time to figure out what government and society can and should look like now that we have digital technologies."
- Discovering why we are not technologically doomed to inequality - "The overarching theme in all this work, however, is profound: it is that inefficiency and rent (whether it's increased or is simply being divided differently) are important causes of inequality, and that power in some form or other is central to these mechanisms. The important lesson to draw is that policies can be developed that at the same time create greater prosperity and distribute the fruits more equally â though they may be policies it will take brave politicians to put in place as they will challenge current power structures."
- The difference between social democratic and liberal intuition - "Liberals don't really believe welfare is a good thing, but instead view it as a necessary thing in order to save people from total destitution... I don't share this liberal view of welfare. Rather, I think welfare is incredibly good and cool. In fact, I'd like to increase welfare expenditures by trillions of dollars each year."
- Data shows that welfare doesn't have a corrupting influence on poor people - "Studies rebut a long-cherished belief in America, on the right and left, that welfare encourages bad behavior by the poor."
- Former IMF chief economist backs 'people's QE' - " 'There is clearly something else you can do if you get to zero (inflation) and still want to increase spending. You can buy goods. Which one should you choose? We haven't asked the question in the crisis but we should', he said. Blanchard said that this does not mean central banks would buy goods directly. Rather, governments can increase their fiscal deficits by spending on infrastructure projects. Central banks can then buy this debt with newly created money."
- Trekonomics - "Brad DeLong: Social credit! Quantitative easing for the people! Monetary policy via direct crediting of seigniorage to everyone's bank account, in equal shares!"
- Negative interest rates and helicopter money could be a marriage made in heaven - "If strongly negative interest rates were ever implemented, they would spread through the deposit system. By itself, that would gradually shrink the money supply â and this is a reason to worry that negative rates could be contractionary. The hope is that the banks, which create most of the money in circulation, would expand their balance sheets (lend more at slightly less negative rates than charged on deposits, and profit from the margin) to make up for negative interest cost on their own reserves. But if they did not do so enough, there would be a case for expanding the money supply directly â and helicopters would be the most effective way to do so."
- Negative real rates signify a broken financial system - "In short, the best explanation for why private markets are forcing interest rates to zero is that the banking system is broken. The system which functioned for centuries on the basis of unsecured, reputation-based, interbank lending no longer exists. ZIRP is just evidence that the financial industry is turning to government as a source of the liquidity that the financial industry is no longer capable of creating on its own."
| Growth and volatility before and after the Global Crisis || |
Flexibility of adjustment to shocks: Economic growth and volatility of middle-income countries before and after the Global Crisis
Joshua Aizenman, Yothin Jinjarak, Gemma Estrada, Shu Tian 19 July 2017
The impact of the Global Crisis of 2008 played out differently in middle-income countries compared to developed countries. This column argues that the associations of growth level, growth volatility, shocks, institutions, and macroeconomic fundamentals have changed in important ways after the crisis. Educational attainment, share of manufacturing output in GDP, and exchange rate stability appear to increase the level of economic growth. Exchange rate flexibility, education attainment, and lack of political polarisation reduce the volatility of economic growth.
The Global Crisis of 2007-09 marked a watershed moment in post-war economic history of the world. Prior to it, most financial and economic crises occurred in emerging markets in Asia, Latin America, and elsewhere. While those crises inflicted a great deal of economic and social hardship on the affected economies, the spillover effects of those crises on other economies was by and large limited. What is qualitatively different about the Global Crisis was that it broke out in the US, the worldâs largest economy and home to worldâs biggest, deepest, and most liquid and sophisticated financial markets. As such, it was bound to have incomparably larger effects on the rest of the world â and so it proved. The Global Crisis was rooted in the US subprime mortgage crisis which, in turn, was rooted in colossal market failures in the countryâs housing and financial markets. The crisis paralysed credit flows in the US and spread like wildfire across the Atlantic to Europe, due to the heavy exposure of many European banks to US subprime mortgage assets. The primary channel of crisis transmission to emerging markets was via the reduction of trade and the disruption of capital flows.
Such a transmission took place for the first and only time in the post-war period (Figure 1). While the decline in global GDP was marginal, the decline in global trade was more substantial (Figure 2). When the Global Crisis broke out, there were genuine, widespread fears of another Great Depression, the interwar catastrophe that devastated the world economy. In fact, only concerted, forceful fiscal and monetary policy interventions by governments and central banks around the world averted another similar occurrence.
Figure 1Â GDP growth of advanced economies, emerging market and developing economies, and the world, 2000-2015
Source: IMF, World Economic Outlook database October 2016.
Figure 2Â Global trade growth
Source: IMF, World Economic Outlook database October 2016
There is a visible slowdown of global growth momentum since the Global Crisis. In other words, the effects of the crisis continue to reverberate. Initially, the slowdown was more evident in the advanced economies, giving rise to the notion of a two-speed global economy of fast-growing emerging markets and slow-growing advanced economies. However, in more recent years, the growth deceleration has spread to emerging markets, causing the world economy as a whole to slow down. The effect of the Global Crisis on global growth is thus significant and persistent. In addition, a number of structural factors also contributed to the weakening of the world economy since 2008. For example, Chinaâs growth has moderated in recent years, largely due to structural factors such as population aging, convergence toward high income, and rebalancing toward domestic demand. Above all, population aging is not confined to China but poses an increasingly global headwind against growth. Whereas the demographic transition toward older population structures was almost exclusively a rich-country trend, in recent decades it has spread to developing countries, including much of Asia (Figure 3).
Figure 3Â Demographic transition
Source: United Nations (2015).Â
While it is admittedly too early to tell whether the Global Crisis will permanently lower the global growth trajectory, it has so far been a game changer that has had a profound effect on the global economic and financial landscape. A key question is whether vulnerability and adjustment to shocks has changed in fundamental ways since the crisis. While this question is relevant for all countries, it is perhaps especially relevant for middle-income countries, in light of their growing integration into the world economy. For example, whereas much of the foreign capital which flows into low income countries is foreign aid and foreign direct investment (FDI) in natural resource industries, middle-income countries receive greater amounts of potentially volatile short-term capital inflows, rendering them more vulnerable to shocks. Furthermore, the policy tools and institutions for coping with shocks tend to be less developed in middle-income countries than in high income countries. Of particular interest is the volatility and level of growth.
The interest in these questions follows the quest for understanding the flexibility of adjustment, a research agenda that was propagated by a seminal paper by Rodrik (1999), who identified weak institutions and latent social conflict as the main reason for the negative impact of volatility on growth.1 Against this background, in a new paper we aimÂ to uncover how countries cope with crises and shocks (Aizenman et al. 2017). We approach the subject by looking at whether better coping mechanisms are associated, on average, with lower volatility of GDP growth, and higher average growth rates. Specifically, we ask:
- What are the conditions that enhance a faster and smoother adjustment of growth to shocks, especially for middle-income countries, before and after a crisis?
- Is faster and smoother adjustment to shocks associated with higher average growth rates and/or lower output volatility, before and after a crisis?
Our analysis does two things. First, it studies the natural patterns of growth and volatility adjustment to shocks in the window of the corresponding shock, focusing on the difference between pre-2008 and the post-2008 periods, comparing middle-income countries and other income groups. Second, it estimates GDP growth and volatility adjustment â i.e. dependent variables â on a set of domestic and external macroeconomic shocks, and then maps the estimates and residuals from the growth and volatility estimation to country's institutions and fundamentals.
Summary and concluding observations
Flexibility of growth adjustment is an issue of high and growing importance, especially against the background of the post-crisis global growth slowdown and heightened political and policy uncertainty. The vulnerability of middle-income countries to shocks is an interesting issue, since these countries are typically more integrated into the world economy but, unlike most high-income countries, often lack well-established policies and institutions to cope with shocks.
Our analysis examines and compares the role of institutions and fundamentals on the adjustment of growth and volatility to shocks in the pre-crisis and post-crisis periods. Empirical analysis of panel data of high-income, middle-income, and low-income countries over 2004-2014 shows that the associations of growth, volatility, shocks, institutions, and economic fundamentals have changed in important ways after the crisis. More specifically, we find that GDP growth across all income groups of countries have become more dependent on the external factors, including global growth, global oil prices, and global financial volatility. In addition, despite the slowdown of global trade after the crisis, there is evidence that growth spillovers from trade partners have economically significant effects on a country's growth. There is nothing unique about the exposure of middle-income countries to such global shocks.
A countryâs response and adjustment to shocks depends on several factors â including the age-dependency ratio and foreign reserves, to name just two. After accounting for the effects from global shocks, for middle-income countries we identify some factors that facilitate adjustment to shocks, in terms of growth and volatility. Higher education attainment, higher manufacturing output in GDP, and higher exchange rate stability increase economic growth. Lower political polarisation, higher exchange rate flexibility, and higher education attainment reduce the volatility of economic growth.
Therefore, overall, our cross-country findings suggest that countries can cope with shocks better in the short to medium term by appropriately using flexible policy tools â such as greater exchange rate flexibility help reduce growth volatility â as well as maintaining solid long-term fundamentals. For instance, higher education and lower political polarisation both help reduce growth volatility.
Authorsâ note: Donghyun Park provided overall guidance for the paper on which this column is based. Ilkin Huseynov provided able assistance with the data. Akiko Terada-Hagiwara and participants at the ADB workshop on âTranscending the Middle-Income Challengeâ provided useful comments and suggestions. Financial support from the ADB is gratefully acknowledged. Any errors are ours.
Acemoglu, D, S Johnson, J A Robinson, and Y Thaicharoen (2003), âInstitutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growthâ, Journal of Monetary Economics 50 (1), 49-123.
Aghion, P, P Bacchetta, R Rancier, K Rogoff (2009), âExchange rate volatility productivity growth: The role of financial developmentâ, Journal of Monetary Economics 56, 494â513.
Aizenman, A,Â Y Jinjarak,Â G Estrada and SÂ Tian (2017), "Flexibility of Adjustment to Shocks: Economic Growth and Volatility of Middle-Income Countries Before and After the Global Financial Crisis of 2008",Â NBER Working Paper No. 23467
Beck, T, G Clarke, A Groff, P Keefer, and P Walsh (2001), "New tools in comparative political economy: The Database of Political Institutions", World Bank Economic Review , 15 (1), 165-176 .
Broda, C (2004), "Terms of Trade and Exchange Rate Regimes in Developing Countries", Journal of International Economics, 63 (1), 31-58.
CÃ©spedes, L F, and A Velasco (2012),"Macroeconomic Performance During Commodity Price Booms and Busts", IMF Economic Review 60 (4), 570-599.
Easterly, W, R Islam, and J E Stiglitz (2000), âShaken and Stirred: Explaining Growth Volatilityâ In B Pleskovic and J E Stiglitz (eds.), Annual World Bank Conference on Development Economics 2000, Washington, D.C.: World Bank.
Edwards, S, and E Levi-Yeyati (2005), âFlexible Exchange Rates as Shock Absorbersâ, European Economic Review, 49 (8), 2079-05.
Frankel, J A (2011), "A Solution to Fiscal Procyclicality: the Structural Budget Institutions Pioneered by Chile", Journal EconomÃa Chilena (The Chilean Economy), 2: 39-78.
Frankel, J A, C A Vegh, and G Vuletin (2013), "On graduation from fiscal procyclicality", Journal of Development Economics,Â 100, 32-47.
Gavin, M, R Hausmann, R Perotti and E Talvi (1996), Managing Fiscal Policy in Latin America and the Caribbean: Volatility, Procyclicality, and Creditworthiness, Inter-American Development Bank, Office of the Chief Economist, Working Paper 326.
Hausmann, R, and M Gavin (1996), "Securing Stability and Growth in a Shock Prone Region: The Policy Challenge for Latin America", IDBÂ Working Paper No.Â 315.
Inter-American Development Bank (1995), Overcoming Volatility: Economic and Social Progress in Latin America 1995, Washington, D.C.: Inter-American Development Bank.
Rodrik, D (1999), âWhere Did All the Growth Go? External Shocks, Social Conflict and Growth Collapsesâ, Journal of Economic Growth 4 (4), 385-412.
United NationsÂ (2015). World Population Prospects: The 2015 Revision, DVD Edition,Â Department of Economic and Social Affairs, Population Division.
 Follow up research includes Easterly et al. (2000), which honed in on the financial system as the primary factor in growth volatility. They found that up to a point, greater financial depth is associated with lower growth volatility. But as financial depth and leverage grow, the financial sector could become a source of macroeconomic vulnerability. Aghion et al. (2009) offered empirical evidence that real exchange rate volatility can have a significant impact on the long-term rate of productivity growth, but the effect depends critically on a countryâs level of financial development. Acemoglu et al. (2003) took the primacy of institutions a step further, arguing that crises are caused by bad macroeconomic policies, which increase volatility and lower growth. IDB (1995) and Hausmann and Gavin (1996) found that higher volatility was associated with both lower growth and higher inequality, with the latter tending to be highly persistent.
The follow up literature provided ample evidence that, for developing and emerging market countries, less flexible exchange rate regimes are associated with slower growth, as well as with greater output volatility (Broda 2004, Edwards and Levy-Yeyati 2005). In a related study by the IDB, Gavin et al. (1996) identified the pro-cyclicality of fiscal policy as a major amplifier of developing countriesâ vulnerability to shocks. Remarkably, over the last two decades the fiscal policies of about a third of developing countries have become counter-cyclical (see Frankel 2011 and Frankel et al. 2013).
[SH1]I think there was supposed to be a reference to authorâs research here, which looks like it was cut and pasted out.
growth, volatility, global crisis, middle-income countries, institutions
| Eurozone stability still under threat of a âbad shockâ || |
The glass is still half-empty: Eurozone stability under threat of a âbad shockâ
Stefano Micossi 20 August 2016
Some economists are approaching a consensus that the Eurozoneâs financial architecture is now resilient enough to withstand another shock similar to that of 2010-11. This column argues that such a view may be overly optimistic. Economic and financial instability persists in member states and the banking sector, and institutions to tackle a shock remain incomplete. While the Eurozone remains vulnerable to a bad shock, the blanket application of burden sharing without consideration of current economic and financial conditions is unwise.
On 25 June, Vox published a column â Â âMaking the Eurozone more resilient: What is needed now and what can waitâ, signed by an impressive list of âResiliency Authorsâ â arguing that the Eurozone now has an adequate financial architecture for coping with another âbad shockâ, and that what needs to be done âmostly [is] to make sure that the rules in place can be enforcedâ (Resiliency Authors 2016).1Â I would like to explain why I feel that this view may prove optimistic and, more importantly, that the careless implementation of existing rules may become the very source of a new bad shock.
Is the glass half-full or is it half empty?Â
The Resiliency Authors share the view that the Eurozone has not resolved the problem of risk sharing that lay at the root of the sovereign debt crisis of 2010-12. They recognise that the ESM is too small to provide sufficient resources in case of a shock hitting the sovereign debt of a large country such as Italy, while its decision-making procedures would not ensure the prompt action needed to stop a financial market rout. They also see that the Single Resolution Fund may prove too small to meet a major shock hitting a large cross-border bank or an important segment of a national banking system, but hold that in case of need the ESM would be allowed to step in. And they see the lack of cross-border deposit insurance (EDIS) as something to be fixed over time, but not urgent. In sum, the glass in their view is half-full, and they maintain that what we have is sufficient to rule out a new bad shock.
I rather see the glass as half-empty. I fear that the combination of extensive economic and financial fragility in some member states and large segments of the banking system on one hand, and an incomplete institutional set up on the other, create sufficient opportunities and incentives for financial investors to test the systemâs resiliency â they may only waiting for some trigger to coordinate expectations, and then launch the attack (and the after-shocks of Brexit could well provide that trigger). Should that happen, a new bad shock could well arrive, similar to that of 2010-11.
Why financial stability in the Eurozone cannot be taken for granted Â Â Â Â Â Â Â Â Â Â Â Â
I see three main reasons why the Eurozone remains exposed to a new shock bad enough to endanger its survival. First of all, the re-emergence of severe stress in the Eurozone financial markets is likely to lead to the same acrimonious and publicly voiced disagreements on the source of the shock and its remedies as when the Greek public sector woes first came to full light in 2010. In this regard, failure to agree on working risk-sharing arrangements for sovereign and banking risks reflects fundamentally different, and indeed incompatible, views on the way to bring about lasting financial stability to the Eurozone. The latest manifestation of this is the recent decision by the ECOFIN Council to freeze âpoliticalâ negotiations on EDIS until âsufficient progress has been made on measures for risk reductionâ and, furthermore, that any such negotiation will resume in the framework of an inter-governmental agreement, requiring unanimity, and no longer under the normal Community decision making under Article 114 (the legal basis for the internal market legislation). I view this decision as an official declaration that the sovereign-bank doom loop may restart at any time.
It is also unclear that the task of meeting a new bad shock could be left solely to the ECB, as has happened so far. For one thing, a repeat of the 2014 OMT hocus-pocus to stabilise the sovereign debt market of a member state under attack without real interventions would probably not work. However, real market interventions could only be initiated after the country concerned had signed up to an economic programme with the ESM entailing âstrict and effective conditionalityâ â i.e. another intergovernmental negotiation,2Â possibly highly divisive, possibly too slow to allow the required swift action by the ECB. Similarly, a lot of the goodwill of the ECB with German policymakers has been consummated to justify quantitative easing, perhaps entailing a reduced ability for the ECB to make âunlimitedâ resources available for the stabilisation of financial markets in the periphery. Investors would of course recognise the predicaments of the central bank. An ominous sign, in this regard, has been that peripheral sovereignsâ risk premia over the Bund have returned to levels that had not been seen since the start of quantitative easing, following the Brexit referendum.
Finally, the reason why a bad shock cannot be ruled out is that the Eurozone is still plagued by severe imbalances in its banking and financial system. According to the IMF's latest Global Financial Stability Report, one in three banks in the Eurozone must confront severe challenges due to legacy issues (900 billion of non-performing loans and an unspecified amount of toxic assets), and the need to revise business models to respond to a sharply modified economic environment, and adapt to taxing regulatory changes. Let me note in passing that the Italian banking system only makes up for about a third of the bad loans, and is virtually clean of other toxic assets. As bank stocks often trade at heavy discounts from book value, raising fresh capital in the market can be prohibitively expensive, raising the cost of capital well above the banksâ ability to remunerate it. This aggregate fragility has come to the fore after the British referendum, with bank stocks sinking to new lows throughout European markets (Figure 1).
The rules on burden sharing and bail-in for state aid to banks
The new rules on state aid and the BRR directive3Â require that shareholders and creditors share the cost of any public intervention to shore up bank capital, but they provide the leeway necessary to suspend burden sharing when financial stability may be put at risk.4Â This risk is stronger when extensive weaknesses plague the banking system.
In such circumstances, expectations of the use of burden-sharing and of the bail-in tool by competition and resolution authorities directly affect the risk of capital instruments in the banking sector and, if not properly governed, may actually become a source of instability rather than firming up the system.
Figure 1 presents data on the evolution of banking stocks in Germany, Italy, Portugal, as well as the Eurozone average.5Â As may be seen, with the exception of Portugal, quantitative easing had a galvanising effect on banking stocks throughout 2015. In Portugal, over the course of 2014 the authorities decided â in the context of the resolution of the Portuguese Banco Espirito Santo â to apply burden sharing to certain unsecured bonds held by institutional investors. The decision led to the collapse of Portuguese banking stocks â the senior unsecured bond market seized up not only for Portuguese borrowers, but also for all but the largest banks throughout the Eurozone. Similarly, the figure shows that especially depressed stock prices for Italian banks have emerged following the resolution of four local banks in November 2015. It may also be noted that in the charted period the stock index of German banks behaved no better than the Italian index â an alarm bell confirming that bank weakness maybe a systemic feature of the Eurozone banking system, as is well reflected in the concomitant fall of the overall Eurozone bank index.
Figure 1Â Bank stock indexes, selected Eurozone countries (02 January 2015 = 100)
Note: Index Eurozone (EZ) = Euro stoxx Banks; Index Italy (ITA) = FTSE Italia All Share Banks; Index Portugal (POR) = PSI Financials Gross Return; Index Germany (GER) = DAX Banks. Source: www.investing.com.
Two conclusions are worth retaining. First, it would seem to me utterly imprudent to maintain that the Eurozone is no longer exposed to a bad shock, given the lack of adequate risk sharing arrangements. Second, existing rules in EU law do not require the application of burden sharing when this risks financial instability. And indeed, the current financial conditions in the Eurozone seem to require great caution in the application of burden sharing.
The idea that the Eurozone would be made more stable by ruthless application of burden sharing without due consideration to the current economic and financial conditions of the banking system seems to me ill-thought and indeed quite dangerous.
Council of the European Union â ECOFIN (2016), "Council Conclusions on a roadmap to complete the Banking Union", Brussels, 16 June
IMF (2016), Global Financial Stability Report: Potent policies for a successful normalization, April.
Micossi S, G Bruzzone and M Cassella (2016), Fine-tuning the use of bail-in to promote a stronger EU financial system, CEPS Special Report no. 136, April
Resiliency Authors (2016), "Making the Eurozone more resilient: what is needed now and what can wait?", VoxEU.org, 25 June
 The case in point in their view is Italy, on the twin counts that large amounts of non-performing loans are carried in the banksâ books at prices substantially above market prices and that the government âhas proven very reluctantâ to apply the bail-in rules.
 This can take the form of a full macroeconomic adjustment programme or, under certain conditions, of a âprecautionaryâ programme. The possibility of a precautionary programme may offer a way out, but requires the governmentâs willingness to sign up to a memorandum of understanding on adjustment measures with the ESM well before the country has its back against the wall â something only far-sighted politicians may be willing to do.
 Commission Guidelines on state aid to banks of July 2013 and Directive 2014/59 of 15 May 2014.
 In its 2013 Communication on the application of Article 107(3)(b) of the TFEU in the banking sector (the Banking Communication), the European Commission stated that, whenever there is a capital shortfall, it will require that any state aid be preceded by all possible measures to minimise the cost of remedying that shortfall, including capital raising by the bank, burden-sharing by shareholders and subordinated creditors, and measures aimed at avoiding the outflow of funds from the bank. However, the Banking Communication provides for an âexception ruleâ whereby burden-sharing can be derogated, when implementing such measures would endanger financial stability or lead to disproportionate results (point 45). The Bank Recovery and Resolution Directive (BRRD), like the 2013 Communication, aims to prevent moral hazard by making the bailout of banks virtually impossible and providing that any extraordinary public financial support will normally entail at least some bail-in of shareholders and creditors, in accordance with the order of their priority claims under normal insolvency proceedings. However, under its Article 32 (4), temporary âprecautionaryâ recapitalisations fulfilling certain conditions â that is, when the institution concerned is solvent, and the injection of funds or purchase of capital instruments takes place âat prices and on terms that do not confer an advantage upon the institutionâ â are permitted without activating the bail-in instrument when they are adopted to remedy a serious disturbance to the economy of a member state and to preserve financial stability.
 The indices have been calculated with basis 2 January 2015 = 100 to highlight the initial impact of quantitative easing by the ECB.
EU institutions Financial regulation and banking
eurozone, ECB, banking, stability, shock, debt, Greece, Italy, burden sharing, institutions
| India likely to improve fiscal situation in 2013: IMF |
Washington: At a time when many countries are facing challenges on the fiscal consolidation front, India with its favorable interest rate-growth differential has an advantage in addressing deficit concerns this year, International Monetary Fund (IMF) said Tuesday.
In its latest edition of annual Fiscal Monitor report, the IMF said there is an improved picture across most of the world in terms of countries getting a handle on their deficits.
Many countries have also taken important first steps to bring overall debt down to levels needed to ensure strong and vibrant economies.
"Deficits in advanced economies fell by 0.75 percent of GDP last year. They dropped both in headline and in cyclically-adjusted terms, and are projected to fall at a faster pace in 2013," the report said.
"In India, subsidy reduction measures, other spending cuts and tax administrative measures recommended by the government-appointed Kelkar Commission will contribute to a reduction in the projected 2013 deficit of about 0.75 percent of GDP relative to previous forecasts...," it said.
This would leave the country's deficit almost unchanged from its 2012 level in headline and cyclically adjusted terms, it added.
The IMF report attributed much of the improved picture globally to concerted efforts by governments to bring spending under control following the peak of the crisis in 2009, as well as a gradually improving external environment.
"A number of countries will need to achieve large primary surpluses and maintain them for an extended period, which will be difficult, but there are no alternative quick fixes. Still, it can be done," said Carlo Cottarelli, head of the IMF's Fiscal Affairs Department.
According to the report, the overall debt situation in most emerging market economies and low-income countries remains more favorable than in advanced economies, owing in part to relatively low levels of debt and deficits combined with low interest rates and growing economies.
"Under these conditions, many emerging market economies have had the scope to pause their fiscal adjustment," it said.
Many emerging market and low-income countries are also seeking to strengthen their fiscal institutions.
Chile, Indonesia, and Mexico now publish reports that discuss fiscal risks, it said.
Others such as Croatia, Kenya, South Africa, and Uganda are turning to the use of fiscal councils for independent oversight of their budgets, it said.
"India has large adjustment needs too (6.75 percent of GDP), but it does not have to maintain as high a target cyclically adjusted primary balance, partly thanks to a very favourable interest rate-growth differential," it said.
The IMF said the Reserve Bank of India has recently taken important steps to tighten bank reporting requirements to get a more accurate picture of asset quality.
"But state-owned bank portfolios remain vulnerable to losses from delayed infrastructure projects and, most importantly, to the recent growth slowdown that has dented the profits of the large companies that account for the bulk of Indian banks' loan portfolios," it said.
"The economy now appears to have bottomed out, but this may not yet be fully reflected in banks' credit quality," the report said.
Noting that credit growth was rapid in India in the years before the crisis, with lending to the private sector expanding by 20 percentage points of GDP during 2001?08, the report said it also remained strong in the aftermath of the crisis, with a growing concentration on infrastructure projects, in response to the government's ambitious investment targets.
"India's banks remain well capitalised, and the likelihood of financial sector stress is low. But credit quality has tended to deteriorate recently, particularly among the state- owned banks, which account for 73 percent of banking assets. Gross nonperforming assets in public banks reached 3.3 percent of advances in 2012," it said.
"However, the long-run risk may be underestimated, as historically about 15 percent of assets reported as "restructured" (a category that likely accounted for 7.3 percent of the public banks' assets as of September 2012) are eventually classified as non-performing," the report said.
India likely to improve fiscal situation in 2013: IMF
| Cipo & Baxx CD286 - farkut ||Cipo&Baxx miesten slimf fit farkut. Tilavat taskut edessÃ¤ ja takana. Sepalus napeilla.
99% puuvilla 1% elastaani
Kuvan malli on 183cm ja 85kg ja kÃ¤yttÃ¤Ã¤ kokoa W32/L32.
Farkkukoot ilmoitetaan tuumissa, esimerkiksi W30/L32. EnsimmÃ¤inen luku on vyÃ¶tÃ¤rÃ¶nympÃ¤rys ja toinen lahkeen sisÃ¤pituus.|
| News Wrap: Eurozone, IMF Agree to Second Greek Bailout of $155B |
Watch Video | Listen to the Audio
HARI SREENIVASAN: Leaders of the Eurozone nations agreed today to give Greece a second bailout worth $155 billion. The International Monetary Fund would join in the package, as would private investors to the tune of $53 billion.
At the same time, the deal allows for the possibility of a selective default by Greece on part of its obligations. That would be a first for a Eurozone nation.
Wall Street surged higher on the news out of Europe. The Dow Jones industrial average gained 152 points to close at 12,724. The Nasdaq rose 20 points to close at 2,834.
In Syria today, reports from the city of Homs said security forces swept through neighborhoods firing machine guns and making arrests. Activists said government forces used tank weapons and intense gunfire. Video posted on YouTube showed at least one home in flames, sending up clouds of smoke. At least 50 people have been killed in Homs since Saturday.
Extreme heat that’s been roasting America’s midsection has now pushed eastward to the Atlantic Seaboard. The air shimmered over major Eastern cities today, as they braced for 100-degree temperatures. In a number of states, heat taxed utility grids, and thousands of people lost power. The National Weather Service has blamed at least 22 deaths on heat in recent days.
The U.S. space shuttle program officially came to an end today, after 30 years and 135 flights. The last shuttle to fly, Atlantis, touched down early this morning at Cape Canaveral, Fla., winding up a 13-day mission. Later, some 2,000 onlookers gathered near the runway to welcome the crew of four astronauts.
Atlantis Commander Chris Ferguson acknowledged it was a bittersweet day in the history of U.S. space exploration.
CAPT. CHRIS FERGUSON, shuttle commander: We do really need something to look forward to. I know right now is a little bit of a time of mourning, if you will. But, you know, that’s — that’s to be expected. We have all — we have said that we’re saying goodbye to a good friend. And we will get over that. And we will — we will — once we get over it, we will — we will start looking forward and we will — we will make it happen again.
HARI SREENIVASAN: For now, though, thousands of NASA employees will be laid off, beginning as early as tomorrow.
The U.S. government is no longer a part owner of Chrysler. The Italian automaker Fiat bought the government’s remaining holdings today worth $560 million. That makes Fiat the majority owner. All told, the new Chrysler created during bankruptcy repaid more than $11 billion in federal aid. The old Chrysler left with the automaker’s bad debts is not expected to repay some $1.3 billion to the Treasury.
The Federal Aviation Administration may be forced to shut down tomorrow night, disrupting the U.S. aviation system. Congress has been unable to agree on legislation that extends the FAA’s operating authority.
Transportation Secretary Ray LaHood warned today the agency will have to stop collecting ticket taxes, and billions of dollars in airport construction will be halted.
RAY LAHOOD, U.S. Secretary of Transportation: We have now reached a breaking point, with unacceptable provisions in the House version of the FAA bill holding up passage of another extension. This is no way to run the best aviation system in the world.
HARI SREENIVASAN: Without an agreement, some 4,000 FAA workers will be furloughed.
A famed figure in the art world, Lucian Freud, died overnight at his home in London. The grandson of Sigmund Freud was known especially for his paintings of nudes, which often highlighted the subject’s flaws. Some of them commanded huge prices at auction. Freud also caused a stir in Britain in recent years with a highly unflattering portrait of Queen Elizabeth II.
Lucian Freud was 88 years old.
Those are some of the day’s major stories.
The post News Wrap: Eurozone, IMF Agree to Second Greek Bailout of $155B appeared first on PBS NewsHour.
| The Worst is Yet to Come? |
With banks failing, unemployment rising and the stock market in freefall, many people are hoping the U.S. economy has "hit bottom", and better times are on the way next year.
Don't bet on it.
The International Monetary Fund's chief economist, Olivier Blanchard, says worse times are on the way and the economy won't begin to improve until sometime in 2010. Echoing this sentiment, president-elect Obama said the U.S. could experience the loss of "millions" of jobs next year. With projections of gloom and doom just around the corner, what can we do to "recession proof" ourselves as much as possible?
1. Insure your most basic needs. Namely, shelter and food. Stick any extra money you have now in a high-yield, FDIC-insured savings account to help cover rent or mortgage payments should the worse happen and you lose your job. Ideally, your emergency fund should have three to six months of living expenses in it, but if you don't have an emergency fund, sock away as much as you can now. Take a part-time job. Bank away unexpected windfalls. Sell stuff you don't need anymore on eBay. Stockpile dried goods in a closet designated your "emergency pantry". This might include canned goods you stock up on at a great sale, bulk purchases of rice and dried beans, tinned meats, anything that will keep for long periods of time until you really need it.
2. Diversify. Your retirement account should already be diversified. This means "don't stick all your eggs in one basket". Your retirement account should NEVER consist mainly of stock in the company you work for. The more diversified your account is, the better it will weather the storm.
3. Don't buy things you don't need. This is hard right before Christmas, but now is not the time to make large purchases of luxury items like high-end electronics, appliances and cars. If you can't pay cash for it, don't buy it.
4. Be the "go to" person at work. If you work for someone other than yourself, make yourself indespensible. Volunteer to take on additional projects, strive to do your best work, and look for ways to make your employer more money or find better ways of doing things. Be the first to arrive and the last to leave each day. If you are a model employee, the boss will look elsewhere if they have to start trimming payroll.
5. Diversify your income. Don't just have one source of income. Do things on the side, as long as it doesn't violate an agreement you have with your main employer. Do some consulting, Sell your arts and crafts. Become an avid eBayer...anything you can do to bring in extra income. Sock the extra cash away in your emergency fund.
If the head economist of the IMF and the incoming president of the U.S. are saying that things are going to get much worse before they get better, we should probably listen to them. We all have a head-start if we haven't yet been affected by hit the economy has taken. Take advantage of it.
| Business Game Changers Radio with Sarah Westall: Will the US Economy Collapse and what is Chinaâs End Game? ||Many economists around the world are predicting a stock market crash this fall. Some are predicting full-blown collapse, while others are merely predicting a major correction in the markets. Perhaps the later are optimists or are motivated to help keep the public calm? Maybe the others are just fear mongers? Regardless, there is widespread consensus that the US economy is very fragile and according to the IMF and the Bank of International Settlements, the world is defenseless against the nex ...|
| Business Game Changers Radio with Sarah Westall: World Bank Insider: Currency Reset 95% Likely ||Karen Hudes, World Bank Attorney for 20 years, explains the process behind the currency reset being planned as well as the corruption she witnessed at the World Bank and amongst the largest global banks. She explains how the IMF and the World Bank functions, the power structure, and discloses the four owners of the Federal Reserve.Karen studied law at Yale Law School and Economics at the University of Amsterdam. She worked in the legal department of the World Bank from 1986-2007. Karen warne ...|
| Achilles' Heel of China's Foreign Currency Reserves ||By He Qinglian on January 14, 2016|
Source article in Chinese: ä¸å½å¤å¨çé¿åçæ¯ä¹è¸µä½å¨ï¼
Right at the very beginning of 2016, the way the Chinese government manages the countryâs stock market and currency exchange market has drawn a chorus of criticism. In response, the Chinese government announced the suspension of the âcircuit breakerâ of the stock market, and, at the same time, steps up its control over the currency exchange market.
The underbelly of Chinaâs foreign exchange market
Everyone knows about the changes to the figure of Chinaâs foreign currency reserves: from its peak of 3.99 trillion US dollar in June 2014, Chinaâs foreign currency reserves fell to 3.33 trillion US dollar in December 2015 and saw a net reduction of more than 500 billion US dollar.
The criticism of Chinaâs currency exchange market from the international investment sector focuses chiefly on two matters: first, they think that the Chinese government regulation of the Renminbi is a violation of the pledge made when the Chinese currency is included in the IMF SDR basket and would greatly embarrass the IMF; second, the international investment sector finds the Chinese government interferes too strongly with the offshore market, widening the exchange rate deviation between the onshore and the offshore markets as a result.
These critics view the Chinese currency exchange market with their own interests in mindâa Chinese market that is open and allows free floating of currency exchange rate and free exchange of currencies would be a new place to make profit; and it seems that there is sound reasoning behind their criticism. However, both the IMF and the Chinese government are full aware of the actual content of the promise made when Renminbi became an SDR currency.
In November 2015, when the IMF altered the criteria to approve the inclusion of Renminbi as an SDR currency, the Chinese government only promised that the clean floating of Renminbi exchange rate would be implemented in the future. But the Chinese government did not state clearly the time it plans to implement the free floating of Chinaâs currency without government intervention. Besides, PBoC President Zhou Xiaochuan openly stated the day before Renminbi acquired the SDR currency status that, to cope with âfinancial attacksâ from beyond the border, the Chinese government would continue to interfere with the currency exchange market and implement the floating of Renminbi exchange rate under the government regulation.
The IMF representative in Beijing knew about all these public statements.
If the stress to depreciate Renminbi is not too great; if the risks of huge amount of bad debt and excessive debt do not exist in Chinaâs financial system, then Beijing might think that it would not be too risky to allow the free floating of Renminbi exchange rate.
From June 2015, however, the above risk factors became increasingly apparent, there is no wonder that the Chinese government would choose financial security over honoring its pledge to the IMF.
And then, letâs explore why the Chinese government wants to intervene in the currency exchange market, in particular, the offshore Renminbi exchange rate. There are two reasons for this. First, Renminbi faces tremendous inflation pressure inside China owing to the countryâs status as the worldâs largest money printer. Second, China is facing immense pressure of capital outflow. As a result of the Chinese government stepping up its anti-corruption campaign from 2012 on, political risk in China became greater. Seeing that with each deposed top official several entrepreneurs fall, many tycoons flee China with their assets, thereby bringing down the countryâs foreign currency reserves.
How much of Chinaâs 3 trillion foreign currency reserves still remain?
Beginning from August 2015, the Chinese government has been forced to sell US Treasury bonds to facilitate payment made in US dollars. In December 2015 alone, China sold US Treasury bonds at a record pace and cleared about 108 billion US dollar worth of the countryâs foreign reserves so as to meet the demands of domestic foreign exchange market.
From this, the international investment sector came to realize that the trillions of US dollar worth of foreign reserves of China is but nominal assets that the Chinese government had long spent away in various areas, The Bloomberg report on January 8, âChina Finds $3 Trillion Just Doesnât Pack the Punch It Used Toâ, was precisely about this topic.
As that Bloomberg report showed, Chinaâs foreign currency reserves have been used in the following areas:
One, US Treasury Bonds:
According to data from the US Treasury, in October 2015, the estimated amount of US Treasury Bonds in Chinaâs possession was worth about 1.25 trillion US dollars. The Treasury added that the estimate may not have truly reflected the amount of US Treasury Bonds possessed by third party accounts on Chinaâs behalf.
Two, Overseas Investment:
Although China has not formally made public the sum of direct investment it committed abroad in 2015, Reuters estimated the figure would exceed one trillion US dollars for the first time. The bulk of this one trillion US dollar was investment the Chinese government and Chinaâs State-owned enterprises committed in other countries. For instance, the Silk Road Fund, an overseas investment fund owned by the China Development Bank and the Export-Import Bank of China alongside other government bodies and state-owned institutions, aims to foster investment projects in countries along the One Belt, One Road and to promote Chinaâs political interests.
The China Development Bank and the Export-Import Bank of China got a combined injection of 93 billion US dollars from Chinaâs foreign currency reserves.
Three, External Aid:
When it comes to external aid, China can be very generous. It often announces new aids to developing countries as it writes off debts owed by those countries that are due for reimbursement. Without doubts, these aid projects are financed by Chinaâs foreign currency reserves.
What Foreign Currency Reserves Really Are
Finally, I would like to point out a common misconception of both the Chinese government and the people in China: they see foreign currency reserves as asset of the Chinese government (or the Chinese people). The reality is that, while foreign currency reserves are asset of the Peopleâs Bank of China (PBoC), every dollar of this asset corresponds to an equal amount of debt. The reason that this is the case can be found in the way China accumulates its foreign currency reserves. The PBoC stipulates that when companies doing business overseas wire their profit in US dollar (or Euro or Japanese Yen) back to China, they must do the settlement of exchange through banks and hand over the foreign currencies to the PBoC before they receive from the PBoC Renminbi of the same value. In this process, the foreign currencies handed over to the PBoC become its foreign currency reservesâan asset, yesâbut at the same time a new liabilityâthe newly issued Renminbiâis added to the balance sheet of the PBoC as well.
To summarize, the PBoC accumulates its foreign currency reserves by âborrowingâ US dollars from individuals, foreign companies in China and domestic companies engaging in foreign trade and export. Every dollar of the foreign currency reserves corresponds to a dollar of debt. To spend these reserves on purchasing US Treasury bonds, overseas investment and external aids is to spend away borrowed money as its own. And the move to sell US Treasury Bonds to provide the US dollars needed in currency exchange market shows that the PBoC does not have enough US dollar cash. If the government does not take action to limit currency exchange in China and allow the people to freely do so, it is possible that the PBoC would go broke.
Currency Exchange: a battle that the Chinese government cannot lose
Many specialists are of the view that a decline in the Renminbi exchange rate would boost the countryâs export. The problem is, the benefit of increased export is slow to materialize, but the pressure of capital outflow following a drop in the Renminbi exchange rate would be imminent. For the authorities, the truth that the 3 trillion US dollar worth of reserves are spent away is like the Achillesâ Heel that must never be discovered.
Currently, the Chinese government is gradually tightening its foreign currency exchange policy.
According to a Reuters report on January 8, some branches of the State Administration of Foreign Exchange (SAFE) instructed banks within their jurisdiction to step up regulation of currency exchange transaction conducted for clients of those banks, and to observe the cap for the total amount of currency exchanged in January so that the agency can curb the piecemeal capital outflow of enterprises and institutions.
According to the same report, SAFE raided a large number of underground banking houses (shadow banks); issued a rule in Beijing, Shanghai and Shenzhen stipulating that any person who wants to withdraw more than 2000 US dollars must place a booking three days in advance. Some banks even lowered that limit to 1000 US dollars.
On January 14, SAFE official dismissed the Reuters report and said the Agency has never put forward policies mentioned in that report. âThe Agency does not rule out the possibility that some banks initiated some regulation because they donât have enough US dollar cashâ. Such a clarification only serves to make people realize that if needed, banks all across China can initiate regulation on their own without getting prior approval.
To sum up, the international investment sector sees Chinaâs foreign currency exchange market as a new ground to make profit, people in that sector thus complain about over-regulation and ask the Chinese government to meet the open standards outlined by the IMF. But for the Chinese government, currency exchange market is a matter of financial security. The real threat of a drop in the Renminbi exchange rate is capital outflow. The outflow of capital would affect the Chinese stock market and the Chinese housing market, making it more difficult for the Chinese government to shore up both markets; besides, the outflow of capital would also mean a huge deleverage pressure for the real economy in China.
Some people predicted that the currency exchange market would be the flashpoint of a financial crisis in China, and the collapse of the regime would ensue. This thinking is too naive. The Chinese government knows better about its own weaknesses than outsiders and is taking all measures to guard against risks.
For this prediction to come true, the prerequisite would be that the central government ceases being able to function overnightâthe possibility of this would be next to zero.
In his piece about the Great Wall of China, Franz Kafka tried to explain the purposes of the Great Wall and the reasons why that construction was built in ancient China. But it seems that Kafka did not truly comprehend why the Chinese wanted to build the Great Wall. For the Chinese people, the Great Wall serves just one purpose: protection against the enemy, and keep all dangerous external factors outside of the Wall. Understand this Great Wall mindset and one would see why the Chinese government wants to control the foreign exchange market.
| The New Norm: Chinese economy faces six bottlenecks ||Source article in Chinese: ä½æ¸
A translation of a talk He Qinglian delivered in Vancouver on May 3, 2015.
My talk today, âThe New Norm: Chinese economy faces six bottlenecksâ, is to give an overview of the state of the Chinese economy. What lies ahead for China depends on whether or not the Chinese government can find ways to work around the six bottlenecks.
Before I start, I would like to share a piece of good news: In 2014, Chinaâs gross GDP volume reached 10 trillion dollars. The only other country which gross GDP is of this volume is the US. However, the Chinese government doesnât seem too pleased with this. Since the year Chinaâs gross GDP surpassed that of Japan, the Chinese government had been trying to dissuade others from calling China the second largest economy, it even said that certain international forces exaggerated Chinaâs GDP out of ulterior motives. In fact, the World Bank and the IMF did their math based on the data from China National Bureau of Statistics and Purchasing Power Parity. Thatâs to say, if you inflated your data in the first place, you canât blame others for exaggeration.
Right, so now I get into the topic.
The first bottleneck: Chinaâno longer the factory of the world
After a golden decade of being the worldâs factory between 2001 and 2010, China has now inevitably started its decline. According to latest news reports, Dongguan, a major pillar of the worldâs factory, has seen the second wave of enterprise closures. It was said that within a year, no less than 4,000 companies shut their doors.
The worldâs factory began its decline in 2008. Based on disclosed data, 72,000 businesses closed down between 2008 and 2012 in Dongguan. Now, as labor-intensive enterprises shut down in larger numbers, the Chinese economic growth model that was fueled by exploitation of labor and environment has reached its limit.
In the past, investment, foreign trade, and domestic demand used to be the three engines that propel Chinaâs economic growth. Now, all three engines lost their steam.
In the first quarter this year, foreign trade growth fell by 15% year-on-yearâa sign that foreign trade cannot propel Chinaâs economic growth anymore. Another way has to be found.
In the last two decades, real property had always been the prime industry that drove Chinese economic growth. Yet, starting from two years ago, the highly bubblized real property came to standstill. While the Chinese government and enterprises fought to shore up the housing market, a dozen or so industries related to real property fell victim to full scale overcapacity. For example, industries most closely linked to real property like steelmaking and cement manufacturing have seen an overcapacity as high as 30%; industries producing flooring, furniture and textile too have experienced severe overcapacity.
This type of overcapacity crisis is referred to as âthe nuclear threat of the Chinese economyâ. In other words, such a crisis is like a nuclear bomb that could trigger an economic crisis at any time. It is because of this that China seeks to export excess capacity by pushing forward the âOne Belt One Roadâ project and establishes the AIIB. The one thing I would say about this project today is that its chance of success is quite low because most of the countries included in the project do not have good sovereign credit. Except for countries like Pakistan, with which China intends to achieve a different objective through economic cooperation, Chinese investment made in those countries might bear no fruit.
The issues above show that there is no hope for Chinese economic restructuring. Economic restructuring is not something that can be done whichever way the government wants it to. Back in 2005, Guangdong province had already called for an industry upgrade as it tried to replace labor-intensive industry with hi-tech industry. The result was: labor-intensive industry relocated elsewhere while hi-tech industry didnât move in, and now the Pearl River Delta is witnessing industrial âhollowing outâ.
The second bottleneck: astronomical number of unemployed people
China is the most populous country of the world, and the unemployment issue has always been a sword hanging above the heads of the Chinese people. During the Cultural Revolution, when I was a teenager, China had already had a serious unemployment issue. At that time, young people in the urban area were forced to take part in the Down to the Countryside Movement, those who managed to get a job or join the army were considered to have found a good way out.
After the implementation of Reform and Opening Up, China, despite being in a prosperous era serving as the worldâs factory, still had huge number of people without a job. For instance, labor surplus in the rural area was as high as 100 million. Now as the worldâs factory is in decline, the unemployment issue became even more serious.
For a long time, the jobless rate in urban area disclosed by Chinese government stayed below 4.5%. Such a figure does not show the actual state of unemployment in China because, firstly, this figure counts only those urban residents who registered with government as jobless and leaves out all those who didnât do so; secondly, this urban unemployment figure does not take in the number of unemployed in rural region, where huge labor surplus exists. An unemployment figure that leaves out two massive chunks of data is itself grossly incomprehensive.
Currently, the unemployed in China consists of four components: first, the labor surplus in rural region, a problem that gets worse as plants are shutting down; second, white-collar workers who lost their well-paid job as foreign investment withdraws from China; third, college graduates who are joblessâgiven that colleges require students to present proof of employment before conferring them their graduate certificates, students are forced to fake the documents needed to get their certificate, the employment figures provided by colleges are thus meaningless; fourth, junior and senior high school leavers who stay unemployed at home over an extended period, Chinese media outlets refer to these people as NEETs.
How many people exactly are out of work in China? There are two sets of data for reference. First, former Premier Wen Jiabao stated at the China Development Forum in March 2010 that â200 million people are unemployed in Chinaâ; second, Justin Yifu Lin, former Senior Vice President of the World Bank, said during the World Economic Forum Annual Winter Meeting 2015 in Davos that, due to the rise in wages, 124 million manufacturing jobs would relocate to other developing countries.
Currently, the working-age population in China is 940 million. When the number of people out of work reaches 300 million, the actual unemployment figure would stand at about 32%.
With so many people out of work, it indicates that the âbread contractâ between the ruling clique and the populace no longer works. As we all knew, China is a totalitarian country where the âbread contractâ means that the rulers make the general public "transfer" their political rights such as suffrage, the freedom of the press, the freedom of speech, the freedom of assembly and the freedom of association in exchange for the freedom from want.
Now that there are so many jobless people, it means the general public has neither political rights nor the freedom from want. Any country facing such a high ratio of unemployed people would have a serious headache.
The third bottleneck: severe resource crisis
The pollution problem in China is three-dimensional. This means the countryâs water, soil, and air are all badly polluted. Information on this is abundant, and due to time constraint, I would not go into the details and would only focus on resource crisis. China faces serious resource constraints for economic development and becomes heavily dependent for resources from all kinds of minerals that are used as means of production to food that is used as means of subsistence.
China now gets 60% of the lifeblood of economyâpetrol it needs from import; it is also highly dependent on foreign metal minerals like iron, copper and zinc. Iâm not going to list out each of the figure; I only intend to point out that Chinaâs economy safety has become seriously dependent on external factors.For the Chinese people, there is nothing more important than food and so letâs use that an example. Sixty percent of the Chinese population grows crops, yet in 2014, the countryâs food self-sufficient rate dipped below 87% and it gets its three staple dietsâsoybeans, corns and wheat from import. So what does this figure tell us? It indicates that, aside from food contamination resulted from soil pollution, nearly 200 million people in China source their food from other parts of the world. This causes food price in China to fluctuate alongside international food price. When disaster or humanitarian crisis strikeâfor instance, grain-producing countries reduce their output because of warâfood price in China would hike.
Twenty years ago American environmental analyst Lester Brown wrote a book called Who Will Feed China? to remind China to pay attention to its food safety. However, China saw this work of research as a âconspiracy of the anti-China forces to smear Chinaâ and threw criticism at it for years. In recent years, however, China came to realize that food safety really is a problem, so it changed its attitude toward Brown and invited him to give a talk in China. Yet many of Brownâs viewpoints were deemed hard to stomach and the Chinese government sort of retracted its welcome extended to Brown.
The attitude changes of the Chinese government toward Brown shows just how difficult it is to say the truth in China.
Canada is a country with lots of resources, and its water resource is particularly abundant. I would like to suggest business people to plan ahead and invest in these industries. There will come a day when China needs to import these resources.
The fourth bottleneck: local government caught in the quagmire of debts
The prospect that a local debt crisis could trigger a local financial crisis gives the Chinese central government a big headache.
According to estimates made by foreign investment banks two years back, the scale of the total debt volume in China was 168% of its gross GDP (when I wrote this, McKinsey Global Institute published its latest report stating that China's total debt has reached 282% of its GDP), only a tiny part of this is individual debt, while most of the rest is government and corporate debt. And local government debt tops the list at about 20 trillion RMB.
Speaking of this, I would like to share a story.
Previously, the amount of total local debt reported was 18 trillion. That was a figure smaller than the actual sum. And the reason local officials made partial report of the debt incurred was that they didn't want to look bad. NDRC official Li Tie said that the 18 trillion debt reported was less than half of the actual local debt incurred. During a survey of a dozen of cities, NDRC officials found that some reported only 10% of thier debt, and some reported 20 to 30%, hardly anyone reported more than 50% of their debt. Thus it was estimated that the 18 trillion debt reported was only 30 to 50% of the actual local debt incurred.
Unsettled by this, the central government issued in September 2014 the âdocument no. 43â ordering local governments to truthfully report all of their debt before January 5, 2015 and hinting that the central government would help to repay part of the local debt.
Upon seeing the âdocument no. 43â, local officials who tried their best to cover up their debt to avoid being sacked now found a new hope, and so they made a truthful report of their debt as instructed. Hainan province even disclosed its debt to the public. As a result, the amount of local debt ballooned in a short time. The Ministry of Finance received the local debt reports and figured the sum was greater than they expected. So, the Ministry issued another document in late January ordering local government to âcorrect mistakesâ in their reports and submit them again.
Now the central government plans to handle the 20 trillion local debt by helping to repay some of it, marketizing some of it and holding the local and provincial governments responsible for the rest. By holding the local and provincial governments responsible, it means that, if the local governments default on their debt and trigger mass incidents, the provincial governments would have to make a gesture shouldering some of the debt to placify the public.
Knowing that local governments have no other source of revenue other than selling of land, the central government is deeply troubled by the massive quagmire of debt.
The fifth bottleneck: financial crisis
Aside from a debt crisis, the rising rate of bad debt and the massive liquidity excess resulted from over-issuance of currency are also factors that would lead to a financial crisis.
Letâs first look at bad debt in banks. The bad debt in banks at the moment is the third debt crisis triggered by bad debt in the real property industry since Reform and Opening up. The first crisis emerged back when Zhu Rongji was the Premier. Beginning in 1998, the Chinese government spent more than 6 years to handle the 170 billion bad debts that were peeled off in the initial stage. Yet the way the Chinese government tackled them was to borrow new debt to repay for the old ones. And so, more bad debts incurred, which in term seriously hindered the efforts to get the Bank of China publicly listed overseas.
To solve this problem, the Chinese government came up with an ingenious idea. It established four state-owned asset management companies and transferred to them the bad debts incurred in banks. And then, part of those non-performing assets was repackaged and sold to foreign investment companies. Why did foreign investment buy non-performing assets? Because at that time, Chinese financial system was a mystery for them and they wanted to understand how the Chinese financial system worked.
The second crisis appeared during the Wen Jiabao era. At that time, the accumulated bad debts in banks stood at more than 800 billion US dollars. In order to ensure the banks that were going to be publicly listed in the US could fulfill the requirements of the Sarbanes-Oxley Act, the Chinese government hired accounting agencies such as Ernst & Young, PricewaterhouseCoopers to help with the audit.
Back then, the chairman of the SEC was seasoned politician Christopher Cox, who was very strict in listing application reviews. The auditors hired by the Chinese government found that the state of the Chinese banking system was too messy and figured that the banks could hardly satisfy the requirements. So they suggested those banks to get listed in Hong Kong instead of Wall Street.
The Chinese government then invited a dozen of foreign banks including UBS, Citibank, Bank of America and Temasek to become âstrategic partnersâ of Chinese banks and allowed them to exit when the contracts expired.
Afterward, the four state-owned banks got listed in Hong Kong and the A-Share market of China and became stocks of high demand. At one point, the market value of these banking giants accounted for more than 50% of the total market value of the A-share market. Those strategic partners pocketed hefty profits and exited in 2007.
Foreign governments found the ways the Chinese government resolved bad debts in banks impressive.
After the outbreak of US financial crisis in 2008, governments in the West struggled to cope with the aftermath. And the United States had to let the Lehman Brothers went bankrupt.
Seeing a scene like that, a contributor of the Chinese version of the Wall Street Journal Report jokingly wrote that the Communist Party should be invited to help deal with the financial crisis in Wall Street.
Letâs then talk about the problem of over-issuance of currency in China. One of the major means that spurred the Chinese economic growth in the last three decades was over-issuance of currency.
In recent years, China became the worldâs largest money printing machine.
In the ten years between 2003 and 2013, Chinaâs monetary base increased by 88 trillion RMB, and its foreign exchange assets grew by 3.4 trillion US dollar.
During the years of investment boom, the effects of over-issuance of currency were not as noticeable. Now, however, as investment slowed, domestic saving and idle fund increased and added to the problem of excess liquidity.
In view of the limited options to sterilize the currency, PBOC governor Zhou Xiaochuan came up with a new way to do that.
During the Caixin Summit in November 2011, he raised the âPool theoryâ, the key concepts of which were that in order to tackle the influx of short-term, speculative fund or hot money, the levees have to be reinforced; and as for the hot money that had already been inside China, a pool should be devised to retain them.
What would Zhou use as pools? To put simply, one of those included the real property. To keep the liquidity in, the housing market was used as a pool. That was why housing price in China skyrocketed and became the most expensive in the world. Someone wrote that if the real property in the city of Beijing was sold, the money obtained would be enough to buy up the entire United States.
Now that the real property faltered, Zhou used instead the stock market as a pool to keep liquidity in control. Once the stocks stumble and their market value vaporize, the amount of liquidity would be markedly reduced.
The predominant reason the inflation rate in China appears to remain low despite issuing so much currency is that, unlike in the US, the CPI in China does not include the property price. If the property price is included, CPI in China would be quite high.
Given the wild fluctuation of stock prices, the use of stocks as a pool could help temporarily dissolve the financial crisis.
Such a method to get around a crisis is cleverer than the Gold Yuan certificate currency reform initiated by the KMT. The currency reform of the KMT was tantamount to arbitrarily robbing the people of their assets. That resulted in the KMT suffering from political and military defeat, a financial meltdown and losing the remaining trust the people had in it. (A side note, a few years back, the Oriental Outlook, a weekly periodical in China ran a piece about a Red economist named Ji Chaoding. The article said that Ji, the person who suggested then Financial Minister T. V. Soong to unveil currency reform, was actually a Communist spy working for Zhou Enlai. His suggestion at that critical moment sped up the downfall of the KMT.)
As for the use of stock market to push off the crisis today, it is the stock buyers themselves that get inside the trap out of their own free will. If the stock market stumbles, they have no one else to blame.
Viewed with the Western financial perspective, Zhou Xiaochuan is a terrible banker. He should not dissolve a crisis by passing it on to others. Yet in the eyes of the Chinese government, Zhou is an irreplaceable banker who managed to steer away from financial torrents and perils during his three terms of the chief of the PBOC, doing his best to postpone the arrival of crises while anticipating them.
Now, what would happen in the future depends on his luck.
The sixth bottleneck: unfair distribution and hyper wealth inequality
Over the last two decades, the appropriation of public and private assets by crony capitalism in China could be seen as reckless. And it resulted in phenomena of severe wealth disparity and the concentration of wealth in a handful of people. Iâm sure that everyone here knew about this and to back what I just said, I will quote a set of data taken from the âChinese Peopleâs Livelihood Report 2014â published by the China Social Science Research Center of the Peking University:
In 2012, the Gini coefficient for net wealth of families in China was 0.73; the top 1% of families have control over a third of wealth of the whole country while the bottom 25% of families have control over only about 1% of the countryâs total wealth.
Such a high degree of concentration of wealth, such a staggering figure of Gini coefficient could hardly be seen in anywhere else, not even in Zimbabwe, the worst country in Africa.
Therefore, in China, the low-income social stratum, or the poor, account for nearly 60% of the countryâs population. A society with too many poor people, one which upward mobility channels are non-existent is one that is teeming with instability factors.
If a democratic country encounters three of the six bottlenecks listed above, its government would collapse and its cabinet would have to resign. But this is China, where the CPC still maintains an unchallenged rule through autocratic measures and forceful control.
Even so, these problems have to be resolved sooner or later; they cannot be put on the back burner indefinitely.
Since modern times, the humanity came up with three ways to deal with social crisis. First, the Marxist approach, this is, stage a violent revolution and start everything all over again.
Before in 1949, this kind of approach was used in China. There were farmer revolts, farmer uprisings and the Communist Revolution.
The second way is the imperialist approach: to try to resolve domestic crisis during difficult times by staging war and seeking expansion abroad.
And the third way is the Keynesian approach: to address the overproduction crisis through state interventions such as raising taxes, expanding deficit budget, resorting to stimulus, employment boost and elevate the purchasing power of the public.
The approach being used in China today is basically a combination of government regulation under a planned economy and the Keynesian measures. As we are all aware, the result of this approach is not quite good.
Which approach would China use to solve the crisis in the future? This is a question I would like everyone here to contemplate. Compared with the second and the third approaches, the first approach is the one that fits most perfectly in with the official ideology, the values of the people in China today.
Marxism would give a simple explanation to conditions such as those in China today: the root of all crises is that the vast majority of the public is exploited, their income too low; while the minority lay claim to most of the wealth in society through exploitation and privileges.
However, it is possible that we come together to find ways for China to get out of its predicament based upon the system path, cultural soil, government ideology and the thinking habit of the people in the country.
Thank you everyone.
| Bolivian Independence from the World Bank and IMF || --> |
Boliviansâ popular uprising in 2000 against Bechtel put the issue of water privatization and World Bank policies in the international spotlight.
Debt and Austerity
Over the last 60 years, some of Boliviaâs largest resistance struggles have targeted the devastating economic policies carried out by the International Monetary Fund and the World Bank.
The bulk of these protests focused on opposition to privatization policies and austerity measures, such as cuts to public services, privatization decrees, wage reductions, as well the weakening labor rights.
Boliviaâs economic dependence on the IMF and the World Bank escalated in the 1970s when the country contracted massive loans to finance the modernization of their mining and agriculture export industries, thereby meeting the needs of Northern countries and enriching a handful of transnational companies in the relevant sectors.
Gradually, IMF-driven reforms became the modus operandi for Bolivian elites; since upper class Bolivians did not suffer from the IMF-backed austerity measures, they had little sympathy for those bearing its costs.
By the mid 1980s, Bolivia had reached a severe debt crisis following a surge of foreign capital from mainly private international banks, recycling petrodollars in the aftermath of the oil shock in 1973â1974.
Between 1971 and 1981 Bolivia incurred more than US$3 billion of foreign debt.
Once in debt, the Bolivian government looked to the IMF for assistance in providing fresh loans with fiscal austerity stipulations attached in order to pay back private lenders.
Rather than deal with the short-term balance-of-payments crisis for what it was, the IMF forced the Bolivian government to divert much needed government funds away from social welfare programs, disproportionately affecting low-income workers who rely heavily on public services.
âIMF loans aimed to reduce the fiscal deficit through budget cuts which primarily resulted in the reduction of social spending,â Patricia Miranda from the Bolivian-based NGO FundaciÃ³n Jubileo told teleSUR.
In Bolivia, the immediate effects of IMF policies have always fallen on the shoulders of the rural and urban working class, thanks to the governmentâs willingness to implement IMF demands such as income tax increases on low-wage earners.
âThe increase of taxes on income without an alternative tributary reform proposal unleashed one of the biggest social crises the country had ever witnessed,â Miranda added.
This combined with the privatization of state enterprises and natural resources such as water and gas during the 1990s and early 2000s led to massive popular uprisings that posed a direct challenge to the legitimacy of the World Bank and the IMF.
Cochabamba Water Wars
In 2000, the World Bank encouraged the Bolivian government to sell the public water system of Cochabamba to the Bechtel Corporation.
The deal, which was negotiated behind closed doors between the World Bank and Bechtel representatives, granted the company control over the cityâs water company for 40 years, guaranteeing them an average profit of 16 percent profit for each one of those years.
As a result of the Bechtel contract, monthly water bills skyrocketed by 43 percent for low-income households, according to the California-based nonprofit Democracy Center.
Public protests and revolts began immediately after this decision was made, forcing the Bolivian government to cancel the contract with Bechtel.
This outcome was regarded as a first victory of popular movements after 15 years of Washington Consensus-inspired structural adjustment policies.
The Cochabamba âwater warsâ of 2000 united urban, rural, mestizo and indigenous populations, setting the stage for Evo Moralesâ eventual election as president.
New Era of Relations
Over 15 years later, Boliviaâs relationship with the World Bank and the IMF has changed considerably as Bolivia is no longer subject to its conditions.
Since Bolivian President Evo Morales was first elected in 2005, the government has established a new set of guidelines which protects Boliviaâs economic autonomy from predatory lending institutions such as the IMF and the World Bank.
The Morales administration views autonomous economic governance as a central policy component to its larger political platform.
Therefore, it has aimed to ensure that external financial assistance corresponds with the objectives of the governmentâs domestic development and fiscal agenda.
Under President Morales, disaster risk management has been a priority for the Bolivian government, which is frequently impacted by climate change-induced natural disasters, even though Bolivia is among the worldâs smallest contributors to carbon emissions.
Last November, the Bolivian government approved the Disaster Risk Management Law, following the impacts of the early-2014 floods, which led to 50 deaths, 411,500 victims, and damages amounting to approximately US$384 million in Beni, Chuquisaca, Cochabamba, Potosi and La Paz departments.
In what at first glance might seem a return to policies of the past in efforts to strengthen its disaster management institutions, the Bolivian government signed its largest ever loan with the World Bank in February, receiving $200 million for disaster and climate risk management.
However this loan agreement grants the Bolivian government executive and administrative control over the allocation and distribution of the capital, which is indicative of the current set of relations between the two parties, Fundacion Jubileoâs Miranda explained to teleSUR.
Despite the recent capital loan, overall Bolivian public debt to the World Bank has fallen from 37 percent in 2005 to 9 percent in 2014.
In recent years, the Bolivian government has successfully managed to lessen its dependency on the IMF and the World Bank through increasing government royalties from the countryâs hydrocarbon reserves (a policy that the IMF and World Bank opposed), which provided the government with sufficient financial independence in order to promote its own economic model.
Today the state is the main wealth generator in the country. Since Morales came to power in 2005, the Bolivian government has increased its hydrocarbon gas production from 33 million cubic meters to 56 million cubic meters in 2013, which has led to a jump in revenues from hydrocarbons from 9.8 percent in 2005 to 35 percent in 2013.
As a result, since 2006, social spending in the area of health, education, pensions, and poverty alleviation programs has increased over 45 percent.
However, if commodity prices continue to fall, Bolivia will then likely be forced rely on alternative sources for fiscal revenue in order to sustain its economic independence from institutions such as the World Bank and the IMF.
In the meantime, Bolivia can rely on its massive buildup of international reserves which has allowed it to avoid the often-harmful conditions that come with IMF and World Bank borrowing.
Boliviaâs success in recent years indicates a newly found independence for the country, which is now able to pursue economic and social policies without the influence of the IMF and the World Bank.
| Relax, Said the Night Man ||Recently, Bloomberg published a Barry Eichengreen column headlined "Don't Sell the Euro Short. It's Here to Stay". He writes:|
Two forms of glue hold the euro together. First, the economic costs of break-up would be great. The minute investors heard that Greece was seriously contemplating reintroducing the drachma with the purpose of depreciating it against the euro, or against a ânew Deutsche mark,â they would wire all their money to Frankfurt. Greece would experience the mother of all banking crises. The ânew Deutsche markâ would then shoot through the roof, destroying Germanyâs export industry.In the conclusion, he says "I argued that it is the roach motel of currencies. Like the Hotel California of the song: you can check in, but you canât check out." To be precise, that's true of the Roach Motel (see here, if you don't know what that's all about), but, according to the Eagles, you can actually check out of the Hotel California, though you can never leave (hmm... sounds kind of like "Brexit"...).
More generally, those predicting, or advocating, the euroâs demise tend to underestimate the technical difficulties of reintroducing national currencies.
In any case, the fact it hangs together because eurozone members feel trapped by the costs of exit is hardly an affirmative case for the single currency. In Greece's case, its hard to believe that the costs of exit really would have been higher than the costs of staying; this FT Alphablog post by Matthew Klein pointed out this figure from the IMF's Article IV report:
The IMF also released a self-evaluation of its Greece program, which Charles Wyplosz analyses in a VoxEU column. See also: this Martin Sandbu column and this article by Landon Thomas. Matt O'Brien's write-up of research by House, Tesar and Proebsting of the impact of austerity in Europe is also relevant.
The fact that the eurozone rolls on with no sign that a depression in one of its smaller constituent economies is enough to bring about a fundamental change is disturbing. It wouldn't be able to ignore an election of Marine LePen as President of France - Gavyn Davies considers the consequences of that.
Update: Cecchetti and Schoenholtz also had a good post on the implications of a LePen win.
| Greek Tragedy, European Farce ||It looks as though Greece is staying in the euro, after all (for now at least...). The terms of the deal - pending approval by the Greek parliament - are not very favorable to Greece. Essentially it means more of the same - additional financing from the EU in exchange for more austerity, "structural reforms" (in some cases absurdly detailed) and a EU supervised privatization of state-owned assets. There is a vague promise to consider debt restructuring, but nothing concrete.|
The reports from the negotiations over the weekend reinforced the impression that Germany, along with some of the other smaller countries, really wanted to push Greece out, but the French and Italians worked to prevent this outcome.
From the viewpoint of Germany, the issue is making sure that euro membership entails following associated rules and obligations: a more forgiving treatment of Greece would create a "moral hazard" problem, inviting more deviations in the future. However, the rules they are enforcing do not make economic sense: they force procyclical fiscal policies and fail to confront an unsustainable debt burden. (Some sympathy for the Germans, though: as this VoxEU piece by Kang and Mody illustrates, they were reluctant about the euro from the beginning).
The response to the deal has been highly critical: see Barry Eichengreen, Martin Sandbu, Wolfgang Munchau, Christian Odendahl and John Springford, Paul Krugman, Ambrose Evans-Pritchard, John Cassidy, Eric Beinhocker, Neil Irwin. This interview with former finance minister Varoufakis is also interesting. Simon Wren-Lewis has a nice post on "trust," a word which has been thrown around alot lately.
The FT's Gideon Rachman has a somewhat different take, emphasizing that Germany backed off its evident desire to force a "Grexit".
One condition of the deal was continued IMF involvement. While Greece objected to this, it may ultimately prove to be in their favor - the IMF has the capacity to act as a voice of sanity, and they have said that Greece's debt is unsustainable (much of the criticism of the IMF is that they haven't pushed strongly enough for a debt writedown, as they ordinarily would). IMF chief economist Olivier Blanchard discussed Greece in a blog post (and Ashoka Mody offered a critical response).
Although some of us think Greece might be better off outside the euro, their willingness to sign on to an agreement of the sort the Syriza govermnment came in to power promising to end (and essentially what they voted "no" on in the referendum a week ago) demonstrates how badly they want to stay in. As long as Greece is saddled with an unsustainable debt, the prospect of a rerun of this drama will remain. But the removal of the immediate threat of a euro exit hopefully will give a short-run boost (Daniel Davies gives some reasons for short-term optimism).
As for the euro, the last several years have laid bare the institutional shortcomings - some of which are discussed in this Simon Tilford column - underscoring the reasons many economists were skeptical of the project from the outset. Although political solidarity and continued moves towards integration might have overcome these flaws, the last several weeks have demonstrated that, as a political matter, the sense of commonality needed to make the euro work does not exist.
Update: IMF to the rescue (?!):
The International Monetary Fund threatened to withdraw support for Greeceâs bailout on Tuesday unless European leaders agree to substantial debt relief, an immediate challenge to the regionâs plan to rescue the country.On this, see also Ambrose Evans-Pritchard and Josh Barro. A few hours ago I said they had the "capacity to act as the voice of sanity" but I didn't expect them to use it so soon... This made me laugh:
Hmm... at this point, hard to say if this will lead to a better deal, or just blow it up, as Gideon Rachman suggests:
| Europe's Final Countdown to "Grexit"? ||The "no" vote in its referendum last Sunday seems to have accelerated the momentum towards a Greek exit for the euro. While there is plenty of room to second-guess the negotiating strategy, I think the Syriza government and Greek voters were right to reject continuing on the same policy path. If they are forced out of the euro (which looks likely), it will be traumatic and disruptive, but the experience of Argentina in 2002 suggests a fairly quick rebound (from a very low starting point) is possible. |
Ultimately, this may be worse for the rest of Europe - not only does it open up the possibility of future crises by demonstrating the reversibility of the euro, it also demonstrates a fundamental lack of solidarity: the "ever closer union" isn't really that close (see Dani Rodrik and Peter Eavis).
Some of Europe's leaders seem recognize this; the main stumbling block in the last-ditch negotiations appears to be on whether some of Greece's debts will be written off (i.e., "restructuring" or "haircut"). The IMF has publicly said that Greece's debt are not sustainable (debt writedowns are part of standard IMF interventions), and the US is urging a writedown.
Politically, it is easy to see why this is a nonstarter in many of the creditor countries. Some "leadership" is badly needed, particularly in Germany, and doesn't appear to be forthcoming: in the Times, Bruce Ackerman calls out Germany's "failure of vision." Clive Crook argues that the Greeks are being deliberately pushed out. Eduardo Porter notes that Germany seems to be forgetting that it has been a beneficiary of debt relief (see also Thomas Piketty). The German stubbornness may be more than just politics - Simon Wren-Lewis argues part of the problem is that they (naturally) do not want to acknowledge the failure of their economic ideology.
Last minute negotiations are ongoing... when Syriza first came to power, the idea of GDP-linked debt was raised. This seems to have fallen off the table, but it might provide a "face saving" way out: the IMF's knack for optimistic projections could be helpful in making the value to the creditors appear initially large. Since they would have some equity-like characteristics, replacing the debt with GDP-linked bonds would have some passing similarity to what normally occurs in a corporate bankruptcy, where creditors receive equity stakes (and perhaps this would help make a "fairness" argument). And it actually might work: if the chances of future austerity and/or a euro exit were substantially reduced, Greece should have a chance at some rapid "bounce back" growth. I don't know anything about Greek politics, but I would think that, in the long-run, a government led by an "outsider" party like Syriza might have a better shot at implementing structural reforms like better tax collection.
See also: a good "tick-toc" on the negotiations from the Times' Landon Thomas on the breakdown of negotiations last week; Ambrose Evans-Pritchard; Ashoka Mody is very harsh on the creditors and the IMF, Daniel Gros is a bit more sympathetic.
| More Greek Notes ||perhaps Greece should be printing some notes this weekend...|
Recently, Christian Odendahl had a sensible take on what should be done in Greece, but reasonable advice from economists is being overtaken by politics and events. Catherine Rampell:
Greeks are hoarding cash and sending their savings abroad; by a conservative estimate, Greek bank deposits have fallen by about 45 percent since their peak in 2009. Recent talk of capital controls and bank closures has only accelerated this bank run (or, as some have dubbed it, a âbank jogâ), making the banking sector weaker, and, by the day, even more in need of European assistance. Last week alone, Greeks withdrew an estimated 4 billion euros. For those keeping track, thatâs two-and-a-half times what the country owes the IMF at the end of the month. Karl Whelan discusses the connection between a Greek government default, the ECB and a euro exit -- in theory, the ECB could help Greece stay in the euro even if the government defaults, but it doesn't appear inclined to. Ultimately, if the euro is to avoid similar crises in the future, it needs to be robust to a sovereign default.
Reports over the deal terms being discussed are hardly encouraging. Wonkblog's Matt O'Brien writes:
Europe is making life so difficult for Greece with such specific demands for austerity that it almost seems like Europe is trying to get Greece to leave the euro now. Before this latest showdown, Greece had actually cut so much that it had a budget surplus before interest payments...Although its the EU that deserves most of the blame, the IMF's role has been controversial, too: see this Politico article and this Ambrose Evans-Pritchard column. At the IMF's blog chief economist Olivier Blanchard explains what the IMF believes a "credible deal" requires.
But Europe isn't interested in that. It's interested in making Greece run bigger and bigger budget surpluses, without much regard for the economic consequences. Not only that, but Greece has to run surpluses the way Europe wants them to. Never mind that Greece has already cut its spending a lot, already cut its pensions a lot, and already reformed its labor markets a lot. There are always new cuts and new reforms that Europe says will make Greece grow at some point in the future.
If this is how it's going to be, why should Greece stay in the euro? It sure seems like Europe is trying to force Syriza to do what Syriza said it wouldn't just to prove a point: don't underestimate the power of the ECB. It's a not-so-subtle message to the anti-austerity parties in Spain and Portugal that they have nothing to gain and everything to lose from challenging the budget-cutting status quo.
See also: James Galbraith on "reform", and Branko Milanovic on what this means for Europe.
Update (6/29): The Greek government has called a referendum and imposed capital controls. See Eichengreen, Krugman and Stiglitz (and Tony Yates for a take somewhat more critical of the Greek government) Charles Wyplosz on the ECB, Francisco Saraceno and Matt Yglesias on the politics, and Hugo Dixon on how the referendum may play out.
| International Monetary Fund to Include Yuan in Reserve Currencies ||The International Monetary Fund has confirmed that it will include Yuan in its basket of reserve currencies. The move has fueled the hopes for the further expansion of the Chinese bond market; however, investors are not going to roll over it as the regulation is still very heavy and the direction of Yuan is not clear.Â
The central banks across the globe are likely to add more assets in terms of Yuan to their reserves after the announcement of IMF. According to the announcement, IMF will be including the Chinese currency as the seventh currency in the world reserve in its Special Drawing Rights (SDR). Others are the U.S. Dollar, Euro, Pound Sterling, Yen, Swiss Franc, and Canadian Dollar.
The Yuan will be having a 10.9% weightage among all the currencies in the basket, occupying the third highest position, standing only after the U.S. Dollar and Euro. The move, though, had little impact on the currency or the markets immediately, but is slated to drive a huge amount of investment in renminbi bonds from global investors in the long run.
Mr. Neeraj Seth, Asian credit head at BlackRock stated that once the fixed income market in China opens up, global investors wonât be able to ignore the market. He further added that this move is going to bring a change in the market structure for the Asian as well as global markets for fixed income.
Central banks around the world that havenât joined their peers, already putting their reserves into Yuan-led debts, are likely to be the first movers and are projected to raise the proportion of global reserves held in RMB from around 1.4%, estimates the People's Bank of China.
Original Post International Monetary Fund to Include Yuan in Reserve Currencies source Twease
| Perang Dunia Sudah Dekat ||Washington (BP) â Dunia sedang terancam. Kali ini pemicunya bukan konflik bersenjata dan perang nuklir, tetapi naiknya harga-harga, khususnya pangan. Kemarin Bank Dunia dan IMF mengadakan pertemuan khusus membahas kenaikan harga makanan yang sudah memicu kerusuhan di negara berkembang. Direktur Pelaksana Dana Moneter Internasional (IMF) Dominique Strauss-Kahn mengatakan, naiknya harga pangan telah menimbulkan konsekuensi yang […]|
| Global PMI Index Shows Further Contraction in Chinas Manufacturing Sector ||According to latest data, the manufacturing industry in China has further contracted while the euro zone and the U.S. growth eased in August. Keeping the recent developments of the world economy in view, the International Monetary Fund has lowered its forecast for world growth this year. Last month witnessed turbulence in Chinese economy affecting the stocks and the commodity prices on major markets. Â The investors are wondering if the Federal Reserve would increase the interest rate in September. Economists have pointed out that the interest rate hike depends on the stability of the global economy which is presently struggling.Â
The Global Manufacturing Purchasing Managersâ Index, produced by JP Morgan and Markit, has shown that in August, the global factory activity grew at its weakest rate since July 2013, dropping to 50.7 from 51.0 in July. The global PMI indicator compiles survey data from countries such as the U.S., Germany, Britain, Russia, China, France, and Japan. The survey points out the lacklustre performance of the global manufacturing sector. The IMF has stated that the global economic growth is expected to be weaker than estimated earlier owing to slow recovery in developed economies and slowdown in developing countries.Â
Original Post Global PMI Index Shows Further Contraction in Chinas Manufacturing Sector source Twease
| Is Ireland's tax base too narrow? ||President of the Irish Tax Institute Mark Barrett, and Director of the Nevin Institute Dr Tom Healy, on the possibility of dÃ©jÃ vu, with both the IMF and the EU recently raising concerns that we are again in danger of narrowing our tax base|
| Turmoil in China Hits Global Economy ||Economic turmoil, initially originating from China, seems to affect the globe. This week started on a worried note regarding the strength of the global economy as the stock market in China crashed, creating ripples across the markets in other countries. As the value of shares in Shanghai plunged, some of the markets registered their largest one-week losses since 2008. Though the analysts have pointed out that there would not be a repeat of the stock market crashes of 1997 or 2008 owing to the reforms in place, they have warned that the continued bleak picture of the Chinese economy would invariable affect the global markets, especially the emerging economies.
With a dip of 8.5% in the value of stocks in Shanghai, the investors started selling off stocks across all markets on Monday. The Chinese stock market crash erased any profits earned in the U.S. or the European exchanges. However, the worst hit were the markets in the emerging economies. This reminds of the 1997 financial crisis when the emerging countries in South East Asia had sought bail out from the International Monetary Fund. At that time, the Chinese economy was stable. This time, it has become the epicentre of turmoil.
Beijing has failed in its efforts to stabilize the capital markets in China. Unexpected devaluation of yuan has added to the problem. Economists have revealed their worries about the inability of the Chinese authorities to manage the economic crisis in the country. Last month, the IMF already moderated its growth forecast for the year to 3.3% owing to the worrying economic scenario in China and other emerging countries. Economists have forecasted that interventions from the global authorities and central banks across nations would help in averting another financial crisis. |
Original Post Turmoil in China Hits Global Economy source Twease
| IMF Backs Islamic Banking Industry with Caution ||Islamic Banking was endorsed by the International Monetary Fund (IMF) in one of its latest weekly reports. The global lender’s interest in Islamic finance principles was reflected in its independent discussions with an advisory group of Islamic finance experts, last year. The IMF’s report mentioned that the lesser risk attached to Islamic banking compared to that of the conventional banking would help in promoting financial stability.
Islamic banking does not allow pure monetary speculation and focuses on deals based on real economic activity. This would discourage credit booms and would lead to better risk management by the financial institutions. The IMF’s backing would help in the expansion of Islamic banking industry. However, the international lender stressed on following Islamic banking rules stringently by the regulators of the industry, without which the industry might not reach its aim.
The deputy director at the IMF’s monetary and capital markets department, Christopher Towe, mentioned that there were differences in the way of following Islamic banking standards by the industry regulators. Inconsistent application of these standards might act as an obstacle to the growth of Islamic banking industry. The principle of risk-sharing and asset-based financing needs to be applied in practice.
Because the Islamic finance industry is relatively young, issues such as the restricted scope of sharia-compliant financial safety nets for banks needs to be addressed. There is a shortage of financial tools to manage the short-term funds of Islamic banks. The investor rights in Islamic banking industry need to be clarified legally. Currently, some of these issues are being handled by regulatory bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain and the Islamic Financial Services Board (IFSB), Malaysia. |
Original Post IMF Backs Islamic Banking Industry with Caution source Twease
| IMF Gives Warnings about the Vulnerability of Developing Economies Because of Changing Monetary Policies of the United States ||The IMF chief, Christine Lagarde recently stated that the latest step being taken by the U.S. to tighten the monetary policy may have an adverse impact on some of the major emerging economies. This adverse impact can be attributed to the fact that such a development would be taking place at a time when most of the economies of the world are taking steps towards easing their respective monetary policies via banks and firms increasing their debts in terms of dollars.
During a conference at the China Development Forum, Christine Lagarde expressed that the global economy is yet to reach a state of economic recovery, and this is because of factors such as low investments, high rate of unemployment, and high debt. Despite substantial growth of the U.S. economy in recent times and cheaper oil prices, global economic recovery still seems rather weak and fragile. According to her, the United States has plans of increasing the rates of interest at a time when there is a plethora of risks involved in the path to economic recovery. One of the main risks relates to the anticipated normalization or the tightening of the monetary policy of the United States in a situation wherein most countries are loosening thee monetary conditions.
This type of monetary policy, which seems in a way a bit asynchronous, may bring about volatile conditions in the financial markets. The U.S. dollar is becoming stronger because of the diverging monetary policies. The vulnerability of the emerging markets can be attributed to companies and banks steeply increasing the amount of dollars borrowed by them over the last five years. Several policies that managed the global financial meltdown and also extended support to the economic recovery of the developed economies, mainly pertained to unconventional steps of monetary policy and steps such as huge and substantial government debt. |
Original Post IMF Gives Warnings about the Vulnerability of Developing Economies Because of Changing Monetary Policies of the United States source Twease
| Avery Table Tents 5305 || Mohamed Hassan: "the causes of the revolution far beyond Tunisia Ben Ali and his party. "|
Tunisians brought down the dictator Ben Ali. Today, they continue to fight against his men to head the transitional government. In this new chapter of our series "Understanding the Muslim world," Mohamed Hassan * ((photo-cons) explains the implications of the revolution of Tunisia and its root causes: how nationalism Liberal advocated by Tunisia under Bourguiba interests Western, plunging people into poverty, how a repressive state has put in place to maintain this system, why dictatorships in the Arab world are caused to fall, and how Islam became the condom imperialism
(Gregory Lalieu Michel Collon)
In December 2010, riots broke out in Tunisia. A month later, President Ben Ali fled the country after twenty-three year reign. What are the causes of this revolution? And why is it popular movement succeeded in bringing down the dictator where other attempts have failed?
For there to be a revolution, it is necessary that people refuse to live as before and that the ruling class is no longer able to govern as before. On December 17, 2010, Mohamed Bouazizi, a young seller of fruits and vegetables, has sacrificed out of desperation after police had confiscated his goods himself, and that local authorities have to stop working. The conditions were ripe for a revolution broke out in Tunisia Bouazizi and suicide was the trigger.
Indeed, the Tunisians did not want to live as before: they were not accepting corruption, police repression, lack of freedom, unemployment, etc.. Moreover, the ruling class could no longer govern as before. Corruption under Ben Ali had taken a phenomenal amount while the majority of the population had to face insecurity. To maintain this status, police repression would be higher but it had reached its limits. The ruling elite was completely disconnected from the people for whom there was no interlocutor. Therefore, when popular revolts broke out, the ruling class had no choice but to quell the violence. But with the determination of the people, the repression reached its limit. This is one of the keys to the success of the popular revolution of Tunisia: it managed to reach all segments of society, including members of the army and police who sympathized with the demonstrators. The repressive apparatus could no longer function as before either. If a revolt occurs but is not able to combine different segments society, it can not lead a revolution.
Even after the departure of Ben Ali, the protests continue. The situation that Tunisians refuse is not the result of one man? For
signs "Ben Ali emerges" signs were followed by "CDR releases. Tunisians are attacking the president's political party because they fear that one of his men to take power. But in reality, the root causes that led to revolt Tunisians far outweigh Ben Ali and the RCD. It is not enough to turn the president for the people earns his freedom and improves living conditions.
corruption, unemployment, social inequality ... What are the effects of imperialist domination of the West over Tunisia. For Tunisia, after independence, became a project of the United States.
What do you mean by imperialism?
Imperialism is the process by which capitalist powers politically and economically dominated by foreign countries. Western multinationals plunder the resources of Africa, Latin America and Asia. They find opportunities for capital they will accumulate and exploit cheap labor market. I say that multinationals are not buying as they plunder the resources at their fair value and the local people not benefiting from these riches. And this looting would not be possible if these countries operated, there were no leaders to defend the interests of multinationals. These leaders are getting richer in the process. They constitute the so-called comprador bourgeoisie. They have no political vision for their own country does not produce wealth and do not develop a real economy. But personally enriched by trading resources their countries with multinationals. Obviously, the people are the biggest victim in all this!
When you're a nationalist anti-imperialist cons, you are looking to develop for yourself. You nationalize key sectors of your economy, rather than leaving the management to foreign companies. This will create a national economy in the country and you allow it to grow on the basis of independence. That's what I call a national democratic revolution: national independent because of the imperialist powers, democratic as against feudalism and the elements reactionaries in the country.
However, Bourguiba, Tunisia's first president, was considered a socialist. And during his reign, the state played a very important role in the economy.
Bourguiba's political party was socialist in name only. If the state played an important role, it was only for the benefit of an elite only. This is called state capitalism. In addition, Bourguiba has systematically eliminated all the progressive elements and anti-imperialist in his party. So that this party became the party of one man, completely subject to U.S. imperialism.
Habib Bourguiba , great actor in the struggle for independence, was president of Tunisia from 1957 to 1987
What Was Tunisia important for the United States?
To understand the importance of that country to the U.S. strategy, we must analyze the political context of the Arab world in years 50 and 60. In 1952, officers overthrew the monarchy of King Farouk of Egypt and proclaim a republic. With Nasser at the helm Egypt becomes the basis of Arab nationalism inspired with revolutionary ideas of socialism. As evidenced by the nationalization of the Suez Canal, Nasser's arrival in power is a blow to the West because the Egyptian president's policy is totally at odds with the hegemonic Western powers in the Near and Middle East. Worse still: the anti-imperialist ideas of Nasser are emulated in the region. In Yemen for example, where in 1962 a revolution divided the country, the South becoming a bastion of Arab revolutionary movement. The same year, the independence of Algeria sends a strong signal to Africa and the Third World, the imperialist powers put on alert. Libya also note the Qaddafi coup in 1969. The colonel took power and nationalized major sectors of the economy, to the chagrin of the West. The same year, the Islamic revolution in Iran toppled the Shah, one of the most important pillars of U.S. strategy in the Middle East.
short, at that time, an anti-imperialist movement defies strong strategic interests of the United States in the Arab world. Fortunately for Washington, all countries in the region do not follow the path of Nasser. It the case of Tunisia. In 1957, a year after the independence of Tunisia, Bourguiba was one of the first Arab leaders to send U.S. in the prestigious journal, Foreign Affairs. The title of the article? Nationalism best antidote to communism. For the United States who want to counter the influence of Nasser is a godsend! Bourguiba wrote in his article: "With the regard, Tunisia has chosen to make unequivocal its way into the free world from the West." We are in the Cold War. The Soviets argued that Nasser's influence grows in the region. And the U.S. needs pro-imperialist agents Bourguiba as not to lose strategic control of the Arab world.
Nasser announced the nationalization of the Suez Canal in 1956
Can we be both nationalist and pro-imperialist?
Bourguiba was a liberal nationalist with anti-communist ideas which led him to join the imperialist camp in the West. In fact, I feel like George Padmore Bourguiba Arabic. Padmore was a leading Pan-Caribbean origin. In 1956 he wrote a book called Pan-Africanism or Communism: The battle ahead in Africa. Like Bourguiba, he fed anti-communist ideas and even if he declared himself a nationalist, his political vision was largely subservient to the interests of imperialist powers. Nationalism served as a cover, their policy is far from being independent. Padmore had a great influence on the first president of Ghana, Kwame Nkrumah, one of the instigators of the African Union. Its pro-imperialist ideas were able to spread across the continent with the result that we see today is celebrated around the golden jubilee of independence in Africa, but many Africans know they have never become independent. President Nkrumah himself later regretted having taken the advice of Padmore.
In Tunisia too, the submission to imperialist interests has quickly been felt and it turned out that nationalism advocated by Bourguiba was a facade. In the 70s, for example, the President has passed a series of measures intended to attract foreign investors: tax exemption on company profits for ten years, exemption from all duties and taxes for twenty years, exemption from Tax Income property values, etc.. Tunisia has become a vast workshop of Western multinationals in recent repatriation of profits.
Tunisia did she not still been some good progress under Bourguiba?
Yes, there have been positive developments: education, status of women, etc.. First, because Tunisia were the progressives in his elite players, but they were quickly dismissed. Then, because Tunisia was to be dressed in his finest dress. Indeed, this country played a major role in the strategy of the United States to counter the influence of communism in the Arab world. But what had you on the other side? Progressive revolutionary movements that had toppled backward and monarchies who enjoyed popular support. You could not counteract this movement by advocating a feudal system. Saudi Arabia has done so because it could use its oil money for that. But Tunisia, unable to rely on such resources, should provide some progressive image. In the fight against communism, it was supposed to represent a successful Third World countries have chosen the path of liberal nationalism.
But behind the scenes was less flattering. As I said, Bourguiba has systematically eliminated the progressive elements that do not follow his steps. The anti-imperialists who wanted an independent Tunisia both economically and politically, those who wanted to assert their own position in the Third World and the Israeli-Palestinian conflict, all were opposed. Tunisia has in fact been used as a laboratory of the imperialist powers. And what was supposed to represent the success of liberal nationalism has become a dictatorship.
When Ben Ali Bourguiba succeeded in 1987, he continues on the same track?
Absolutely. One can even say that the submission to Western interests has grown. Ben Ali was a pure agent of U.S. imperialism. In 1980, as ambassador to Poland, he even served as a liaison between the CIA and Lech Walesa, the union leader who fought against the Soviet Union.
In 1987, when Ben Ali assumed the presidency of Tunisia, the country was deeply in debt by the capitalist crisis of 1973. Moreover, at that time, the ideas of Milton Friedman and his Chicago Boys were very popular. These ultra-liberal economists believed that the market is an entity capable of regulating themselves and that the state should certainly not interfere in the economy. The technical elite Tunisian largely from U.S. schools were highly influenced by theories of Friedman. Ben Ali then left the state capitalism in effect at the beginning of the era Bourguiba. Under the supervision of the IMF and World Bank, he began a privatization program much more massive than what his predecessor had already begun in the 70s.
What were the effects of this new economic policy?
First, privatization of the Tunisian economy has allowed Ben Ali and his wife's family, Trabelsi, personal enrichment. Corruption has reached a very high level, Tunisia has become a country totally subservient to imperialism, headed by a comprador bourgeoisie. Obviously, Ben Ali and his clan did not have many raw materials to selling out to Western multinationals. But they took advantage of the education system established under Bourguiba to develop a service economy. Indeed, the Tunisian workforce is highly educated and inexpensive at a time. It therefore attracts foreign investors.
Tourism has also developed strong as to become the mainstay of the Tunisian economy. Here we see the lack of political vision of the elite. Indeed, no country can develop its economy based on tourism if not first developed a national economic base. The tourism industry consumes a lot but reported very little to the Tunisian people. Imagine: while Western tourists consume hectoliters of water to bask in pools, Jacuzzis or golf course, the poor peasants in the south face of the drying soil.
But it's not just the farmers who have suffered from this policy. Overall, the social conditions of the Tunisian people deteriorated while the president's entourage has amassed a huge fortune. Everyone knew the regime was corrupt. So to maintain this system, the system should prevent any disputes. The repression became even more brutal penny Ben Ali simple criticism or even the desire for modernity and openness were not allowed. Such a situation could lead to popular revolt. Moreover, trying to monopolize his clan the wealth of the country, Ben Ali has also drew the ire of some of the traditional bourgeois Tunisia.
You say that political repression was very strong. Is there anyway today, opposition forces can guide the people's revolution now that Ben Ali has fallen?
Genuine opposition parties were banned under Ben Ali. However, some continued to exist underground. For example, the first Tunisian Communist Party could not live openly and organize like any political party in a democracy. But he continued to operate secretly through associations of civil society (teachers, farmers, doctors, prisoners ...). The PGWPP was able to form a social base and fired a solid experience of this period. It is exceptional in the Arab world.
I think two major challenges now await the opposition parties. First, they must come forward and make themselves known to the general public in Tunisia. Then they must organize a united front of resistance to imperialism. In fact, the imperialist powers seek to maintain the system without Ben Ali Ben Ali. We see now with the Union government National rejected the Tunisians, which is very positive. But the imperialist powers will not stop there. They will certainly seek to impose an International Electoral Commission to support candidates who defend to their best interests. It is therefore necessary to resist interference by creating a united front to build a true democracy.
Opposition parties are they able to overcome their differences to create such a front?
I know that some political parties were reluctant to associate Islamo-nationalist movement Ennahda. This movement emerged in the 80s. He advocated an anti-imperialist line and in fact, has suffered political repression. Why not combine Ennahda in front of resistance to the interference of foreign powers? Tunisia is a Muslim country. It is normal that a political force emerges with an Islamo-nationalist trend. You can not prevent that.
But each of these movements must be studied separately, with its own specificities. This was done by the communist PGWPP. They studied scientifically objective conditions that apply Tunisia. Their conclusion is that the Communists and Islamo-nationalists have been victims of political repression and that even though their programs differ, they share common ground: they want an end to dictatorship and the independence of Tunisia. The Communists have proposed an alliance with the Islamo-nationalists long ago. Of course, the PGWPP does not make Tunisia a Islamic state. Its political agenda is different from that of al-Nahda. But it is the Tunisian people who will judge these differences democratically. Elections should be a contest open to everyone. That is true democracy.
Precisely opposition parties gathered in front of 14 January to fight against the interim government of Mohamed Ghannouchi, a henchman of former President Ben Ali. A hopeful sign?
Absolutely, Tunisia is on the right track: all opposition parties banned so far have created a united front to prevent the system is maintained without Ben Ali Ben Ali. Also underline the role played by the base of the union UGTT. The head of the union authorized under Ben Ali was corrupt and working with the state police. But since the basis of the union put pressure on its leaders and members who UGTT were part of the transitional government have resigned. Although much remains to be done, democracy wins Tunisian institutions under pressure from the people.
Western powers opposed to that. They want to impose democracy in Tunisia where only low-intensity "good" candidates would be allowed to stand for election. If you look at the type of democracy that the United States enjoy, you come across Ethiopia. The U.S. government has provided $ 983 million to countries in the Horn of Africa for the year 2010. That same year, Prime Minister Meles Zenawi, in office since 16 years, was reelected with 99.5 percent of the vote! It's even better than Ben Ali! The reality is this: behind their rhetoric in support of the Tunisian people, the Western powers continue to actively support many other Ben Ali in the world.
The United States could not they support other candidates pro-imperialist, but in the eyes of Tunisians, were not associated with the Ben Ali era?
It would be difficult. There is a part of the comprador bourgeoisie which was lÃ©sinÃ©e by the corrupt system of Ben Ali. But this elite is not strong enough control the popular movement and not enough grounding in the Establishment to win.
The United States had also thought of another strategy: a few months ago, while Ben Ali was still in power, the U.S. ambassador has visited a Communist leader in prison. Officially, a simple observation visit in the framework of respect for human rights. Unofficially, the U.S. anticipated the departure of Ben Ali and wanted to test the waters. Their goal was to get the Communists against the Islamo-nationalists, divide the resistance to imperialism to weaken more. But the Communists Tunisia does not fall into the trap. They are very familiar with the strategy developed by Henry Kissinger in the 80s in the Middle East. They published a very good study on the subject and know they should not take orders from outside or adhere to ideologies manufactured by foreign powers.
Why the U.S. have they abandoned Ben Ali? Had he gone too far in personal enrichment? According to a cable Wikileaks, the U.S. ambassador was very critical of the system of quasi-mafioso Tunisian president, organized corruption are obstacles to investments by foreign companies.
This is not the problem. The United States does not care about corruption. Instead, it is a key element of the system of domination on the U.S. South. In fact, Washington was aware of the internal situation in Tunisia and knew that Ben Ali would not be able to govern. The West must now ensure that the replacement of Ben Ali will continue to defend their interests. The stakes are high. The capitalist crisis is causing serious problems in the West. Besides this, China is getting stronger and now provides more loans than the World Bank and other imperialist powers combined. She even wants to buy a significant portion of the debt of the euro area partly because it has economic interests with European countries, on the other imperialist powers to divide, the EU is historically associated with states USA.
In such a context, the Tunisian people's movement, under the auspices of a revolutionary leadership, could establish an independent government and take advantage of this situation of a multipolar world. The imperialist powers fear that countries that were traditionally under his rule become economically independent, turning also to China. Tunisia could build relationships with the Asian giant to develop its commercial ports. And it would seriously question the concept of the Mediterranean Dialogue, this expansion of NATO to the countries of the Mediterranean that is not a dialogue but a mere instrument of Western domination.
Another country that seems to fear democracy in Tunisia and in the region, Israel. Deputy Prime Minister Silvan Shalom said shortly after the fall of Ben Ali that the development of democracy in Arab countries threaten Israel's security. This country often called only democracy in the Middle East, would he be afraid of competition?
Under a democratic facade, Israel is a fascist, apartheid state. In the region, it can not ally with repressive dictatorial states, led by comprador bourgeoisie that weaken the body of the Arab nation. Currently, these Arab states are rich countries inhabited by poor people. But if a democratic government in the full sense of the term emerges, it will increase economically the Arab nation as a whole. And this economic development will lead to an alliance of Arab countries against the state racist oppressing the Palestinians. Israel fears this course.
Moreover, there is a very big gap between the official positions of Arab dictatorships and the popular sentiment about the Israeli-Palestinian conflict. Since Egyptian President Sadat visited Israel in 1977, Egypt's position is "we want peace." But it is a position imposed by force to the population. And the current Egyptian government is not content to maintain peaceful relations with Tel Aviv. It participates actively in the strangulation of Gaza, while the majority of Egyptians in solidarity with Palestinians.
It's the same alignment of Arab dictatorships on Washington politics. Tunisia, Saudi Arabia and Egypt are allies of the United States while the populations of these countries are anti-imperialists. I was in Egypt when Muntadhar al-Zaidi, a journalist in Iraq, threw his shoes on George W. Bush. The Egyptian population was celebrated as a hero. I heard of fathers wanting to marry their daughter with the reporter. Still, Egyptian President Hosni Mubarak is one of the most faithful allies of Washington.
Do you think the revolution Tunisia a domino effect could cause the downfall of other dictatorships in the Arab world?
70% of the population in Arab countries is less than thirty years and knows that unemployment, police repression and corruption. But all these young people want to live. And to live, they need change. This is the reality of each country. It is therefore not even need a domino effect, the objective conditions are ripe for further revolutions erupt.
People no longer want to live as before. But for their part, the ruling classes are they unable to govern as before?
course. And we see in Egypt today. There are police everywhere in this country. But it is impossible to control everything. A state police has its limitations and the Arab world have reached.
Furthermore, information plays a very important role today. Tunisians, Egyptians and peoples of the Third World are better informed through Al-Jazeera as part of an Internet and social networks on the other. The evolution of information technology has increased the level of education and consciousness of people. The people no longer a mass of illiterate peasants. You have a lot of very smart young people, with a certain practical sense, able to circumvent censorship and of mobilizing the Internet.
there in these countries the opposition forces can guide the popular revolutions?
Why Punishment is so important if these dictators were not in danger? Why the comprador bourgeoisie, so greedy, she would spend so much money in the repressive apparatus if she was not afraid to be reversed? If there was no opposition, all this would not be necessary.
the side of Western observers, many fear that the collapse of these regimes Arab favors the rise of Islamism. As summarized so finely Christophe Barbier, editor of L'Express, "Ben Ali is better than the bearded." These fears proved on of Islamism are they based?
Islamism became the condom of imperialism. Western powers justify their strategy of domination in the Arab-Muslim world under the guise of fighting against Islam. There are Islamists everywhere today. Soon, we shall find even traces of Al-Qaeda on Mars if it is useful to the imperialists!
In reality, the West has always needed to invent an enemy to justify its hegemonic designs and incredible military spending (financed by taxpayers). After the fall of the Soviet Union and the demise of the communist enemy is Islam and Al Qaeda who have played the roles of villains villains.
But the West has no problem with Islamism. It adapts very well to this trend in countries like Saudi Arabia. Moreover, he himself fostered the rise of Islamist movements to counter the Arab nationalism at a time. The real problem for the West is anti-imperialism. That's why he tries to discredit any popular movement in the Arab world who is opposed to its interests by affixing the label "Islamist."
Finally, it should not be very smart to think that the Arab dictatorships are bulwarks against the rise of religious fanaticism. Instead, these repressive regimes have led some of the population to be radicalized. Who could afford to say that such and such people have no right to democracy? In a truly democratic country, different political forces may emerge. But the bourgeoisie comprador ruling in the Arab dictatorships can not convince people. She can not even face to face. To defend the imperialist interests, you must prevent other political forces to emerge because they are likely to convince the people against a corrupt elite. The West has always sought to maintain dictatorships that served its interests by waving the specter of Islamism. But the Arab peoples need democracy. They claim it today and nobody can not go against these claims.
| How To Repair A Torn Couch || Lures & Revolutions |
What happens in the Maghreb, Egypt is probably a prelude, predators waiting for their time: these insurgencies are for them, as once were the struggles of American countries South, a field of experimentation. Become cumbersome, the Ben Ali Mubarak and other (member of the International Socialist! As DSK, as SÃ©golÃ¨ne!) Will be replaced by Democrats on their own blessed by the IMF and technocrats dismal. As we will rely on the current economic system will not change anything in depth because it is the source of deadly disturbances of humanity as a whole.
All cases we defend not they come here? Address the profound evil does he not return to drastically change my lifestyle? Give yourself the luxury of denying that the neighbors poor, hitherto ignored, can live decently. Solidarity that is shared, like bread, like a handshake, like a poem, like ideas and wealth too. Let's start by sweeping our doorstep. Globalization? I felt like an illusion, an ideology of standardization and formatting of the masses. An insurgency is not a revolution: the first is the result of a situation had become intolerable while the second, in essence, is the long term, by mobilizing more than the civic conscience which should be central to any process and any political action. The game of global governance that is taking place is to discredit political thought (which has nothing to do with an ideological construct). Let us not forget that capitalism is the result of an ideology (with its strategies, policy makers and police), and in this respect is comparable to Stalinism which was only a state capitalism totalitarian. And this is capitalism, we do not too worried, is not it, when rampant in the Arab and African held an iron fist by dictators orders of multinational corporations, guided by foreign secret services. Dream holiday in Hammamet Marrakech or for a nominal price, which in the wings, has a price in human lives.
unbridled consumption, a synonym for huge profits, which suck the vast majority of people, today revealed its limitations and the risks it is incurring imminent future generations. Market forces, as we bombard the singers of the single thought, were only dressing a hateful ideology has continued to crush the living beauty of the values common to all cultures.
" That the Earth is pretty " said the poet Armand Robin, "No need also flowers!"
| By: John B Taylor ||Thanks very much to Professor Hamilton for posting my paper and for stimulating such a good discussion. Though the title of the post mentions only the Fed, my paper also raises questions about fiscal policy decisions (the temporary rebates), implementation of policy by the Administration (the lack of clarity in the operation of the TARP), and regulatory policy (the failure to rein in Fannie and Freddie). The last of these is an example of regulatory failure, and I completely agree here with the analysis in the Hamilton 2007 Jackson Hole paper.
Here are some other comments:
Tim: The Total TAF balance in Figure 9 includes the dollar loan auctions at other central banks in addition to the Fed TAF balance. GK,1: As I mention in the paper, the fall in oil prices in the period beyond the data plotted in Figure 10 was very likely due to the sharp decline in the world economy and the deteriorating future outlook. In my view the IMF staff research I referred to controls for such effects using multivariate methods in ways that are difficult to include in a graph. GK,2: If you take the funds rate down to 1 but then raise it more rapidly than in Figure 1 you get very similar results as in Figure 2. So I think my results are robust to your alternative counterfactual, which seems like a reasonable alternative. KNZN: I did not say that the Fed should not have cut rates in the first 6 months of the crisis, but I do think that the rate came down too much and too rapidly during that period and that is why I used it as an example. You get very similar results if you use blue chip forecasts for inflation and output at the time, but, in any case, I do not think it is silly to use current values in the policy rule. First, that is how the rule was first evaluated. It builds in the lags that you mention. Second, the current values are effectively forecasts because the Fed always has to forecast (nowcast) where we are. I am not arguing that you should put asset prices in the Taylor rule. I do not think that is a good idea. The Fed was too low in 2002-2004 even without asset prices. MICHAEL KRAUSE: I agree with you about the dangers of falsely attributing causation to correlation, especially with the passage of time. Using explicit counterfactuals with models, as I have tried to do when possible, helps prevent this. Also much of the work underlying this paper was done in real time without the advantage of hindsight. SMG: Housing also depends on short rates, because of ARMs. I think the long rate problem was due to holding short rates down for too long, which affected expectations of future short rates.
RONMEXICO: 1. The estimated regression coefficients of housing starts on the federal funds rate are very significant. 2. Figure 9 is an illustration; in my paper with John Williams we control for other factors using multivariate regressions. 3. I have tried to add oil prices to regression tests of the rebate, but the impact of the rebate on consumption remains insignificant. 4. The point here is that rates were cut by more than the policy rule.
| "Temporary" Capital Controls Coming to China? ||Massive Reserve Hemorrhage |
China hemorrhaged $663 billion of its reserves since June 2014 in a misguided attempt to prop up the yaun. Once the biggest buyer of US treasuries China Starts Dumping U.S. Government Debt.
Note the irony of that headline. Misguided analysts long clung to the belief that the US dollar would go to hell when China started dumping treasuries, "certificates of confiscation" as they were commonly called.
Instead, China has used a significant portion of its reserves to prop up the Yuan. It still has about $3.3 trillion left according to estimates, but China cannot keep the current pace up forever.
"Temporary" Capital Controls the Solution?
The Financial Times reports Capital Controls May be Chinaâs Only Real Option.
Chinese officials readily admit that communication has not been their strong point when it comes to dealing with international investors. Policymakers have now made it explicit that they have no wish to engineer a big devaluation. However, they are much less forthcoming about how they plan to reconcile a desire for currency stability with the realities of capital flight and a slowing economy.Yuanâs Fall Is Just âNoiseâ Amid Deeper China Woes
Central bank guidance is most effective when the policy is clear and it is relatively straightforward to work out how it will evolve in response to changes in economic data. At present, the reality in China is that the PBoC has no clear course of action and wants to leave itself flexibility.
No amount of clarification would help to varnish the underlying problem: capital flight. The corruption clampdown and a lack of investment opportunities at home are driving Chinese people to take their money out of the country, just as the prospect of higher US interest rates is prompting companies to pay off dollar debt. Fear of a devaluation has fuelled the outflows. Far from seeking a weaker renminbi, the central bank has been forced to spend a big chunk of its reserves to prop it up
This goes against the grain of recent liberalising measures, which last year helped China win the renminbiâs inclusion in the International Monetary Fundâs special drawing rights basket, alongside traditional reserve currencies. However, the IMF has become far more willing to accept the case for temporary capital controls since quantitative easing sparked huge flows of hot money into emerging markets.
Capital controls are not a long-term solution but, at present, they are the correct step for Beijing to take in a very difficult situation. However, they will only work if China uses the breathing space to articulate a clear policy to rebalance its economy and liberalise its currency in the longer term â a process that will take many years.
The Wall Street Journal hits the nail on the head with this headline: Yuanâs Fall Is Just âNoiseâ Amid Deeper China Woes.
When the financier George Soros attacked the British pound in 1992 and famously âbroke the Bank of Englandâ he was trading on a conviction that the currency was misaligned.Managing a Crisis of China's Own Doing
Britain devalued after squandering its reserves in a vain defense. Mr. Soros walked off with $1 billion or more. To the surprise of many, though, the U.K. economy soon picked up once the pound found its proper level.
Chinaâs raging battles with currency speculators are unlikely to end as happily for the country. Thatâs because turmoil in the currency markets reflects a much more perilous imbalance than an overvalued yuan: China is now lopsidedly dependent on ever larger inputs of local bank credit to keep sputtering growth from declining further.
The country is already littered with âzombieâ factories, empty apartment blocks that form ghostly suburbs, mothballed power stations and other infrastructure that nobody needs. But yet more wasteful projects are in the pipeline, even as the government talks about cutting industrial overcapacity.
âThatâs the misalignmentâeverything else is noise,â says Rodney Jones, the Beijing-based principal of Wigram Capital Advisors, who was a partner at Soros Fund Management during the 1990s.
If debt keeps piling up at the current rate, China faces an eventual financial crisis, perhaps leading to years of subpar growth, mirroring the fate of Japan after its bubble burst in the early 1990s.
Mr. Jones argues that global equity markets havenât property adjusted to this risk, even after a 16% decline in U.S. dollar terms from their May peak. âThe world will have to learn to live without demand from China,â he says. âItâll come as a shock.â
As we sit here discussing "temporary" measures that often seem to last decades, we need to step back and ask: What caused this mess?
The answer is a ridiculous growth targets. To hit 7% growth targets for years on end, China had to waste a lot of money on projects, many of which are now worthless.
While the boom lasted, China, like Japan before it, was considered an "economic miracle".
To top it off, China did not float the yuan, but now wants to defend an untenable target.
Unlike the above writers, I suggest China do what it should have done a decade ago: float the yuan and stop micro-managing the economy.
Sure there will be a lot of short term pain. But short term pain is a lot better than three lost decades as Japan is experiencing
Mike "Mish" Shedlock
| Syrizia and the SNP ||I didn't really like Ian McEwan's novel Saturday but there was one line that spoke to me, which had to do with the "accidental nature" of the opinions you hold. We like to think we arrived at them by a rational interrogation of the available evidence but really it often has to do with timing and the (frequently unrepresentative) people you read or talk to. I'm like that with the Euro. I graduated three years before the introduction of EMU and from what I had read, I was convinced it wasn't a very good idea. It was pretty basic textbook optimal currency zone stuff. Europe, as far as I could tell, fell far short of qualifying as one - but I could have easily drawn a different conclusion if I was reading the same European history a few years later when it looked as if the naysayers were wrong, or if I had been clever enough to convince myself that the differences in the putative Eurozone economies didn't matter as much as I thought they did.|
I don't, in other words, have anything particularly original to say about the position Greece finds itself in now. One is inclined to agree with much of what has been written about the deflationary impact of the IMF intervention within the context of a monetary union, which now virtually everyone agrees Greece should not have joined.
Syrizia obviously were not responsible for all of this but I'm also with a rather smaller number who think criticism of the way they have handled this situation they did not create has to go some way beyond admitting "they've made a few mistakes". Dan Davies has a very good summary of this, "When negotiating with Germans, do
mention the war, as much as possible" non-strategy here
There's one small point to add of a personal nature: I was a little dismayed when people were going on about how cool it was that Varoufakis was a clever leftwing academic because it reminded me of my Dad. There's lots of things that clever leftwing academics are generally really not very good at but at the top of my list is admitting they might be wrong. (You may find something Freudian in this if you wish...)
It is in this context of a complete failure to do anything that could be reasonably described as negotiation that Sunday's plebiscite
should be understood. I'm not alone in finding similarities
between Scotland's September independence referendum and this, although I think most people would agree the former was rather better conducted. Among the features they shared were as follows:
1) The insistence that, what to the outside observer would be reasonably described as populist nationalism, it is absolutely not this but rather democracy! What with democracy being an unarguably Good Thing, if you disagree with us, or have any issues with the populism inherent in plebiscites, then you obviously hate democracy. So saith those who intone the General Will. For them, raising issues about whether this 'purest expression of democracy' is the best way to conduct politics in a country is unbearably bourgeois.
2) The insistence that this exercise in democracy creates obligations that stretch outside the borders of the country in which it is held. In both cases this has to do with the messy business of sharing a currency. With the SNP and Yes Scotland, the idea that the outcome of the referendum created an obligation for the rUK to enter a currency union - and was not a matter that the English, Welsh or Northern Irish needed to be consulted on
. You can take this 'sovereign will of the people' thing too far.
It is a similar situation with Syrizia. I should stress that I hope Greece strikes a deal with the EU and to this end I hope people realise that the last thing they need here is more democracy because there is no way that a proposal for more assistance would pass the sort of 'democratic' test in Eurogroup countries that Greece held on Sunday.
3) The insistence that pointing out that potential pitfalls in a chosen political trajectory is just 'scaremongering'. I would concede that there was some of this on the No side in Scotland and the Yes side in Greece but I'm afraid merely pointing out that if party x does y, it's reasonable to assume bad stuff might happen, simply can't be dismissed in this blanket fashion. Hope over fear? Yeah, that always works, doesn't it? Like with children and fireplaces, for example.
For the Nats, it was this idea that refusing a currency union was a 'bluff', as if the Eurozone crisis hadn't happened or something. Then it was the idea that 'sterlingization' might not be a very good idea and if you suggest otherwise, you're 'talking Scotland down' - as if any 'dollarised'
country isn't dependent on its balance of payments to generate currency reserves, or that the fall in the price of oil might have created a bit of a problem here - with or without 'secret oil-fields'
For Syrizia it was the idea that 'Oxi' may well mean an exit from the Eurozone. I do hope and believe that this won't happen but the consensus is that it looks increasingly likely. There surely isn't now anyone who thinks this is impossible? Yet at the time of voting apparently only 5% of No voters thought this was a likely outcome
. I hope to God it doesn't happen but those lines about 'scaremongering' are going to look pretty stupid if Greece starts paying wages and pensions in IOUs.
For the future, for Greece we'll have to wait and see but being of a parochial mind recently, one can't help wondering what impact all this will have in Britain and Scotland with the forthcoming referendum on EU membership. I'm struck by the way that the Greek debt crisis has caused some on the British left to return to the days before (some) Labour and the Tories swapped sides on the issue of EU membership. The question is, what does a party led by someone
who seriously imagines Labour went wrong when they ditched Michael Foot do now, given that they claim to represent 'real' Labour values? The SNP adopted 'Independence in Europe' as part of Salmond's gradualist strategy but the interesting thing is that not only is Scotland not a country of Euro-philes in the way that the SNP leadership likes to pretend, Yes voters are actually more Euro-sceptic
than those of us who voted No.
The Euro crisis has obviously had an impact on the SNP, which is why what they were effectively arguing for in the referendum was independence within the UK rather than Europe. Assuming this ill-advised Europe referendum goes ahead as planned, there is no question of the SNP adopting the position of the Bennite left that many of them claim to represent. They won't do this because they are not a leftwing party at all, Bennite or otherwise. Making these assumptions, one could make the following predictions about the SNP's position on the EU 'in-out' referendum:
1) They will struggle to have anything relevant to say. They will conveniently forget that Salmond-era SNP wanted us to ditch the 'millstone' of Sterling for the pound and join EMU but there is no question of campaigning for an exit. Therefore their position is likely to be the same as that of the Conservative government, which one assumes will be to retain membership of the EU but rule out adopting the Euro. What's left is complaining about details such as insisting HM Government needs a 'mandate' in all the component part of the UK and complaining about how awful it is that 16 and 17 year olds can't vote or whatever.
2) This won't make a blind difference to the level of SNP support. It's not just that your average SNP voter is indifferent to the EU, it is that the Nationalist movimento has occupied a space that is completely beyond any arguments about economics, which creates something of a problem for opposition parties. It doesn't seem to matter that a party doesn't have a coherent plan - what matters is they are seen as making a stand for the national collective, regardless of whether they actually achieve anything. Both the SNP and Syrizia are considerably more benign than some of those who cheer them on but it is a trend in European politics that is more than a little unsettling. You could say that I take this position because I am fearful, conservative, on the side of 'neo-liberalism', or lacking faith - but then you'd be making my point for me.
| Mabadilliko ya tabianchi yameathiri uchumi wa Malawi-Benki ya dunia ||Shirika la fedha duniani, IMF na benki ya dunia wanafanya kazi kwa pamoja ili kusaidia nchi ya Malawi kukabiliana na athari za mabadiliko ya tabianchi. Mabadiliko ya tabianchi yameathiri pakubwa uchumi wa Malawi katika kipindi cha miaka miwili baada ya mafuriko yaliyofuatiwa na ukame mbaya zaidi kuwahi kushuhudiwa katika historia ya nchi hiyo. Kwa mujibu [...]|
| Analisa Kasus Penjualan Saham Telkomsel dan Indosat ke SINGTEL |
(HASAN NURYADI M.Ec)
âAnalisa Kasus Penjualan Saham Telkomsel dan Indosat ke SINGTELâ
A.Analisis Kasus Ekonomi Politik Indosat dan Telkomsel
B.Dampak negative privatisasi
C.Telekomunikasi dan kepemilikan asing
D.Sejarah operator di Indonesia
E.Kepemilikan silang dan asing
F.Nasionalisme dan manfaat
G.Pulsa, internet, sms, 3G kita membuat kaya negara asing...
1.Penjualan indosat ke singapore,(STT)
H.Telkom Gandeng Singtel Kembangkan SDM
enganalisa kasus -kasus yang telah dilakukan oleh telkomsel maupun indosat ,yang saya kira membuat negara kita rugi hingga saaat ini dan hal inilah yang membuat saya tertarik dengan permasalahan ini ,saat ini Indonesia menjadi incaran para pakar-pakar bisnis dunia kerana Indonesia mempunyai segalanya .katakan saja seperti Telkomsel,Indosat,XL dan lain-lain ,yang dimana semuanya menguasai pangsa pasar di Indonesia,tapi apa yang terjadi pada saat ini justru perusahaan di atas menjual saham-saham mereka kepada pihak-pihak asing sehingga membuat perekonomian Indonesia semakin kacau saja .dan yang membuat kita geram mendengarnya adalah yang membelinya singapore,malasia yang merupakan negara tetara kita yang hasil buminya tidak lebih baik dari negara kita ,namun sistem ekonominya seratus kali lebih dari negara kita .mereka pinter memamfaatkan sumber daya yang ada sehingga menghasilkan sesuatu barang atau hal-hal yang bernilai ekonomi.dan hal inilah yang membuat pengangguran di negara mereka berkurang ,dan bahkan mereka mampu mempengaruhi dunia saat ini yaitu singapore.
Dalam hampir setiap seminar, workshop, diskusi atau forum-forum terbuka lain yang membahas mengenai telekomunikasi, saya hampir selalu menemukan komentar atau lontaran pertanyaan mengenai kepemilikan perusahaan-perusahaan telekomunikasi di Indonesia ini. Yang lucu, kalau sudah bicara mengenai kepemilikan asing, maka pasti yang akan dibahas adalah Indosat. Mengapa demikian? mengapa tidak operator lain yang yang diributkan?..
A.Analisis Kasus Ekonomi Politik Indosat dan Telkomsel
Semua orang Indonesia mengaku tahu dan bangga bahwa negara kita kaya, kaya sumber alam, kekayaan anugerah Allah Yang Mahakaya. Namun, tidak semua mau mengaku bahwa kita ini bangsa yang bodoh, juga bangsa yang tidak bisa berdagang, sehingga dibodohi orang lain.Bagaimana kita dilecehkan karena kebodohan kita, lihat saja kasus STT/Temasek.STT atau Singapore Technologies Telemedia menjual 40,8 persen sahamnya di PT Indosat ke Qatar Telecom (Qtel) dengan harga jauh dari saat membelinya tahun 2002.Kita seolah (terlambat) disadarkan bahwa pemerintah Megawati waktu itu menjual terlalu murah, hanya Rp 5,62 triliun untuk 41,94 persen saham Indosat ke STT dengan alasan sedang butuh uang untuk menambal APBN. Mendapat dividen sekitar 1,5 miliar dollar AS selama mengelola PT Indosat selain menyisakan 1,14 persen saham, STT juga untung hampir dua kali lipat dengan penjualan senilai 1,8 miliar dollar AS atau Rp 16,56 triliun (kurs Rp 9.200 per dollar AS). Kelompok Temasek, selain mempunyai PT Indosat, juga memiliki 35 persen saham PT Telkomsel, yang sebagian didapat dari hengkangnya Koninklijke PTTâPost Telefoon en TelegrafâNederland (KPN), ditambah penjualan saham Telkom untuk menaikkan kepemilikan saham Singapore Telecom (SingTel), anak usaha Temasek. Dari semua unit usaha telekomunikasi di Singapura atau di luar, Telkomsel menyumbang jumlah pelanggan yang paling besar, yakni 55 juta berbanding sekitar 2,5 juta pelanggan Sing.
Indonesia memang merupakan negara yang luas tapi sayangnya pemikiran kita tak seluas negara kita,lihat saja Talkomsel dan indosat murupakan perusahaan besar yang di miliki oleh negara kita,namun apa yang terjadi pada dua perusahaan ini mereka malah menjualkannya pada negera-negara asing,yang mlah mumbuat negara kita semakin miskin dan meningkatnya pengangguran .coba seandainya kedua perusahaan ini tidak di jual,dua perusahaan ini bisa menambah pendapatan negara kita ,karna kenapa di lihat dari segi penduduknya indonesia murupakan salah satu negara yang penduduknya sangat banyak dan semuanya menggunakan handphone selularbaik itu yang kaya maupun yang miskin.dan harga pulsanya pun sangat mahal misalnya saja pulsa yang 5ribu rupiah Rp6000 rupiah,dan ini merupakan harga yang sangat mahal kalau kita bandingkan dengan Malasia,singapore,Brunai Darussalam,bahkan hampir bisadi katakan pulsa di negara mereka tidak berharga.sungguh ironis apa yang telah di lakukan oleh bangsa kita ini sehingga menjurumuskan kita ke dalam keterperosotan yang semakin dalam.
Privatisasi merupakan kebijakan yang diambil pemerintah untuk mendapatkan devisa bagi negara dengan menjual sebagian saham milik aset milik negara ke pihak lain. Kebijakan yang diatur dalam Undang-Undang No. 5 tahun 1999 ini diambil dari usulan yang diberikan oleh pemerintah sebagai upaya untuk menstabilkan kondisi keuangan dan meningkatkan devisa atau penerimaan negara. Kebijakan yang dikeluarkan oleh pemerintah ini harus mendapat persetujuan dari DPR RI. Oleh karena itu kebijakan privatisasi merupakan salah satu kebijakan ekonomi politik Indonesia yang diharapkan dapat membawa manfaat yang besar bagi Indonesia.Dalam kasus privatisasi PT Indosat Tbk dan PT Telekomunikasi Seluler (Telkomsel) yang mendapat persetujuan DPR RI adalah penjualan sebagian saham PT Indosat Tbk dan PT Telkomsel Tbk kepada pihak luar. Sebesar 35 persen saham Telkomsel dibeli oleh Singapore Telecom (Singtel) dan sebagian saham Indosat yaitu sebesar 41,94 persen saham dibeli oleh Singapore Technologies Telemedia (STT). Akan tetapi dalam kenyataannya kedua perusahaan Singapore yang telah membeli saham PT Telkomsel Tbk dan PT Indosat Tbk adalah perusahaan-perusahaan yang ada dibawah satu perusahaan induk yaitu Temasek Holding Group Ltd Singapura. Sehingga secara tidak langsung Temasek Holding Group Ltd Singapura yang memegang lebih dari sepertiga saham memiliki kewenangan untuk mempengaruhi kebijaksanaan, strategi dan profit dari PT Indosat Tbk dan PT Telkomsel Tbk.
Indosat Tbk dan PT Telkomsel Tbk merupakan provider telekomunikasi terbesar di Indonesia. Kedua perusahaan tersebut memiliki cakupan pasar sekitar 80 persen dibandingkan dengan provider telekomunikasi yang lain sehingga bisa dikatakan bahwa kedua perusahaan tersebut merupakan perusahaan vital karena berhubungan langsung dengan hajat hidup orang banyak. Bila mengacu pada pasal 33 ayat 2, kepemilikan saham yang begitu besar ini jelas akan mengurangi peran pemerintah dalam mengalokasikan sumber daya publik pada masyarakat karena semakin besar pemegang saham membeli saham suatu perusahaan, maka akan semakin besar pula intervensi yang dapat ia lakukan dalam menentukan kebijakan perusahaan tersebut.
B.Dampak negative privatisasi
Sedangkan dampak negatif yang diberikan dari dilakukannya privatisasi ini adalah adanya tanda-tanda bahwa adanya monopoli pasar yang dilakukan oleh perusahaan induk dari Singtel dan dan STT Singapore yaitu PT Temasek Singapura. Kondisi monopoli pasar ini merupakan kondisi yang tidak diinginkan dalam suatu lingkungan industri yang dapat merusak iklim bisnis di Indonesia. Walaupun tidak menguasai seluruh saham kedua perusahaan tersebut, tetapi lebih dari sepertiga sahamnya dikuasainya dan secara langsung Temasek mempunyai kewenangan yang sangat besar dalam mengatur kebijaksanaan, strategi dan profit yang didapat oleh kedua perusahaan telekomunikasi Indonesia tersebut. Selain itu pemerintah akan mengalami kesulitan untuk mengintervensi dan mengatur perusahaan-perusahaan ini secara langsung, karena selain berhadapan dengan Temasek, pemerintah juga akan berhadapan dengan hukum Internasional.Studi Kasus Privatisasi PT. Indosat Tbk. (2002-2003). Agus Sarwanto ... politik ekonomi pada Pemerintahan Megawati Soekarnoputri: Studi kasus Soekarnoputri mengeluarkan kebijakan privatisasi terhadap perusahaan yang sangat strategis dan ... Korporasi perusahaan agar tercipta manajemen dan budaya kerja ..ï»¿
C.Telekomunikasi dan kepemilikan asing
ada hal menarik yang belum saya tuliskan dan cukup worth it untuk dibahas mengingat topik ini terus menerus berulang dan menjadi bahan pembicaraan orang (atau koran?). Sayangnya, sedikit sekali orang yang mau melihat persoalan secara utuh dan menempatkannya pada konteks yang tepat. Sayangnya lagi, justru orang-orang yang hanya mengambil screen shot dari konteks permasalahan yang banyak bersuara lantang di ruang publik sehingga terbentuklah opini.
Dalam hampir setiap seminar, workshop, diskusi atau forum-forum terbuka lain yang membahas mengenai telekomunikasi, saya hampir selalu menemukan komentar atau lontaran pertanyaan mengenai kepemilikan perusahaan-perusahaan telekomunikasi di Indonesia ini. Yang lucu, kalau sudah bicara mengenai kepemilikan asing, maka pasti yang akan dibahas adalah Indosat. Mengapa demikian? mengapa tidak operator lain yang yang diributkan?
Karena saya tidak suka conspiracy theory, maka saya melihat dari sudut pandang yang jelas-jelas ada saja. Jadi dalam issue ini, saya lebih suka menduga bahwa ini karena faktor sejarah yang membedakan antara Indosat dengan perusahaan-perusahaan telekomunikasi berlabel PMA yang lain.
D.Sejarah operator di Indonesia
Di antara seluruh operator di Indonesia, memang hanya Telkom dan Indosat perusahaan telekomunikasi yang pernah menjadi perusahaan yang BUMN secara langsung (artinya saham langsung dipegang oleh Pemerintah dan juga menyandang gelar persero). Kedua perusahaan pernah menikmati masa-masa indah monopoli yang dibagi dalam dua wilayah layanan, yaitu telekomunikasi domestik (oleh Telkom) dan telekomunikasi internasional (oleh Indosat). UU Telekomunikasi No. 3 Tahun 1989 dan turunannya bahkan menjadikan kedua perusahaan sebagai Badan Penyelenggara, yang berarti bagian dari Pemerintah. Meminjam istilah fraksi yang merupakan perpanjangan tangan parpol, maka Telkom dan Indosat merupakan perusahaan yang menjadi perpanjangan tangan Pemerintah di dunia bisnis. Bahkan menjelang IPO, kedua badan penyelenggara mendapatkan hak ekslusifitas atau jaminan monopoli untuk jangka waktu cukup lama (Indosat untuk SLI sampai tahun 2004, Telkom untuk SLJJ sampai tahun 2005 dan Lokal sampai tahun 2010).
Dari kedua perusahaan ini, muncullah perusahaan-perusahaan telekomunikasi lain, besar dan kecil yang merupakan hasil patungan kedua Badan Penyelenggara. Bisa dikatakan, hampir seluruh perusahaan telekomunikasi penyelenggara Jasa Teleponi Dasar merupakan milik Pemerintah, baik langsung (di Telkom dan Indosat) maupun tidak langsung (sebagai anak cucu kedua perusahaan tersebut). Perusahaan telekomunikasi yang murni swasta masih bisa dihitung dengan jari (misalnya Excelcomindo yang sejak awal berdiri merupakan swasta murni).
Pada Tahun 1997-1998, ketika krisis moneter yang berlanjut menjadi krisis multidimensi melanda Indonesia, datanglah IMF yang membawa dana sekaligus âresepâ pemulihan ekonomi. Salah satu âresepâ yang dibawa IMF untuk sektor telekomunikasi adalah privatisasi dan pelarangan cross ownership. Pemerintah dan DPR pada waktu itu tidak memiliki pilihan lain, UU Telekomunikasi baru, yaitu UU No. 36 Tahun 1999 segera dibuat dan disahkan menggantikan UU No. 3 Tahun 1989. UU baru ini yang secara drastis mengubah peta telekomunikasi Indonesia. Struktur penyelenggaraan jelas dirubah, kepemilikan juga tidak luput. Liberalisasi telekomunikasi Indonesia diawali dengan diterbitkannya UU baru ini. Pada prinsipnya, siapapun bisa menjadi penyelenggara telekomunikasi, baik BUMN, BUMD, swasta maupun koperasi. Dan ketika berbicara swasta, tidak ada pembatasan atau kentuan mengenai asing atau domestik. Satu-satunya regulasi terkait dengan kepemilikan asing adalah komitmen dalam GATT / WTO, namun pembatasan ini juga akhirnya banyak sekali direduksi dan bahkan banyak pula pembatasan yang dihilangkan.
Selain liberalisasi dan privatisasi, ada satu tuntutan IMF lain yang âsederhanaâ namun dampaknya jelas berkepanjangan sampai sekarang. Dalam LoI (Letter of Intent) yang ditandatangani oleh Pemerintah Indonesia dan IMF, konon salah satu klausul yang tercatat adalah larangan adanya cross ownership antara dua perusahaan telekomunikasi Pemerintah, yaitu Telkom dan Indosat. Larangan ini benar-benar diterapkan pada awal tahun 2001 yang ditandai dengan kesepakatan pembagian anak-anak perusahaan Telkom dan Indosat. Pada awalnya keduanya, baik Telkom maupun Indosat âberebutanâ untuk mendapatkan Telkomsel diantara anak-anak perusahaan lain. Maklum, bahkan pada pada tahun 2001, Telkomsel merupakan perusahaan yang sangat sehat, tanpa hutang, sudah menjadi market leader dan berani mengklaim sudah hadir di seluruh propinsi di Indonesia (meskipun baru di ibukota provinsi). Dengan âpetunjukâ dari Pemerintah sebagai pemegang saham kedua perusahaan, disepakati bahwa Telkom mendapatkan Telkomsel, melepaskan kepemilikan di semua perusahaan yang lain, menyerahkan wilayah Jawa Tengah (Divre IV) dan masih harus membayar secara tunai kepada Indosat.
Sebelum eksekusi larangan cross ownership di atas, Telkom dan Indosat sudah mendapatkan alokasi frekuensi GSM baru dari Pemerintah di band 1800 MHz. Indosat segera membentuk Divisi Mobile yang kelak menjadi IM3 dan Telkom membentuk Divisi Mobile pula yang waktu itu dinamakan Telkom Mobile. Proses âperceraianâ dilaksanakan, Telkom yang harus membayar Indosat dalam jumlah besar memutuskan untuk melebur Telkom Mobile ke Telkomsel dan sekaligus menjual sebagian saham kepada strategic partner. O ya, kebetulan KPN yang menjadi pemegang saham Telkomsel lain mengalami kesulitan di daratan eropa dan memutuskan untuk quit dari Telkomsel, selain itu entah apa alasannya, Setiawan Djodi juga melepaskan sahamnya di Telkomsel. Telkom menemukan strategic partner yang pas, yaitu SingTel. Pada awalnya SingTel hanya menguasai 25% dari saham Telkomsel, namun kemudian menambah kepemilikannya menjadi 35%. Komposisi kepemilikan ini berlaku sampai sekarang.
Eksekusi kesepakatan pelepasan cross ownership ternyata tidak mulus. Karyawan Telkom di Jawa Tengah menolak untuk masuk ke Indosat bahkan mereka berbondong-bondong datang ke Jakarta untuk melakukan demonstrasi pada saat dilakukan RUPS di Indosat. Entah ada intervensi dari Pemerintah atau tidak, beberapa tahun kemudian, management kedua perusahaan (Telkom dan Indosat) sepakat untuk membatalkan salah satu bagian dari kesepakatan tersebut, konsekuensinya, Telkom harus membayar Indosat. Indosat rupanya tidak mau tanggung untuk keluar dari lingkaran Telkom. Selain melepaskan kepemilikan di MGTI (pelaksana KSO di Jawa Tengah), Indosat juga melepaskan saham di PIN (KSO Divre I, Sumatera).Dengan uang hasil penjualan Telkomsel, Indosat langsung mengakusisi Bima Graha, pemilik mayoritas saham Satelindo pada waktu itu (Bimagraha merupakan unit bisnis di bawah bendera Bimantara sekarang merupakan Pemilik Mobile-8). Kepemilikan Indosat di Satelindo naik menjadi 75%. Sementara itu, pada akhir 2001, IM3 anak perusahaan berada dibawah kendali penuh Indosat (sebagian saham dalam proporsi yang sangat kecil dimiliki oleh Koperasi Karyawan Indosat) mulai launching. Kini Indosat memiliki dua perusahaan seluler yang beroperasi dan dikemudian hari akan menjadi sumber permasalahan besar di Indosat.
Sementara IM3 baru mulai beroperasi dan telah menyerap dana trilyunan rupiah dari Indosat, Satelindo berada pada posisi yang sulit. Kreditor Satelindo menerapkan covenant yang mengakibatkan Satelindo tidak dapat melakukan ekspansi. Struktur permodalan Satelindo yang kritis mengakibatkan kreditor mengawasi perusahaan ini dengan sangat ketat. Padahal, di dunia seluler, berhenti membangun sama saja menunggu kematian pelan-pelan. Untuk melepaskan covenant tersebut, shareholder harus melakukan penyuntikan modal kepada perusahaan untuk memperbaiki struktur permodalan. Sayangnya DT Mobile sebagai pemilik 25% saham Satelindo tidak sudi mengeluarkan dana tambahan untuk melepaskan covenant itu. Barangkali dengan tekanan dari Pemerintah juga, DT Mobile akhirnya keluar dari Satelindo, Indosat menjadi satu-satunya pemegang saham Satelindo 100%.
Dengan semua corporate action di atas, bisa dibayangkan berapa dana yang terlibat dan pajak yang harus dibayar oleh Telkom maupun Indosat. Kabarnya untuk pajak saja, tidak kurang dari Rp. 3 T dibayarkan kepada negara (sebagai perbandingan, bahkan revenue Indosat pada waktu itu masih di bawah Rp. 5 T).
Jika Telkom nampak sudah mulai tenang dan menata kembali bisnisnya setelah selesainya segala ribut-ribut di atas, tidak demikian halnya dengan Indosat. Kali ini bukan corporate action yang dilakukan oleh Indosat, tapi justru datang dari Pemerintah. Setelah issue cross ownership diselesaikan, Pemerintah masih tetap memiliki saham sebesar 65% di Indosat (sisanya semua diperdagangkan di pasar modal, baik JSX maupun NYSE). Karena tekanan kebutuhan untuk mengisi kas APBN, maka atas persetujuan DPR, Pemerintah diperbolehkan menjual saham-saham BUMN (privatisasi). Dalam daftar BUMN yang akan dijual, muncul Indosat.Pada awalnya, Pemerintah melakukan block sale di JSX, 8% saham dijual kepada publik. Namun rupanya cara ini tidak menghasilkan harga yang memuaskan. Maklum saja, dengan cara menjual saham ke publik, Pemerintah akan mendapatkan harga pasar terhadap setiap lembar saham dilepas. Strategic sale akhirnya menjadi pilihan. Dengan sisa kepemilikan sebesar 57%, Pemerintah menawarkan 42% sahamnya kepada investor yang berminat sehingga hanya menyisakan kepemilikan sebanyak 15%. Mengapa strategic sale? mudah saja, dengan strategic sale, Pemerintah berkesempatan mendapatkan harga premium, atau harga diatas harga pasar. Mengapa 42%? Alasannya juga mudah, kalau yang dijual hanya 30% misalnya, sehingga dalam komposisi akhir Pemerintah masih menguasai 27% (hampir berimbang dengan investor baru), maka pasti premium yang akan didapatkan akan semakin kecil. Logikanya investor akan memberikan premium lebih tinggi sebagai kompensasi terhadap kontrol yang akan diperolehnya terhadap perusahaan. Saham yang jual block sale ke JSX akan dihargai pada harga pasar karena investor tidak memiliki kontrol langsung kepada perusahaan. Semua proses di atas adalah logika bisnis normal.
Setelah mengadakan tender terbuka, dipilihlah pemenangnya yaitu STT yang menggunakan ICL sebagai SPV dalam pembelian ini. Lepas dari âkejanggalan-kejanggalanâ yang ditengarai berbagai pihak, misalnya keputusan pemenang yang ditentukan pada hari libur dsb, semua proses itu masih normal. Saya tidak tahu detail kejadian dibalik menangnya STT, namun dari sudut pandang corporate action, tidak ada kejanggalan apapun di sini.
E.Kepemilikan silang dan asing
Semua hingar bingar termasuk demonstrasi pasca penjualan Indosat nampaknya mulai mereda setelah masuk tahun 2003. Akhir tahun 2003, bertepatan dengan hari ulang tahun Indosat yang ke 36 (kalau saya tidak keliru), Indosat melakukan corporate action besar terakhir, yaitu melakukan merger tiga perusahaan (secara legal sebenarnya empat perusahaan, karena ada Bima Graha sebagai pemilik sebagian saham Satelindo) . Setelah hari itu, Satelindo dan IM3 sebagai entitas hilang ditelan oleh Indosat, namun produk-produknya tetap hidup sampai sekarang.
Tujuan dari merger yang dilakukan Indosat nampaknya adalah untuk meningkatkan efisiensi, terutama dalam belanja modal dan operasional jaringan yang dimilikinya, namun tujuan itu ternyata tidak mudah untuk dicapai. Setelah merger, ternyata Indosat mulai memasuki salah satu masa tersulit dalam sejarahnya. Merger secara entitas dapat dipersiapkan dan dilaksanakan dengan sukses, namun merger dalam hal-hal lain tidak semudah itu. Indosat harus melalui periode transisi menuju single network yang ditandai dengan menurunnya kualitas jaringan dan kemampuan meningkatkan kapasitas maupun coverage. Penyatuan sumber daya manusia, penyesuaian-penyesuaian organisasi dan berbagai persoalan pelik internal ternyata memerlukan waktu lebih panjang untuk diselesaikan. Dalam tiga tahun, sejak 2003 sampai 2006, âgejolakâ internal tersebut mengakibatkan performansi Indosat tidak cukup meyakinkan. Beberapa kali pergantian pucuk pimpinan tidak disertai dengan peningkatan pada performansi keuangan. Harga saham tentu saja cenderung stagnan dan segera dilewati oleh Telkom yang memang performansinya jauh lebih baik. Performansi Telkom yang kinclong tersebut sebenarnya ditopang oleh pertumbuhan Telkomsel yang hampir bisa dikatakan âtanpa sainganâ di Indonesia.
Puncak dari masa sulit Indosat terjadi di awal 2006 dimana baru pertama kali dalam sejarah, jumlah pelanggan seluler Indosat mengalami pertumbuhan negatif. Namun demikian, akhir 2006 sudah mulai menunjukkan tanda-tanda baik yang terus berlanjut sampai sekarang. Dan bersamaan dengan itu pula, mulai muncul issue-issue buy back, sentimen kepemilikan asing, monopoli dan berbagai tuduhan lain. Bahkan lembaga-lembaga akademis seperti LPEM dan INDEF melakukan studi khusus untuk âmenyelidikiâ kerugian rakyat Indonesia akibat monopoli yang dilakukan Temasek, nenek moyang dari SingTel yang memiliki Telkomsel dan STT yang memiliki Indosat.
Basis argumentasi dari kajian mereka pada intinya adalah tarif layanan post paid Telkomsel dan Indosat yang cenderung mirip dari tahun ke tahun serta capex dan profitabilitas Telkomsel (atau secara umum performansi) yang jauh melebihi Indosat dalam beberapa tahun sejak sebagian -besar- kepemilikan Indosat beralih ke STT. Baik LPEM maupun INDEF menyimpulkan bahwa semua itu merupakan indikasi adanya kontrol dari the ultimate owner (yaitu Temasek) yang berpotensi merugikan konsumen Indonesia (bahkan sempat keluar angka Rp. 25 T!).
Mengenai tarif layanan postpaid, baik LPEM mapun INDEF melupakan satu hal yang sangat penting dan berpengaruh terhadap industri telekomunikasi, yaitu faktor regulasi. Sampai dengan diterbitkannya PM 12 Tahun 2006 mengenai tarif layanan di Jarber Seluler, seluruh tarif seluler di Indonesia pada dasarnya adalah diregulasi. Tarif postpaid ditentukan berdasarkan skenario panggilan yang komponennya terdiri dari tarif Air Time dan tarif Interkoneksi. Baik tarif Air Time maupun tarif Interkoneksi semuanya di atur oleh Pemerintah. Tidak bisa dihindarkan, kondisi seperti ini tentu memaksa Telkomsel dan Indosat untuk menerapkan tarif sangat mirip. Lalu mengapa hanya Telkomsel dan Indosat yang menerapkan tarif post paid yang mirip? mengapa operator lain memiliki pola tarif yang berbeda? pertanyaan ini justru akan tepat jika dijawab oleh operator yang menerapkan tarif post paid berbeda. Telkomsel dan indosat jelas mengikuti regulasi dari Pemerintah, operator lain? who knows?
Kondisi yang sama sekali berbeda terjadi di prepaid karena memang sejak awal, tarif prepaid hanya di atur ceiling (maksimal 140% dari tarif post paid). Karena hanya diatur batas atas, maka variasi bisa sangat banyak dan range yang terjadi juga bisa sangat lebar. Dalam hal ini (tarif pre paid), tidak akan bisa dilihat pola yang mirip antara Telkomsel dan Indosat. Masih ingat aturannya bukan?
Hal kedua yang diributkan adalah performansi, baik keuangan maupun pertumbuhan pelanggan. Sebagaimana telah saya jelaskan panjang lebar di atas, pasca merger Indosat mengalami masa-masa transisi yang sangat sulit. Ini bukanlah kondisi yang terjadi by design, tapi secara natural. Belanja modal yang dianggarkan Indosat habis untuk melakukan pembenahan jaringan di seluruh Indonesia. Situasi internal perusahaan juga masih âshockâ pasca merger, perlu waktu untuk kembali ke jalur pertumbuhan. Dalam banyak kasus merger antar perusahaan-perusahaan besar, hal seperti ini terjadi di mana-mana. Indosat masih termasuk beruntung. Dalam waktu tiga tahun, bangunan baru hasil merger sudah mulai stabil. Perusahaan kembali mulai melangkah dan kembali ke jalur yang semestinya. Sebagaimana telah saya sebutkan tadi, Indosat baru mulai bangkit pada awal 2007 dan sebelum akhir tahun, tanda-tanda perningkat performansi itu sudah terlihat, harga saham Indosat kembali merangkak naik.
Kedua pokok argumentasi yang dibungkus dengan studi yang menggunakan berbagai metodologi canggih di atas ternyata dapat dijelaskan dengan sangat sederhana seperti di atas. Orang tidak memerlukan gelar doktor untuk memahami kondisi tersebut. Tapi cerita belum selesai.Akhir-akhir ini, KPPU bahkan âturun tanganâ menangani kasus ini. Dengan menggunakan berbagai âstudi ilmiah,â di atas sebagai bekal, KPPU melihat adanya indikasi bahwa Temasek telah dengan sengaja melakukan monopoli di pasar Indonesia. Orang yang sedikit saja tahu sejarah perkembangan seperti yang diuraikan di atas tentu akan tertawa atau setidaknya tersenyum. KPPU merupakan lembaga terhormat yang di dalamnya terdapat pribadi-pribadi cerdas dengan reputasi mengagumkan. Tapi ada satu hal kecil yang aneh di sini. Antara tahun 2001 dan 2002 ketika baik Telkom menjual saham Telkomsel ke SingTel maupun ketika Pemerintah menjual saham Indosat kepada STT, KPPU sudah eksis atau setidaknya UU No. 5 Tahun 1999 tentang Laranngan Monopoli dan Persaingan Usaha Tidak Sehat sudah diterbitkan. Kemana KPPU pada waktu itu? Mengapa penyelidikan baru dilakukan sekarang? Tahun 2007, lima tahun setelah Indosat dijual ke STT.
F.Nasionalisme dan manfaat
Tidak dapat dipungkiri bahwa aroma nasionalisme yang anti asing sangat dominan dalam issue-issue seperti ini. Sangat wajar bahwa setiap warga negara yang waras akan memiliki rasa nasionalisme, kecintaan terhadap bangsa dan negara ini. Saya pribadi sangat sedih ketika Indosat harus berpindah kepemilikan dari Pemerintah ke STT, saya bahkan mendukung ketika karyawan Indosat melakukan demonstrasi menolak privatisasi. Tapi rupanya para pengambil keputusan di negara ini memiliki pertimbangan lain. Saya tidak tahu, apakah karena terdesar oleh kebutuhan untuk mengisi kas negara sehingga harus menjual âangsa bertelur emasâ? lalu mengapa dijual kepada investor dari luar negeri bukan dari dalam negeri? lalu mengapa STT yang menang? dst. Itu semua tentu pihak-pihak yang terlibat langsung yang bisa menjawab.
Saat ini, yang bisa kita lakukan adalah menerima kenyataan bahwa semua itu sudah terjadi. Kita masih memiliki pilihan untuk masa depan. Jika memang menginginkan Indosat atau Telkomsel kembali menjadi milik Pemerintah atau setidaknya dimiliki oleh pemodal dalam negeri, akan jauh lebih elegan jika peminat tersebut mengajukan tawaran langsung kepada STT atau SingTel. Tidak perlu membuat kasus yang sebenarnya tidak ada. Kita bisa melakukan jauh lebih banyak hal demi kemajuan negeri ini atau dunia telekomunikasi pada khususnya dibandingkan dengan membangun opini publik, membuat berita di koran, membuat seminar, workshop atau kegiatan lain yang ujung-ujungnya adalah memaksa salah satu (atau salah dua) dari STT atau SingTel untuk melepaskan sahamnya. Cara-cara seperti itu sangat tidak elegan dan sangat membosankan.
SingTel Tingkatkan Kepemilikan di Telkomsel Singapore Telecommunication Ltd. (SingTel) kembali meningkatkan kepemilikan sahamya di PT Telekomunikasi Selular (Telkomsel), dengan membeli 12,7 persen saham PT Telekomunikasi Indonesia Tbk. (Telkom) senilai US$ 429 juta. Dengan demikian, kepemilikan saham SingTel di Telkomsel kini menjadi 35 persen dari sebelumnya 22,3 persen, sehingga komposisi kepemilikan saham Telkomsel berubah menjadi Telkom 65 persen (sebelumnya 77,7 persen).
G.Pulsa, internet, sms, 3G kita membuat kaya negara asing...
Apalagi yang dapat kita banggakan atas dunia telekomunikasi Indonesia ??Tahun 1995, PT Telkom mulai melakukan penjualan sahamnya di Bursa Efek Jakarta (BEJ), Bursa Efek Surabaya (BES), New York Stock Exchange (NYSE) dan London Stock Exchange (LSE). ursa Efek Jakarta (BEJ), Bursa Efek Surabaya (BES), New York Stock Exchange (NYSE) dan London Stock Exchange (LSE). Dengan melakukan perdagangan saham di beberapa bursa efek ini, maka saham Telkom dapat dengan bebas dimiliki oleh investor. Pertanyaannya sekarang, apa untungnya Telkom melakukan hal ini? Kalau alasannya cuma untuk mendapatkan tambahan dana untuk menyehatkan dan mengembangkan bisnis Telkom, seperti ini kurang relevan. Bukankah pada saat itu Telkom tercatat sebagai BUMN paling sehat. Pada saat itu jasa telepon wireline masih menjadi pilihan utama masyarakat, karena bisnis telkomunikasi mobile belum terlalu berkembang. Sehingga dapat dipastikan bahwa Telkom adalah satu-satu perusahaan telekomunikasi yang menguasa pasar telekomunkasi di Indonesia pada saat itu. Banyak pihak berpendapat bahwa process penjualan saham ini adalah bagian dari scenario besar yang sedang dijalankan oleh pihak-pihak tertentu untuk dapat ikut menguasai Telkom sebagai asset telekomunikasi paling besar di negara ini.
Lalu pada tahun 1999, dengan desakan yang sangat kuat dari IMF, disahkanlah Undang-undang nomor 36/1999, tentang penghapusan monopoli penyelenggaraan telekomunikasi. Pada dasarnya UU ini hanya bertujuan untuk mengurangi control pemerintah di pereusahaan-perusahaan telekomunikasi besar yang ada di Indonesia. Salah satu dampak dari UU ini adalah, Telkom dan Indosat tidak boleh ambil berbagi kepemilikan dalam sebuah perusahaan telekomunikasi di Indonesia. Sehingga di seluruh perusahaan telekomunikasi yang ada, dimana Telkom dan Indosat memiliki saham, maka kepemiliki keseluruhan saham perusahaan tersebut harus diserhkan kepada Telkom atau Indosat, sesuai dengan kesepakatan kedua perusahaan tersebut. Salah satu contoh kasusnya ialah seperti yang terjadi di Satelindo dan Telkomsel. Kepemilikan Telkomsel sepenuhnya menjadi milik Telkom, dimana Telkom harus membeli seluruh saham Indosat yang ada di Telkomsel. Dan Satelindo, sepenuhnya menjadi milik Indosat, dimana Indosat juga harus membeli seluruh saham Telkom di Satelindo.
Lihat juga kasus penjualan 12,72% saham telkom di Telkomsel kepada SingTel Singapore, sehingga saham SingTel di Telkomsel bertambah menjadi 35%, sedangkan saham Telkom turun menjadi 65%. Padahal pada waktu itu, proses penjualan saham Telkom di Telkomsel kepada SingTel ini tidak disetujui oleh DPR RI (kalau DPR tidak setuju, mestinya ada sesuatu dibalik process penjualan saham ini). Perlu diingat bahwa pada saat itu (2002), dengan jumlah pelanggan sebanyak 5 juta pelanggan, Telkomsel merupakan market leader di bisnis telekomunikasi mobile di Indonesia. Sehingga dengan bertambahnya jumlah saham SingTel di Telkomsel, maka akan mengakibatkan bertambahkan aliran uang dari Indonesia yang mengalir ke Singapore, yang secara langsung hanya akan memperkaya mereka.
1.Penjualan indosat ke singapore,(STT)
Kemudian kasus yang paling heboh, penjualan INDOSAT ke perusahaan asing asal Singapore, Singapore Technologies Telemedia (STT) pada tahun 2002. Dimana nilai jual INDOSAT saat itu dinilai sangat murah, padahal asset INDOSAT saat itu sangat besar, karena sebelum dijual INDOSAT baru saja mengakuisisi SATELINDO (dampak dari pemisahan saham INDOSAT dan TELKOM di seluruh perusahaan telekomunikasi yang ada di Indonesia). Dan dana hasil penjualannya juga tidak jelas alirannya kemana. Buntut dari penjualan ini, saat ini pemerintah Indonesia tidak memiliki control yang kuat di Indosat, karena mayoritas saham dimiliki oleh STT, yaitu sebanyak 39,96%, JP Morgan memilkin saham sebesar 8,38%, saham public sebesar 37,37%. Sedangkan pemerintah Indonesia hanya memiliki saham sebesar 14,29%. Dan yang lebih penting lagi, asset Negara yang begitu besar yang ada di Indosat, tidak lagi apat dimanfaâatkan sepenuhnya untuk kepentingan nasional bangsa Indonesia.
Lihat juga kasus jual beli license dan saham yang terjadi di 2 perusahaan pemegang license 3G yang baru, yaitu Cyber Access (CAC) dan Natrindo Telepon Seluler (NTS) kepada perusahaan-perusahaan asing (Hutchison Telecom dan Maxis Malaysia). Padahal pemerintah dengan tegas melarang mereka menjual license dan sahamnya sampai mereka benar-benar dapat beroperasi dan membuktikan komitmen mereka untuk membangun infrastruktur 3G di Indonesia, sesuai dengan kesepakatan yang ada dalam kontrak license 3G yang mereka dapatkan. Kedua perusahaan ini seperti ini tidak mau repot-repot membangun infrastruktur 3G, tapi mereka tetap mau dapat untung gede, akhirnya mereka hanya berlaku sebagai âbrokerâ license 3G, dapat license dari pemerintah dan menjualnya dengan harga lebih mahal ke perusahaan asing. Dapat untung gede dengan tanpa harus repot. Tetapi akibatnya resource dan infrastruktur 3G di Indonesia akan denganmudah dikuasai pihak asing.
Lihat juga kasus penjualan XL ke Telekom Malaysia (TM Malaysia) pada tahun 2005. Dengan penjualan ini maka komposisi kepemilikan di XL saat ini menjadi sebagai berikut : Indocel Holding Sdn. Bhd. (Malaysia) sebesar 67,0%, Khazanah Nasional Berhad (Malaysia) sebesar 16,8%, Bella Sapphire Ventures Ltd. Sebesar 16%, dan sisanya sebesar 0.2%.dimiliki oleh karyawan dan public.Selain kasus jual-beli di atas, pada tahun ini, pemerintah juga telah mengeluarkan ijin bagi 10 negara asing untuk mengorbitkan satelit mereka di atas wilayah udara Indonseia. Dengan demikian maka bangsa-bangsa maju dapat dengan sesuka hati mereka mengorbitkan satelitnya di atas wilayah Indonesia, akibatnya semua wilayah Indonesia akan mampu mereka pantau, baik kondisi lingkungannya, keamanan, maupun kekayaan alamnya. Kita seperti membuka lebar-lebar pintu rahasia rumah kita yang selama ini kita tutup rapat-rapat.
Deretan kasus-kasus di atas mengakibatkan hampir semua perusahaan-perusahaan telekomunikasi besar di negeri ini menjadi milik perusahaan asing, baik sebagian ataupun keseluruhan. Sehingga secara otomastis, devisa yang dihasilkan dari industri telekomunikasi di negeri ini, yang nilainya sangatlah besar, akan mengalir juga ke negara-negara yang perusahaannya memiliki saham di perusahaan-perusahaan telekomunikasi Indonesia tersebut.
Selain dari sisi ekonomi, resource dan infrastruktur telekomunikasi adalah suatu hal yang sangat penting bagi suatu bangsa, yang akan sangat mendukung keamanan dan integritas bangsa tersebut. Bagaimana jadinya jika hal yang begitu penting itu dikuasai dan dikontrol oleh pihak asing. Belum lagi dengan infrastruktur telekomunikasi asing yang diperbolehkan beroperasi di wilayah Indonesai. Akibatnya pihak-pihak asing bisa saja dengan mudah mencuri informasi-informasi penting bangsa dan negara kita, yang dengan informasi itu maka melemahkan tingkat keamanan, kedaulatan, kesatuan negara kita.Belum lagi keuntungan yang didapat jika dihitung bahwa banyak pembelian prasarana telekomunikasi harus lewat Singapura, tidak dibeli di Indonesia. Singapura memang miskin sumber daya alam, tetapi akalnya hebat, bisa memanfaatkan mitra untuk keuntungan mereka tanpa risi.
Namun, lewat Bridge, aliansi yang menyatukan semua perusahaan telekomunikasi yang sahamnya juga dimiliki kelompok ini, SingTel bisa mendapatkan harga beli yang sangat murah dari vendor, seperti harga untuk pembeli besar. Harga kartu SIM (subscriber identification module), misalnya, yang kalau di bawah satu juta sebulan bisa Rp 60.000 setiap keping, tetapi karena dibeli oleh Bridge yang sebulan bisa memesan 12 jutaan kartu SIM, harga bisa hanya Rp 3.500.Dari semua kebutuhan SIM untuk kartu perdana, contohnya, Telkomsel saja perlu sedikitnya 60 juta keping, belum Bharti India, belum Maxis Malaysia, belum dari Thailand, Australia, dan Filipina, sementara SingTel paling hanya membutuhkan 10.000 sebulan. Alasan itu juga kenapa Indosatâyang kelompok aliansinya berbeda dengan Bridgeâharus membeli barang teknologi semisal BTS atau perangkat sentral lewat grupnya di Singapura. Baik dari transaksi atau kartu SIM atau barang lain, Singapura akan mendapat semacam fee.
Memang itulah bisnis, unggul jika piawai dalam memanfaatkan kelebihan dan meminimalkan kelemahan, dan kemampuan itu dimiliki Singapura, tetapi tidak kita miliki. Menjual kembali dengan harga berlipat, dalam bisnis dan dagang seperti yang dilakukan STT, tidak ada haramnya.Soal sah secara dagang, sudah digaungkan banyak pihak yang menganggap tak ada yang salah dalam transaksi antara STT dan Qtel. Badan Pengawas Pasar Modal (Bapepam) tidak melihat sesuatu yang salah dalam jual beli itu. Bahkan, Wakil Presiden Jusuf Kalla, yang memang dari kalangan saudagar, menilai itu adalah transaksi bisnis biasa yang sah.
Tidak ada satu pun dari mereka yang berkutat di perdagangan yang mengaitkan transaksi ini dengan hukum, dan hanya melihat dari sisi hukum dagang saja, malah Menneg BUMN Sofyan Djalil memandang transaksi ini sebagai berkah. Dengan naiknya harga minyak, negara-negara Timur Tengah penghasil minyak kebanjiran uang dan pemerintah merasa perlu menarik mereka menanamkan modal di Indonesia.Padahal, ketika transaksi ditutup, STT masih terkait masalah hukum yang sedang dalam proses kasasi di Mahkamah Agung yang sewajarnya dihormati oleh semua pihak. STT terkena masalah ketika Majelis Komisi Pengawas Persaingan Usaha (KPPU) melihat Kelompok Temasek sudah melakukan praktik usaha yang melanggar Pasal 27 Undang-Undang Nomor 5 Tahun 1999 tentang Larangan Praktik Monopoli dan Persaingan Usaha Tidak Sehat.
PT Indosat dan PT Telkomsel dimiliki oleh Kelompok Temasek lewat beberapa unit usahanya: PT Indosat dimiliki Asia Mobile Holdings (AMH) yang 75 persen sahamnya dimiliki STT dan 25 persen Qtel, sementara PT Telkomsel dimiliki lewat SingTel. Keduanya memiliki pangsa pasar sampai 82 persen, yang dianggap berpotensi untuk mengatur harga dan menimbulkan monopoli serta persaingan yang tidak sehat.
Majelis KPPU memutuskan STT harus melepaskan salah satu anak perusahaannya di Indonesia itu dan menjual sahamnya kepada pihak lain yang tidak punya afiliasi dengan STT, maksimal 5 persen saham kepada setiap pembeli. Angka ini diubah menjadi 10 persen oleh Pengadilan Negeri Jakarta Pusat, lalu STT mengajukan kasasi ke Mahkamah Agung.Apa pun keputusan Mahkamah Agung, terlihat bahwa STT melecehkan Mahkamah Agung dan KPPU karena menjual saham tanpa menunggu proses hukum berakhir. Mustahil STT atau Temasek tidak tahu proses hukum di Indonesia, tetapi mereka sudah melihat lubang-lubang penyelamat yang membuat hukum di Indonesia lewat keputusan MA tak bisa menjangkau mereka.STT menyalahi keputusan Pengadilan Negeri Jakarta Pusat karena menjual saham sekaligus dalam jumlah besar, 40,8 persen, tidak 10 persen. STT juga menjual kepada perusahaan yang berafiliasi di AMH yang 25 persen sahamnya dimiliki Qtel, 75 persen sisanya STT.
Kecanggihan STT atau Temasek bisa disimak dari pernyataan Chief Excecutive Officer STT, Lee Theng Kiat, seperti dikutip media belum lama ini. Menurut dia, dengan transaksi itu, STT tidak lagi terlibat dengan PT Indosat, juga dalam masalah dengan KPPU.Apakah maksudnya walau MA menguatkan keputusan Pengadilan Negeri Jakarta Pusat, eksekusi tidak bisa dilakukan karena STT tidak lagi ada kaitan dengan Indosat? Qtel yang punya saham di Indosat pun bisa berkelit. Mereka bukan STT dan sama sekali tidak mewakili STT sehingga keputusan itu tidak berkaitan dengan Qtel.
Kalau ini terjadi, wibawa lembaga hukum kita akan makin merosot sampai ke dasar, khususnya pada masalah bisnis dan industri internasional karena keputusannya tidak bergigi. KPPU pun sama karena keputusan akhir mentah, sasarannya bisa berkelit.Syamsul Maâarif, Ketua KPPU, yang sangat kecewa pada manuver bisnis STT yang melecehkan lembaganya itu, berencana mengadukan masalahnya ke Asian Expert Group on Competition (AEGC) .Lembaga pengawas persaingan usaha se-Asia ini diharapkan bisa memberikan dukungan atau jalan jika Bapepam dan Mahkamah Agung tidak bisa menyelesaikan kasus ini.
H.Telkom Gandeng Singtel Kembangkan SDM
Telkom menandatangani nota kesepahaman dengan Singtel dalam program kerjasama peningkatan kualitas sumber daya manusia. Perusahaan telekomunikasi Singapura itu dipilih lantaran reputasinya sudah mendunia. Tahap awal kerjasama, kata Direktur Sumber Daya Manusia Telkom Faisal Syam, meliputi bidang pengelolaan pelanggan dan tanggung jawab sosial perusahaan. "Selanjutnya akan dikembangkan ke bidang manajemen risiko, bisnis internasional, dan regulatory management,"ujar . Faisal mengungkapkan, pengelolaan pelanggan merupakan bidang yang berkembang pesat dan semakin penting perannya. Persaingan di bisnis telekomunikasi telah memacu operator berlomba memberi pelayanan terbaik kepada pelanggan, khususnya pelanggan perusahaan.
Pelanggan perusahaan, Faisal menambahkan, membutuhkan banyak pilihan layanan telekomunikasi bagi kebutuhan bisnisnya yang semakin kompleks. "Persaingan untuk memperebutkan pelanggan jenis ini mulai menjadi fokus operator telekomunikasi,â ujarnya.
Menumbuhkan kesadanran penduduk indonesia bahwa negara kita kembali di jajah oleh orang â orang yang memegang kendali bisnis di dunia ini.dan ingin menegaskan kembali bahwa sebenarnya nagara kita mempunyai sangat banyak sumber daya ,baik itu sumber daya alam maupun sumber daya manusia. Cuma yang di sayangkan negara kita tidak memamfaatkan hal tersebut?
Bahkan sesutu yang sudah ada di jual kepada negara lain ,seperti ke singapore,malasia,Qatar DLL.kasus-kasus yang seperti ini saya pikir sangat merugikan negara kita,bahkan dunia mamandang negara kita sebagia negara yang tidak mempunyai komitmen dalam mengatur perusahaan dalam negri,apalagi di luar negeri.
| The Next Recession Looms Large ||
Currently economists and market watchers roughly fall into two camps: Those who believe that the Federal Reserve must begin raising interest rates now so that it will have enough rate cutting firepower to fight the next recession, and those who believe that raising rates now will simply precipitate an immediate recession and force the Fed into battle without the tools it has traditionally used to stimulate growth. Both camps are delusional, but for different reasons.
Most mainstream analysts believe that the current economy can survive with more normalized rates and that the Fed’s timidity is unwarranted. These people just haven’t been paying attention. The “recovery” of the past eight years hasn’t been just “helped along” by deeply negative real interest rates, it is a singular creation of those policies. Since June 2009, when the current recovery began, traditional economic metrics, such as GDP growth, productivity, business investment, labor force participation, and wage growth, have all been significantly below trend. The only strong positives have been gains in the stock, bond and real estate markets. We have had an “asset price” recovery rather than a bona fide economic recovery. This presents unique risks.
Asset price gains have been made possible in recent years because ultra-low rates have driven down the cost of borrowing, encouraged speculation, and pushed people into riskier assets. Donald Trump was right in the presidential debate when he noted that the whole economy is “a big fat ugly bubble.” Any rate hike could hit those markets hard across the financial spectrum and can tip the economy into contraction. Look what happened this January when the market had a chance to digest the first rate increase in 10 years. The 25 basis point increase in December 2015 led to one of the worst January's in the history of the stock market. Since then, the Fed has held off from further tightening and the markets have treaded water. There is every reason to believe that the sell-off could resume if the Fed presses ahead.
Our current “expansion,“ which began in June of 2009 is 88 months old, and is already the fourth longest since the end of the Second World War (post-war expansions have averaged 61 months) (based on data from National Bureau of Economic Research and Bureau of Labor Statistics). But although it is one of the longest it has also been the weakest. Despite fresh optimism nearly every year, we have not had a single year of 3 percent GDP growth since 2007. More ominously, the already weak expansion is beginning to slow rapidly. GDP growth has been decelerating, averaging just 1% in the past three quarters. (Bureau of Economic Analysis) And while hopes were high for a significant rebound in Q3, as has been the pattern all year, rosy estimates have recently been sharply reduced.
Typically rate-tightening cycles start in the early stages of a recovery when the economy is still gathering momentum. As I have argued before, a rate tightening campaign that begins in the decelerating tail end of an old and feeble recovery is bound to unleash problems.
So I agree with those who believe that rate hikes now will bring on recession, but I disagree that we should keep rates where they are. They believe we need to keep the stimulus pedal to the metal…and when that’s not enough, to cut a hole in the metal and push harder. I believe that despite the short term pain that will surely follow, we need to raise rates now to break the addiction before it gets worse.
The “keep rates at zero camp” argues that global economic developments have made traditional GDP growth nearly impossible to achieve. These believers in “the new normal” fear that the Fed is mistakenly waiting for growth that will never come. Larry Summers, the leader of this group, recently argued in the Washington Post that the Fed will never be able to raise rates enough in the short term (without plunging the economy into recession) to gather enough ammunition to effectively fight the next recession. In his view, to raise rates now would be to risk everything and get nothing.
Summers knows that central bankers now do not have the caliber of bazookas that their predecessors once carried (Bernanke was able to slash interest rates over 400 basis points in a few months). So he advocates continued stimulus until newer means can be developed to head off the next recession before it develops. (He promises to reveal those new ideas soon…really).
Given all the economic realities that central banking has attempted to suspend in recent years (such as the antiquated belief that lenders should be paid to lend rather than being charged for the privilege), it’s no great stretch for them to consider the next big leap and call for an age of permanent expansion.
To do this they must short-circuit the business cycle, which up until now has regulated prior monetary mismanagement. Rather than being some naturally occurring process, the business cycle actually results from artificially low interest rates. Mistakes are made during the booms, when rates are held artificially low, and are then corrected during the bust, once those rates are allowed to normalize. Ironically, the busts are actually the benign part of the process, and should not be resisted, but embraced. But to mitigate the short-term pain associated with actually correcting those mistakes, central banks typically opt to paper them over for as long as possible. The problem is that this time the papering over process has gone on for so long, and involved a record amount of paper, that correcting the mistakes now will necessitate a recession so severe that it is unthinkable. The only apparent “solution” is to make sure one never arrives.
To do so Fed must replace the “ups and downs” of the economy with the “ups and ups.” This futile process will likely involve the Fed intervening directly in the equity markets (by actually buying shares), or in the real estate market (by buying properties or making loans) or into the consumer economy by directly distributing money to citizens. But since contractions are necessary and healthy, especially when markets have gotten ahead of themselves, attempting to short-circuit them does more harm than good. Yet despite how crazy such a policy sounds, Yellen just suggested that she thinks it’s not only a good idea, but that the Fed is already giving it serious study. Given the damage our crazy monetary policy has already inflicted in the past, one can only imagine what kind of devastation awaits.
Just this week the International Monetary Fund issued a report about the dangers of global debt growth, which has reached $152 Trillion, or roughly twice the size of global GDP. They noted that the growth of private debt has recently led the upswing. With negative rates actually paying some companies to borrow, should this be a surprise? And while it’s nice that the IMF raised a red flag, it’s pathetic that their only proposed solution is to call for governments to increase public debt through fiscal stimulus (based on what should now be the debunked theory that deficit spending creates growth).
Even more pathetic is Alan Greenspan attempt on CNBC this week to blame the current low growth economy on Congress, and its failure to reign in entitlements. Greenspan is correct in his determination that "the new normal" results from the plunge in productivity gains that is a function of drops in savings and capital investment. But he can’t absolve the Fed. Had they not monetized the ever growing Federal deficits, or kept interest rates artificially low for so long, market forces would have forced cuts in entitlement spending years ago. These actions, originated with Greenspan himself, enabled Congress to repeatedly kick the can down the road.
According to Greenspan, to spare the public the pain of higher interest rates the Fed has no choice but to hold its nose and accommodate any level of debt Congress chooses to accumulate. But the ability to pursue unpopular policy is precisely they are supposed to be politically independent. What good is an independent central bank that simply helps incumbents win reelection?
Given that the Fed has already unsuccessfully exhausted so much firepower, it is unfortunate that it never seriously questions whether their policies are actually harmful. Modern economists simply can’t imagine that throwing ever more debt on the back of a weak economy actually prevents it from recovering.
I think it’s high time the Fed finally moves rates well into positive territory. The next recession has been on its way for years, and it will arrive no matter what the Fed does, if it’s not already here. Sometimes reality hurts, but fantasy can be more damaging in the long run.
The real choice is not between recession now or recession later. It’s between a massive recession now, or an even more devastating one later. Either way, there is no Fed policy that will be able to fight it. But that is not because the Fed is out of bullets, but because it never had any real bullets to fire in the first place. All it had was morphine to numb the pain as the wound festered. Now is the time to bite the bullet, endure the pain, and allow the wound to actually heal. This will also allow us to finally bury the idea of a new normal, enjoy a real recovery with all of its traditional benefits, and actually make America great again.
To order your copy of Peter Schiff's latest book, The Real Crash (Fully Revised and Updated): America's Coming Bankruptcy - How to Save Yourself and Your Country, click here.
For in-depth analysis of this and other investment topics, subscribe to Peter Schiff's Global Investor newsletter. CLICK HERE for your free subscription.
| A proposal for a co-development contribution index: for an effective assessment on developed and emerging countries role in sustainable development ||The Center for Global Development developed an interesting index to measure the developed countries commitment to development. It is based not only on aid but also on trade, investment, migration, environment, security and technology transfer contributions: it is truly comprehensive. This tool is very useful and innovative. It contributes to raising the pressure on developed countries and to advocate for an increasing contribution to development.|
Nevertheless, I have some key elements that a development contribution ranking should imperatively include:
- Considering their increasing role in the international economy and politics, such a ranking could take into consideration also the impact of emerging markets (including in their own development).
- In order to improve the ranking, building index for every dimension is not very transparent and effective. I think it will be better to transform all contributions in monetary terms. The index will be based on monetary contribution on development calculated in percent of GDP.
- Both positive and negative contributions will be taken into account.
This index will be very useful to understand the real impact of every developed and emerging country on development. It will pose number of methodological problems but it will be more effective for advocacy and more transparent.
To calculate this raking I propose the following elements (it is only a raw thought that need to be further developed) to be taken into account in the calculations:
- Aid Contribution = Aid flows â food aid negative impacts â debt interests â aid that does not contribute to development.
- Trade contribution = Trade opportunities used (notably for manufactured goods and advanced services) â losses due to protectionism â losses due to subsidies (both on world and developing countries markets) â negative externalities of liberalization measures promoted by developed countries (also through WTO, World Bank, IMF and other institutions).
- Investment contribution = Investment flows â negative impacts of Transnational Companies â developing countries money in foreign banks
- Migration contribution = remittances â losses due to emigration of skilled workers â losses due to death of emigrants (caused by developed countries restrictions) + gains of temporary workers + gains in term of skilled workers that return in their developing country.
- Environment contribution = aid for environmental goals (e.g. GEF) â cost of environmental degradations caused by rich countries and their transnational companies (e.g. pollution of companies and climate change) â cost of policies to protect the environment imposed by developed countries.
- Security contribution = aid to conflict resolution and prevention (included cost of military intervenction that contributed to avoid or stop a civil war) â exports of arms to developing countries â cost of wars against developing countries (included embargos).
- Technology transfer contribution = value of technology transferred â copyrights and licenses cost â cost of property right imposed to developing countries (including cost of implementaing IPR policies)â cost caused by developed countries policies that limit access to technology.
By adding up these elements, we can find the value of a country contribution to development. I guess that many countries will have a negative score. This index will be difficult to calculate but it will be very useful to better understand both why asymmetries exist and how we can reduce them.
Sustainable Development Index ODA trade and development
| What role plays agriculture in economic development? ||In 2007-2008 agriculture became once again a major issue in the global agenda. Even, the World Bank recognizes the importance of this sector for economic development in its 2008 World Development Report. Another reason is linked to rising prices of agricultural commodities caused by drought in some major exporting countries (e.g. Australia), rising global consumption and growing use of agricultural commodities for biofuels. Some actors underlined that the 21th century will be the agricultural century.|
Agriculture plays for sure an important role in development. In fact, according to IFAD, 2/3 of poor in developing countries live in rural areas.
Agriculture debates at the international level are always linked with the trade dimension. In fact, even if only around 10% of the global production is traded, trade plays a crucial role in agriculture because it influences greatly prices. Trade in crucial for farmers incomes as well as for the added-value produced by the agricultural sector. For this reason, agricultural negotiations at the WTO are very difficult.
Economic history, as Reinert and other authors show us, can give us some insight on the role of agriculture in development:
- Never in the history a country succeed to achieve development through its agricultural sector. In fact, often agricultural products are subject to decreasing returns that, as we showed in a post on trade and development linkages, does not enable a country to develop successfully. Nevertheless, some products can be subject to increasing returns notably rare products (Japanese beef meat from cow daily massed with sake), transformed and typical products (e.g. Swiss cheese, wine, etc.) and likely biofuels.
- Never in the history was rural development possible without the presence in the same region/country of an industrial sector providing inputs and tehcnological innovations. Historically only industrialization allowed to raise durably productivity in agriculture.
Nevertheless, agriculture can play an important role in development event if we take into account what the history tell us:
- Agricultural exports enable countries to increase their incomes that can be used to implement a strategy of industrialization and of development of an advanced service sector. An interesting option to start industrialization is to create an industry that transforms agricultural commodities. Often, this industry is easier to set up than high-tech industry. This will increase the country income, by climbing the value chain. These additional resources will be invested again in order to improve industrialization and create new industries, jobs and incomes. In this way, a developing country can start a virtuous economic development cycle.
- Agriculture can raising incomes and help poor farmers to increase their consumption and improve their education. These two outcomes will both increase the national/regional market size essential to allow the development of a national (temporary protected against international competition with tariffs) industrial sector and increase the opportunities of farmers (when productivity rise) to have the skills required to work in the industrial sector. This process is what we observed in developed countries history.
You will think: âIf it is so easy, why only a bunch of developing countries succeed to achieve high growth rate?â The reason is quite simple. Developing countries faced huge difficulties to export their agricultural commodities at a fair price. Historically there were at least three reasons:
- Developed countries subsidies depressed international as well as developing countries local prices. This both decreased farmers and developing countries incomes and pushes out of business many farmers. For this reason, nowadays number of developing countries, even net importers of agricultural products, cannot fully profit of their production potential. Developed countries subsidies are a partial explanation of the growth success of many developing countries between the end of WW II and the 70s (when subsidies were relatively low in developed countries) and the growth low rates in the 80s and 90s (when developed countries invest large amount of money in subsidies).
- Developed countries, for long time basically the only market for developing countries, in order to protect their farmers, adopted high tariffs and implemented non-tariff measures that restrict greatly the acess to their markets. Subsidies also played a role. In fact, they caused overproduction and reduced the need of import. What is more, developed countries tariffs policies imposed higher tariffs on transformed products (tariff escalation) in order to protect their agro-industry. This constraint developing countries to continue to export commodities without having a chance to develop their transformation industry.
- Agro-industry is an oligopoly of developed countries industries that take advantage of their dominant position by negotiating low prices with producers. This issue can be solved if the WTO rules will include an international antitrust policy. This was never very high on the agenda because developed countries want to continue to take advantage of their dominant position in many sectors.
Today, the situation is different. In fact, agricultural prices were very high the last couple of years. The consequences are that developing countries can use agriculture more profitably to start a sustainable development path. What is needed is a WTO agreement that:
- Pushes developed countries to decrease their subsidies and opens their market (and eliminate tariff escalation);
- Allows developing countries to implement policies (tariff and subsidies) to modernize their agriculture (and temporarily protect poor farmers until an industrial sector is developed) and to increase their competitiveness and export capabilities.
In conclusion, agriculture can be a powerful tool to start a sustainable growth and economic development. Nevertheless, barriers that prevent to realize this potential are still large. Doha Round negotiations do not seem to be likely to remove these barriers effectively.
IFAD (2001), Rural Poverty Report. The Challenge of Ending Rural Poverty
Reinert Erik S. (2007), How Rich Countries Got Rich... and Why Poor Countries Stay Poor, New York, Carrol And Graf
World Bank (2008), World Development Report. Agriculture for development
agriculture Economics Trade and Development WTO
| Why NoGlobal Movement Disappeared? ||During the Seattle Ministerial Conference in 1999 a global social movement appeared. The groups that took part of this Movement where very different from development NGOS to Unions and other civil society organizations. It was the so-called No-Global Movement.|
Less than a decade after Seattle NoGlobals basically disappeared. Of course, they continue to organize their World Social Forum but people participating to this event as well as demonstrating against major multilateral events as WTO ministerial meetings, G8, etc. are always less visible.
What happen? How a very big enthusiastic movement die out?
In my opinion, there are four important reasons:
- People where demoralized because changes in the world global order are too slow. What is more, they proposed very different pattern of change among NoGlobal organizations. Many of their propositions where very far from reality. Because they were out of reach propositions, people lost faith when they did not succeed to bring these propositions in the international arena.
- The international community accepted part of the NoGlobal claims and (partially) implemented them. For example: 1) The United Nations launched the Millennium Development Goals, 2) The International Financial Institutions (IMF and World Bank) start to implement initiatives to reduce the poorest developing countries debt and 3) The World Trade Organization dedicated its current Round to development (but only in its discourse).
- This movement contained too different organizations that after 2001 they chose different ways. Many Union turned to be protectionist and asked for more trade barriers. Development NGOs ask for more trade opportunities for developing countries. Environmental NGOs warned against problems linked to emerging countries development. These divide become too important to allow a joint advocacy by these organizations.
- 9/11 and the war against terrorism decreased world attention on the regulation of the world economy.
If you have other ideas on this abrupt end of this movement, share your ideas on this blog.
I am very disappointed with this disappearance not because I shared all the NoGlobal ideas but because they played an important role to push government, mainly from industrialized countries, to change their policies that arm developing countries. They contribute to change (at least for a period) perceptions of stakeholders and to improve their sensitiveness on sustainable development issues.
| The GDP cliche |If i hear just one more time the words: "India is growing at 7.6%, and it is the only bright spot in a year of global economic turmoil", i'll.... i'll... i'll know that the FM is somewhere in the vicinity parroting into a mike.âª#âIndiaGDPâ¬Here's a secret, Mr AJ - If you focus on the agricultural growth rate, your favourite 7.6% will touch the skies.Here's another secret, Mr AJ - IMF has called the bluff on neoliberalism! So rethink the kind of reforms you are drafting.
| Economic Policy Challenges in Asia |
ECONOMIC POLICY CHALLENGES IN ASIA Recently a three day conference jointly organised by Ministry of Finance and IMF regarding Advancing Asia: Investing for the Future was held in New Delhi. It was attended by finance ministers and representatives of 30 countries of Asia and the Pacific region. Various issues of contemporary relevance was discussed […]
The post Economic Policy Challenges in Asia appeared first on MP Study.
| Seismic Faults in the European Union |
On 2-3 December the Sapienza University of Rome organised a Conference on âPresent and Future of the EU and EMUâ, in honour of Francesco Forte. Speakers at the conference illustrated Forteâs scientific and professional merits. This post discusses Forteâs statement that âI governanti europei sono cretiniâ, arguing that this is only part of the problem: those who govern Europe have a different agenda, and European institutions and policies can be likened to seismic faults, with an earthquake probability gradually approaching near certainty over time. Forte also is on record stating that ânothing is irreversible in economicsâ, facts prevail on rules written on paper â an important lesson for those who are reconsidering the terms of EU Treaties.
Introduction. Brexit is widely viewed as a tendency towards EU disintegration, with the risk of contagion spreading to its weaker member states. In truth the crisis is much more serious: the EU has many fault lines, institutions and policies sliding over one another and colliding like tectonic plates. There are also external pressures similar to continental drift. With the passing of time the probability of a catastrophic institutional earthquake approximates near certainty. Crisis management is not a way to, and does not promote greater integration. At best it is ineffective, causing delays and inertia in multiple crises; at worst it is used as a political tool to justify âmission creepâ and to avoid democratic monitoring of EU Ã©lites political, non-transparent agendas and behaviour. Fault Lines. There are a dozen fault lines in the EU: 1 Brexit. Cameron promised a Referendum to defuse UKIP challenge, hoping to replicate the success of the referendum on Scottish independence, in destroying the Scottish Labour Party while denying independence from the UK. He destroyed UK Labour, alright, but in the whole of the UK a 52% majority on a large turnout secured independence, i.e. to LEAVE the EU; he had to resign. His successor Theresa May confirms âBrexit means Brexitâ. Brexit will be punitive: migrations control and EU migrantsâ lower access to welfare provisions, no ECJ jurisdiction, and the rest, mean reduced UK access to the single market, in spite of significant mutual losses, in order to discourage other exits or aâ la carte membership. 2 Trade policy. There is a clear democratic deficit: either representatives of 3.5mn Wallonians can block a Treaty affecting 545mn; or after 7 years of secret negotiations with Canada, the Treaty on CETA (Comprehensive Economic and Trade Agreement, like Transatlantic TIP and TransPacificPA, now unlikely to be signed under Trump, who also intends to denounce NAFTA as âthe worst trade deal everâ) was unduly favourable to international investors, enjoying an ad hoc ISDS (Investor-State Dispute Settlement) mechanism, protection of profits from regulatory legislation, excessive protection of patents. There is a pro-multinational corporate bias also in EU âGold Plated Revolving Doorsâ recruitment policy of high officials (Monti, Draghi, Issing, Barroso, Bangemann, etc.). The role of the nation state is that of protecting its citizens from multinational corporations (Judt 2010): self-evidently this role cannot be entrusted to the European Union. 3 Migrations. In 2014-16 there was an acceleration of migrant inflows into the EU from the Middle East, the Balkans, South-East Asia and Africa. Refugees escaping war and persecution are entitled to asylum (art. 13, Universal Declaration of Human Rights) but most migrants are economically motivated and, unlike refugees, their right to migrate is unmatched by a corresponding obligation under international law, to receive them. Migrations yield a net welfare gain. In a world without borders this would range between 143.3% (Hamilton et al. 1984) and 7% of global GDP (Docquier et al. 2012). Gross losses are also involved (of workers in host countries, especially if unskilled, and employers in countries of origin) which cannot be overcompensated by gross benefits (accruing to migrants, workers who remained at home, employers in the host country; consumers all round benefiting from greater competition) so as to make everybody better off, because transfers from gainers to losers would have to be international (impractical) and/or from the poor to the rich (undesirable). Trickle-down cannot be taken for granted, trickle-up is just as likely. Migrations also involve the dilution of social capital (whether viewed as physical infrastructure, or as welfare state benefits, or trust and cohesion) freely appropriated by migrants while private capital is fully protected globally. An unsustainable contradiction. Moreover, any benefits of cultural enrichment can be matched by losses from cultural impoverishment. Here the seismic fault is an East-West divide, that caused Schengen area collapse, the building of walls and the spreading of populism. Populism must include cross-party and inter-class protest against the reintroduction of poverty, mass unemployment, poor services in stable societies, and above all against all losses from globalisation. Such protest is an integral part of democracy and no longer deserves contempt and demonization. A re-definition of populism is required also by the diffusion of Information Technology and the fast inter-connectivity of people in everyday life (e-mail, social media, blogging, mass access to leaked official documents and to expertise, etcetera.) 4 Austerity. Maastricht rules on budget deficit and public debt ceilings, and the tougher GSP and the Fiscal Compact, have condemned member states to pro-cyclical fiscal policies, protracted recession and mass unemployment, creating a North-South divide. Early claims of a possible âexpansionary fiscal consolidationâ were disproved by the IMF Research Department and now have been abandoned. The IMF and other international organisations had under-estimated fiscal multipliers in EU and OECD countries throughout 1970-2009, at an average 0.5 now recalculated upwards to be as much as 1.7 (Blanchard & Leigh, 2012). This revision is due to the ineffectiveness of monetary expansion close to a zero interest rate, lack of opportunities for exchange rate devaluation, a large gap between potential and actual income and simultaneous consolidation across countries. Also, fiscal multiplier for expenditure cuts turns out to be up to ten times higher than for tax rises.
Fiscal consolidation is much more expensive in terms of output loss than previously believed. Worse, it can be proven that, starting from a hypothetical fiscal balance, a fiscal consolidation (tax increases plus government expenditure cuts) will always necessarily result in an increase instead of a decrease of the Public Debt/GDP ratio, with respect to what that ratio would have been otherwise, as long as the fiscal multiplier is greater than the countryâs GDP/Public Debt ratio (See Nuti 2013).
Thus fiscal consolidation works only in countries with a low Public Debt/GDP ratio, that do not need a consolidation. Renzi promised to make Europe âchange direction â but run perversely large primary surpluses and slowed down debt growth. 5 Tax competition. Taxation across the EU is not sufficiently harmonised. In order to attract foreign investment a beggar-my-neighbour tax competition destroys national and EU collective tax revenue potential, making fiscal discipline more difficult. As Luxembourg Premier, in 2002-2010 Jean-Claude Juncker made âsweetheart dealsâ with at least 340 multinational corporations, reducing their tax liabilities by billions of dollars. A poacher turned gamekeeper, he now enforces austerity in countries which he robbed of their tax revenue. Ireland, levying a 0.005% (sic!) tax on Apple European revenues, is the most spectacular instance. It was fined â¬13bn but tax recovery is doubtful and is not going to benefit the EU members damaged by its policy. See also Fiatâs move to the Netherlands, etcetera. 6 The tiny EU budget (about 1% of EU GDP). The USA have a federal budget of over 20% of US GDP, which can support the issue and service of federal debt. Individual member states can issue their own bonds involving a default risk without threatening the dollar or the US financial system. The tiny EU budget, combined with the rule that it should always be balanced ex-post (by a variable income tax on member states) rules out the possibility of issuing and servicing EU debt. It also rules out financing major Europe-wide investment in infrastructure, or counter-cyclical policies: the Juncker Investment Plan (â¬2bn EU funds expected to mobilise â¬315bn private investment through impossible multiplier effects) has remained a dead letter. 7 Divergence of welfare policies. Until the early 2000s the European Social Model, a desirable target though not part of membership obligations, relied on institutions as well as markets, providing employment protection and a generous welfare state. The Model was diluted and debased by EU enlargement to the East (2004-06), globalisation of labour and austerity. The Bertelsmann Stiftung computes a Social Justice Index for all 28 EU states, summarising: poverty prevention, equitable education, labour market access, social cohesion and non-discrimination, health, as well as intergenerational justice. In the vast majority of EU countries the Index, after years of decline, reached the lowest point in 2012-14 but is still noticeably worse than before the crisis. There are significant country differences, impacting on the relative attraction of migrations. (Graph 4, p. 17, plotting the SJI 2016 against the PPP GDP per capita 2015 illustrates well the dispersion of both income per head and the SJI throughout the EU: the rejection of a financial Transfer Union has involved a de facto Labour Transfer Union.) 8 Tolerance of Illiberal Regimes. The original European design was committed to shared values, listed by Angela Merkel in her message to President Trump as âdemocracy, freedom, â¦respect for the rule of law and the dignity of the individual, regardless of their origin, skin colour, creed, gender, sexual orientation or political views.â Such commitment has been neglected by EU acquiescence in member statesâ illiberal regimes. Hungary and Poland have restricted freedom of speech, media pluralism and the protection of minorities. In Hungary since 2010 the Fidesz government of Viktor OrbÃ¡n changed the election system, redesigned electoral districts, eliminated checks and balances within governance built over the past two decades, reshaped the juridical system and gained nearly full control over the media and all state institutions. Transparency International describes Hungary as a âstate captured by private interest groupsâ. Viktor OrbÃ¡n in 2014 announced his desire to create an âilliberal stateâ modelled on China and Russia. Recently he declared the end of the era of âliberal blah blahâ, predicting that Europe would come around to his âChristian and nationalâ vision of politics. On 2 October 2016 an overwhelming majority of Hungarian voters rejected the EU's migrant quotas, though turnout was marginally too low to make the poll valid. In Poland, since October 2015 KaczyÅskiâs PiS party âattacked the countryâs Constitutional Court, politicized the judiciary and the civil service, and launched an assault on media pluralism.â (MÃ¼ller 2016). The EU treated it as a Rule of Law violation but took no further action for the moment. Accession state Turkeyâs ErdoÄan, emphasizing traditional Islamic morality, claims to be a âconservative democrat.â Turkeyâs authoritarian involution accelerated after the failed coup of 16 July, when over 100,000 people were purged. In November the European Parliament condemned "disproportionate repressive measures" and called for a freeze on EU accession, but MEPs have no formal role in accession talks. Turkey will still receive â¬6bn to take back migrants who failed to obtain asylum in Greece. Robert Ficoâs government in Slovakia has pursued a similar brand of what has been dubbed âraw majoritarianismâ (Sierakowski 2016). Renziâs constitutional reform (rejected by the 4 December Referendum) was also a move towards power concentration beyond democratic control. A fault line is dividing liberal and illiberal Europe. 9 The Euro: premature, handicapped, divergent. The common currency was supposed to âcrownâ European integration, after political, fiscal and banking integration, and a common foreign and defence policy, but was introduced prematurely, an exemplar of the âcrises create opportunity for integrationâ myth. It was also handicapped by the ECB limited powers: unlike the Fed, the BoE and BoJ the ECB cannot finance the EU budget or that of member states purchasing government bonds in primary markets. The Euro also suffered from increasing divergence of member state fundamentals. Nevertheless, the Euro gave us ten years of low inflation, low and converging interest rates, trade and investment integration; its crisis was due to contagion from the US credit crisis, and worsening public debt due to bank rescues, feeding back onto banksâ balance sheets. On 12 July 2012 ECB President Mario Draghi announced that the ECB was âready to do whatever it takesâ to preserve the Euro. He tried Long Term Refinancing Operations, Outright Monetary Transactions and Quantitative Easing, against German opposition, but on a scale much lower than in the US. Monetary expansion on its own, without fiscal expansion and with debatable âstructural reformsâ, soon loses effectiveness. QE comes to a natural end for lack of eligible bonds. Negative interest rates were introduced, to induce commercial banks to expand credit, but failed to re-launch economic growth. âNegative interest rates are stupid. They only shrink a bankâs capital, hinder the sale of credit and weaken the economyâ (Stiglitz 2016). Helicopter money might work, but then traditional fiscal expansion seems preferable. 10 The recapitalization of commercial banks. The fragility of European banks is due to the long deep recession worsened by austerity, uncontrolled expansion of derivatives transactions, local credit concentration and bank governance failures. Large scale bail-out (Germany â¬241bn) is no longer available since the EU bail-in directive came into force on 1-1-2016. Deposit insurance is still the responsibility of national Treasuries. Bank resolution rules will come into force in 2018. Bank supervision (stress tests, etc.) is feeble. German commercial banks are still in jeopardy because of the persistent derivatives crisis (Deutsche Bank); liabilities to US fines for selling toxic bonds (Deutsche and Commerz Bank) as well as the precarious state of German Landesbanks. Basel III rules should make banks safer, but their introduction in a recession slows down lending. 11 Foreign Policy. After 1992 the EU was complicit in NATO enlargement to the East, in violation of the 1990 confirmed deal between Gorbachev and George H.W. Bush whereby NATO would expand not âone inch to the east,â (James Baker, see Zuesse 2015). A needlessly aggressive policy became a missed opportunity for dÃ©tente with Russia (Romani 2014). In 1991, after the dissolution of the SFRY, Germanyâs hasty recognition of Slovenia and Croatia put the EU in front of a fait accompli and was followed by civil war (Bosnia 1992-95) and NATO intervention (1999). In Ukraine the EU helped initiate and supported the Euromaidan movement that in February 2014 ousted pro-Russian President Viktor Yanoukovich, elected in 2010. This was followed by Russian annexation of Crimea, a âpresentâ from Khrushchev to Ukraine in Soviet times (1954) but ethnically Russian and militarily essential for access to warm-water ports. The EU joined sanctions against Russia which damaged member states asymmetrically (Germany continued to import oil and gas from Russia.)
After the US Presidential election Juncker declared that Trump âdid not know the world and his first two years would be wasted while he travelled and learnedâ; his campaign had been âdisgustingâ â not exactly a sober, diplomatic reaction. Merkelâs Social Democratic coalition partner, Deputy Chancellor Sigmar Gabriel, imitated Juncker and greeted Trump as âthe trailblazer of a new authoritarian and chauvinist movement.â Member states are committed to CFSP â a Common Foreign and Security Policy, aimed at Conflict Prevention and Crisis Management. Acronyms (EUGS, HRVP, EDA, EEAS, EDP, CDA, INTCEN, EUMS INT â¦) and paperwork abound. 12 Defence. Every EU member state controls its own army but under the Common Security and Defence Policy more than 30 civilian and military operations have been launched since 2003, in Europe as well as Asia and Africa. France, Germany Belgium, Spain and Luxembourg also created Eurocorps, a military body for rapid deployment to hotspots. The lack of a democratic, political route to decision-taking in military and paramilitary action at EU level is a further source of gross instability. The EU was divided over the Iraq War. Unilateral military initiatives were taken against Gaddafiâs Libya by Cameron and Sarkozy, with Italian acquiescence. The fight against Daesh is handicapped by divisions over the Assad regime, Turkeyâs dominant anti-Kurd stance, Saudi Arabiaâs involvement and differences in policy towards Iran. A Franco-German Plan for closer EU defence cooperation was discussed at the Bratislava summit last September; British Defence Minister Michael Fallon declared that the UK would veto the creation of EU military capabilities so long as it remained an EU member. President Trumpâs plan to require European states pay up for NATOâs costs contributes to sources of dissension. Other Potential Fault Lines. There are other potential fault lines: energy policy â energy saving, alternatives to fossil fuels and the nuclear option being still nation-based â or environmental policy - the Paris agreement was ratified by the EU but relies on national implementation policies; and the VW emission scandal uncovered by the US and compensation denied to European customers. External pressures. Trumpâs election to the US presidency might worsen the EU crisis. The likely rise in interest rates, following his plans for $1,000bn infrastructure investment, is bad for the European South and bad for banks which should have sold government bonds much earlier but did not; the Euro will probably fall, generating a greater German export surplus which ceteris paribus will force the South to run larger budget deficits. Trumpâs plans are reminiscent of Reaganâs policies which led to defaults in Latin America. Interconnections. Many of the EU faults are inter-connected: immigration was encouraged by the divergence of welfare policies; its problems were aggravated by austerity; it was precipitated by EU foreign policy and war involvement; has contributed to Brexit. Difficulties with CETA are bound to hinder any after-Brexit EU-UK Treaty. Tax competition clashes badly with austerity. ECB negative interest rates contribute to the crisis of commercial banks and raise their recapitalisation requirements, and so on. Local earthquakes feed back onto the Union as a whole: e.g. the failure of Union attempts at stopping the authoritarian involution of Hungary and Poland, and of enforcing national quotas for refugees relocation, has damaged further EU credibility. Remedies. In principle, the virtual tectonic plates that make up the EU could be controlled by European governance. The remedies to secure the EU entire system are available, in many cases even without amending the Treaties. Thus Brexit might be softened by revamping UK membership of the EEA (Yarrow 2016) or the creation of a European Continental Partnership (Pisani-Ferry et al. 2016). The migration crisis might be reduced by a common asylum acceptance regime; a stronger common external border; re-location of refugees across countries under penalty of losing structural funds; stopping the Dublin Treaty placing an unfair burden on EU frontier countries; deducting the financial burden of migrants from the permitted fiscal deficit.
Migrants welfare entitlements might be restricted to what their states of origin would offer the recipient countryâs nationals, on plausible grounds of reciprocity. Entitlements might be restricted during an initial period (the current UK proposal), or made conditional on residence requirements. Re-patriation of economic migrants often is problematic, but ought to be considered with greater determination. During his campaign Trump has caused a sensation by announcing plans to repatriate 11 million undocumented immigrants, scaled down to 2 million after the election. But during his tenure in 2009-2016 President Obama re-patriated 2.5 million immigrants, often in debatable circumstances â more than the previous 19 Presidents combined. Pakistan re-patriated 800,000 Afghans; last year Sweden announced the re-patriation of 80,000 immigrants.
Austerity might be loosened by excluding from the permitted deficit public investment, which does not involve an inter-generational transfer, or the payment of government arrears towards suppliers, which involve a change of creditors and not an increase in debt. Potential output, relatively to which the permitted deficit is calculated, might be estimated according to a more permissive methodology like that of the OECD. The maximum trade surplus permitted, currently of 6% of GDP, should be reduced to 4% in line with the maximum trade deficit permitted; surplus countries exceeding that ceiling (like Germany at 8.5%, or Holland) could be forced to run a parallel budget deficit in order to facilitate other membersâ fiscal discipline. ECB seigniorage could be mobilised to fund the issue of bonds to reduce national public debts in proportion to ECB shares, as proposed by Wyplosz and PÃ¢ris 2014 in their PADRE scheme (Politically Acceptable Debt Restructuring in the Eurozone) and by Nuti 2014. This would avoid a Transfer Union. The adverse distributive effects of globalisation are harder to handle: short of a global Exchequer taxing gainers and over-compensating losers, the transfers involved have to take place within nation states or Unions, compensating domestic losers from additional revenue raised by taxing domestic taxpayers regardless of whether they are gainers from globalisation, or out of savings in domestic expenditure. Clashes. These effective remedies are in line with the original European design. Unfortunately they clash with the hyper-liberal design that has gradually perverted European policies, as well as with conflicts of interest between states, ideologies, welfare regimes, classes, bureaucracies, memories and expectations. In Germany the Ordo-liberal tradition of Walter Eucken in the 1930s, based on competition and monetary stability as the pillars of society, is still a heavy inheritance. In German and Dutch the same word Schuld, means both Debt and Guilt. German memories are long about interwar hyper-inflation, wrongly believed to have caused Hitlerâs ascent to power, generated instead by the deflation and austerity of Chancellor BrÃ¼ning in 1929-32. But Germans have a short memory about their own Wirtschaftswunder, the result of a redistributive currency reform, cancellation of public debt of over 300% of GDP and Marshall Aid â all measures which they denied to Greece. âThomas Mann dreamed of a European Germany. His wish has turned into its opposite. Today we have a German Europe.â (Lafontaine, 2015). Lenin (1915) was prophetic: ââ¦ a United statesof Europe, under capitalism, is either impossible or reactionaryâ. Conversely, Hayek (1939) strongly supported interstate federalism as essential to his liberal project: international mobility of goods and factors would constrain national state policy, and heterogeneity of interests would constrain federal policy. Hence Thatcherâs support for UK membership (Parijs 2016). The New European recently stated that âBrexit is not an earthquake. It is the aftershock of the death of European Social Democracyâ. This is only partially correct: Brexit and other forms of the EU crisis, and Trumpâs triumph, are not an aftershock but a foreshock, part of a seismic swarm which may or may not be followed by âthe big oneâ. And it is the agony â not quite the death yet â of a particular, perverted form of Social Democracy: hyper-liberal, globalist, austerian, pro-multinationals, unequal, politically correct, pre-Keynesian after Keynes and pre-Minskyan after Minsky, relying on alleged but unreliable mechanisms of self-regulation and self-balancing of markets, through international mobility of labour (Schengen, Pope Francis, Hillary Clinton) and capital (Maastricht).
Exitaly/ExIT/Italeave. Citizens are reluctant both to move from locations of high seismic risk, and to face the cost of implementing anti-seismic measures to secure their homes and public buildings and infrastructure. EU countries are reluctant to abandon Europe and the Euro, despite the proven impossibility of securing sustainable European institutions.
Therefore the idea that "there is no salvation outside Europe", and that "we need more European integration rather than less" - instead of a different Europe â is just as senseless and fearful as the refusal of actual and potential earthquake victims to move elsewhere, and the purblind commitment of the Italian government to "rebuild everything as it was, where it was.â In any case, it is absolutely necessary to imagine, investigate and assess the likely consequences of an exit from the Euro and Europe, on the part of Italy and other countries that have suffered the consequences of European multiple crises. First, Italy might be required to leave. Imagine a balance of payments crisis, a burst of capital flight, restrictions on capital movements and bank withdrawals, a panic run on the banks. European assistance might be provided, subject to draconian conditions. This is where Greece got to before it capitulated. But Italy is much larger, it might be offered assistance in insufficient quantity, or the government might be unwilling or simply unable to meet the required conditions before the imposed deadline. Then the ECB would no longer be able to provide emergency liquidity assistance, and the only choice left would be between a barter economy or the introduction of a national currency. The trouble is that this would require long and secret preparations, which are difficult to imagine in Italy. Second, the cost of Exitaly would be enormous, but perhaps not as large as it is often suggested. It should not be taken for granted that the large cost of leaving Europe would be necessarily greater over time, in terms of present value, than the large cost of remaining in Europe without the necessary, possible but unlikely improvements. Finally, reflections and discussions about the mutual costs of Eurozone disintegration would strengthen the negotiating position of those seeking to reduce the risks from catastrophic shifts and collapse. A LONGER VERSION OF THIS POST IS AVAILABLE HERE
Blanchard Olivier J. and Daniel Leigh (2012), âBox 1.1. Are We Underestimating Short-Term Fiscal Multipliers?â in International Monetary Fund (2012), World Economic Outlook â Coping with High Debt and Sluggish Growth, Chapter, âGlobal prospects and policiesâ, pp. 41-43, October, Washington. Docquier F., J. Machado and K. Sekkat (2012), âEfficiency gains from liberalizing labor mobilityâ, Discussion Paper 23, IRES Louvain and UCL.
Fayola Anthony (2016), âAngela Merkel congratulates Donald Trump â kind ofâ, The Washington Post, 9 November.
Hamilton B. and J. Whalley (1984), âEfficiency and distributional implications of global restrictions on labour mobilityâ, Journal of Development Economics, Vol. 14, No. 1, pp. 61â75. Judt Tony (2010), Ill fares the land, Allen Lane, London. Lafontaine, Oskar (2015), âLetâs develop a Plan B for Europeâ, LINKS-International Journal of Socialist Renewal, 23 September. Lenin Vladimir Ilich (1915), âOn the Slogan for a United States of Europeâ, Sotsial-Demokrat No. 44, August 23, 1915. Lenin Collected Works, Progress Publishers, , Moscow, Volume 21, pages 339-343. Nuti D. Mario (2013), "Austerity versus Development", "International Conference on Management and Economic Policy for Development", Kozminski University, Warsaw, 10-11 October. Nuti D. Mario (2014), âPADREâ, Blog âTransitionâ, 4 April. PÃ¢ris Pierre and Charles Wyplosz (2014). PADRE â Politically Acceptable Debt Reduction in the Eurozone, Geneva Reports on the World Economy, Special Report 3, ICMBS and CEPR, January. Pisani-Ferry Jean, Norbert Rottgen, Andreâ Sapir, Paul Tucker and Guntram B. Wolfe (2016) âEurope After Brexit: A Proposal for A Continental Partnershipâ, Bruegel Institute, 29 August. Romani Sergio (2015), In Lode della Guerra Fredda â Una Controstoria, Longanesi, Milano. van Parijs Philippe (2016), âThatcherâs Plot â And How To Defeat Itâ, Social Europe, 29 November.
| Institutions and Policies |
âIf Institutions are so important, why do we talk so much about economic policies?" This excellent question was the subject of a Round Table of the First World Congress of Comparative Economics, held at the University of Rome Tre, on 25-27 June 2015, with the participation of Josef C. BRADA (Arizona State), Michael KEREN (Jerusalem), D. Mario NUTI (Rome Sapienza), Chaired by Marcello SIGNORELLI (Perugia). The Round Table took place on 26 June, 2.15-4pm, at the Department of Economics, Aula Magna, Via S. D'Amico 77, 00145 Rome.
Immediately afterwards (4.30-6.15pm) at the Congress there was a session on my own contributions to Comparative Economics, organised by my friends Renzo Daviddi (EU) and Milica Uvalic (Perugia). Renzo focused on Utopias, Milica on Participation, other friends: Saul Estrin (LSE) on Socialism, Jan Svejnar (Columbia) on Transition, and Bozidar Cerovic (Belgrade) on Integration (chaired by Saul Estrin). Most of my publications can be viewed and downloaded freely from my website, where the respective PPT presentations will be available shortly.
My views on âIf Institutions are so important, why do we talk so much about economic policies?" are summarised here.
In any modern capitalist economy the State â i.e. the set of government, other political institutions and the Public Administration - has at its disposal a wide range of instruments of economic policy. A classic textbook by Ian Tinbergen, Economic policy: Principles and Design. Amsterdam, 1956, 1978, distinguished between qualitative and quantitative policy instruments.
Within the context of our Panel, I regard qualitative instruments as the creation and manipulation of economic institutions: from bankruptcy legislation to corporate governance, from competition policy to health insurance, from unemployment insurance to anti-corruption laws. They include automatic stabilizers (which in truth are only dampeners of economic fluctuations).
Quantitative instruments were classified by Tinbergen under four headings:
1) Direct controls of economic activity;
2) Fiscal policy: the level, composition and balance of government direct and indirect taxation and other revenues and expenditures (including subsidies);
3) Monetary policy: the quantity of money, the associated level and structure of interest rates, credit policy, the exchange rate regime and trends; with the management of government debt necessarily linking monetary and fiscal policy;
4) The price and investment policies of (wholly or partly) state owned enterprises.
For Tinbergen the structure of the economy could be summarized by a macroeconomic model quantifying the relationships between economic magnitudes, such as consumption, investment, employment, trade balances, the price level, the rate of inflation and so on - simultaneously with the values assigned by the government to quantitative policy instruments. Through the choice of appropriate instruments the government could determine consistent, feasible values of policy targets, while accepting the corresponding values of âindifferentâ variables. Tinbergen was a pioneer of such an approach to model-building and economic policy.
Note: Policy targets are often labelled âprioritiesâ, but this is incorrect, because they cannot be ranked in absolute but only relatively to the trade-off between targets preferred by the government.
For about thirty years from the end of the Second World War this framework can be used to characterize public policy in advanced countries. Thanks to Keynesian policies sustaining demand, employment and growth, we experienced a golden age of unprecedented prosperity: reconstruction, industrialisation and growth, accompanied by re-distribution policies to protect the weaker strata of the population: the unemployed, the aged, the sick, the poor, children.
That approach was less successful in keeping under control inflation and/or public debt, primarily because of inconsistency between, on the one hand, high and stable employment and economic growth and, on the other hand, low inflation and/or public debt.
The 1980s and 1990s, however, saw the demise of Keynesianism and the victory of neo- or hyper-liberalism, exemplified by Reaganite or Thatcherite economic policies. This was due to three major developments:
1) Margaret Thatcher was elected as conservative Prime Minister of the UK from 1979-1990, and Ronald Reagan was elected as Republican President of the USA (1981-1989, and was influential even earlier as Governor of the State of California);
2) the extension of the neo/hyper-liberal model to the countries of the post-socialist transition in the early 1990s, encouraged by foreign advisers, the EU and the international organisations (World Bank, IMF, OECD etc.), and
3) the passive, mis-timed adoption of neo/hyper-liberalism by several social-democratic governments in the 1990s, such as the Third Way of Tony Blair, Bill Clinton and most European Union governments in the late 1990s.
âReaganomics" was characterized by supply-side economics, tax reductions expected to promote economic growth, restrictive monetary policies to control inflation, economic de-regulation, reduction of public expenditure, anti-Trades Unions policy, hostility and re-armament against communist countries (the Evil Empire), support for anti-communist movements (Grenadaâs invasion). Although Reagan negotiated with Gorbachev the first Treaty for reduction of nuclear weapons (INF Intermediate-range Nuclear Forces Treaty, 1987).
Other features of the neo/hyper-liberal approach, extended to the post-socialist world include:
- Immediate unilateral opening of foreign trade, frequently revoked and therefore premature;
- Exceptionally rapid liberalization of capital flows, in contrast to the experience of other European economies after World War Two;
- Large scale privatisation, especially (with a few exceptions for instance in Hungary) unprecedented mass privatization through the distribution to the population of free or symbolically priced vouchers, convertible into state assets or shares in state enterprises â a macroscopic experiment in social engineering of debatable effectiveness;
- The demotion of the role of the state, leading to delays or gaps in market regulation, especially in financial markets (see the diffusion of banking pyramids), shareholders protection and corporate governance;
- The dismantling of the welfare state, formerly provided by state firms;
- A costly reform of the pension system from a Pay As You Go, defined benefits, distribution system (whereby pensioners are funded by the contributions of current employees), to a capitalization, defined contributions or funded system (with pensions paid out of the revenue earned on accumulated past contributions);
- A low and uniform rate of direct taxation (flat tax), therefore at best only mildly progressive, on households and companies, mostly without taxation of capital gains but with higher indirect taxation;
- Lack of consultation and concertation between social partners and with the government;
- A very flexible labour market, with weak trade unions and a low incidence of collective bargaining; the principle of market sovereignty was not applied to the labour market, frequently subjected to widespread wage ceilings enforced through punitive taxes;
- A central bank not only independent but exceptionally independent and free from any controls, without coordination with fiscal policy, pursuing a strict policy of inflationary containment and high interest rates, with the pursuit of positive real rates even in the presence of currency appreciation (therefore attracting foreign capital but making the sterilization of the ensuing monetary expansion very costly);
- In general, a dominant weight of markets as against other institutions.
The Third Way was characterised by
- The acceptance of the primacy and desirability of markets, both domestic and global;
- Rejection of public ownership and public enterprise, supporting private entrepreneurship and continued privatisation; and, above all,
- Affordability, i.e. fiscal discipline and monetary restraint, rejecting inflation and public deficit and debt.
In many ways the Third Way approach went too far, in neglecting the increasing inequality involved in market allocation and the dangers of de-regulations (two major causes of the 2007 crisis), privatising on a vast scale (more assets per year in France under Lionel Jospin, in under 2 years 1997-98, than by Thatcher), and in endorsing the EU ruinous policies of fiscal austerity, not to speak of war-mongering and the dereliction of civil liberties.
In other ways the Third Way did not go far enough, as in pursuing the reduction of the working week for an unchanged wage, resisting the increase in pensionable age in the face of rising longevity, or failing to promote environmental protection and reclamation. And the whole project had an authoritarian bias.
Such excesses and deficits of the Third Way are at the root of the subsequent current crisis of the Left especially in Europe.
Today the traditional quantitative instruments of economic policy discussed by Tinbergen in 1956 and 1978 have been disabled:
- Direct controls have completely given way to market-determined processes;
- Monetary policy has been delegated by governments to independent central bankers, and completely disconnected from fiscal policy; exchange rates have been left largely floating, while membership of the Eurozone has eliminated that instrument completely for member states;
- Fiscal policy has been constrained by the straight-jacket of balanced budget over the cycle, indeed of budget surplus âin normal timesâ (UK Chancellor George Osborne, 10 June 2015; âThere is no economic reason for Osborneâs surplus plan. Itâs time Labour stopped playing catch upâ¦ Osborne is using the budget as an excuse to reduce the size of the state. Labour must not follow his leadâ, Simon Wren-Lewis, NewStatesman, 18 June 2015); with heavy penalties and costly automatic provisions for rapidly reducing debt (the Fiscal Compact);
- State-owned enterprises have been privatised or are scheduled for further reduction under pressure from EU and international institutions.
Qualitative instruments, on the other hand, today are restricted to the sole adoption of neo/hyper-liberal institutions, under the euphemistic label of âeconomic reformsâ.
A reform should be, by definition, a change for the better, but there is no consensus on desirable reforms: I might regard income re-distribution to the poor as a desirable reform, others might regard the ending of such re-distribution as desirable. In post-Stalinist Soviet-type economies â as Yanis Varoufakis recently noted - there was frequent talk of âreformâ to indicate projects of economic and political de-centralization. Today, on the contrary, reforms are an authoritarian design to dismantle the welfare state, reduce pensions, eliminate collective bargaining and labour employment protection, and to privatise state assets at any price regardless of opportunity costs.
Official EU and IMF documents recognise that both austerity and most of these âstructuralâ reforms are at best ineffective (in particular labour market liberalisation, unlike product market liberalisation especially in services) or at worst positively counterproductive (see Amartya Sen, The economic consequences of austerity, NewStatesman, 4 June 2015), but unelected officials perversely persist in forcing their implementation as a condition of their statutory support. And if and when âreformsâ might be effective they only operate in the medium-long term, often with adverse short term effects that turn them into investments that are not necessarily attractive. Amartya Sen likens the unholy and unnecessary combination of austerity and reforms to a mixture of rat poison and antibiotics given to a sick person.
The Great Recession that began in 2007 and is still on-going is concomitant with the general crisis in public economic policy. We must re-think and re-found the theory and practice of economic policy, restoring both traditional quantitative instruments and broadening the range of eligible qualitative instruments, either within the constraints of globalisation or shifting away from some of those constraints; we need more and different instruments of economic policy, quantitative and qualitative, i.e. a much wider range of policies and institutions. Otherwise we remain passive victims of chaotic and costly global processes, aided and abetted by rulers who are undemocratic and ultimately destructive.
| Greece: Enough is Enough |In Alexis Tsiprasâ shoes I would apply immediately for Greece to leave the EU, as envisaged by Art. 50 of the TEU (Consolidated Version of the Treaty on European Union, Official Journal of the European Union, C 115/15, 9/5/2008). Since Greeceâs 2010 crisis the Troika (sorry, the âinternational institutionsâ) have sunk about â¬245bn into its rescue, i.e. more than would have been sufficient at that time to pay off the entire Greek debt. It is well known that these funds did not benefit the Greeks but went almost entirely to save French, Swiss and German banks from their exposure to Greek government bonds. And in the FT or 21 April Martin Wolf debunks Greek âmythologyâ including the myth that âGreece has done nothingâ:
âGreece has undergone a huge adjustment of its fiscal and external positions. Between 2009 and 2014, the primary fiscal balance (before interest) tightened by 12 per cent of gross domestic product, the structural fiscal deficit by 20 per cent of GDP and the current account balance by 12 per cent of GDP.â
âBetween the first quarter of 2008 and the last of 2013, real spending in the Greek economy fell by 35 per cent and GDP by 27 per cent, while unemployment peaked at 28 per cent of the labour force. These are huge adjustments. Indeed, one of the tragedies of the impasse over the conditions for support is that the adjustment has happened. Greece does not need additional resources.â
The cost of such adjustments to the Greek people were immense. Unemployment reached 28% (48% for youth unemployment), the dismantling of collective bargaining lowered real hourly wages by 25% by 2014. The minimum wage fell to its level of the 1970s. The minimum pension fell below the poverty threshold. As many as 35.7% of the population and 44.1% of children aged 11 to 15 are now at risk of poverty or social exclusion. And Gechert and Rannenberg (of the German Hans BÃ¶ckler Foundation) show that without austerity the Greek economy would only have stagnated, avoiding the deep recession, while tax increases without spending cuts would have been much more effective in lowering the Debt/GDP ratio.
Another myth debunked by Martin Wolf is that Greece will pay its debt in full. As a a result of fiscal consolidation and the bailout its debt has gone from about 120% of GDP in 2010 to over 177% today. Thus Greece needs either further debt relief or, in order to continue to service the debt, it needs the â¬7.2bn bail-out funds due last year that were not disbursed on the ground of alleged delays in Greek implementation of âstructural reformsâ agreed in the Memorandum of Understanding negotiated by the previous right-wing government with the âinstitutionsâ.
After the 25 January elections the new government, democratically elected on a specific anti-austerity campaign, and reported by post-election polls to consistently command the support of 80% of the population, an agreement with the âinstitutionsâ was reached in principle on 20 February for the release of the â¬7.2bn on condition of somewhat different but yet unspecified structural reforms. However there have been continuous wrangles about whether or not the Greek reform proposals were or were not sufficient to warrant the release of the residual bail-out funds.
Up to now Greece has paid punctually interest and debt instalments as they became due, such as $450mn owed the IMF on 9 April and a batch of Treasury Bonds that also fell due. But the IMF is still owed â¬203mn on 1 May and â¬770mn on 12 May, plus â¬1.6bn in June, while some of the debt with the ECB is also due for repayment. The Greek government has scraped the bottom of the barrel by requisitioning the liquid balances of state enterprises and local authorities. It has announced that it is not in a position to make these payments, unless it stops payment of pensions and public sector wages and salaries. Without access to these â¬7.2bn Greece is likely to default on its payments to the IMF and the ECB.
On 15 April the FT reported that Greek officials had approached the IMF informally proposing to delay the repayment of loans due in May but were told that no rescheduling was possible; indeed they were persuaded not to make that request officially, presumably to avoid an open refusal.
At the same time Germanyâs finance minister Wolfgang SchÃ¤uble was reported in an interview to have virtually ruled out that at the Eurogroup meeting in Riga on 24 April a deal might release bailout funds to Athens. "You can't pour hundreds of billions... into a bottomless pit."
However Die Zeit reported that Ms Merkel now might support emergency measures that would give Greece continued access to ECB Emergency Financial Assistance even in case of default. The possibility of a Greek default not being followed by Grexit is being discussed more and more widely (see for instance Wolfgang Munchau and Martin Wolf in the FT). It might be possible, perhaps, but would still be very messy, and if there is sufficient goodwill to make it possible it would be much more effective to disburse the wretched â¬7.2bn.
The Financial Times on line of 18 April (Breaking News, 6.57 pm) reports that ECB president Mario Draghi told the IMF spring meeting the euro area was better equipped than it had been in the past (in 2010, 2011 and 2012) to deal with a new Greek crisis but warned of âuncharted watersâ if the situation were to deteriorate badly.
On 21 April BloombergBusiness reported that âThe European Central Bank is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the countryâs stricken lenders grows in the Governing Councilâ. The writing is on the wall.
Grexit costs would be very serious not only for Greece but for the entire Eurozone and beyond, but unilateral withdrawal from the whole of the European Union rather than simply the Eurozone would make more sense. An application to withdraw would only take effect two years later, leaving ample time for a possible change of mind and for re-negotiations, but might be an effective and quick way of sobering up Mr SchÃ¤uble and the other Troika hawks that have been bullying Greece, pushing it towards default regardless of consequences. Greece might as well take back the initiative, not least to avoid an internal government crisis.
What is particularly deplorable is the IMF duplicity and bad faith: in Greece and everywhere else on a global scale they have been calling relentlessly for fiscal consolidation and structural reforms (a euphemism for enterprise freedom to dismiss employees and for the systematic destruction of the welfare state) but at the same time they have played a leading role in discrediting consolidation and "reforms" as policy instruments to fight a recession.
The IMF World Economic Outlook of October 2012 (Box 3.1 untypically signed by Chief Economist Olivier J. Blanchard and Senior Economist David Leigh, presumably to suggest that their views are personal and not official) raised previous estimates of fiscal multipliers for several reasons. First, the ineffectiveness of countervailing monetary expansion close to the zero floor of the interest rate'; second, lack of opportunities for exchange rate devaluation especially in the Euroarea; third, the existence of a large gap between potential and actual income (for fiscal multipliers are higher in a downturn than in a boom) and finally, the simultaneous consolidation across many countries. Such revision of estimated multipliers implied an upwards revision of the costs of consolidation, to the point of theorizing that tax increases and especially expenditure cuts would actually raise, instead of lowering, the ratio between Debt and GDP, thus setting up a vicious circle. This of course is what happened punctually in Greece and in other highly indebted economies â like Italy â as a result of fiscal consolidations.
Further the IMF World Economic Outlook 2015 (Ch. 3, Box 3.5 on The Effects of Structural Reforms on Total Factor Productivity, pp.104-107) issued on 14 April candidly recognizes, on the basis of available econometric evidence, that total factor productivity can be increased by using more skilled labour and ICT, by investing more in research and development and by lowering the level of regulation in product markets. In contrast, the IMF does not find any statistically significant effects on total factor productivity that result from lowering labour market regulation (See also Ronald Janssen Social Europe). Such schizophrenic duplicity on the part of the IMF has not even incompetence as a conceivable justification. A Greek unilateral withdrawal from the European Union would sober up lots of people in Washington as well as in Brussels, Frankfurt and Berlin. Go for it Alexis and Yanis on behalf of all of us, not just on behalf of Greece.
Last Monday (11 May) Greece paid the $750mn owed to the IMF, one day before the deadline, ending days of uncertainty over funds availability and whether payment might be withheld in order to put pressure on creditors.
Where did the money come from? The FT reminds us that âThe Greek government ordered hundreds of state entities â among them hospitals, universities and local authorities â to deposit their cash reserves with the central bank. But many such entities, including an overwhelming majority of municipalities, have declined to complyâ. An unmissable piece of news, which appears to have gone largely unreported in the financial press: TSIPRAS TO FIRE [FIRED] BANK OF GREECE BOSS FOR UNDERMINING SYRIZA POSITION: âBank of Greece Governor Yannis Stournaras will be quitting his post today (last Sunday). Alexis Tsipras will ask for his resignation in the light of documentary proof that the former New Democracy Finance Minister personally gave specific briefs to a top journalist about âputting the most negative spin possible on the newsâ about Greek finances. Yannis Stournaras was Greek Minister of Finance from 5 July 2012 until he moved to the BoG last year. As a senior consultant to the Bank he was personally involved in the entry of Greece into the euro. As a senior Governor he sits on the Board of the IMF, a position that places him in a serious conflict of interest with the Greek government. âMeanwhile, the forensic investigation into debt overstatement in 2010 and how much Greek debt can be objectively defined as âodiousâ continuesâ.
| GREXIT |Si vis pacem, para bellum â If you want peace, prepare for war, said Vegetius in the 5th-6th century b.C. Just as then, and by the same token, Si vis euro, para exitum: if you want to keep the euro, prepare for exit.
In 2012 Willem H. Buiter and Ebrahim Rahban, respectively chief economist and global economist of Citygroup, writing in the Market Insightsection of the Financial Times (Greece far from safe even after debt swap, 13 February), coined the word Grexitâ a euphonic synthetic neo-logism for Greek exit from the Eurozone. They wrote then:
âThere is some good news. Plentiful ECB liquidity has pushed back the risk of disorderly default of systemically important euro area banks and, combined with financial repression in euro periphery nations, has eliminated the near-term risk of a disorderly default by a systemically important sovereign. The external damage caused by a Greek euro area exit (or âGrexitâ, as we call it) could, given appropriate policy response from the ECB and euro area creditor countries, be limited and need not trigger waves of âexit fear contagionâ to other fiscally weak peripheral countries. The second LTRO on February 29 may buy more time but until the fundamental drivers of the euro area sovereign debt and banking crises are addressed, volatility will remain a constant companion and recovery and growth absent friendsâ Since the unexpected victory of Alexis Tsipras and his Syriza Party, elected on 25 January 2015 on a programme rejecting European austerity and its embodiment the Memorandum imposed by the Troika (EC, ECB and IMF) on the Samaras government, references to Grexit have become increasingly frequent, including its variation Grexident (Wolfgang Schauble) to indicate the possibility of Greek âaccidentalâ exit, in spite of neither the Greek government nor European authorities (perhaps not including Schauble) actually wanting to provoke that event. Three observations are in order. 1) There are serious legal problems involved in Grexit. For a start, there is no legal provision in the Treaties for an EMU member state to withdraw from or be compelled to leave the Eurozone. The decision to introduce the euro is âirrevocableâ (Art. 140 TFEU). The same was true for the EU as well. Article 50 TEU, however, grants EU member states the right to withdraw from the European Union. It is inconceivable, though it has not been explitly stated, that a country could leave the EU and still maintain all the rights reserved to EMU members. Conversely, membership of the EMU is part of the obligations of membership, the so-called acquis communautaire, unless a derogation had been successfully negotiated in 1992 at the time of signing the Maastricht Treaty. Therefore a State that left EMU or, by some unspecified measure, was no longer a member of EMU would have to leave the EU as unable to fulfil its membership requirements. And even if a country was allowed such a derogation ex-post, thus maintaining EU membership, it would still be subject to the fiscal straightjacket of the so-called Growth and Stability Pact and the Fiscal Compact, i.e. the exit from EMU would not restore a countryâs fiscal sovereignty. Unilateral exit from the EU would take effect only two years after its declaration, but we must presume that exit from the EU of an EMU member would involve its immediate exit from the Monetary Union. The immediate implementation of capital controls and ceilings on cash withdrawals from banks, in order to avoid capital flight and bank runs, would certainly follow. That the Council, the European Parliament and the relevant Greek institutions would have to be consulted beforehand would also and detrimentally make secrecy impossible. 2) Grexit would involve the problems of managing the new currency. The rate of conversion of the old into the new currency would have to be identical, at least to start with, with the rate of conversion of euro prices and wages into the new currency. Without loss of generality therefore at time 0 the new currency could be initially issued at par with the euro. Immediately afterwards, however, the exchange rate between the old euro and the new currency, let us call it the drachma, would necessarily have to be floating, fully determined by the market. At any managed exchange rate different from the market rate Gresham's Law would operate: âBad money [i.e. the currency overvalued with respect to the market rate] drives out good [the undervalued currency]â. One of the oldest economic discoveries, anticipated in 1519 by Copernicus, even earlier by Nicole Oresme in the fourteenth century, the law was first stated clearly by Aristophanes in his play The Frogs, around the end of the fifth century b.C. The new currency would have to be devalued, very soon after issue, for the exiting country to obtain the benefits of greater international competitiveness and devaluation of debt payable in that currency. (Wolfgang Munchau expects the new currency to continue to circulate at par with the euro voluntarily on a significant scale, but this is unrealistic). However the currency to be used for discharging earlier obligations cannot be chosen at will; it is determined by the law of the country where the transaction has taken place. Thus, for instance, much and probably most of the outstanding import and export orders, as well as past unpaid tax, and the servicing of already existing debt will have to continue to take place in euro, under penalty of default; overall, something like 30% of debt and almost all of derivatives trade. Target 2 large balances â a purely technical construct while the euro lasts â would become real and would have to be settled or canceled, coming to a head. And furthermore âDual currencies are always a bad ideaâ (this Blog, 10 February 2010). Euro denominated obligations contracted under the law of a non-Eurozone country like Britain will have to be discharged by converting the new currency into euros at the market exchange rate. Thus the introduction of the new currency would not avoid default, it would simply be the form that a default would take. As well, a default would involve the inability to access international financial markets for the next 10 or 15 years and/or a much higher cost of finance. The devaluation of the new currency would necessarily involve an acceleration in inflation with respect to euro inflation, and therefore an increase in the interest rate with respect to euro rates, and especially a higher spread with respect to German Bunds. The impact of the new currency on external accounts, income and employment, will depend both on its subsequent impact (âpass-throughâ) on the path of wages and prices inflation, and on trade elasticities of both demand and supply; in principle perverse effects cannot be ruled out. In the end the success of a euro exit would depend on the flexibility of real wages and prices, as well as on the countryâs ability to implement productivity-enhancing policies, which are the same conditions under which the maintenance of a common currency would work. 3) Grexit would never be accidental. Grexit would be the result of a deliberately destructive strategy adopted by Germany and the Nordic countries (Finland, the Netherlands, France, the Baltics) aided and abetted by Spain and Portugal for fear of opposition parties ousting their governments should Syrizaâs example succeed, and by Italy out of perceived self-interest. The Greek refusal, backed by the new elected government and today reportedly supported by 80% of the Greek population, to continue with the self-defeating, ruinous austerity policies imposed from Brussels, Frankfurt, Berlin and Washington, is a completely rational and democratic choice rather than the reckless strategy in an irresponsiblee game of âchickenâ of which Greece has been accused. The most likely course of events leading to Grexit would be: the continued denial of Greek access to any of the â¬7.2bn residual funds provided by the Troikaâs earlier rescue package, while Troika officials slowly verify compliance with outdated conditions, impossible for a poor country to satisfy; the continued prohibition by the ECB of the Greek government raising finance through the issue of short term Treasury bills, indeed the imposition of ceilings on banksâ holdings of such bills, under the pretext that in Greek circumstances this would amount to funding the government deficit directly (a peculiar dysfunction of the ECB, seeing that the independent Bank of England and the independent Central Bank of Japan are allowed to fund government deficits all the time).
At the end of March the Greek government is facing a bill of â¬1.7bn for wages and pensions; on 9 April the IMF is owed a loan repayment of â¬450mn, and in mid-April two Treasury bills for a total of â¬2.4bn also are due for repayment.
Since the elections of 25 January Greek corporations and households have cut their tax payments drastically; a government running a primary surplus, even at the reduced rate of 1.5% of GDP, should always be able to finance current public expenditure but now the position is unclear. The Greek government has been particularly skilled at mobilizing cash belonging to the National Health Service and state-owned corporations to keep the government afloat. But cash withdrawals from the banks have been accelerating since the new year, both before and after the elections. According to Barclays on Wednesday 18 March withdrawals reached a record â¬300mn per day, at which rate they regarded a block on deposits as unavoidable (not least because of this kind of malicious rumour). The Greek government has admitted that without fresh funds they will not be able to meet all payments due in April: we should believe them. Failure to repay the IMF loan instalment would not have immediate adverse implications, but would involve the loss of all IMF credits. Failure to repay the â¬2.4bn Treasury bills would trigger-off cross-default clauses in other loans and precipitate a deeper crisis, including the likely loss of ECB Emergency Liquidity Assistance. At that point a run on the banks, stricter limits on bank withdrawals, capital controls and actual default would become self-fulfilling prophecies. In order to avoid the de-monetisation of the economy and its vast contractionary implications the government would be forced to issue a euro substitute, i.e. a new currency parallel to the Euro.
The transition to the new currency presumes that the new banknotes and coins can be produced quickly or, better, well in advance in complete secrecy. Normally this would take about six months; it has been suggested that the new currency could be introduced by stamping old euro notes as drachmas, but this would be a silly waste of good money.However a cash shortage could be initially tackled by means of the issue of small denomination Treasury notes, or by the issue of bank cheques like those that were introduced in Italy in the 1980s to deal with a shortage of coinage. At least initially, and indeed for some time, the euro and the new currency would circulate in parallel, but as long as the rate of exchange between the two was market determined this should not create problems other than some confusion and uncertainty.
It might be safest to turn our deposits into bricks and mortar, withdraw as much cash as we can as fast as we can while we still can, and hide it under the mattress to avoid negative interest rates. Actually, si vis pacem para pacem, as Pope Francis might have said, and if you want to keep the Euro get on with completing a banking Union, promote fiscal and political integration; above all Growth and Stability suicide Pact must be imaginatively re-interpreted and accompanied by a serious, large scale, European public investment effort. Together with the felicitous large reduction in oil price, overdue but welcome Quantitative Easing by the ECB and substantial euro de-valuation, this might still do the trick without the drama and trauma of Eurozone and European Union dis-integration.
| Kakistocracy |In 1988 my old friend, teacher and mentor Luigi Spaventa was made Treasury Minister in the Italian government. The Communist Party had been offered a few posts in the government, including Vincenzo Visco at the Ministry of Finance, but had refused; Luigi belonged to the left but was not a party member, and fortunately accepted. On that occasion, I sent him a postcard with the following verses: Visco al Fisco! Noo? Peccato, Il Partito sâeâ imbranato. Per fortuna câeâ Spaventa Che al Tesoro sâarroventa, E la fine eâ ormai per via [Visco at Finances! No? Pity./The Party has goofed./But fortunately Spaventa/At the Treasury is getting fired-up,/And at last we are on the way/To end our kakistocracy.] Naively I thought I had coined the word, from the Greek kakistos, superlative of kakos(bad), government by the worst citizens, but on googling the word there are almost half a million entries: kakistocracy was first used in 1829 by the English satirical writer Thomas Love Peacock. The American poet James Russell Lowell wrote in a letter in 1876: "Is ours a government of the people, by the people, for the people, or a kakistocracy rather, for the benefit of knaves at the cost of fools?" Luigi, a wonderful teacher and a great economist, died prematurely in 2010. Had he lived longer he might have been appointed premier in 2012 instead of Mario Monti (for he was President Napolitanoâs economic adviser), or to even higher office later: Italian recent history would have taken a turn for the better. In any case I was patently wrong: not only does kakistocracy â the mafia in collusion with the political Casta- still rule Italy, now it has spread to the entire world. Whenever the best men come to power in a country, the global kakistocracy tries to squash them. This is the case right now in Greece. All that Alexis Tsipras is asking of the European and global rulers is six months of breathing space to prepare an alternative plan for debt management and economic recovery. After all, the elections of 25 January had been called only on 14 December and he could not conceivably have been expected to have a plan ready when his outstanding surprise victory was proclaimed. His first moves were directed at reassuring the global community: Greece would honour its debts in full, without insisting on a debt haircut; the country would remain in the Eurozone, as preferred by a large majority of its citizens; it would fight tax evasion and raise the living standards of those who had suffered most from the austerity imposed by the Troika (the âMemorandumâ issued by the EC, ECB and IMF): the unemployed, especially those unfairly dismissed, the poor, old age pensioners and the other economically weak groups. âIf the countryâs sacrifices were conducive to recovery and growth I would be the first to advocate themâ â he said to Parliament last week (I am quoting from memory) â âif the bitter pill was necessary to recover health I would readily swallow itâ. But the austerity imposed by the European and globalist kakistocracy demonstrably leads only to cumulative impoverishment and ruin, as it has already done. Thus Tsipras rejected at once the continuation of the programme agreed with the Troika by his predecessor, renouncing the â¬7.2bn aid that Greece otherwise expected to receive at the end of February, asking only for the â¬1.9 bn repayment of ECB profits made on its Greek bonds, with a view to using the next six months to negotiate a new agreement and in the meantime to meet all outstanding obligations by issuing around â¬10bn short-term Treasury bonds. So far the Kakistos and Tsipras are set on a collision course. The Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang SchÃ¤uble would not even âagree to disagreeâ. On 11 February in Brussels at a meeting of Eurozone Finance Ministers talks collapsed after six hours. There is no way the debt owed to the ECB or the IMF can be cut, under penalty of losing access to assistance from these institutions â though Greece might be allowed to repay ECB credits by borrowing on very long terms from EFSF, the Eurozone bail-out fund. Moreover Tsipras has promised that private investors will not be hit. The only room for debt renegotiation is with European governments, to whom Greece owes directly or indirectly about â¬195bn, around 62 per cent of its total debt (of which almost 148bn or 45 per cent to the bail-out fund EFSF). True, Greece has already benefited from a debt cut in 2010 and 2012, and from the lengthening of maturities right up to 2057; and from a reduction of interest on its debt down to 2.6% of GDP, equivalent to that paid by Italy or France (and only 1.5% on its debt with the EFSF, which could not possibly be cut further). But according to the Troika Memorandum Greece is committed to running a primary surplus (before paying interest) of 4.5% of GDP a year, which is an exceedingly heavy burden on an impoverished country. Such a surplus requirement could very well be cut at least temporarily, by an interest moratorium until growth is resumed, back to earlier income levels, to the 1%-1.5% primary surplus that Syrizaâs current plans would require. This is the purpose of the proposal put forward by Yanis Varoufakis, of swapping debt owed to European governments with new bonds indexed to the Greek growth rate. The ECB was certainly within its rights to cancel the waiver allowing Greek banks the use of Greek government bonds as collateral, thus denying Greece access to liquidity at 0.05% interest, once Tsipras had indicated his unwillingness to continue on the agreed course at the end of February. But it was certainly not âlegitimate and opportuneâ as declared by Matteo Renzi, who presented Tsipras with an elegant tie instead of solidarity (âSo that he could go and hang himself with itâ, commented Giorgia Meloni, leader of the right-wing party Fratelli dâItalia). As long as Greece has access to Emergency Liquidity Assistence (even at the higher cost of 1.55%) Greek banks can cope even with the slow run on deposits that has already begun (â¬15 bn in the two months preceding the elections); but such access has to be confirmed every fortnight and its possible suspension is a Damoclesâ sword. Greece really needs the Tsipras really needs the â¬10bn Treasury bonds that Tsipras wishes to issue. The trouble is that Greece is already right up against the â¬15bn limit to short term indebtment that has already been imposed by the Troika, and the additional â¬10bn bonds have to be, but have not been, authorised. Yet this is the only and therefore the best way out of the Greek-Troika confrontation. Wolfgang SchÃ¤uble declared that âEurope is not in the business of granting bridging loansâ, but the â¬10bn would be no skin off his nose, they would be raised â at a price, that current delays make rise all the time â in the international market. By giving up its entitlement to â¬7.2bn under the Memorandum surely Greece can have its â¬15bn borrowing ceiling lifted at the same time? The Troika cannot have it both ways, tying Greece to its borrowing limit when it is renouncing some of the benefits of its current deal with the Troika. Germans display the memory typical of elephants when they evoke the ghost of their 1922-23 hyper-inflation to justify their opposition even to ECB quantitative easing. But they have a shorter memory than goldfish when it comes to the 1953 cancellation of German debt of over 200% of its GDP at the time, much in excess of the current Greek debt burden of under 180%. According to the economic historian Albrecht Ritschl (LSE), Germany was âthe âbiggest debt transgressor of the twentieth centuryâ;Robert Skidelsky recently reminded us thatâGermany experienced eight debt defaults and/or restructurings from 1800 to 2008. There were also the two defaults through inflation in 1920 and 1923. And yet today Germany is Europeâs economic hegemon, laying down the law to miscreants like Greece.â Tsiprasâ mention of war reparations was not commented on by Merkel but both vice-Chancellor Sigmar Gabriel and Wolfgang SchÃ¤uble immediately said that the issue was definitively closed years ago, and its re-opening was out of the question. Tsipras mentioning the War was treated as an inappropriate gesture in bad taste. Shades of Basil Fawlty of Fawlty Towers, shouting at the Hotelâs Spanish waiter Manuel: âDonât mention the War!â when German guests arrived. But why ever not? If memories of 1922-23 hyper-inflation are not buried, a fortiori neither should more recent and tragic ones. Such a combination of a good memory for distant events with forgetfulness of recent ones is typical of dementia. A secret Greek Finance Ministry report is said to provide detailed evidence of âatrocities and forced loans during Nazi occupation of Greece in World War IIâ. Apparently âin 1960 Germany paid DM 115 million in reparation payments to victims of the Nazi terror regime in Greece in accord with a bilateral reparation agreementâ. But 1) the Netherlands suffered much less and received a much larger compensation; 2) âthe 1953 London Agreement on German External Debts, between the Federal Republic of Germany and creditor nations, stipulated that payment obligations from World War II were to be deferred until âafter the signing of a peace treatyâ", and 3) apart from the cost of war suffering, casualties and loss of material assets, there was a loan the GreekCentral Bank was forced to give the Nazi regime in 1942, 476 million reichsmarks which the occupiers not only acknowledged but had actually started repaying shortly before the end of the war. Even at a modest interest rate of 3% a year (though German loans after the War generally had a 6% interest rate) after 70 years that loan would have built up to a handsome three digit billion sum in today's euros. Professor Hagen Fleischer, a historian from Athens University, explains that "Before 1990, Germany tended to point out [that] it was too soon, because Germany was divided and it was the entire country that had gone to war, not just one half. So the issue was supposed to be canned until Germany was again reunified". After reunification, however, "Germany's response was suddenly, 'So much time has passed - now it's too lateâ". Clearly the Greek Ministry of Finance should publish its secret report in full on the Internet at once, together with all the body of evidence of post-2009 Greek negotiations with the Kakistos of the Troika that led to the âMemorandumâ. There is a perfectly feasible solution to the otherwise potentially catastrophic losses involved in the confrontation between Greece and the Troika: lifting the â¬15bn ceiling on short-term debt in exchange for Greece renouncing the aid otherwise payable under the Memorandum. Paradoxically, Angela Merkel is standing firm and and wisely stopping Europe from joining the USA and its jejeune warmongering President Barak Obama in arming Ukraine and fighting Vladimir Putin. Letâs hope that she might come to her senses also in her dangerous confrontation with Greece. On Thursday 13 February it was announced that fiscal revenue for the month of January was â¬1bn lower than forecasts (a shortfall of 23%). The ECB extended another EUR5bn in emergency loans to banks in Greece after fears that a spate of bank withdrawals could dry up funding. In fact according to JP Morgan withdrawals from bank deposits since the beginning of 2015 amounted to â¬21bn. But ELA is subject to fortnightly verification and is not a permanent solution. On Friday 14 it was announced that in the fourth quarter of 2014 the Greek economy had contracted slightly, reversing the trend after nine months growth. The Greek government claims that it does not need any fresh cash: âWe do not want new loans, we need time, not money to implement reformsâ â the Greek premier said in an interview to the German weekly Stern. But a spokesman for the Commission commented: âWe fear that the available liquidity is shrinking faster than anticipatedâ. Monday 16 February was supposed to be the day of reckoning. But the Brussels meeting of Eurozone Ministers of Finance with Tsipras and Varoufakis ended with a bitter row, with general recriminations and yet another postponement of the final decision until no later than Wednesday next. The Union offered Greece only the extension of the pre-existing agreement, at the same conditions; the Greeks rejected the proposal as âabsurd and unacceptableâ Time is running short, for some countries, like Germany, the Netherlands, Finland and Estonia, need parliamentary approval not only for a new Memorandum but also for an extension of the last one. One might think that the difference between the positions of the two antagonists is minimal and purely formal. After all, what big difference there might possibly be between the extension of a pre-existing agreement subject to consensual renegotiation within six months, and a slightly different stipulation also subject to consensual renegotiation within the same term? The difference however is immense. The extension of the current agreement would involve the acceptance not only of the general principle of austerity but also of new privatizations of public assets at derisory prices, and the reversal of policy measures already taken by the Tsipras government, such as the reinstatement of public employees especially if unfairly dismissed, the adoption of a higher minimum wage and higher pensions. It would be a capitulation on the part of the Greek government, involving the rejection of the main principles of their electoral campaign and popular mandate. And for the kakistos European leaders it is a serious question of asserting who is really Master in Europe. We could say that the Troika, like Shylock The Merchant of Venice, is demanding of Greece its pound of flesh in payment of its debt, whereas Greece is willing to pay a pound of its flesh only on condition that it does not include any of its blood. This Shakespearean drama is being replicated next Wednesday, with an open ending.
Greeks and eurozone agree bailout extension âGreece and its eurozone bailout lenders agreed an 11th-hour deal to extend the countryâs â¬172bn rescue programme for four months, avoiding bankruptcy for Athens but setting up another potential stand-off in June when a â¬3.5bn debt payment comes dueâ. Financial Times, 20 February 2015, 8.18pm
Hip Hip Hip! Hooray!
| Europe is a Cow |The Greek etymology of Europa (Îµá½ÏÏ
- "wide" or "broad" and á½¤Ï"eye(s)" or "face"), suggests that as a goddess she represented a cow (with a wide face). See also Antonio Carracci (b. ca. 1583, Venice, d. 1618, Rome),The Rape of Europe, currently being shown at the exhibition "From Guercino to Caravaggio", Palazzo Barberini, Rome. 1. Costs and benefits of the Euro The introduction of the Euro involved for all the EMU member states significant benefits and costs. Benefits include: a greater economic and financial integration of trade and investment; a rate of inflation lower than the Bundesbank best performance with the DM; and ten years of an interest rate on public debt rapidly converging to a common, decreasing level. At the same time national governments lost the use of several instruments of economic policy: monetary policy, delegated to the ECB; the nominal exchange rate of the national currency (the alternative âinternalâ devaluation through lower price and wage inflation than competitors being conflictual and impopular), and fiscal policy now subjected to a much stricter discipline (Maastricht, Growth and Stability Pact, followed by the Fiscal Compact). Italy had the additional cost of a fiscal squeeze undertaken in order to approach the required pre-requisites â an excellent investment in view of the benefits obtained as a result. In the transition to the Euro, Italy and Greece recorded an initial burst of inflation caused by the lack of price monitoring and control on the part of the government; this immediately eroded the international competitiveness of both countries, which could no longer be restored through devaluation. Monetary sovereignty had already been surrendered by the government to the Italian Central Bank in 1980. A greater financial integration turned into a channel of contagion in the subsequent crisis. And, above all, on 19 October 2010 in Deauville, Angela Merkel and Nicolas Sarkozy decided that ESM bailouts would inflict losses on government creditors â a position ethically unimpeachable but infelicitous, because it caused a further widening of the spreads of long term interest rates on the public debt of member states with respect to German Bunds. Thus began the Eurozone tribulations, characterized by stagnation, record unemployment, deflation, still today in the grips of the deepest crisis ever experienced by modern capitalism. In fact the Great Crisis of 1929 had seen a rapid recovery already from 1933 thanks to the public investment of F.D. Rooseveltâs New Deal, while the crisis that began in 2007 and is still rampaging has been aggravated and prolonged by the perverse austerity policies imposed by International Financial Organisations and the European Union. The Euro suffered from policy errors by various national governments, including the fiscal profligacy of Southern members, but above all from two congenital diseases and a subsequent degenerative disease. First, the Euroâs premature birth, before political and fiscal integration (and before defence and foreign policy integration): the Euro should have been the very final stage of European integration, its crowning, instead of which it was used to accelerate integration processes, pushing la finalitÃ© politique through the tensions generated by monetary dysfunction. Second, the ECB was born incomplete, not to say mutilated, not so much because of its independence, which is common to the major central banks in the world, but because it was modelled on the Bundesbank, and even more than the latter was totally separated from fiscal policy, without the virtually unlimited power to buy government bonds enjoyed by other central banks otherwise equally independent (as the Fed or the Bank of England or the Central Bank of Japan). Moreover the ECB was born without the usual powers of supervision, recapitalization/consolidation/liquidation of commercial banks, and without the safety net of a common European insurance of bank deposits (the amount nominally insured today is the same throughout the Eurozone, but is the responsibility of national Treasuries, and is therefore worthless in case of a countryâs default). The degenerative disease of EMU has been the progressive economic divergence of member states, not only in terms of monetary and fiscal parameters for which a statutory convergence was envisaged but not observed, but also in terms of other real and financial parameters whose convergence should have been a condition of entrance and continued membership of the Eurozone but was not, such as the unemployment rate, the share of non-performing loans, international competitiveness. Such progressive divergence created strong and increasing centrifugal tensions. Monetary policy on its own is not sufficient to re-launch the European economy, in spite of the original and courageous initiatives of the ECB President Mario Draghi (LTROs, OMTs and other unconventional initiatives), also because of the policy constraints imposed by Treaties and/or by the pressures of Northern member states. It is enough to consider the failure of Japanese policies of Abenomics, i.e. monetary expansion accompanied by modest fiscal stimuli and structural reforms. International trade, which since the 1970s had been a dominant factor of global economic growth, in the last years has slowed down more than global GDP; the IMF confirms that it has reduced considerably its earlier role in growth promotion. Many quarters invoke âstructural reformsâ. A reform by definition ought to be a change for the better, and a structural reform a significant change for the better, which therefore should be politically uncontroversial and unanimously acceptable. But such reforms raise three serious problems. There is no agreement on the desirability of this or that reform, in view of their re-distributive effects; any positive effect, if any, can only accrue in the long run (5-10 years); and there are structural reforms that, although clearly beneficial in the long run, in the short run can have strong negative effects. For instance, a competition increase reducing prices today would promote undesirable further deflation; this kind of structural reform is like an investment that although beneficial is not always sufficiently profitable to be recommended. A reduction of public expenditure in order to reduce taxation (as anticipated but not yet implemented by the Italian spending review) has a positive effect only if it reduces the waste of resources, but otherwise a balanced reduction of both public expenditure and taxation can only have a recessionary impact on income and employment, as demonstrated by Haavelmo. What might be desirable is an increase of public investment funded by the reduction of current public expenditure. A superior solution would be a collective large-scale public investment undertaken at the European level. The trouble is that Europeâs so-called virtuous countries, which would be in the best position to undertake a growth-promoting role â thanks to the low interest rates at which they can borrow and their greater margin for fiscal manoeuvre â are stubbornly reluctant to do it. And the Union budget, at a miserable 1% of European GDP (compared to 20% in the USA), does not allow any large scale initiative. It might seem that the recent Juncker Plan, with investments of the order of â¬315bn over three years beginning in the autumn of 2015, represents an important progress in this direction. But in truth these investments include a presumed and unrealistic multiplier effect on private investments, of the order of almost 15 times. European Union funds would be only â¬21bn, of which 8bn diverted from other important uses, 8bn consisting only of guarantees, and 5bn provided by the EIB and unlikely to be fully available without its re-capitalisation. It is believed that at the moment the funds really available for the Plan are of the order of â¬2bn â a sick joke (âEuropeâs alchemistâ, âLaughingly inadequateâ The Economist 29 November. See also Mazzucato and Penna, The Guardian, 27 November). Jacques DrÃ¨ze and Alain DurrÃ© (CORE 2013) have proposed the issue of bonds indexed to average growth rate of the Eurozone on the part of the ECB or other EU agency, which would then swap them with government bonds issued by member states indexed to national growth rates, in proportion to their share in European GDP. In such a way the EU agency would be able to insure member states against macroeconomic shocks, paying a subsidy to under-performing states out of the profit made on the bonds of over-performing states, at zero cost. This is a brilliant scheme, which however in case of default by countries participating in the scheme would inflict serious capital losses on the emitting European Agency. Pierre PÃ¢ris and Charles Wyplosz (2013, 2014) have proposed a scheme called PADRE â Politically Acceptable Debt Reduction in the Eurozone, similar to a proposal of mine of 2013 â consisting in the mobilization of ECB seigniorage for the purchase and retirement of government debt of all countries holding shares in the ECB (including 10 countries that are members of the EU but not of EMU), in the same proportions of the shares they hold. Therefore even a possible default by a large country would not damage other members and would not involve a Transfer Union. In his CaffÃ¨ Lectures of 2011 Willem Buiter estimated the present value of ECB seigniorage at about â¬3300 billions, but seigniorage mobilization for Eurozone debt reduction is unlikely to be acceptable to the Northern members of EMU. 4. Disintegration of the Eurozone? Over the last years there has been frequent discussion of the possible disintegration of the Eurozone, with the return to national currencies by the weaker or the stronger members. The recovery of national monetary sovereignty would allow weaker members the use of all the instruments of monetary policy, and the ability to recover international competitiveness through exchange rate devaluation. However European fiscal discipline would continue to apply to all EU members even after ceasing to be members of EMU, by virtue of the Growth and Stability Pact. The initial exchange rate between the Euro and the new national currency would be irrelevant, because the same rate would apply to prices. But its use as an instrument of economic policy would involve for the weaker members the cost of successive devaluations, higher inflation and higher interest rates, as well as the revaluation of debt; exiting stronger members would face the cost of revaluations making them lose international competitiveness. All exiting countries would also face the large scale cost of exit from the entire European Union, that requires the single currency as a part of the obligations of membership â the acquis communautaire (except for Denmark and the UK that negotiated a derogation from the Maastricht Treaty before signing it). Even under unchanged current policies, sooner or later the economic crisis might well come to an end thanks to the automatic mechanisms that always operate in the course of any economic cycle in a capitalist system. Once the floor of zero gross investment is reached, further falls of investment come to an end, stabilizing national income; at that point net investment is negative and gradually eliminates excess capacity; gross investment resumes first to replace excessive capacity losses, then to exploit the superior technical opportunities accumulated during the crisis; and the ensuing multiplier/accelerator interaction boosts growth further. Growth revival, however, might happen too late to prevent the disintegration of the Euro (just as it happened with the ruinous disintegration of the USSR and the rouble in 1992). If this happens this Europe of ours will have betrayed the vision and the values of its Founding Fathers. And we would not even be able to cry over the inglorious end of the European project because the Europe we have today is no use to us, and it most certainly does not deserve our tears. [Note: An Italian version of this paper was presented at a Round Table on âPerspective of European Economic Policyâ, at the Conference for the Centenary of Federico CaffÃ¨âs Birth, Sapienza University of Rome, 4-5 December 2014].
| Arrears |
One of the factors that have slowed down Italian growth in the current crisis, even relatively to a sluggish Eurozone, is undoubtedly the