Public Foundations of the Financial System

THE FUTURE OF MONEY (2/4)

The financial system is concerned with the issue and circulation of money. Within capitalism the purpose is to direct money to the most profitable use.

Money is a peculiar phenomenon, real and not real so far. In essence it is a promise. Holding money is a claim on any resources, goods or services that are categorised in money terms. However, for these claims to be realised, the sellers of resources, goods or services must trust in the persistent value of that money.

Historically, money has been made of a commodity that can itself be resold, such as gold, but today it mostly consists of base metal, paper, or merely electronic records. People trust it because convention and experience tells them it will be honored. It is also backed by a public monetary authority as legal tender that has a stated value.

This is critical to public responsibility for money. For example, all monetary activities designated in pounds are collectable from the British banking system (or its international agents). Underlying the whole banking system is the Bank of England. Despite it having been made independent in policy terms, the Bank’s authority rests on the financial viability of the nation in terms of its productivity (GDP) and its ability to collectively assemble money through taxes.

As has been shown in Iceland, the people, through the state, are forced to take on financial liabilities created by the private sector. If a company produces a car that ceases to function, the owner does not go to the state asking for a new one. With money, however, this is exactly what the holder of that money will do. People invested in Icesave, the Icelandic online bank, because it offered higher interest. Despite the fact that the bank was linked to a small country of only 300,000 people, investors did not see it as a risky investment.

When the parent bank failed, depositors turned all together to the British government and demanded payment in full. In order to secure the safety of its own banks, the UK lent Iceland the money to repay deposits – a huge debt on the Icelandic people against which they are now protesting.

How could Iceland’s banks have financial commitments several times larger than its economy? Partly this was because the banks took in deposits from around the world, but mainly it was because banks can themselves create money. They do this by issuing bank credit – loans.

Free market has been built on bank credit. Traders and companies have borrowed bank money to set up their businesses. Recently most credit issue has been related to consumption or financial investments such as housing. The illusion is that banks act as intermediaries between savers and borrowers, but that is not so. Banks take in deposits, some paying interest. They also issue loans and charge interest. There is no direct relationship between savers and borrowers.

All deposits are returnable, regardless of what loans are still outstanding. Banks can also lend much more than they have in deposits, traditionally up to ten times more and even more in recent years. This is how financial sectors can explode in total value, eclipsing the productive economy and inflating financial assets.

Recently bank lending has contributed to the vast use of ‘leverage’ to enable the investments of the rich to go even further. Hedge funds, private equity investments and the investment arms of banks use borrowed money to inflate their speculative gambles. Some of these may even be gambles against the banks themselves or the national currency. As more money is issued it floods into the financial system and becomes part of the waves of money looking for a profitable home. As it is impossible to separate the interests of bank depositors or pension holders from financial speculators, in a crisis the whole system must be secured.

In such a crisis, the public groundwork of the money and banking system becomes clear. As all bank-created credit is designated in the national currency, this becomes a liability on the state. The logic would be that such a public liability should also be seen as a public resource. If the people are to be made ultimately responsible for whatever money is issued in their name, should they not have a say about how this money is used?

Far from having democratically controlled access to the process of credit issue, the public, as represented by the state, has itself to borrow from the capitalist owners and controllers of the nation’s money supply or tax money for public expenditure as it circulates. Today more than 95 per cent of money issue is through bank credit. Historically states controlled much higher levels of money issue as coinage. As expenditure on social or public needs are seen as secondary to privatised economic forces, the private sector determines how much public expenditure can, or cannot, be ‘afforded’.

Privatised control of money issue creates the impression that it is the private market that is creating wealth. Certainly it is making money, quite literally, largely through issuing it to itself as leverage to swell speculative trading. Private ownership and control of money issue has created huge differences of wealth. The mass of the people can only hope for a trickle down of economic activity through the consumption of the champagne-swigging traders and increasing numbers of billionaires. On the illusion that the manipulators of money have actually generated the wealth they gamble with, those playing the money markets demand a huge percentage of the product. The levels of pay and bonuses have become so obscenely puffed that they have become an economic ‘gated community’ set apart from ordinary mortals by their wealth. In fact they have stolen what should be a public resource and harnessed it for private benefit.

Finance Is Not Private

THE FUTURE OF MONEY (1/4)

The global economic crisis in progress has naked the contradictions of privatised finance. If taxpayers have to bolster the system when it fails, why should they not also have control over the supply and allocation of money in the first place?

The UN's Economic and Social Commission for Asia and the Pacific (UNESCAP) painted a grim picture for the region overall in the wake of the global financial crisis

At the height of the financial crisis, the total public financial exposure in rescuing the world’s financial systems was around $15 trillion – a quarter of world GDP. Most of this was not operated, but the existence of public aid prevented a worldwide collapse of financial institutions. This vital role of the public sector has in practice been ignored, as the surviving banks return to the bonus culture, benefiting from reduced competition and additional state support through, for example, quantitative easing/ facilitation (increased money supply).

Not all states could support their bloated financial sectors. Iceland collapsed with financial commitments up to ten times its GDP. Britain, with a financial sector worth around five times GDP, could have faced similar problems. Globally the financial sector eclipses world GDP by at least ten times.

Why do governments feel compelled to spend uncountable billions rescuing the banks and financial sector when other businesses are often left to fail? The answer is that the financial sector is not a private sector at all. It embraces a public function, the issue and circulation of money – something that has been appropriated by private capital.

The contemporary banking and financial system has appropriated this public doings for its own benefit. However, when the financial system goes into crisis, the need to retain this public function means that it becomes a liability on the public, as represented by the state or equivalent monetary authority. As John McFall, chair of the UK Treasury select committee, wrote (Guardian, 9 January 2009):

 ‘After the extraordinary self-induced implosion of the financial system, the future of the market system now rests in the hands of governments. The politicians are the only show in town.’

The financial crisis and the public response have revealed both the instability of the global financial system and the importance of a public monetary authority of last resort.

The latter half of the 20th century saw a rapid growth in the financial sector as people became entangled in debts (particularly consumer debts and mortgages), as collective and public financial security was abandoned in favour of personal investments (particularly pensions), and because there was benefit to be had from inflated financial assets (particularly housing). Even institutional investors were tempted by the promise of higher profits in the most speculative areas, such as hedge funds.

With such a large proportion of the population entangled in the financial system, a demand for public rescue became more likely. A collapse in the financial system is much more threatening to social order than failures in the productive sector. If one factory fails it does not automatically close the rest (they may even benefit from less competition). But if a bank fails the panic threatens to become systemic as people lose confidence in the banking system. This alone was a major reason why states had to get involved.

The need for state intervention has exposed the contradictions of financialised capitalism and its reliance on ‘Wall Street socialism’. A pivotal point was the rescue of the US investment bank Bear Stearns. The US monetary authorities were not only bailing out the retail banks, but finance capital as well. When the US Treasury later tried to isolate the investment sector by letting Lehman’s fail, there were nearly fatal consequences for the banking sector. The financial sector was so interconnected that a crisis of default in the US subprime sector could bring down a relatively small bank in the UK, France or Spain via the functioning of the global money market and the drying up of credit.

Dreadful post coitum in the backstage of power (2)

Dominique Strauss-Kahn VS. Nafissatou Diallo: A case of Comparative Law

A media event on the threshold of the American Criminal Procedure

A brilliant career, stunning accusation · © CNN

Reality is a hard nut to crack.
Dominique Strauss-Kahn is a major figure who has friends who may be sincere in their affection, no matter how often crossbred with ulterior political motives. Whenever a person is accused of something incredibly serious, his relatives have the natural reflex to refuse to believe that it is just possible.

The first instinct is to protect, to rush to help, sometimes awkwardly, like that wife who thought helping her husband accused of robbery and who found nothing better to say at the bar of the criminal court: « Murderer maybe, but a thief, surely not! »

Clumsy reactions, not to say completely ill-advised have been held. Most of those who did so have retracted or expressed their regrets by realizing the nonsense of their arguments.

It is not herein about demonstrating the guilt or innocence of the IMF’s managing director. No more than trying to prove a hypothetical plot, in one way or another, but to describe and explain the criminal proceedings which he is subject to understand what is happening and what will happen. Note that I do not pretend to be a lawyer practicing in New York and I beg more eminent experts than me to forgive my probable errors and approximations, and I will correct the post if required.

The U.S. procedure, a much more balanced system than the French feedback might suggest.
Let us briefly recall the facts: DSK is charged of having appeared suddenly naked, facing a maid who had entered the room thinking it was cleared out, to put it back in order. After closing and locking the door, DSK would have intended to force her for oral sex, he would have tried to take off her clothes in order to go further, but she managed to escape. The police arrived, reportedly found that he had left the scene, forgetting one of his (seven) mobile phones, and tracked him down in the list of passengers on an Air France flight to Paris.

He was arrested onboard by the Port Authority of New York and New Jersey – the local Border Police – and delivered to the NYPD, the Special Victims Unit to be precise.

In the United States like in England, police have broad powers of inquiry and initiative in investigations. Unlike France, where the prosecutor leads the investigation and gives instructions to the police – which are in fact orders –, the district attorney discovers the records when the police bring them together with the suspect. For some serious cases, police officers may have an advisory role, stating the evidence that the DA needs to go further on prosecution. Both authorities are more separated in the U.S. than in France.

The arrest may take place without an arrest warrant in two cases: the crime takes place in the presence of the police officer or if the officer has sufficient evidence to arrest the person (sufficient grounds). In general, a home arrest requires a judge to issue an arrest warrant.

The first stage is booking and it is held at the police station. Fingerprinting, photo identification, judicial collect of criminal record (in New York it is called NYSID report or rap sheet. The person under suspicion may be questioned but he has the right to remain silent (which will never be retained for the prosecution against him unlike in French law). He may be assisted by a lawyer who has the right to intervene during interrogations (the Paris prosecutor shivers in terror at this perspective). The police officer in charge of the case (usually the first on scene) prepares a report – the criminal complaint— which is the basis for prosecution.

Less serious facts give rise quickly to release from custody with straight summons by the judge (Desk Appearance Ticket, DAT). Here we are facing a felony – on top of the scale of gravity, not DAT, but submission to a judge. This arrest should be as brief as possible. The law provides for a period of 48 hours in case of arrest a weekend away, but this rule does not apply in NYC, where hearings are held 365 days a year (from 9:00 a.m. to 1:00 a.m.). In this matter, DSK agreed that such hearing which could take place on Sunday – as ‘New York city’s justice doesn’t sleep’— might be postponed to allow achieving DNA testing.

Once the booking is completed, the suspect is escorted to the Court Building, the competent court (here, in the case of felonies, the New York City Criminal Court, but only for the preliminary phase). It was there that DSK was featured on May 16: his memorable walking out under the flashes, that most French journalists published by asking if they could do it, and his transfer from police station to Criminal Court.

There, the police officer handling the case – and/or the complainant – is received by a substitute (Deputy District Attorney, DDA) who decides whether to prosecute or not. The DDA does NOT speak to the suspect, since in the United States, they have realized quite a long time ago that he is the opposing party (in France, there is hope it finally occurs all along the XXII century). If DDA considers the record substantial, he should formalize a ‘written complaint’, i.e. the official complaint of public prosecution.

The suspect is then brought before a judge for a hearing called the arraignment. The judge notifies the suspect of charges against him (a copy is delivered to him), of his right to counsel (he must be assisted, if necessary by a court-appointed lawyer at the arraignment), he is entitled to a preliminary hearing (in the case of a felony as it happens to DSK). He will not be asked at this stage whether he pleads guilty or not guilty, only in cases of misdemeanors and minor offenses, the equivalent in France of ‘délit’ and ‘contravention’ (but the suspect is entitled to give it up and, if need be, to plead guilty before the Criminal Court, this option is already ruled out by DSK’s lawyers).

The judge may decide to immediately stop the proceedings if he believes that the offense is not clearly established (case dismissed, French’s ‘affaire classée’)). With regard to alleged felonies against DSK, the indictment is incumbent on the Grand Jury.

The judge will then decide what happens to DSK until the Grand Jury decides. He can be released on his promise of appear spontaneously (Released on his Own Recognizance, ROR), released on bail or exceptionally remanded –i.e. arrested up to 120 hours until the Grand Jury has ruled or a Preliminary Hearing is held if the suspect, who is now the defendant, asks for it; but the prosecution does not bet on it usually).

The essential difference between Preliminary Hearing and Grand Jury is that the former is public and is held in the presence of the defendant while the Grand Jury meets closed-doors in the presence of the sole District Attorney and witnesses brought to testify.

The Grand Jury is composed of 23 people (a quorum of 16 people is required for it to decide). It outlines the evidences gathered and deliberates and it either votes a true bill – 12 jurors at least consider that there is prima facie, and then the case goes to trial (indictment) – or a no bill – i.e. no trial, then the case is dismissed.

In case of indictment by the Grand Jury, a new arraignment hearing is held before the Superior Court competent to try crimes (felonies), here the New York Supreme Court. Thus began the preparatory stage: the parties may negotiate a plea bargaining, ie, a guilty plea, where they have 45 days to submit petitions (motions) to be settled before the trial, eg to exclude illegally obtained evidence, or direct certain actions. Once these motions considered, a trial date is set. The trial shall be public, and judged by a jury who votes only over the conviction. The penalty, under the sole judge’s domain, is ruled at a subsequent hearing.

Finally there are 3 qualifications retained at this point: criminal sexual act, attempted rape, unlawful imprisonment. The penalty system is somewhat complex. Crimes are divided into categories AI, A-II. B. C, D and E. DSK appears to fall into the category B, so a maximum of 25 years imprisonment and a minimum of 1 to 8 years (Criminal Code of New York State. art. 70).

Dreadful post coitum in the backstage of power (1)

Dominique Strauss-Kahn vs. Nafissatou Diallo: A case of Comparative Law

On the eve of the hearing to be held June 6, throughout Dominique Strauss-Kahn will have to plead guilty or not guilty on the seven charges against him, it seems appropriate to analyze the situation – and report progress – from the perspective of comparative law. To be precise, if DSK pleads guilty, there will be no trial but a conviction to several years in prison, whose number will be negotiated with the judge. If he pleads not guilty – as his lawyers have suggested – a trial will take place.

From crime disguised as vaudeville to presumption of innocence

DSK was the favorite candidate for the French presidential elections of 2012

Falling of an idol. After two breathless weeks of one of the most spectacular cases in French politics, with hearings filmed, suspense, shocking images, conspiracy theories – will this century experience a significant event without its conspiracy theory? – and of course sex – which means outselling–, the excitement will drop, so to speak, and a media relief will be imposed from necessity.

But the jurist loves nothing more than the calm and serenity, which are propitious to reflection.

In hindsight, 15 days later, it is clear that the omnipresence of this case in the timeliness will inevitably recess. « At last! » some masochists might say – the same ones who are sick of this case but who still read this article.

Dominique Strauss-Kahn has been released (but is very closely supervised) and I am delighted, beyond any consideration, of his eventual guilt. Everyone expects to be released until their trial, as detention must be truly exceptional. This is not the case in France. This principle is best applied in the U.S. than in France, especially in criminal cases. Not to mention that before 2000 in the French criminal procedure, before a criminal court, the accused was free until he would necessarily become a prisoner on the eve of the hearing.

The conditions under which this freedom has been granted (a deposit of one million dollars, in addition to a 5 million warranty executed if Dominique Strauss-Kahn does not attend the hearing; prohibition from leaving NYC where he ought to live in a CCTV apartment, an armed guard at the door entrance, waged by the accused himself; a permanent electronic tracer anklet… anything at his expense) have prompted comments on Justice of richest (the accused had to raise $ 6 million and spend about $ 200,000 a month to ensure his own 24-hour monitoring). One thing must be understood.

Though a person who’s well off can probably – and in the U.S. probably more than anywhere else among the democratic countries with an independent judiciary – easily put the necessary resources to ensure his defense and will necessarily be much better defended than a person that may not do so, at this point it was not the New York justice who imposed stringent conditions for releasing DSK. It was the DSK defense who proposed what is called a lease package made of reinforced concrete: the defense came with such a turnkey probation, saying « That’s what we propose.» Basically, the judge just alleged: «Okay, I’m fine with this. » Defense brought out the (very) heavy artillery, for it knew that the prosecutor’s office (District Attorney, DA) would do everything possible to keep this very big fish in the fishpond of Rikers Island. Being elected, the NY prosecutor (in contrast to French judges who are appointed by the President of the Republic on proposal of the Minister of Justice, and the opinion of the Supreme Council of Magistracy; if someone could point it out to some know-it-all, thank you) has everything to gain by showing that he’s severe with the powerful, especially if this powerful is an alien. The prosecutor’s office has pushed to the limits the Polanski precedent: the flight risk (under French law, one talks about « lack of guarantees of representation »), stressing that the accused was arrested on an airplane when he was getting ready to leave the territory. The defense did expect this and anticipated correctly: it showed the ticket purchased before the facts occurred and came up with a proposal that no judge would probably have dared to require since it is costly and burdensome. Add to this the argument that the IMF Managing Director may be considered an honorable man, and the decision has been taken away…

Now begins a period that in French law would be called « pretrial » –understand « making the case ready for trial. » Indeed, U.S. law in general and New York in particular ignores the criminal enquiry conducted by a judge, specific to the Anglo-American inquisitorial system. It is an accusatory system, where the Judge is at a retreat – on a temporary basis – and acts as arbitrator.

A clarification: the Anglo-American accusatory system has never meant that it was on the accused to prove his innocence. It does not preclude the innocentation scheme, but the inquisitorial system, where Justice leads the investigation and keeps the bulk of the initiatives. The systems are not incompatible: in France, civil proceedings are accusatory, while criminal procedure is inquisitorial, with accusatory parties (such as the procedure before the trial chamber). Both parties – and I mean both parties because under U.S. law the complainant is not a party to criminal proceedings – will present their motions to the judge who will decide essentially on the admissibility of an evidence a party wants to produce and which the other does not want to hear about (Let’s say if a DNA test charges the defendant but the chain of custody was broken, meaning that at some point the integrity of the sample was not preserved with certainty -if  the sample has been forgotten in the police officer car at night, so as that could allow its contamination or its replacement- the Judge will exclude this evidence and the prosecution may not fall back on it). They have 45 days to do so. The hearings will be held in the Office of the Judge without publicity so the jury is not aware of these elements. If the DA had fled the information that a DNA test was rejected the defense may request a mistrial, (which is) to consider that the right of the defendant to a fair trial was irreparably damaged and that case should be permanently dismissed. And for those wondering, if it was the defense that was the source of the leak this would allow the DA to make a point of mentioning before the jury. Proceedings are not messy…

To sum up,at the end of the day,  until the trial begins the case will be prepared secretly, without further hearing or videoed suspense. So goodbye, hilarious scenes of special correspondents from the courthouse live from New York, less well informed about what is happening than journalists in Paris who have access to Twitter. I will miss it.

I have heard the optimistic statements of a DSK’s lawyer, Mr. Benjamin Brafman. I must confess my astonishment. Such statements, even cautious are not common in general and it is a first for this lawyer who has now a lot to loose in the event of a guilty plea or of a conviction. I can only speculate that he has a wild card up the sleeve to be so affirmative.

This leads me naturally to the presumption of innocence. In short, it is primarily a rule of evidence (it is up the prosecution to prove the guilt) to which French law added a protection matter of reputation: it is forbidden to make a person being subject of an investigation or prosecution as guilty until he has not been finally convicted. It is not easy (enough), even a lawyer like President Sarkozy cracks up regularly.

Respect for the presumption of innocence is then both a fundamental principle of trial, a pillar of the rule of law – listed by the Declaration of the Rights of Man and of the Citizen, Article 9, since this assumption was far from obvious in 1789 – and a rule limiting freedom of expression.

So to avoid torturing Language, let us clarify concepts so far. Talking about Dominique Strauss-Kahn as a suspect or indicted or accused is entirely correct. Legally speaking, the most accurate perception at this stage is ‘defendant’ since the indictment has been delivered by the Grand Jury. To designate him as « rapist » would undermine the presumption of innocence. But designate him as « alleged rapist » is cumbersome, inelegant and imprecise – as the implicit concept, probably inspired by presumption of innocence, has a sense of « Who is supposed by hypothesis or conjecture. » The opposite of what we mean actually. An alleged rapist is not a presumed innocent.

Where the auditor risks headache is when the victim becomes in turn alleged. Lord! If the rapist is presumed innocent, the victim is an alleged liar? No, of course not, she’s just downgraded to alleged victim category. This makes a lot of suspects, presumed and alleged, isn’t that so?

The French word for « alleged victim » (‘victime présumée’) is « complaining » (‘plaignant’). The concept of « victim » which etymologically refers to the religious as it refers to what is offered in sacrifice to the gods (‘victima’ in Latin) is legally adequate once the crime is established or after conviction. In short, the term victim is inconsistent with presumption of innocence.

This leads me to my second assessment (next week), namely, the French perception of the U.S. procedure –which often forgets the U.S. context and aims to exonerate the alleged abuse of power while forgetting the alleged victim.

War of words

While we wait for history to judge the decision of the Security Council, words place themselves as judges.

The war in Libya is not virtual but very real. Then the outcome depends a lot on the war of words. Prudence dictates to wait for a positive outcome (with a free Libya at the end of the tunnel) or a disastrous issue instead (with a Muammar el-Qaddafi stronger and more upset than ever) for the decision of the UN Security Council to be judged in the light of history … And while we wait for the history words place themselves as judges — words used to judge what is happening in Libya.

The purpose of resolution 1973 of the Security Council was to protect the Libyan people against the tyrant, but as this reality bothers the tyrant he relieves all sorts of conceivable semantic tricks to transvesty reality and attempt to pass for a victim. Seeing is believing. Muammar el-Qaddafi vows to protect his people against the foreign invader when in fact it is about protecting the very people from the aggression of the tyrant. The crasser is the lie the more likely it is to pass through as true. And it would be a mistake to trifle with it because although the colonel’s propaganda is particularly rough and fallacious, his misinformation affects those whom such propaganda is flattering given their self-interest or ideological reasons. Such as in the case of some countries, headed by China (whom Muammar el-Qaddafi has promised concessions in the Libyan oil if they look the other way – thus allowing him to get out of trouble), as in the case of other regimes - Arab or not - who have no desire for the UN interfering in their affairs to ensure compliance or not with human rights in their respective countries.

But there is a category even more revolting: that of narrow-minded and dumb ideologists  for which any intervention involving Western countries is imperialist by nature. These zealous advocates suffer from true migraines because if, by any chance, Westerners were not a horde of unkind and greedy people, then the imposture  would not fit into their lowbrow straitjacket. It has to be particularly indigestible for them to witness how Western and Arab countries assume jointly undeniable risks to save Libyan rebels – including those who are shouting “Allahu Akbar “. The more if you believe upside down in the war of civilizations and that you deem the intervention hides, as usual, other unlawful and guilt-producing interests.

What then is the alternative to doing nothing?
Muammar el-Qaddafi counts on that – unfortunately widespread – ominous approach. That’s why it is essential to avoid falling into the trap by describing this coalition as a typical western one and try on the contrary to associate the largest possible number of Arab countries. It was not easy to reach an agreement and this alliance will not last long, we know that. As soon as the first air strikes took place, the secretary general of the Arab League, Amr Moussa, started disassociating oneself. In fact, this former Mubarak minister, greeted by some Egyptians for his hostility to Israel and his support to the revolution, has just one thing in mind: to become the next president of Egypt. And in this case, Mr. Amr Moussa wanted to bet on all winning horses to seduce western countries by giving support to the resolution draft, but without having to accommodate and assume the consequences in the eyes of the Arab citizens in general and in Egyptians’  in particular. The dude in fact bet on Russian and Chinese veto power. But it was not so. Hence his current confusion and hardship, especially having regard to the Egyptian people sensitivity, whose solidarity with the suffering of the Libyan people is more than obvious. The opportunism of Mr. Amr Moussa is currently blamed by Egyptians: he wanted to flatter the people and adulate their demons. He got the wrong war and marched out of step as Libya’s events have nothing to do with the war in Iraq: rebels yell in Benghazi without blushing: “Merci la France, Thak U America” (which for sure would not last long, we know that): indeed, many who now criticize the military intervention would make a great fuss if the United Nations had been passive not facing the massacres of Muammar el-Qaddafi. If the UN would have done so, now Benghazi would have fallen into the hands of the tyrant, the people would have been crushed and probably the Arab spring would have come to an end.

 

While we wait for history to judge the decision of the Security Council words place themselves as judges.

The war in Libya is not virtual but very real. Then the outcome depends a lot on the war of words. Prudence dictates to wait for a positive outcome (with a free Libya at the end of the tunnel) or else a disastrous issue (with a Colonel Gaddafi stronger and more upset than ever) for the decision of the Security Council of UN to be judged in the light of history … And while we wait for the history words set themselves up as judges, words used to judge what is happening in Libya.

The purpose of resolution 1973 of the Security Council was to protect the Libyan people against the tyrant, but as this reality bothers the tyrant he relieves all sorts of conceivable semantic tricks to transvesting reality and attempt to pass for a victim. Seeing is believing. Colonel Gaddafi vows to protect his people against the foreign invader when in fact it is about protecting the very people from the aggression of the tyrant. The crasser is the lie the more likely it is to pass through as true. And it would be a mistake to trifle with it because although the colonel’s propaganda is particularly rough and fallacious, his misinformation affects those whom such propaganda is flattering given their self-interest or ideological reasons. Such as in the case of some countries, headed by China (whom Gaddafi has promised concessions in the Libyan oil if they look the other way – thus allowing him to get out of trouble), as is the case of other regimes - Arab or otherwise - who have no desire for the UN interfering in their affairs to ensure compliance or not tof human rights in their respective countries.

But there is a category even more awful: the narrow-minded and dumb ideologues for which any intervention involving Western countries is imperialist by nature. They suffer from true migraines because the opposing would not fit into their intellectual straitjacket. It should be particularly indigestible for them seeing how Western and Arab countries assume jointly undeniable risks to save Libyan rebels – including those who are shouting “Allahu Akbar “. Even more if one believes in the war of civilizations upside down and says that the intervention hides other unlawful interests.

What then is the alternative to doing nothing?
And the colonel Qaddafi counts on that – unfortunately widespread – ominous approach. That’s why it is essential to avoid falling into the trap by describing this coalition as western one and try on the contrary to associate the largest possible number of Arab countries. It was not easy to reach an agreement and this alliance will not last long, we know that. As soon as the first air strikes took place, the secretary general of the Arab League, Amr Moussa, started disassociating oneself. In fact, this former Mubarak minister, greeted by some Egyptians for his hostility to Israel and his support to the revolution, has just one thing in mind: to become the next president of Egypt. And in this case, Mr. Amr Moussa wanted to bet on all winning horses to seduce western countries by giving support to the resolution draft, but without having to accommodate and assume the consequences in the eyes of the Arab citizen in general and Egyptians in particular. The dude in fact bet on Russian and Chinese veto power. But it was not so. Hence his current confusion and hardship, especially having regard to the Egyptian people sensitivity, whose solidarity with the suffering of the Libyan people is more than obvious. The opportunism of Mr. Amr Moussa is currently blamed by Egyptians: he wanted to flatter the people and adulate their demons. He got the wrong war and marched out of step as Libya’s events have nothing to do with the war in Iraq: rebels yell in Benghazi without blushing: “Merci la France, Merci l’Amérique “ (which not last long, we know that): indeed, many who now criticize the military intervention would make a great fuss if the United Nations had been passive not facing the massacres of Gaddafi. At present Benghazi would have fallen into the hands of the tyrant, the people would have been crushed and probably the Arab spring would have come to an end.

Universal Periodic Review, A Lukewarm Success

Updated March 2, 2011

>> Pulse aquí para la versión en Castellano

US report booklets are displayed on a table during the Universal Periodic Review (UPR) on United States of America of the Human Rights Council at the European headquarters of the United Nations in Geneva, Switzerland, Friday, November 5, 2010. © PressTV

Late February the 7th meeting session on Universal Periodic Review came to a close in Geneva. UPR is a mechanism introduced in 2006 — and first started early 2008 — that might allow scrutinizing the overall human rights situation in the 192 UN member countries during four years. 112 countries have been examined so far. This seventh session assessed in detail states as El Salvador, Bolivia, Bosnia-Herzegovina and Iraq – Iran and Egypt especially generated the most reactions. Two years gone after this mechanism kick off, what conclusions can we draw?

The presentation takes about 2 or 3 hours by country. Previously, each country under review presents the measures that have been launched to improve the inland situation of human rights, while other states put forward their questions and offer their recommendations: that is what the UPR is. In fact states examine each other – but when this instrument first started, many NGOs feared that the states concerned do not act condescending each other.

For Julie de Rivero, Geneva advocacy director at Human Rights Watch, after two years the balance is ultimately positive:

“For us, this is a useful tool because it allows open debate on the human rights situation in a country, despite being an assessment between states (…) NGOs have the opportunity to enforce the discussion in presenting documents which provide support for the review, and otherwise enable us to make allegations on countries participating in the review (…) Thus, proposals of the NGOs have been accepted in the final recommendations.”

Eric Tistounet, Secretary of the UN Human Rights Council, makes a fairly positive assessment despite the initial reluctance:

“We shared the initial fears with NGOs. As High Commissioner our vision (…) is that peer review has given a more effective result than if it had been carried out by experts. Another positive point was the attendance of all participants. At first we feared an audience of only 60 or 70%, which is usual, ie normally countries cooperate within the system. This time all were there, including micro-states and states without delegation in Geneva. That allowed us to realize our influence over a majority of states, which we have been able to run in a non-controversial or political mood. “

For Julie de Rivero it is also essential that discussions raised during the UPR have to be undertaken at a national level – and here it is where international and domestic NGOs are involved to attempt influencing political decisions. In the case of Egypt and Iran both rejected criticism during the session. Iran has categorically rejected all criticism and has not supported favorably the request for inspection by independent experts on torture and freedom of expression, although the authorities had promised to do so earlier.

“It’s just an opportunity for a state to face up its commitments and promises (…) It is clear that there is no enthusiasm on the part of Iran – more reason to maintain the pressure.”

The downside, as a result of each session, is post monitoring. After examining, each state returns home with lots of recommendations (between 150 and 200, on average), and this is where the mechanism has shown its limits. Eric Tistounet, from the UN Human Rights Council:

“The recommendations can not be in the air (…) It is necessary to implement a proper monitoring system so that the main recommendations come into effect at least. Knowing what kind of action or how it will work is the next project. “

112 states have been examined to date. 80 remain from now till late 2011. At the 8th meeting in May Guinea, Haiti, Kenya, Belarus, Turkey and Spain will be examined among many other countries.

Sources: The Universal Periodic Review Mechanism (HRW) / Véronique Gaymard, RFI – Chronique des droits de l’homme, Paris, march 2010 / Universal Periodic Review – Seventh session meeting highlights

Related Posts:
· The United States and the Human Rights Council
· U.S. faces criticism from HR abusers at Universal Periodic Review

The seamy side of American diplomacy and China’s true face

The Wikileaks list seems interminable. American diplomats spy on the United Nations Secretary General and on other senior UN officials, to the extent of learning their credit card numbers. The Gulf monarchies are pressing Washington to start a war against Tehran before Iran becomes a nuclear power and brings them to their knees. Turkey’s moderate Islamist government faces continued resistance from secular army officers, and a secret Islamist plan is feared. Beijing orders a cyber-attack on Google at the end of 2009, while planning to ditch its long-time Stalinist ally in North Korea in return for hegemony over a unified Korean peninsula. Pakistan discreetly supports terrorist groups, while its nuclear arsenal grows. To do business in Morocco you have to pass on a cut to the royal house, which maintains its army in a deplorable state. Saudi Arabia is the main source of financing for Islamist terrorism.

The list extends to every continent. The emotional stability of the president of Argentina, Cristina Fernández de Kirchner, is a worry to many; when her husband was alive she passed official business on to him. Cuban-Venezuelan relations are so close that Cuban spies operate freely on Venezuelan soil. The Cubans also treated the Bolivian president for a serious nose tumor. The German coalition government is limping along due to the chancellor’s timid, reserved personality. The French president, the most pro-American since De Gaulle, has a despotic streak. The Spanish prosecutor’s office played a questionable role in the inquiry into torture at Guantánamo…

Further material may yet emerge from the State Department papers, which renowned newspapers (1) have been publishing having had access to the massive leak mounted by the Wikileaks organization. Significantly, its founder is wanted by Interpol, and his website is being boycotted by servers and service providers.

The publication of the diplomatic cables has stirred international opinion and surprised some governments, who often adduce false arguments to downplay or discredit this news bomb. The security of individual sources has been assured by eliminating names and data that might endanger them. The media that have published the revelations have acted within the limits sketched out by the US Supreme Court in the Pentagon Papers case (2), opting for freedom of information and the citizen’s right to know.

There is no historical precedent for this in term of scope, as it affects so many conflicts throughout the world. The revelations show a seamy side of the political world, about which we all had well-grounded suspicions, but no clear certainty. We are, in a sense, freer now than we were before.

China shows its true face.

If the Chinese government was hoping to snuff out the international repercussions of yesterday’s presentation in Oslo of the Nobel Peace Prize to the dissident Liu Xiaobo, the results of its attempt turned out quite differently. The Beijing regime sentenced him to 11 years in prison as a deterrent to all other dissidents, as has been revealed by the US State Department cables by WikiLeaks. And once Liu Xiaobo had been designated a Nobel winner, China managed to reduce the numbers of foreign state representatives at the ceremony after a forceful campaign of diplomatic threats, at the risk of exposing the limitations of the country’s political system in full view.

All this, added to the campaign of slander and harassment against the Nobel winner, his family and friends, seriously damages China’s international reputation.

The status of emerging power has turned China into an inescapable force in the world. With this award for Liu, Beijing had the chance to prolong the current situation in which all the leading powers, with the United States at the forefront, choose to minimize their demands in terms of human rights given the necessity of reaching understanding with a country considered so crucial to the shaping of the world’s future. After such a display of bad temper on the part of Beijing, maintaining the delicate balance somewhere between cynicism and realism becomes that much harder.

Among the steps it has taken in reaction to the Norwegian committee’s decision, China decided to create an alternative to the Nobel, the Confucius Peace Prize. The aim of this distinction is to reinforce the singularity of China’s attitude toward internationally accepted principles, such as the need to respect human rights and political and civil liberties.

China to award Confucius peace prize

This is yet another mistake. The reasoning behind the Confucius Prize is identical to that which is employed by other authoritarian regimes when they are denounced for human rights violations. China is therefore aligning itself with such nations.

Dealing with the situation created by China with its reaction to the Nobel for Liu Xiaobo will not be an easy task for the international community. Cynicism and realism cannot be so easily combined from now on. And in the same way that China has been forced to show its true face, so too now must all the governments which maintain an ever-more intense relationship with the emerging power.

So, does traditional diplomacy have any contemporary relevance yet?

Related posts:
Should we be afraid of China?
WikiLeaks reveals essentials of the ‘dirty war’ in Iraq

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(1) WikiLeaks turned over all of the classified U.S. State Department cables it obtained to Le Monde in France, El Pais in Spain, The Guardian in Britain and Der Spiegel in Germany. The Guardian shared the material with The New York Times, and the five news organizations have worked together to plan the timing of their reports.

(2) The Pentagon Papers was a top-secret United States Department of Defense history of the United States’ political-military involvement in Vietnam from 1945 to 1967. The papers were first brought to the attention of the public on the front page of the New York Times in 1971. A 1996 article in the New York Times said that the Pentagon Papers “demonstrated, among other things, that the Johnson Administration had systematically lied, not only to the public but also to Congress, about a subject of transcendent national interest and significance”. In the summer of 1971, David Ellsberg, a Harvard graduate and former Marine, brought out 7,000 pages of secret notes on the war in Vietnam. The Nixon administration had no mercy with Ellsberg, spied him, harassed him, attacked him. Ellsberg won his trial in 1973. Also did The New York Times — which published excerpts of the Pentagon Papers.
New York Times Co. v. United States, 403 U.S. 713 (1971), was a United States Supreme Court per curiam decision. The ruling made it possible for the New York Times and Washington Post newspapers to publish the then-classified Pentagon Papers without risk of government censure.
President Richard Nixon had claimed executive authority to force the Times to suspend publication of classified information in its possession. The question before the court was whether the constitutional freedom of the press, guaranteed by the First Amendment, was subordinate to a claimed need of the executive branch of government to maintain the secrecy of information. The Supreme Court ruled that the First Amendment did protect the right of the New York Times’ to print the materials.

U.S. faces criticism from HR abusers at Universal Periodic Review

The detention center at Guantanamo, the death penalty or the non-ratification of treaties deserved strong criticism to the United States on Friday in Geneva at the UPR 9th session (1st to 12th November 2010). For the first time, the U.S. administration backed its record on human rights at the UN.

The UPR is a Council’s major innovation. The Human Rights Council was born in 2006 from the ashes of the Commission on Human Rights – which was criticized for its inability to enforce the fundamental values of the UN. The Council allows the systematic and regular review of the situation on Human Rights in all 192 UN member countries in order to avoid the accusation of selectivity.

Friday 5 November, The United States upheld its record on human rights before the UNHRC – under intense criticism, particularly concerning the detention center at Guantanamo, the death penalty or the non-ratification of treaties.

Opening the meeting, Esther Brimmer, the U.S. Assistant Secretary for International Organization Affairs, assured that the Universal Periodic Review (UPR) – that the United States faces for the first time before its peers – “represents a milestone in our long commitment to promote human rights.”

Another senior official of the substantial U.S. delegation in Geneva, Michael H. Posner, Assistant Secretary of State for Democracy, Human Rights, and Labor, focused on ongoing improving health systems and education.

“We’re not satisfied with the status quo. We will continue to improve our laws,” he said.

Being the first country to confront the U.S., Cuba requested the end of “the blockade against Cuba,” which it described as a “crime of genocide”– and the release of five Cuban activists in US custody considered “prisoners of war” by Havana.

Venezuela went further, calling on Washington to ratify the UN conventions even now unsigned, to close the U.S. base at Guantanamo, to abolish the death penalty and reduce emissions of greenhouse gases, among others.

Iran condemned the U.S. and expressed its deep concern over the “extensive and systematic violation [of human rights] by the U.S. government at both national and international levels.”

China expressed concern over “gaps” in U.S. law preventing full protection of human rights and the failure of the U.S. to ratify all human rights treaties. It expressly condemned the tendency toward “excessive use of force” by U.S. law enforcement and widespread discrimination against minorities and immigrants.

Russia congratulated the Obama Administration for efforts taken to eliminate “some of the most odious violations of human rights which were committed in the war on terrorism” and bring those responsible for torture in secret detention centers and Guantanamo to justice and pay compensation to the victims. It also demanded that the U.S. prohibit the death penalty.

Several countries have denounced the conditions of migrants in the United States, including Brazil, which has appealed  “to consider alternatives” to their detention.

The audacity of some of the aforementioned countries in accusing the U.S. of human rights violations is stunning. While the U.S. is not perfect, it is as respectful and observant of human rights as any state sitting on the HRC and far superior to these countries that perpetrate serious, widespread violations of human rights daily. But to hear comments during the UPR, one would think that the U.S. was the worst human rights abuser on the planet.

Related Posts:
· Universal Periodic Review, A Lukewarm Success
· The United States and the Human Rights Council

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Obama gives way to recognition of a Palestinian state

Impressive Speech from Barack Obama at the UN on the Israeli-Palestinian issue: either we act as in the past – great speeches without changing anything – or everyone rolls up his sleeves. The whole meanwhile, bearing in mind that in 2011 the UN General Assembly might welcome a new member: the Palestinian state.

“The conflict between Israelis and Arabs is as old as this institution. And we can come back here next year, as we have for the last 60 years, and make long speeches about it. We can read familiar lists of grievances. We can table the same resolutions. We can further empower the forces of rejectionism and hate. And we can waste more time by carrying forward an argument that will not help a single Israeli or Palestinian child achieve a better life. We can do that.

Or, we can say that this time will be different — that this time we will not let terror, or turbulence, or posturing, or petty politics stand in the way. This time, we will think not of ourselves, but of the young girl in Gaza who wants to have no ceiling on her dreams, or the young boy in Sderot who wants to sleep without the nightmare of rocket fire.

This time, we should draw upon the teachings of tolerance that lie at the heart of three great religions that see Jerusalem’s soil as sacred. This time we should reach for what’s best within ourselves. If we do, when we come back here next year, we can have an agreement that will lead to a new member of the United Nations — an independent, sovereign state of Palestine, living in peace with Israel.”

Palestine at the UN – where Palestinians have just now an observer status – new idea or recycling? This wish of President Obama reminds a provision in the “roadmap“, the peace plan finally endorsed (with reservations) by Israel and the Palestinians. The plan, which would lead to a Palestinian state by December 2005, included in the transition phase (June-December 2003) the following measure:

“Quartet members promote international recognition of Palestinian state, including possible UN membership.”

Then it was about recognition of Palestine in temporary borders, but 2003 passed as 2004 and 2005, and nothing happened. Suffice to say that the wish of the President of the United States, which coincides with the publication in France of a book under a deliberately provocative title – There will be no Palestinian state, Ziyad Clot, Ed. Max Milo – will no doubt be greeted with caution by those most affected.

Related Posts: The Impossible Palestinian State

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Shadow banking: still big, still dangerous (3)

A lot of attention has been focused on the work of traditional banks amongst the recession. But according to some measurements traditional banks lent only 40% of the money in the economy prior to the credit crisis. Shadow banks were responsible for the other 60% of lending and securitized a large portion of those loans.

The part of the financial system that lends the most money to Americans remains
almost untouched by regulation. It’s shadow banking, as Paddy Hirsch explains.

There is a strong consensus that the main fault which led to the current crisis was the total deregulation of the banking system. A banking system which in recent decades created a parallel clone to conventional banking, fully interconnected to global financial system, but disconnected from real economic activity. That parallel universe that found the financial industry to carry out the traditional role of linking savers with borrowers, had a huge increase in recent decades, as shown by the blue line on the graph. That is what is known as the “shadow banking system.”

This system is in the heart of the current financial turmoil and, according to the latest report of the New York Fed, is still larger than the traditional banking system. According to Fed data, there are still U.S. $ 16.000.000.000.000 (16 billion) sloshing around the financial system of the U.S. banks, polluting the world banking. The figure is greater than the entire GDP of the United States and it is remarkable to note its powerful boost since the 80s.

The shadow banking system gave rise to many of the issues that triggered the current crisis, and the report offers a detailed look at how the system did its job. First, the volume of credit grew bigger on the shadow banks than in retail. Before the crisis outbreak the shadow banking system had a $ 20 million liabilities compared to $ 10 billion of retail bank. Securitized loans, CDOs, CDS, the market for mutual funds, stock bubbles, are at the heart of this great legal fraud that allowed the existing self-regulation, as it provided huge inflows of money to keep the system moving.

The fragility of the system was demonstrated when its brutal collapse arose. But while the housing market crash was only the catalyst of the financial crisis, the sharp phase of the crisis was defined as a bank run on the shadow banking system in late 2007 and early 2008. Anticipating the crisis, all investors and lenders tried to recover their money at the same time. This is because on the shadow banking system – in contrast to retail banks – money is only paper – i.e. not backed by any real assets. Hence the strong bank run that sank Bear Stearns and Lehman Brothers before the monetary authorities were aware on what was happening in the market, despite Fannie Mae and Freddie Mac were knock down already. The fall of Lehman, in any case was the warning sign that the whole system collapsing and that the breakdown was imminent.

Fed specialists realized overdue this great market failure and the dangers that most of the system operates without any regulation. The bottom line is that if shadow banking is vulnerable too to financial runs that can produce a collapse of equal or greater magnitude than the retail bank runs, then it is reasonable to consider that shadow banks should also be regulated. Their failure has provoked a colossal damage to the entire world economy.

Related Posts:
Part 1 – Financial turmoil and global unemployment.
Part 2 – Ponzi Scheme and Global Finance.

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Ponzi Scheme and Global Finance (2)

For decades the whole U.S. economy has been structured as a pyramidal fraud under the “Ponzi scheme”.

Haga click aquí para la versión en Castellano.

Since the U.S. is the dollars printer, it generated a huge bubble which in turn ramified into a huge debt that cripples the world today. The financial mess that we now live, whether it is a tsunami or a perfect economic storm, is the result of unsuitable monetary and fiscal policies of the dominant reserve currency. As a blogger assesses in connection with a talk by Robert Solow: “The lesson that should be drawn is therefore that the real economy should be somehow shielded from the instabilities of the financial system.”

There is little hope on a quick return to fiscal and monetary discipline everywhere. At present, each and every one is in the midst of the storm without a compass or rudder. And we should not expect to keep banging with the oars. Nobody has accurate answers on the future action plans. What is known is that in January there were 550 000 unemployed again in the U.S., and that the rate will go on rising until year end. The Obama administration would give rise to 250,000 jobs per month – this figure is lower than job destruction – so employment will get higher, with the impact this has on the demand and consumption.

The Ponzi scheme developed in the financial markets have collapsed. And the culprits are still handing out awards such as the $37 billion that were distributed to top executives in December 2009. That’s why we lost faith in the financial system. And the famous phrase that comes on every dollar “In God We Trust” is now the subject of derision when for every dollar you give many people a few cents.

More than 40 years ago the economist Jacques Rueff, anticipated that an “uncontrolled U.S. deficit could destabilize the entire global economy.” Rueff ‘s vision was that issuing the U.S. reserve currency could incur in massive and unlimited deficits, forcing as well the creation of money in other countries to accumulate dollar reserves that, once entrenched, would come back to the U.S. in order to earn interests and give extra occupation to the greenbacks printer.

Now, the only clear way to stabilize the world’s economy and control social over-running is the creation of a world central bank and the return to a single reserve currency. For centuries gold was this reserve currency, allowing internal reckoning and external deficit control without losing real resources. It is not a matter of coming back to gold standard but to prove an anchor currency satisfying the requirement to provide a secure and stable environment – while allowing countries with the real concern of full employment. A reserve currency that can help bringing stability to a system that has collapsed and which repair will take a lot of time. If you do not believe it, look at this interactive graphic.

The Ponzi scheme collapse plunges dollar and the US economy

During the last decades, one of the main driving forces of global economic prosperity was the increase in debt and in financial design of the Ponzi scheme. Much of the growth occurred since the 80s but mainly from the 90s, was driven by the generous credit lines to governments, businesses and consumers used along this support. Well, no doubt, the crush of Ponzi scheme and the subsequent shadow banking system, have set in motion the collapse of the United States.

With the Ponzi scheme, a large number of people stretched to such limits debt choking the burst. For many, debt allowed the biggest party on earth – as through the “crazy years”, that period of loose waste in the 20s, which ended abruptly with the Great Depression in 1929. In those roaring years, the optimism of inventions like the airplane and the radio generated a huge level of debt aimed rather at waste than at investment. Hence, one of the causes of that crisis is endorsed by slam on brakes to credit and by the strong increase in the interest rates propelled by the Fed as a way to contain the waste. We already know how that ended: the entire economy collapsed and it took ten years and a World War to recover.

Today, things are awfully similar. The economic system based on debt was greatly dependent on it to create a parallel economic system, which from the shadows, swallowed us all. Except that the New York Fed was slow to take seriously the problem of parallel banking system, discovering that, before the crisis broken in July 2007, the shadow banking liabilities were twice the real banking charges –  70% of world’s GDP.

That is why this crisis is severe enough and will be here a while. So do not be surprised if dollar continues to slide down. That’s what’s coming. Fixing the Yuan to the dollar was the sole breadwinner in the last two years. However, a dose of that poison named indebtedness, may help resolve things if applied rigorously in generating employment. No way to do it however even though employment is the only variable that can boost demand and begin to move ahead the real economy machinery.

The collapse of the shadow banking system has paralyzed the first economy in the world: the U.S. certified unemployment is 10% (the real climbs to 17%), retail sales plummeted, and property sales have fallen to their lowest level in 50 years. United States faces a deficit of $ 1.6 trillion, a debt of $ 16 trillion and a total debt of $ 60 trillion.

With these data, there is no system that works, mainly if it has been for massive bad habits and waste. United States is in the early stages of a financial implosion that will make history. Since late last year, Europe saw the markets were obsessed with the sovereign debt crisis of the European countries. Well, we now enter a new phase: the alarm bells of the global economy big ship just starting to sink.

Related Posts:
Part 1 -  Financial turmoil and global unemployment.

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even though

Financial turmoil and global unemployment (1)

This August marks another anniversary of the origin of financial chaos that swept the world in overall unemployment drift.

Haga click aquí para la versión en Castellano.

Unemployment rate 2009 © Publico.es

Abandoning the gold standard on August 15, 1971 is closely linked to the mass unemployment experienced by industrialized countries. Until then, the dollar was as close as possible to gold, and all nations were trying to maintain a constant balance between exports and imports. Most countries devised ways to export more than they imported, so as to accumulate gold reserves or, otherwise, U.S. dollars – according to the treaty of Bretton Woods in 1944 – could be exchanged for gold.

Unlike the rest of the world, America was not particularly concerned about maintaining a balance between exports and imports since, as under the Bretton Woods Agreement, the US would pay export deficit sending more dollars to creditors. As it was the sole source of international currency, the U.S. had a clear advantage over the rest of the world: it was the only country that could pay its debts by printing money. Something that the rest of the world did not matter a little: the dollars were a seductive line of credit that allowed access to the key casino in the market. No one took into account that the gadget also had limits.

So it was when, at the end of the Second World War, more than 20,000 tons of gold that the U.S. owned dwindled year by year while many countries (especially France) insisted convert dollars for gold. This situation came to an end in 1970 when two unexpected phenomena put the U.S. government on the wrong foot: the upcoming oil crash (a situation that forced the U.S. to import oil instead of export until then) and the adverse outcomes of war in Vietnam. Both events brushed away the US gold reserves and pushed the country to bankruptcy. The benefit it had to hide its bankruptcy was clear: being the owner of the dollars printing press.

In the early months of 1971, Henry Hazlitt and Paul Samuelson urged the Richard Nixon administration to devaluate the dollar sharply as it would need to increase the amount of dollars it would take to get an ounce of gold from the U.S. Treasury. But Nixon did not take their advice into consideration and followed the suggestion of Milton Friedman who advocated the idea to let floating freely the dollar and eliminate the dollar-gold convertibility into  – as the international currency was worth at the very back offered by the U.S. government, the global economic locomotive. Thus Sunday morning August 15, 1971, Richard Nixon declared the dollar-gold inconvertibility, so he unilaterally broke the Bretton Woods agreement.

Since then, the whole world trade has been accomplished using the dollars printed by the U.S. Treasury, which is nothing more than fiat money, i.e. easy papers. Up until then, international trade was valid as it was backed by gold; from that moment onwards, trade depends on a fiat money produced by the major press in the world. The consequence of that fateful day was that all countries (that could do so) began to accumulate dollars as an unrestrained U.S credit expansion – without the restrictions imposed by Bretton Woods. The rest of the world had to accumulate dollar reserves and these reserves had to be ever increasing, since the slightest sign that a country’s reserves fell, woke currency speculators who could attack that country’s currency and destroy it with a sharp devaluation.

The increasing flow of dollars throughout the world prompted the global credit expansion, which only stopped the speed in August 2007, after exhausting all instances of what is called the ponzi scheme (1). The international banking elite always strove to devise mechanisms for higher profits and to extend credit. A provision that was released from the restriction of having to pay international accounts in gold, and that scored the U.S. trade boom.

Until the ’70s, a poor country like China had no interference with world trade: it sold low and bought little. The globalization of the 80s, provided by this extension of counterfeit money, offered great facilities to companies in search of cheap labor, they set up their factories in China. This was the beginning of the industrialization process that began in the U.S. and went on with Europe. A process which destroyed jobs in the industrialized countries as never seen before. A no return pathway.
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(1) A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

Related Posts:
Part 2 -  Ponzi Scheme and Global Finance.

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The Impossible Palestinian State

Pulse aquí para la versión en Castellano.

When you look at the vast and unstoppable proliferation of illegal Jewish settlements scattered throughout the occupied Palestinian West Bank, you don’t need to be a specialist in geopolitics to become aware of the problem which lies under the foundation of a Palestinian state.

@ The Far Queue

A West Bank cut, framed by a concrete wall, protected itself by barbed wire with turrets; a territory ran through forbidden roads to the Palestinians and which connect together the numerous Jewish settlements; a space, in short, fragmented and dispersed, can not become the territorial base of any State. And if the territory issue appears as something impossible to sustain a viable state, the issue of capital splits hairs. The eastern sector of Jerusalem –  traditionally Palestinian and occupied as a result of the war in 1967 –  where the capital of the impossible Palestinian state lodged, is being strangled by illegal settlements invariably while the native population is displaced from their homes and an Israeli unstoppable tide is thriving suburbs that were only Palestinians. In such circumstances we do not make out any possibility of creating a new practicable Palestinian state, according to the various peace plans so far devised for solving this complex problem. If Gaza was abandoned to its fate –the exceptional fact that Israeli troops evicted Jewish settlers from illegal settlements – no Israeli leader can promise to evacuate settlements extended over the West Bank without suffering a serious political breakdown. Likewise, no Palestinian leader could accept a state whose capital is not in the eastern part of Jerusalem. There is nothing new or surprising in this situation, visibly outlined after the 1967 war. Do not forget that the State of Israel – possessing a nuclear arsenal and an increasingly militarized society – would not hesitate to ignite the Middle East if its national security is threatened by a little: more than four decades of bloody conflict and increasing risks to international security have shown the need to end this unstable and risky political dynamics. Here comes into play the deciding factor: the U.S., as the historical guarantor and main responsible for the security of Israel. Obama can not keep closing his eyes to this situation, as his predecessor did, whereas he has shown he is determined to address it without delay. The hard part is however deciding how and when. The recent misunderstandings between the U.S. and Israel, during Netanyahu’s refusal to stop building new settlements around Jerusalem, are produced in a moment of weakness for the coalition that governs Israel and serious disagreements within the Palestinian officials. Even after the initial disagreement between the U.S. and Israel, on the occasion of the visit of Vice President Biden – and yet both sides have publicly reaffirmed the validity of the bonds that link both countries – mistrust between them grows and deepens. Does Obama have a concrete plan, with details of boundaries and limits, among other things, to put on the table and enforce its application? Would he dare it? Would he run the risk of bump into a rejection of the parties involved? How would this affect his weakened position against a Congress progressively more openly hostile?

The Palestinian dilemma does not arise in an isolated space. Closely linked to it are other conflicts that shake that critical space between the eastern shore of the Mediterranean and the western frontier of India: Lebanon, Syria, Iraq, Iran, Afghanistan, Pakistan … This is an open system, in technical terms, where any intervention in one element inevitably affects the others. Moreover, the manner in which such an impact comes about depends on a lot of variables with very difficult — if not impossible — identification and quantification. It seems that the club members of the so-called Quartet (U.S., UN, Russia and EU) have not enlightened any miracle brew, apart from repeating the usual good intentions and some timid threats.

To achieve something new – and not just a minimal agreement – it would be hypothetically necessary to assemble a complete “symphony orchestra”, more than a quartet, where all the musicians who have a voice in this complicated score, and not just four of the many elements that make up the “system” that we have previously pointed out. Things being so, it is not uncommon that discouragement goes widespread, nor that, given the overwhelming complexity of the problem, some resort to the (surreptitiously) old formula “let things settle themselves”. What fatally lead into a new string of failures…

From time to time, further meetings and talks between U.S. and Israeli officials are made known, but it is to be feared that, after any compulsory revenues on image that propaganda would improve both for Obama and Netanyahu (without forgetting the brief visit of Baroness Ashton to the conflict zone, to show the presence of the European Union), everything should go away again as the smoke vanishes – while the Palestinians go on facing the insurmountable obstacles that separate them from their old dream of owning finally, their statehood, free and sovereign, as they quit their status of occupied people, humiliated and hopeless.

Economic trends ‘After the Empire’ age

A change of economic model for the next decade is possible

Pulse aquí para la versión en Castellano.

Without having to draw on awful – but sometimes accurate – predictions of Emmanuel Todd’s After the Empire, it must be admitted that the influence and power of the U.S. will no longer be what they were. American political, economic and military supremacy of the last century is coming to an end. The 120-page report of the National Intelligence Council (NIC) on Global Trends 2025, (November 2008) remains up to date when considering the end of the unipolar world and the emergence of multilateralism. A multilateralism in which China, India and Russia weaken the U.S. dominance. It is expected that by 2025 the relative strength of the U.S. will decline and its levers of influence will be more limited, being only one among the global players, with a minor role and not decisive as it was in the past.

End of U.S. hegemony

The financial crisis and the collapse of the superpower at the end of 2008 were a clear sign of how intense the global economic crisis  would be (a crisis that began in August 2007). In this aspect it will be very difficult not to question the basics of the economic model applied in most countries and the weakness of regulatory mechanisms. Since the 80s, the Reagan, Bush Sr., Clinton and Bush jr. administrations, got used to admonish and reproach to the world about keeping finances in order, via the IMF and Washington Consensus (1). Meanwhile, Washington completely neglected own’s at a level of irresponsibility and exuberance completely irrational.

A key issue of ‘Global Trends 2025: A Transformed World (Global Trends 2025: a world transformed)’, is the gradual abandon of the dollar as standard of exchange and the growing strength of Asian currencies. Asia as a whole is the continent that will emerge with strength in a growing shift of wealth from West to East in terms of technological and cultural development. Latin America, with Brazil at the top – and Mexico, Argentina and Chile to a lesser extent, if the political will and the economic powers do not fail – has a golden opportunity to gain their own lever to progress. Hollywood productions will cede ground to Asia which mass culture will popularize widely. The positive predictive value of the report is the weakening of al Qaeda and terrorism in general and the low risk of using nuclear weapons – but it seems to ignore the unknown Russian factor.

The report confirms that Brazil (and not Mexico) will be the Latin American country to gain considerable influence on the global stage, as – with Russia, India and South Africa – it will help define the new challenges and game rules of humanity. Climate change will be the biggest problem and the shortage of drinking water and reduced harvests in some parts of the globe (for every degree the temperature rises the agricultural production decreases by 10%) will bring troubles and hunger. But this increase in temperature will benefit Canada and Russia by increasing their agricultural capacity and better and easier access to oil reserves in the north: these are elements that will powerfully reinforce their economies.

The U.S. will remain trapped and will live a lost decade as a result of the huge deficit left by the Bush administration. Its debt (2) now exceeds 13 billion dollars and it is growing by one million per minute (U.S. $ 1,400 million a day). Hence the importance of what Barack Obama can do to reverse a potentially adverse scenario across the line. It remains to be seen whether he will be a new Franklin D. Roosevelt to lead the country into the stormy waters of the current decay and collapse.

Overall trends for the next decade

Some of the projections of the Global Trends report, and that at the time were not taken into account, are:

• The leading economies are, from most to least, the United States, China, India, Japan, Germany, UK, France and Russia. (Note that Japan lower second to fourth place ranking in and Italy and Canada go out)

• The growth of the BRIC countries (Brazil, Russia, India and China) would exceed the GDP of the G-7 in 2040.

• Brazil, and not Mexico, will be the Latin American country that gain more influence in the international arena.

• The economic axis will move from west to east as China and India are the countries with greater economic progress.

• The U.S. weakness will not take away its economic supremacy (its GDP is three times higher the following country) but its influence and domination will be undermined.

• This will allow the emergence of multipolarity, which will allow overcrowding and the use of different currencies.

• While terrorism will not disappear it is difficult it ever meet the preponderance as in the past, especially when the relevance of Al Qaeda is increasingly diluted. The real danger may lie in the opportunism of groups that want to exploit the rise of multipolarity: gangs, criminal networks, religious organizations, tribes, companies and insurgent groups.

• As a result of the crisis, and at global level, there will be a resurgence of public enterprises which will increase the “state capitalism”, a phenomenon that may promote corruption and the consequent emergence of criminal groups.

The authors’report point that the survey “only” reflects the opinion of some specialists. Never mind, almost over two years after its publication, we can see its accuracy in several points. What should we do then, to avoid falling into the hands of corrupt governments and criminal gangs, according to what the report delivers?

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(1) See the contrasting views of John Williamson, the originator of the concept in A Short History of the Washington Consensus and the critical approach of the program of the Center for International Development at Harvard University.

(2) A meter of the U.S. debt at the U.S. National Debt Clock : Real Time.

The speculators’ ploy and the win-win gambit

Time Magazine lends itself to confusion ceremony ...

The romantic concept of the speculator who may lose or gain from betting does not apply in any case to the current situation. Let us dot the i’s and cross the t’s .

If you consider yourself a speculator because you’re betting that the Inter Milan will win the Champions League on next 22 May, it is up to you. But you may lose money or may worsen it. In this case, no matter you sit well/bad the coach José Mourinho, the actual chances are 50/50 (obviously everything changes if the other team, i.e. Bayern München, has half staff injured, but even so…) Well, this can be applied to any bet in real life. But this is not speculation and, at least, it has nothing to do with the attacks on Greece, Spain, Portugal and – if God cannot help – on Italy. Under present conditions the speculator earns when the market goes up, and he also earns when the market goes down. It’s an everlasting win-win gambit, while the rest of us – you, me or the owner of a company, that’s 99.5% of the world – we lose. So the economy is taking a nose-dive: we are in the hands of Stuka (1) speculators.

To this point, it seems crucial to pull out the smokescreen that let many of us consider that anyone who cooks up a business, who creates and produces a little is a speculator. The word even sounds bad and many associate it with the “parasite” living at the expense of others. But it has nothing to do with it. Speculators are now true professionals, an armed militia who earns when the dollar or the euro go lower, and earns as well when the dollar or the euro are getting higher. One will easily understand that this has nothing to do with the speculator prevailing in the collective imagination. King Arthur’s or Napoleon’s romantic hand-to-hand battles are not still on. Now the attacks are done with drones and occur in Wall Street. Operators do not bet on a particular product, but on a particular result regardless of what happens to the product, which may be a country, your city, your home or your health insurance.

In the U.S., the five largest banks hold assets for 60% of GDP. Government is not even so powerful (bankers who finance elections and war campaigns to both Democrats and Republicans are definitely more powerful). 20 years ago (1990), bank assets accounted for 20% of GDP while 30 years ago (1980), less than 5%. Keep in mind the increasing power of banking for the loans granted. Banks (not governments) are the owners of the world economy. And if the side effect of the crisis led to decreased liquidity, it is logical that banks are now in trouble. That’s why they bet on whole countries as they do with horse racing. With the difference being, in these bets, banks will always win because of benefits offered by the CDS (2).

So do not be surprised if these five banks are who most gain from crisis. At this tempo they will stop being 60% owners to become owners of 100%: the building where you live, the street where you walk. Before long, you will have to cancel these charges to banks, not to governments.

The lords of the photo: Robert Rubin, Alan Greenspan and Lawrence Summers who concocted the formula to make that possible. And governments, sheltered by the idea that consumption makes happiness, bought the idea that plunged us into the global chaos we live today. Greece, Portugal, Spain and Italy top their list of attacks, and you are part of the 99.5% who did not reap any benefit from it.

Now you know a little about speculators.

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(1) Sturzkampfflugzeug, kamikaze, ‘suicidal’, opt in step with your preferred sensitivity.

(2) Credit Default Swap (CDS). The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap. For example, the buyer of a credit swap will be entitled to the par value of the bond by the seller of the swap, should the bond default in its coupon payments.

US state of Arizona passes controversial anti-immigration law

US Border Control © The Last DJ

Thousands of people marched peacefully on Sunday 25th in Phoenix, the capital of the US state of Arizona, to express their opposition to a controversial new anti-immigration law.

Opponents argue that the new law discriminates against Latino Americans. In a rare presidential intervention on a state matter, President Barack Obama described the law as “misguided” on Friday. Civil rights organisations have threatened with lawsuits.

The law was signed by Republican Governor Jan Brewer last Friday. The state of Arizona borders with Mexico. Illegal immigrants smuggled over from the sparsely-populated Mexican desert region cause a lot of trouble, say Americans living in the frontier area. It’s a busy drug trafficking route and the Mexican drug barons regularly extend their wars across the border, killing their victims on US territory. Immigration control is the responsibility of the federal government, but a majority in Arizona feel that Washington has failed them.

So, Arizona has acted on its own behalf, passing a law aimed to stem the flow of illegal immigrants into the US border state. The law requires police officers to question and detain anyone they believe may be an illegal immigrant, even if they are not suspected of committing another crime. It would also require anyone in the state suspected of being an illegal immigrant to show a document proving their legal status.

Racial profiling
But, say critics, if police demand papers from people just because they look Mexican, and they turn out to be a US citizen, their constitutional rights will have been infringed as US citizens are not required to carry ID. Latinos are assuming that only people with an Hispanic appearance will be stopped by authorities, which constitutes an act of discrimination, says one demonstrator in Phoenix:

“That law legalises racial profiling which we fought so hard to end in this country…”

The first anti-immigration legislation demonstrations ahead of the governor’s announcement on Friday ended in clashes with authorities. Empty bottles and lunch leftovers were hurled at the police; supporters of the law were also harassed.

Indignation
Sunday’s organised march denouncing the legislation passed off more quietly. The law has ignited fury among the mayor of Phoenix, Democratic politicians and civil rights leaders who have announced further protests and legal action. Some police commissioners also spoke out against the legislation, arguing that it will widen the rift between police authorities and Hispanics, including the hundreds of thousands of illegal citizens. This in turn will undermine security at the border region, the very argument used by the governor for its introduction.

Illegal Latinos in the US are a bit like Muslim immigrants in Europe. They’re all thrown on the same heap and often the scapegoat for all the woes of society. The passing of the law – just as Democrats are considering launching a comprehensive immigration reform bid – has ensured that the immigration debate will be placed fully under the spotlight in the weeks ahead.

Obama saves more for better care

Obama’s reform: An expense or an investment?
For conservatives (Republicans but also some thirty Democrat representatives) this is an expense, a redistribution gadget: those who are able to earn money are bled for the benefit of those who are not able to bring in. For liberals we are facing an investment: spending for the poor health, any American – even rich ones – will gain. Besides, this reform is similar to the French universal health coverage-CMU (which impressed Hillary Clinton): taking care of the poor, first you avoid the risk of contamination from the poor to the rich, and then you consolidate an employable and compliant workforce. In the US, the health reform will cost 940 billion dollars over ten years and some 32 million Americans would benefit of it. The aim is to cover active and young, 95% of the population under 65 years. So it costs money.

And it saves money… the hardest to understand. Explanation in 5 points.

The reform creates a more competitive market for insurance and it will be overall cheaper for Americans. So far the insurers provide the richest people who have no health problems. But they do not cover sick. Reform is more than a humanitarian measure; it puts pressure on the cost of health insurance as insured contributors will make the practice to compare proposals.

President Obama’s reform establishes a commission to control health spending, composed of independent experts approved by the Senate. They observe spending excesses in that event.

The most unpopular, but the clearest, the tax on Cadillac insurance (1). Today, employers pay 70% of their better paid employees’ insurance plans and do not pay taxes on it: 250 billion dollars annually for top executives and other senior officers who waste health outrageously. There will be taxed up a certain ceiling: a right way to limit rising of unnecessary health spending.

Turn doctors into caregivers, instead of health merchants. Today, Americans buy health like cars, except they do not want a third car they won’t buy. In health matters, the more doctors push Americans to consume, the more they consume. Obama strikes first at hospitals that offer Therapy Packs with the result one easily anticipates at the end. For the most part, the reform consists in discard the most expensive system in the world, the same who cares the least.

Summarizing the preceding: reforming the philosophy of health, and there, even Republicans agree. Today US system limits health care expenses taking no care of people. Now, the less we care of people, the more health expenses explode. With president Obama’s system, elected people’s representatives will be compelled to focus on health spending, even though they let them go off course drift in the past. Final outcome is $ 138 billion saving cost of Federal deficit in the next ten years and 1,200 billion over the next decade. Obama reform is both an investment and a sharp cutback scheme.

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(1) Sometimes referred to as a “Cadillac” or “gold-plated” insurance plan, a high-cost policy is usually defined by the total cost of premiums, rather than what the insurance plan covers or how much the patient has to pay for a doctor or hospital visit.
People who have Cadillac plans often have low deductibles and excellent benefits that cover even the most expensive treatments, but this is not always the case. Premium costs can be high for reasons other than generous benefits, including the age, gender and health status of the customer. In an employer-based plan, premiums are based on the pooled risk of employees and may be higher if many of the employees are sick, older, female or live in a region with expensive health costs. Additional information in ebri.org.

America does not understand the crisis

Fall of Quotations ©Miscellaneous

Being concerned about the new American plan for banking supervision, many have welcomed with great emphasis the real revolution in the regulation proposed by Timothy Geithner, the US Treasury Secretary.
If you look a little closer, the collective enthusiasm is shocking. Certainly, the powers of the Federal Reserve have been increased –even if subject to congressional approval, which is not completely negligible. Certainly the FED will turn into an agency aimed at consumers protection – and it is not too early indeed. But on the merits, one has the feeling that the U.S. administration has made its own the Lampedusa’s motto in The Leopard, « Everything must change so that everything remains the same », since in a country where the derivatives are still supervised by the Ministry of Agriculture, the general household yet called for by Barack Obama during his campaign will wait a few months or a few decades. The idea of a single supervisor has been permanently abandoned; the adoption of the rule where one sole supervision should apply to all financial institutions taking the same kind of risks, has been shelved. One may ask if this reform is yet another demonstration, since the start of the crisis, of the Anglo-Saxons willingness — United States but also England — to evade any new rules that would jeopardize their financial imperium? Examples do flourish which allows me to reinforce that point of view. The United States are self protected – because this is protectionism – against the thread of accounting and prudential rules that Europe keeps on applying with a rigor bordering on mysticism. Similarly, nothing has been done on the rating agencies. It is significant that CRAs are two-thirds American for the whole world market. In the same way, control of insurance companies, nothing has been done while the virtual collapse of AIG could be considered a pure product of U.S. regulatory deficiencies. What is valid for the United States is also applicable for the United Kingdom. The FSC — which is the equivalent of the Financial Market Authority in Britain — has not yet made any proposal on the way of a steady reform. Also, UK remains a vast tax haven. During that time, the European Commission and the governments of continental Europe have stated unrelenting rules even more stringent and in many cases still too inadequate to manage this crisis of unprecedented proportions. I think we should really ask the question: on one side, aren’t we witnessing an Anglo-Saxon world which has decided not to reform, and on the other, a European world — Continental Europe – which, seized by debauch to try reforming, monitoring and supervising, risks masses weakening the financial industry in this part of the world?

A 3D Exploration of Picasso’s Guernica by Lena Gieseke ©

>> Haga clic aquí para la versión en castellano

The ‘Guernica’ is a powerful masterpiece, an oil canvas, of very impressive proportions (782 x351 cm), that Pablo R. Picasso made in 1937 for the Paris International Exhibition.
The fabric, black and white, represents the bombing of the town of Gernika on 26 April 1937 by the Nazi German Aviation. The canvas is currently exhibited at the National Museum Centro de Arte Reina Sofía.

Now, a New York artist Lena Gieseke, who is very conversant with modern digital computer graphics techniques, has decided to propose a 3D version of the famous masterwork and hang it on the Internet, in video form. The result is fascinating and gives out visualizing imaginary details that, otherwise, we would have overlooked.

Even though, I am not fully aware what Pablo Picasso would think …

Thanks to my lovely Geneviève who forwarded me the video.She’s always raring to go for new amazing adventures

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Unrepentant Blair

Protestors called Blair a 'liar' and a 'war criminal'

Former Prime Minister Tony Blair has been appearing before an inquiry looking into Britain’s involvement in the Iraq War. Blair said he did not wait for UN backing, because he believed it would never be given.

Former British Prime Minister Tony Blair said he wanted the backing of the United Nations in the Iraq war, but believed that he would never get it. Giving evidence to a UK public inquiry into the decision to go to war, he said he thought that it would be pointless to continue debating the war with fellow United Nations Security Council members.

The inquiry is examining the legitimacy of the war as well as when the decision on providing military support for the 2003 US-led invasion was made. Blair, now an international envoy to the Middle East, said he doubted at the time that it would be possible to secure a UN “second resolution” that would add legitimacy to the war under international law.

“It was very, very clear to me that the French, the Germans and the Russians had decided they weren’t going to be in favor of this (…) There was a straightforward division, frankly, and I don’t think it would have mattered how much time we had taken; they weren’t going to agree that force should be used.”

Blair denied the accusation that he made a secret agreement with his US counterpart George W. Bush to go to war in Iraq. The former Labour Party leader was asked whether he had pledged to support the war during a visit to the then president’s ranch in Crawford, Texas. Blair said he had told Bush, “we are going to be with you in confronting and dealing with this threat,” but that no promises were made.

9/11 attacks changed judgement

The September 11 attacks changed the “calculus of risk” and meant it was no longer possible to contain Iraqi leader Saddam Hussein through sanctions, Blair also said. Britain committed 45,000 troops to the war. It was the most controversial episode of Blair’s 10-year premiership, provoking huge protests, divisions within his party and accusations he had deceived the public about the justification for invasion.

Under close questioning, Blair said the September 11 Qaeda attacks on the United States – and the threat of weapons of mass destruction – were the main factors in Britain’s decision to invade Iraq.

“We were advised that these people would use chemical or biological weapons or a nuclear device if they could get hold of them; that completely changed our assessment of where the risks for security lay.”

Unrepentant Blair defends war in Iraq without UN backing

No regrets over decision

At the end of the session, Blair said that he did not regret the war despite the fact that weapons of mass destruction were not found.

“If I’m asked if I believe we are safer, more secure, that Iraq is better with Saddam and his two sons out of power, then I believe indeed we are.”

The British inquiry has already heard from senior civil servants who said intelligence in the days before the March 20, 2003 invasion indicated that Iraq’s weapons of mass destruction had already been dismantled.

Protesters outside of the building where the inquiry was being held chanted “Tony Blair, war criminal!” as he entered through a back door amid high security.

Observers say that Blair’s appearance may not only affect his personal political legacy but also damage the Labour government of his successor Gordon Brown, who was chancellor of the Exchequer at the time of the Iraq invasion.

Obama Lays Siege to the Financial Casino

>> Haga clic aquí para la versión en castellano

The tragedy that hit Haiti last week meant a welcome sigh of relief to the four Wall Street emperors. That sad day — Wednesday 13 to be exact – wherein more than 111,000 people were killed in one of the poorest countries in the world, Lloyd Blankfein, Goldman Sachs CEO; James Dimon, JP Morgan Chase CEO; John J . Mack, Morgan Stanley CEO and Brian T. Moynihan, Bank of America CEO, responded to questioning by the Financial Crisis Inquiry Commission (FCIC), a commission created by President Obama last year to investigate and discover the perpetrators of the worst financial crisis of the past 70 years.

The catastrophe in Haiti prevented these four glorious characters to get the front pages and the information came buried in the back pages the next day. Parts of the final reports are here. They worth a look for a clearer understanding of recent events and from which the press has turned a blind eye, such as articles published today by El Pais, one of Sandro Pozzi and another by Peter Larsen. None’s aware of the reasons for President Obama to besiege bankers — “If they want war, we will give them,” he said Friday — as well as the requirement to divide the largest banks into smaller entities, or the application of $ 120,000 million tax expected to recover some of the rescue plans. This is a direct comeback to the results of last week and which the press did not report.

Wall Street bankers admit mistakes by the financial crisis. In their view, they already assumed an attitude of apology – but they did not actually account for their acts. As when Lloyd Blankfein said: “What we did, didn’t worked well. We regret that people have lost so much money. ” But what “not worked well” for the people, worked well for them, they who shared out hundreds of billions of dollars in bonuses.

As of Wednesday and Thursday last week, bankers totally downplayed the consequences of the crisis: “It was the perfect storm of the year”, Blankfein said, while James Dimon trivialized “This happens every five or six years”, as if we were into a normal slowdown business cycle and not into a systemic failure founded on financial basis generated by fraud. And although they were cautious not to blame the government, the government caught them and wouldn’t let go of the piece. Furthermore when the bank has continued speculating and creating the seeds of the next crisis.

The investigation led by Sheila Bair, of the FDIC (Federal Deposit Insurance Corporation) helped to illustrate that the trouble is structural and that government and consumers have long been hostage of Wall Street. The frantic struggle to eliminate the Glass-Steagall Act was one of their results. Now you understand Obama’s saying “We will never again be held hostage to banks too big to fail”. And this is just the beginning.

The investigation detected that commercial and investment banks, in collusion with political world, managed to completely disable the security mechanisms and take full control of the system while cheating the government. No public institution was relevant to their view, all public boards were pawn agencies like the SEC — that despite having warned of repeated fraud cases as Bernie Madoff, failed authorizations to investigate and arrest, and so the unscrupulous swindlers could commit crimes with the gentle complicity of the banks. Financial capital formed its own internal guerrilla and finished devouring the industrial capital, the one producing and creating jobs.

Much of this is because the leading figures of finance (Henry Paulson, Timothy Geithner, Lawrence Summers and Robert Rubin) have held positions in banking, government and Wall Street: what must be considered a real incest. You can not serve two masters, being Secretary of the Treasury (that is, a high state official servant) and hold such visible ties with commercial banks, more so when the Fed, is since 1914 a fully private body which lends money to the state, and whose interests are paid by all taxpayers. It would not be surprising that once the whole truth is done Fed decides to return to the Treasury. Maybe Paul Volcker’s plan has already thought about it.

Obama’s War

The worst war is the one being fought into our brains.

West is repeating mistakes of the past in Afghanistan

As soon as its terms are acknowledged you can give it for lost. And you have to write it in full: in Europe, the war in Afghanistan is being considered ever-increasing lost.

It is about the culture war (1) wherein violent actions have a dual persuasive function: intimidate the whole population and transfer responsibility — i.e. guiltiness — to those who act in disagreement with radical Islam, thereby becoming potential targets. The result is that they lead to restraint freedom of expression and censorship. This war has many accomplices, because not only radical Muslims ask for a special status for their religion. Ireland enforced this Jan 1^st an anti-blasphemy act which punishes by fine up to € 25,000 those who commit blasphemy publicly. A soldier of this war is the Somali who the Year’s Day attempted assassination — ax and knife in hand — against Kurt Westergard, the Danish cartoonist who published a Muhammad caricature in the Jylland Posten in 2005 — who, since then, is under police protection. Pope, Tony Blair and even George Bush agreed criticizing the cartoons — despite freedom of expression is far better protected in West than in Middle East.

The next battle to fight, waged in view of everybody in the street and in institutions, is not far behind. As the former fight, its identification mark suggests that you are losing it as soon as you accept its existence. The dream of invulnerability can lead to the greatest aberrations. What a hard life will have those who use air transportation! But it happens likewise in trains, buses, subways and even private cars. There is however an inversion of terms in this case. In Europe, for now more familiarized with risk society, the reaction is moderate. In the US, however, where the legend of invulnerability has thrived, even Obama has been incapable to reverse the effects of war on the rule of law and freedoms. The soldier of this war is a Nigerian who tried to blow up the Northwest flight on its arrival to Detroit — from Amsterdam — on Christmas Day. And because of it Guantanamo will remain open. And as a result, imprisoned people without trial will keep on running, as well as secret warrants, eavesdropping without judicial control and everything Bush did at wholesale scale, but now acomplished in retail and with greater care and prevention.

The Culture War of values as shown on a graffiti

Where we are losing the second war at most — the war on values — is inside the third war; the war of real fighters with true clashes, and belligerent general staffs… basically, Obama’s real war. It is a regrettable and revolting war, as any war, but it is more certain and effective. It is waged in secret, without bluster, quietly — although the effects emerge with no little alarm from time to time. Such as, in the recent suicide attack on the CIA base in Afghanistan — a historic setback for the United States who believed getting bin Laden within reach through a double agent when in fact they lost six US agents and one  Jordan’s allied. This action of Al Qaeda is in response to a cyber war through drones, which maintains the CIA in Afghanistan and Pakistan, and has killed at least two dozen of prominent terrorist leaders.

Obama has intensified this kind of war, to the point that some experts say it will replace the current massive presence of troops in the conflict zone that spreads out from Pakistan to Somalia. The CIA has accomplished more than 50 attacks from Predator and Reaper drones all through Obama’ first year at the White House – figures that double those of 2008 with Bush on the stage and surpass the whole activity of the Bush 8 year Presidency. Formally it is about a targeted assassinations program that Bush authorized after another Republican president, Gerald Ford, banished it in 1976. Philip Alston, UN Special Rapporteur on Extrajudicial Executions and law professor at the New York University, believes that such actions may be legal in terms of “just war” when there are no other means to stop or prevent the enemy to go on with its activity and when every precaution is taken to avoid civilian casualties. But this does not appear to be the case because there is no official information and no possibility of judicial or parliamentary control over such actions.

Bush made a package with all those wars, which he called Global War on Terror — some mistook with a war against the Arabs or against Islam. “Invoices” for those errors, increasingly higher, are still coming now. Obama qualifies and distinguishes amongst them: but this does not make him immune to criticism from the right, for his supposed excessive restraint and, from the left, because of his continuity with Bush’s illegal war.

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(1) Have a look on the clash of ideas over here: The Cultural War

Is Obama’s Smart Diplomacy Substandard?

In Afghanistan, the military solution is like a bottomless pit: just look at the affirmative accents of former president Bush and right now president Obama (“We must finish the job”). What does the US public opinion ponder while Obama is willing to strengthen the conventional forces ?

Yet after his first year, and after his speech of Dec 1st, let us consider President Obama’s general guidelines.

The fall of the Berlin Wall has highlighted the decisive character of the Afghan adventure among the causes of the collapse of the Soviet Union. The Red Army was well and truly stuck on this theater of operations – deemed dangerous. Could it also become fatal to Obama’s America?

Barak Obama tried one week ago to convince the US opinion, more and more reluctant to increase to 100 000 the number of U.S. soldiers engaged in war against the Taliban. Therefore the use of force is preferred, with a deadline.

Will this voluntarism shut up the critics who, since taking office, accuse Obama of being a “weak president”, a new Jimmy Carter, who will eventually be run by those he tries to coax? These critics point out that the “smart diplomacy” of the new Democratic administration has, so far, no notorious  success, meanwhile his hand extended policy toward the traditional adversaries of America remains desperately unrequited. Neither Iran nor North Korea have been sensitive to calls for restraint. In the Middle East, American diplomacy seems without real outlets on a situation which deteriorates every day. And coming back from China – his main partner now – the president returned empty-handed: no revaluation of the yuan, inflexibility on climate policy, and  human rights totally muted.

Of course, it is too early to decide on a foreign policy that is yet preparing the ground for milestones…

The latest false move from Obama, a step towards the militarization of US foreign policy.

It was surprising – and not only in US – to survey television reports whereas in his recent visit to several Asian countries, President Obama prompted a solemn bow before the Emperor of Japan. It is hard to believe that Obama – or anyone from his entourage –could ever consider the Emperor as Heaven Sent when he is just a simple constitutional symbol of the Japanese nation. I do not remember Obama giving such unnecessary signs of respect to other dignitaries – who are also symbols of their respective sovereignties.

For some critics of Obama’s policy in Afghanistan, the speech meaning through the president finally defined his strategy to follow on that troubled country, was another sign of unjustified respect and reverence, but this time to the US military institution and its senior executives. Not only because he chose to do so before the select audience of the Military Academy at West Point instead of the Oval Office. The worst and most ominous precedent of this fact is that also on the same stage, and before a similar audience, his predecessor in the White House presented seven years ago the disastrous strategy of “preventive war” that blazed a trail of blood and destruction across the world. Let us say, in defense of Bush and against Obama, that the first delivered his speech during the military graduation ceremony of the new officers, as it seems to be usual in West Point, while Obama has done so for no particular reason, which is still more shocking.

It is not about criticizing here, once again, the major strategic error which consists to expect winning a war and, secondly, to establish in advance the time frame in which the victorious troops return home. One cannot satisfy both the desires of the people, tired of an endless war that, the lower social strata are suffering especially, and some military commanders who want to achieve all the signs of victory and none of the defeat – as the shameful retreat from Saigon who still lives in the minds of many Americans. Therefore, the date of July 2011 as the scheduled move back is an empty gesture as the withdrawal of the occupation troops will take place just when possible. Just as the closure of Guantanamo, announced later this year and unenforceable to date.

The outcome is that over the next six months 30,000 new US troops will arrive in Afghanistan, i.e. in less than two years the US military contingent will triple, reaching about 100,000. If we add up the 38,000 NATO (to increase by about 7,000), the military deployment in Afghanistan will exceed that of the USSR in the eighties, which contributed to the final disintegration of the Soviet superpower. Will Obama get what the former Soviet Kremlin could not achieve?

But there is another problem. In the aforementioned speech Obama literally said:

“As commander-in-chief, I have determined that it is in our vital national interest to send an additional 30,000 US troops to Afghanistan. After 18 months, our troops will begin to come home. These are the resources that we need to seize the initiative, while building the Afghan capacity that can allow for a responsible transition of our forces out of Afghanistan.”

What is and on what terms you define a “responsible transition”? When will the armed and security forces of Afghanistan be operative as to replace foreign troops of occupation? That’s not up to the White House nor NATO. Uncertainty is the same as before the speech delivery because the objectives of this war are still not clearly defined.

“I make this decision because I am convinced that our security is at stake in Afghanistan and Pakistan,” Obama said. “This is the epicenter of the violent extremism practiced by al-Qaida. It is from here that we were attacked on 9/11, and it is from here that new attacks are being plotted as I speak.”

President Barak Obama chose not to recall that his predecessor in the White House was the true catalyst for the spread of terrorism in these and other countries, with his aberrant “preventive war on terror”.

Even if it seems simplistic, it looks as if Obama gets rid of the straight weight on Afghanistan, putting it on the shoulders of the Pentagon and NATO, to pursue other more immediate and politically profitable concerns. A step forward in the usual militarization of US foreign policy, that Obama does not seem determined to change.

The United States and the Human Rights Council

The hopes quickly went on smoke at the end of the 12th session marking the official attendance of the United States to the Human Rights Council in Geneva.

H. Cartier-Bresson · Séville, 1933. © Cartier-Bresson & Magnum

When the United States announced their candidacy to the Human Rights Council earlier this year, many had welcomed the decision with the hope that some cases completely blocked under the government of George W. Bush could finally move forward, including those involving Israel, Gaza and the occupied Palestinian Territories. But hope quickly went up in smoke at the end of the twelfth session, which marked the United States official entry to the HR Council. The US administration had sent specially from Washington Michael Posner, Assistant Secretary for Democracy, Human Rights and Labor. He defines America’s standing in the council:

We see our role as broadly engaged in a range of issues. Our intention is to address all issues and suggest ways to advance the Council over its program to help the greatest number. We are in new relationships, new alliances. For example, we worked with Egypt on a resolution on freedom of expression that resolves disputes that we had. The Council needs this type of exchange. Our intention is to apply universal principles to everyone, including ourselves. We know that the US must lead by example in its own affairs and participate actively in the Council. Our situation of human rights will be reviewed next year with the procedure of Universal Periodic Review, and we encourage other countries to do likewise.[1]

The intentions were initially positive but Americans have widely criticized the Goldstone report on Gaza and US pressure has resulted to postpone the vote on the resolution at the next session in March 2010. The recommendation of the Goldstone mission to seize the International Criminal Court if no independent investigation is conducted within six months scared off Israel.

In turn, the US, who refused to join the ICC, might be revising its position:

We are currently reviewing our policy regarding the ICC and the ratification of certain conventions, like the Covenant on Economic, Social and Cultural Rights, which could pose a challenge for the USA. It’s a fresh start. And we will consider all treaties this way. I think this will be a long process. No doubt, priority will be done to the elimination of discrimination against women. We will create a new dynamic.[1]

But these are all political considerations that have taken hold in the Human Rights Council, although many NGOs have welcomed the opening created by the joint resolution between the US and Egypt on freedom of expression. Other resolutions which have been voted are at least as important as those on the Aboriginal peoples, the right to truth, the effects of toxic chemicals on human rights or access to care.

On the merits, the important thing for Fred Abrahams, senior researcher for HRW on the Middle East, is the implicit message by the reaction of the USA, Israel and the European Union – the latter very discreet on the Goldstone report:

If Europe and the US want to promote justice, for example in Africa, they must apply equally the concept of justice to the Israeli-Palestinian conflict. Otherwise, there will always be a double standard.

The Human Rights Council is criticised for its too political positions at the expense of serious violations of human rights situations. The United States have disappointed by their position on the report on Gaza. They will be very expected for the next March session of the Human Rights Council.

Related Posts:
· U.S. faces criticism from HR abusers at Universal Periodic Review
· The Spanish Law of Universal Jurisdiction, now in Brackets?

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[1] Véronique Gaymard, RFI – Chronique des droits de l’homme, Paris 3 oct. 2009

Drug trafficking and imperialism

US imperial mentality in the fight against drug trafficking

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At a recent conference [1], the original and always rightly incisive Noam Chomsky, referred to US military bases installed in Colombia, with the official purpose of assisting the Government of Bogotá in the war on drugs.

Mexico's Federal Police officers escort suspects of working for a drug trafficking gang, as they are shown to the media in Mexico City

He called to consider a similar case but with different actors. Suppose, he said, that Colombia, China or any other country claim their right to establish military bases in Mexico, in order to fumigate and destroy US tobacco plantations in North Carolina or Kentucky, traditional breeders of this plant. The plan would be enhanced by blocking the production areas through the action of air and naval forces, while sending inspectors to verify the overall elimination of such plantations. All this would aim to prevent tobacco trafficking towards countries suffering its effects.

Chomsky points out that smoking has provided evidence to be more lethal than alcohol, which in turn is more harmful than the use of cocaine or heroin, and these are, in turn, more harmful than cannabis. If in addition to the number of deaths caused by harmful products inhaled by smokers, we take account of those caused to “passive” smokers – though their number is difficult to determine – it is quite sure that the overall lethal outcome of nicotiana tabacum will exceed that of the remaining drugs as a whole. It would be quite logical to pursue more actively tobacco growers than coca’s.

Clearly this assumption is not plausible in the reality of today, not only because tobacco in most countries is not a banned substance while many drugs are. However, when facing this relentless logic, what should be asked is why this happens. Why the US, who say they feel adversely affected by drugs that come from south of the Rio Grande, naturally attributed the right to deploy their armies in Colombia to combat coca growers in the area, and it is even conceivable that no other country could do likewise when its interests are affected similarly.

For Chomsky, the answer is simple and it has an unquestionable bottom: the imperial mentality that exists in the US, so deep-seated in North American minds that it pass unnoticed. Should we add here that this frame of mind also exists – on a smaller scale – in many Western countries.

However, the results so far obtained seem to justify the effort committed. The “war on drugs” has lasted more than four decades in Colombia and has intensified over the past ten years, neither the food nor drug trafficking have declined. The reasons offered by Chomsky leaves no doubts. Several studies show that well-funded prevention and treatment of drug addiction are much more effective than coercive measures used in this endless war. And the preventive or curative treatment of drug-consumers in this business-has a performance cost-effectiveness improved over 20 times to the attacks against growers supplier-side-in “chemical warfare” waged to destroy the fields of drugs.

According to Chomsky, only two scenarios would explain the current situation: Either the US leaders have been consistently fools for 40 years, or the purpose of the war on drugs is very different than what is proclaimed. If one excludes no further the hypothesis of insanity, then what may be the real reasons for this alleged war?

Inside the US two main facts are obvious: the cleaning of the socially less useful (which has led the US into the world’s first place on top of prison population rate) and, as with the “war on terror”, dependence and subjugation of a population terrorized by the danger of drugs, to stop showing its angry opposition to economic policies that have led to the largest social imbalance that the US has ever suffered.

Meanwhile, abroad, the war on drugs is a way of hiding in Colombia – and other countries –some of the most iniquitous antisubversive operations. Colombia is the second country in the world (after Sudan) with more population driven out their homes, while local oligarchies and multinationals occupy the land abandoned by farmers and transform them into mining, agro-industrial production, intensive livestock or infrastructure for industry – whose benefits hardly benefit to concerned populations.

Now it’s time to ask whether Obama will follow the winding road – yet partly covered by his predecessors but in opposition to which he has not revealed much indignation as he showed with e.g. Guantanamo – or on the contrary, he has enough support, resources and intentions to leave the swamped problem that Chomsky clearly presents and whose resolution is difficult and complex, since it not only depends on the White House decisions, although they can point the beginning of a new path.

[1] Noam Chomsky, Militarizing Latin America. In chomsky.info. August 30, 2009

The US economic revival just (provisionally) around the corner

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The US economy yesterday offered a robust data that, at least temporarily, allowed closing the world’s largest economic downturn since the Second World War.

Budget deficits, 2001-2010, by EU region · Déficit presupuestario 2001-2010 por región UE (Source: Ronan Lyons Economic Analysis, Oct. 16, 2009)

American GDP growth in the third quarter was 3.5% after four consecutive quarters’ drops. The positive data was expected by analysts, but the strength of the US economy stunned – and pleased – the world stock markets and particularly the Dow Jones index, which rose above 2%. The turnaround from the Q2 (-0.4%) suggests that the incentive plans of the U.S. government, an interest rate of 0% practice, the takeoff of the upturn in private consumption and housing are sufficiently solids to undertake corrections in a few months which would put the economy outside the ICU. If so, we would not be far from a very modest increase in interest rates by the Federal Reserve, an assessment that, sooner or later, should be followed by the European Central Bank, especially if consolidating the growth in Germany and France. In the case of Spain, data also released yesterday show the fifth consecutive quarter of economic decline, although it is true that the deterioration has been moderating in the last three quarters we have moved from -1.9% (Q1) and -1.1% (Q2) to -0.4% in Q3. We are, according to the Bank of Spain, in an “incipient recovery” that entails a great deal of risks: the worst unemployment rates, intolerably increasing next to18.2%, deficit escalating close to 10% of GDP and an upward  lack of credit to businesses and individuals.According to the latest figures in relation to countries under the Excessive Deficit Procedure (EDP) of the European Commission, the general government deficit of the euro area lay at 6.1% of GDP in 2009.As a result, the EU-15 public debt the will increase as of 69.3% GDP in 2008 to 78.4% in 2009. By 2010, however, it is expected to further increase on average 6.6% of GDP.At disaggregated level, most euro area countries in 2009 recorded a deficit exceeding the 3% of GDP, while all euro zone countries will infringe the maximum allowable deficit in 2010, according to latest IMF estimates.

Thus deficit cuts jump out over 0.5% per year, mostly in countries with higher deficits.

And what are these countries? Ireland, Greece and Spain showed the highest euro area’s gap budget, both in 2009 and 2010. In particular, Ireland’s public deficit will reach a rate close to 13% of GDP, according to recent estimates. Greece exceeds 12%, while Spain recorded a deficit of 9.5%, along with the IMF.

In 2010, these three countries will continue to be leaders in fiscal imbalance: Ireland (13.3%), Spain (12.5%), while Greece will approach 10%, given its public accounts inaccuracy, only just admonished by the Eurogroup Chairman Jean-Claude Juncker.

A pedagogy on carbon tax

Carbon tax on the way back to Welfare Economics

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Designing a tax for everything that contaminates incites people to preserve environment, the atmosphere in particular, which is in serious danger. The idea is to penalize polluting energy in transport, housing and personal consumption. Every time we consume less fuel but this is not enough to achieve the goals set at the last conference on climate change: hence the idea to programme a compulsory tax (to be paid per tonne of fossil fuel issued). This in order that the world decrease to half the emissions of greenhouse gas (2050) and limit Earth warming to 2 degrees – which causes climate change.

Global warming due to greenhouse gases from the combustion of carbon dioxide is 49,000 million tons of CO2 emissions. Enough is enough, this must be punishable. Its effects could lead to an overall increase of 3% of the temperature within approximately 100 years. The cost of global warming is estimated at 5,500,000 million (Nicholas Stern) [1]. While the concept of a tax on CO2 emissions comes from Arthur Pigou (Economics of Welfare) [2] who, in 1920, first established the polluter pays principle.

Now …

• Should we tax the product itself or the energy consumed?
• What about taxing imported products?
• How do we avoid the risks of inequality?
• What can we do with the tax revenue?

The solutions adopted by each country are different.
France, with about 50,000 million of environmental taxation laid up, shows a certain delay. The structure of French environmental taxation is so unwise by voluntarism emphasis that it will not generate benefits in the sense of net contribution or revenue – but only more taxes on water, on garbage, on the consumption of hydrocarbons (TIPP) which are not reversed in any improvements (infrastructure, citizen responsibilization); on the contrary, it is the umpteenth patch covering the phenomenal public deficit hole. The pedagogy turns into a demagogic fatalistic verbiage as to mislead the common man – because it ignores the virtues of consensus that in all the surrounding countries is originated in the parliamentary debate, which is where popular sovereignty revives up and where such taxation should be decided, not in the halls of the presidential palace – a very usual symptom in the French Republic whose skin politicians refuse to change. These rates represent 3% of GDP … thrown away. Unless considering France as the cleanest country in Europe thanks to its huge nuclear program, which on the contrary converts this country in less safe by the obvious potential for nuclear incidents due to its atomic central park and may involve in quantity of radioactive wastes concerned – the highest per capita in the world. The rhetoric continues, forward flight, too. The only positive point is that hydroelectricity accounts for 93% of energy resources … with the aggravated disadvantage that the driving force’s the nuclear cell. Who do we kidding? If the decrease in CO2 emissions must involve the breakneck growth of the nuclear beast, then where do we go? Stripped from one mouth to feed another.

Moreover, the tax on CO2 emissions in a country is not really quantifiable to impact CO2 emissions at the global level. Global policies are needed to internalize environmental costs and act on the behaviour of firms and households. That is the healthier principle. France is wrong in the way of carrying it out: confusion over the extent rate itself (cheerfully going from 20 to 32 for up to 100 euros / TN emitted by 2030, then left who can say where?) over the exemptions, over its operation. The increased cost of living is set: estimated at 10% the additional costs of household heating in French homes by 2010, from 5 to 10 cts. for a liter of fuel at the pump now. Another consequence is that the tax, as is, will ruin the remaining local industry (current bleeding is the largest ever seen in France) and as usual,  only a few (large) groups will afford to face such additional costs in the midst of an industrial desert. Who will invest in a country that overtaxes 100 euros each emitted CO2 TN? As for the wicked 35h law, nor study or reflection has been implemented and no effort tryed to coordinate with other European countries. The devil is in the details, French say …

The topic of compensation is often talked about, but what about inequality between consumers? What to do with the € 8,000 million that the government is supposed to enter through the concept (e.g. fatten the coffers of the ministry of finance)?

Swedish pedagogy against French demagogy
Other countries as Sweden have also established a carbon tax, even more substantial, but with a very different modus operandi: e.g. Swedish tax implies a graduated scale for companies that invest more in technological innovation to improve production processes in CO2 emission – now that is pedagogy. It’s bad times in terms of economic crisis situation but action is credible in Sweden and demagogic in France where nobody knows whether the tax will be redistributed or yet another ‘neutral’ tax – that is, outside of Pigouvian incitement, which has the favour of Prime Minister Fillon.
Because the environment policy can not be summarized to raise the level of taxation or implementing new taxes, unless you’re old tricks again and increase unemployment and public debt. Two years back here it was the bonus / malus tax on car CO2 emissions (an onerous  marketing device that ruined much of the automotive industry, with a fall of 40% of French production, forcing car manufacturers to abandon the profitable manufacture of sedans to engage in small cars’ on which the profit margin is zero or nearly zero), last year was the tax on diapers for newborns turn, this year it is the time of a tax on CO2 emissions … a joke (or better yet, a shortsighted policy).
The temptation to tax the super profits of the oil industry (Ségolène Royal) would only have negative repercussions in the pocket of the consumers. Better a tax that changes that behaviour and not simply going to fatten the coffers of the state and its lifestyle. Report and well communicate with citizen, having a little patience not changing everything at a stroke or by decree.
Taxation reforms are essential throughout our countries. We talk about tax incentive and not subsidies e.g. car industries so that they manufacture a kind of cars that they would have made anyway. Let’s face green taxes; it is just and necessary, but mostly to help us getting out from the unending virtual crisis of rampant capitalism, far from the real economy. No green custom duties at European borders, a trend advocated by some, in their eagerness, to lead us into a new protectionism; but rather concentrating on comprehensive policies, at least in Europe, better globally. It is useless to establish national policies not coordinated with the rest of countries, giving way to protectionist policies more or less latent: have a look on the global trade drop of 12%, if you want to add more crisis to crisis just add the perversion of protectionism to all the difficulties we face today. The environment is a global public good. To be honest we do not know how to deal with externalities steadily i.e. when China or Brazil pollute, they do not so in their respective territories only but in the entire world. Enforcing tariffs however is theoretically a nice building, but in practice it is just about regression. Also do not forget that China’s censure is unfair: the PRC is making genuine efforts to drastically reduce pollution in its industries – and it still does not occur in most of developed countries.

One of the biggest questions is to identify what the US attitude will be. So far the US had no concern on the Kyoto Protocol; the position is changing but it all depends on the type of changes that comes about there. Scenarios abroad are in my opinion: the role of the G20, the Doha WTO round re-launch and the climate meeting in Copenhagen. All three turn around the same concern: the need for global economic governance to meet challenges.

Pedagogy missing in the US and UK.
The increasing size of speculative capital flows, mainly in US and UK, is the pending business. I mean speculative capitals and hot money outflows are bigger now than a year ago – in the worst moment of financial-mortgage crisis. Hot money is tossed into the emerging economies as the first symptom relief crops up. Thus, the central bank of China is increasingly doomed to buy huge reserves to support a sick dollar (thus some $ 70,000 million per month, are beyond the circuit of productive investments in order to prevent the US currency to collapse again), deflecting precisely investment in productive economy. That is, in essence, we have not yet altered the global imbalances, and even we are somewhat higher than before the crisis. The issue of executive bonuses and allowances is less significant than the required dismantling of the opacity in the banking investment -something impossible in the most key European financial center, the City of London, since the future PM Cameron opposes to it. This, in US terms, is yet unimaginable. So far the best indicators of the City and NY – queues at the best restaurants – behave well as table reservations vary from 2 to 3 months … bonuses, windfalls, luxury cars, stratospheric contracts are just around the corner again. To pin a button: flows exchanged in the derivatives markets reached a record of vertigo – almost 10 times world’s GDP. So how can David control Goliath?

To be continued …

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[1]  The Stern Review on the Economics of Climate Change is a report on the impact of climate change and global warming on the world economy. Written by economist Sir Nicholas Stern, commissioned by the UK government, the report was published in October 2006. The report represents a milestone by becoming the first government report commissioned by an economist rather than a climatologist.

[2] Arthur Pigou is considered the founder of welfare economics and the main precursor of the environmental movement to make the distinction between social and private marginal expenses and advocate for state intervention through subsidies and taxes to correct market failures and internalize externalities. Welfare Economics is his most emblematic book.

Something smells bad in Wall Street

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Wall Street thriller goes on…

For some time, something smells bad in Wall Street, and despite the outright rejection that the greed of the system brings about, fraud is still the order of the day.

This time, the offensive from the authorities did not take long to show up when last Friday 16^th October six people were arrested for using illegal inside trading in a financial hedge fund. Among them, investment managers Raj Rajaratnam – a 52 year Sri Lanka billionaire –  and the hedge fund guru Mark Kurland, who handled $ 7,000 million assets. Wall Street thriller goes on.

Along with four more people under arrest, they have been charged with profiting from insider information and manipulating assets that caused more than $ 20 million illegal profits. According to FBI records, this case has emerged as the largest fraud in hedge funds, investment funds that have been targeted since the beginning of the crisis on its no supervision and facilities open to fraudulent transactions.

The dismantling of this organization – orchestrated by Rajaratnam Galleon Group initiator –was made possible through wiretaps performed by the FBI. With this, the research bureau shows that the office gives to these fraud cases the same treatment than fighting drug trafficking and organized crime. Similar to Bernard Madoff, Rajaratnam enjoyed a great protection net due to be an active donor of resources to political parties.

After accusations of inefficiency and delays in monitoring cases like Bernard Madoff, SEC and the FBI have started up operational plans to clean the large image of corruption surrounding the financial sector. Rajaratnam and Kurland’s fall is just one of many to come. Part of the resolution of conflicts that sparked the current crisis, settles into purge the image of the financial sector and eliminate corporate wrongdoing.

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Roman Polanski Revisited

Why talent is not above justice.

The French-Polish filmmaker was arrested in Switzerland upon a US request due to a sex scandal back in the late 70s.

The legal issue on the case.- Roman Polanski was arrested under an international warrant of arrest issued by a US court. Many international conventions, bilateral or multilateral on judicial cooperation, get involved to require the execution of the warrant by the requested State. These agreements are not signed with any state: e.g. France has no extradition treaty with Iran or North Korea. In this occasion, we witness the execution of the extradition treaty between the United States and the Swiss Confederation, signed in Washington on November 14, 1990 (pdf here).

The warrant is notified to the country’s authorities where the person comes into (if he is registered in the international database of Interpol). When a person comes to the border the police check on the base. If the answer is positive, the person must be arrested, police officers have no choice. In all Western legal systems the warrant leads to provisionally incarceration, typically a few days, the time for authorities to notify the warrant to the individual, so he is able to identify who ordered his arrest and why. This is crucial for the rights of defense and the non-compliance with this condition leads to prisoner’s immediate release. The detainee has right to a counsel (i.e. a lawyer). He is then presented to a judge who will ask him if he agrees to be returned to the requesting state. If he refuses, the judge decides on possible release supervision – and he can appeal the warrant of arrest.

Finally, there is a fundamental principle: a State never extradites its nationals. This is contrary to the protection it owes to its citizens. That does not mean they are immune from prosecution in their home state. And I think it necessary to add that no law or international convention provides immunity for artists, Oscar-winning or not.

Mr. Polanski is French and Polish. He is the target of an international warrant of arrest issued by a Californian court of justice for an issue dating back to 1977. At that time he had sex with a minor aged 13 after making her drink alcohol and consume drugs. Mr. Polanski presumption of innocence did expire as soon as the illusions of this girl broke down – since Roman Polanski admitted facts by pleading guilty. In the legal sense, Roman Polanski guiltiness is no longer on discussion. After a few days in jail, Mr. Polanski was released in hold of the sentence hearing. He took the opportunity to clear out LA and has carefully avoided the U.S. for thirty years. Initially, the indictment contained five charges, including rape . Following an agreement with prosecutors – as California law allows it – Roman Polanski pleaded guilty to a single chief of “unlawful sexual intercourse with a minor” (i.e. child sexual abuse, California Penal Code Section 261.5.), offense punishable by 4 years.

The warrant seeks to summon for sentencing – hence the appearance of the convicted person is required in California law. The victim has been formerly compensated and she withdrew her complaint. This was probably part of the agreement with the prosecution (the victim is not party to the criminal trial in American law). This does not preclude further prosecution. While he resided in France, Mr. Polanski was confident: France does not extradite its nationals. And he could not be prosecuted in France, although being French national, as the facts have already been tried in the United States. This is the rule non bis in idem (no matter can be judged twice).

Vanity catch out our filmmaker: he was invited to Switzerland to receive a reward for all his career, and then he came visit the pleasant federal confederation. Fatality: at the airport, when checking the passport, custom bell gave a loud ‘bang-bang’:  “Mmm, this man is the subject of an international warrant of arrest issued in 2005″ thinks the policeman. “Mr.Polanski is not Swiss,so he can be stopped”… and here he tasted the wet straw of Helvetian dungeons, where he is in individual cells, confined 23 hours a day. Does it shock you? Please take note that prisoners in France are treated the same way in jail, except that in addition, they are in an overcrowded cell.

Finally, I found two shocking things in the barrage from the artists’ world.

Notwithstanding Mr. Polanski has long suffered throughout his life – an unhappy childhood in the Cracow ghetto; then as an orphan whose parents were deported and killed by Nazis; the awful murder of his wife, actress Sharon Tate, by Manson’s sect – this does not grant him a leeway to commit a crime and escape the law. One’s to bear in mind that this is a crime. It is a matter of rape in the person of a minor.

I find it shameful to hear artists – who a few weeks ago vowed to pillory French downloaders (Hadopi law on censorship over Internet) and approved the repressive legislation against constitutional rights to punish the illegal downloading of their works – make now a fuss when it is one of them whom the law applies in its entire rigor. When you know that a lot of downloaders are in the 13, we draw the impression that minors are good for their eyes only to spit their pocket money and serve as sex objects. As if their image needed it. And after that, we treat judges as corporatist.

It makes my blood boil when I hear the French minister of culture Mitterrand  pointing “the America that fears.” Oh, how we know America badly. Tocqueville had already identified 170 years ago, the passion for equality in this country. It has not changed. It is inconceivable there to treat an individual differently because he belongs to aristocracy, even THE artistic aristocracy. Even if it permanently weakened the executive, ten years ago, America has seriously considered the possibility of overthrowing the President because he lied under oath before a Grand Jury.

A justice that does not spare the powerful and those protected by the powerful? I understand now why a minister of the French Republic – a republic who has carefully put his president and his ministers safe from justice – finds that America is frightening.

Obama Drives a Valuable Shift in the US Defense Policy

No need to search for obscure reasons or ulterior motive when scrutinizing the change in direction introduced by President Obama in the US defense policy after President’s refusal to install the so-called missile shield. The expected partial deployment on European territory was one of the pillars of Bush’s failed strategy against international terrorism.

Obama’s resolution involved several decisions of domestic and foreign policy, all high draft. On the one hand, the strong US defense industry will not feel aggrieved, since this is not about trying to cut off a program that would produce significant benefits, but to transform the land-based missile defense system installed on other naval platforms. The technical explanations do little to the case except to deny the accusation that the US and its allies could be defenseless against a suspected terrorist attack with missiles.

The adopted solution presupposes a more thorough risk assessment, dismissing the idea that Iran is able to hold mid-term long-range missiles and reduce the anticipated missile threat from shorter range. The fact that the current US Secretary of Defense Robert Gates, who was also in charge during the Bush administration, supports and implement this change in strategy, is a smart move by Obama. The US President skillfully – and to the surprise of many who did not understand his decision– maintained R. Gates at the same position –the very same that had fully supported the failed military strategy of the former president.

Russia expressed rapidly and unambiguously its favorable opinion about this amendment and countries most directly concerned which are Poland and Czech Republic shall cover up that Europe defense is a common issue that affects all countries rather than a result of bilateral agreements of some of them with the American superpower – in order they appease their peculiar and atavistic fears towards Russia, however reasonable their historical reasons may seem.

Nor should it surprise that the new Secretary General of NATO – an alliance that since the Soviet Union collapsed is looking for a suitable place in the global system of supranational military organizations – is enthusiastically pointing to a new strategy that does not see an almost mandatory enemy in Russia but an appropriate and necessary ally, by which NATO can continue to keep alive, despite all previsions – a treaty that was precisely born to fight today’s new ally.

Subsequently, Mr. Rasmussen, in his first public comments of some significance since in August he took over from NATO, suggested combining missile defense systems of US, NATO and Russia into a single one. However, when asked about specifics of the plan he did not know how to respond and referred to further clarification of the military leaders –quite understandable since the NATO HQ itself was surprised by the swift and unexpected decision by the US president.

Obama, therefore, takes firmly the helm of US foreign policy. He will face a tough offensive from his political rivals. Senator McCain already warned the decision as a “serious error” that “potentially undermines US leadership as perceived in Eastern Europe”. The most obsessive US right wing – the very same which identifies traits of socialism and even communism in Obama’s plan to extend health coverage to every citizen – will go on with its campaign of denigration, with the helpful support from the most extreme republicans.

Obama definitely buries the former US policy, which divided Europe with the invasion of Iraq – one might remember the shameful pamphlet to support Bush policy, signed by many conservative European leaders, including Berlusconi, Aznar and Barroso, together with the joint efforts of three Eastern European countries, significantly Poland and the Czech Republic. The ensuing releasing in the Wall Street Journal allowed the most US reactionary forces to contempt the “old Europe” (led by France and Germany), who opposed the war, while praising the “new Europe” – the latter, whilst supporting Bush’s illegal adventure, showed a mixture of servility and excitement to establish a special relationship with the American superpower, that is trying to came closer to develop relationships with influential people (UK), in sum expecting benefits, as Jeb Bush, the dreadful brother of the former US president, who ruled his fiefdom in Florida, decreed when visiting Madrid: “This relationship between the United States and Spain will provide benefits that cannot be imagined today.”

The way Obama has to pass through is easier said than done and he will need all his personality resources to face opposition from the social sectors – within and outside the US –who worshiped Bush and still share his reactionary ideology and highlight his disastrous decisions.

Questions about an execution

Echoes of an umpteenth time tragedy

Henri Cartier Bresson · Cell in Model Prison in the USA, 1975

With 135 death convicted since 1973, it was clear that the evidence would come a day in the United States, that a man has been sentenced to death by mistake and then executed.

That day seems to have happened, if you attend to the opponents of death punishment. Innocence Project co-Director Barry Scheck says:

”There can no longer be any doubt that an innocent person has been executed. The question now turns to how we can stop it from happening again”.

Innocence Project is an NGO dedicated to helping prisoners to use DNA genetic testing.

“As long as our system of justice makes mistakes – including the ultimate mistake – we cannot continue executing people,” Scheck said.

On 23 December 1991, a 2-year-old daughter and 1-year-old twins died by fire at family home in Corsicana, Texas. Cameron Todd Willingham, 23 years, the children’s father, who was the only adult present, has been accused of murder. He was found guilty and then sentenced to death in 1992. After twelve years in death corridor and five appeals, Camron Todd was executed by lethal injection in 2004, although he always protested his innocence.

Five years later, an investigation committee on the death penalty operation in Texas established in its preliminary conclusions that the fire could have been a purely accidental origin – that’s what Innocence Project has argued all the time.

According to the weekly The New Yorker, who spent a long investigation on Cameron Todd Willingham’s case, the Commission should deliver its final report in early 2010. It reports a botched investigation, particularly in terms of scientific expertise to determine the origin of fire. For ten years, several states have imposed a moratorium or initiate discussion, after being confronted with legal errors, but none has yet admitted having executed an innocent man.

An ‘affligeant’ indictment

In a 30 August editorial column, The New York Times considered the Cameron Todd Willingham’s case “shocking”, even for those who have

“no illusions about the brutal injustice of the death penalty after all of the exonerations in recent years from DNA evidence. […] It is outrageous that Texas is conducting its careful, highly skilled investigation after Mr. Willingham has been executed, rather than before”,

…reproves the NYT, emphasizing on the fact that the defendant’s trial ran just two days.

Texas remains the state that executes more: 18 of the 37 executions in 2009. But across the country, capital punishment is declining; it has reached its lowest level for thirty years because of so called “crisis of confidence” in the judiciary –in the opponents’ words. Nearly 3 300 inmates are in death corridor now, whereof 53 are women.

Fighting bank recidivism

From Martin Wolf’s analysis in Financial Times.

It would take little for banks to have hands free again. What emerges from the crisis is a system even worse than the one who had caused it. The bank rescue lets the banks free hand to remake the same mistakes. It is urgent to raise prudential ratios.

Henri Cartier-Bresson · Shanghai (Run on Bank)

The panic of autumn 2008 now tends to fade. However, the period during which it is possible to draw lessons and make changes is nearing completion. Without radical changes, another crisis is inevitable. It could even happen much sooner than we think.

Never again? This is probably asking too much. But avoid “it” happening again quickly is crucial. Financially, politically and morally, governments cannot afford repeating this crisis in the short term: the lives of so many people can again be sacrificed to the whims of a few irresponsible.

So far, what emerges from the present crisis is a financial system even worse than that which had provoked. The survivors form an oligopoly of financial monsters too big and too interconnected to fail. And they won. Not because they are necessarily the most healthy institutions, but because they are the ones who received the largest support. One can easily imagine how they will behave when you consider all the devices that encourage risk taking.

What should we do? The most common response recommends tinkering some regulatory safeguards. You’d better worry about aligning the deck chairs on the Titanic: perfectly futile.

The proposals recently put forward by the US Treasury would fall partly into this category. Now the financial system must be protected from its own clumsiness at managing risk. In addition, it will not change it by external control, but only by redefining the system of incentives and bonuses.

The starting point must be the famous “too big to sink”. We need a credible system capable of dismantling huge financial institutions if necessary. The proposals are more attractive to look at the “good banks” in which creditors, in want of warranty, become shareholders. It would be easier if, as proposed by President Barack Obama and as demonstrated Mervyn King, governor of the Bank of England, a regulated institution was obliged to submit a plan for orderly stop its activities.

However, bank failures are like buses: you do not see one for hours and suddenly there came a half-dozen at once. The authorities cannot credibly promise that they would be willing, at a systemic crisis, to accept the failure of all affected establishments. This would lead to a particularly serious panic. The “too big and too interconnected to sink” is indeed a reality. And it is because, as recently remarked Andrew Haldane, from Bank of England – his speech “Rethinking the Financial Network” is available on Bankofengland.co.uk – the financial system is a network increasingly tight.

If institutions are too big and too interconnected to sink, and no satisfactory structural solution can be found, then we must identify alternatives.

The most obvious would be to raise considerably the amount of capital required and to pay greater attention to liquidity. Today, major financial institutions operate virtually with no capital: in the United States, the average debt ratio of commercial banks was 35 to 1 in 2007; in Europe, it was 45 to 1. This allows shareholders to play all out with results that we previously witnessed.

Let financial institutions being managed by the interests of shareholders who provide only 3% of funds intended to be loaned, is pure folly. To align the interests of managers with those of shareholders is even more insane. Given their current capital structure, major financial institutions have a real incentive to play with taxpayers’ money.

How much equity would be reasonable for systemically significant institutions? The answer is: “Much more than today.”

Moreover, the risk that capital needed could be exposed should not be evaluated based on banks models, which are unreliable. Shareholders’ funds should be at least 10% of assets. In the U.S., there was a time when it was much more.

More important capital equities might be a good way to internalize negative externalities – and more precisely the risks – generated by an institution in respect of the rest of the system. Ideally, therefore, the capital requirement might be correlated to the weight of systemic schools, as recommended in the latest annual report of the Bank for International Settlements (BIS). Moreover, these requirements should be calculated based on all the activities derived from fully consolidated accounts.

As part of a financial system much better capitalized, it is also relatively easy to implement a system of macro-prudence, while the required capitals increase during booms and decrease during decline periods.

Again, the higher the proportion of shareholders would be important the less would be worrying to see the bonuses of managers aligned with theirs. Even then, as it is the taxpayers who bear the residual risk, regulators should exercise control over the premiums paid to managers.

Two problems remain. First, transition. Secondly, level of regulation.

Regarding the first point, requiring now more significant capital ratios would jeopardize the recovery of the economy. It is better to imagine a long transition period, stretching perhaps over a decade.

For the second point, it is obvious that we cannot let the so-called “shadow banking system” operating outside any capital constraint if some entities are systemically significant –as we got evidence with funds acting on the money markets.

In addition, capital equity requirements might be imposed in all significant countries. The United States is powerful enough to urge a movement in this direction –by requiring any foreign bank operating in their territory to be properly capitalized.

The conservative method of small steps, not radicalism, is today the most risky option. What must first apply this radicalism? The answer is obvious: the system of premiums and bonuses, of course.

The American vs. French economy

A lot of people on the far left are quite happy claiming that American-style capitalism has failed. They miss out a few facts. First, this is just the flip side of the business cycle. The American economy will be back to normal before you know it. Second, it was a quasi-governmental agency, the Federal Reserve, that is primarily responsible for the housing bubble, and thus the housing bankruptcy. Third, even in this downturn Europe’s economy is doing worse than America’s.

The benefit of the American economic system is that it produces greater economic growth (and thus greater overall wealth) in the long run, but in return you get greater economic disparity.

In the video, she claims that “the American way makes everyone better off.” This overstates the case. The American way makes most people better off. In general, Americans are better off in the middle and top of the economic and social scale, but worse off at the bottom.

I predict however that when all is said and done, and we look at the performance of the French and US economies from, say, 1970-2020, the French will trounce the Americans. The US economy right now is a total sham, and it’s in for a massive depression. While we’ll no doubt drag the rest of the world down temporarily, the issues in the US are structural, and will take a very long time to resolve. Frankly, we’ve yet to even acknowledge what those issues are, much less craft solutions.

France -and Europe to a large extent-  is certainly not without its problems, but unlike the US, it does have a solid industrial base; sound, productive, high-tech, high-value industrial firms; an intelligent, well-educated workforce possessing a wide range of skill-sets; much lower dead-weight in terms of military spending and the cost burdens of an overseas empire; and an assertive, socially-aware working class which makes the ruling class continually justify their position by demanding positive social outcomes.

But France has a severe fondness to decline. And if reforms are required, they are not necessary because of a supposed French lack of adaptation to globalization, but because it is mandatory that their leaders reconsider their abusive lifestyle and the incompetence that follows (from both right and left wings). It was often claimed that social protection was mainly responsible for the endemic unbalanced financial situation, as if social care was a scapegoat. The way political leaders communicate the deficit is used on a regular basis for the purpose of political marketing and in fact it subsidizes further deficits, i.e. at the present time 9 billion deficit, including 5 billion from government vs. social care admin. Is this the only government public spending? Also you never talk about Europe financing and its Mexican army of civil servants, and so …

One wonders if it is not time to leave the ship, because the captain is crazy!

US Economy to improve by late 2009

Outlook should suggest a slight improvement at the end of 2009. Sectors most affected are automotive, metal, chemical, building and retail.

Current business environment
Since December 2007, the United States economy has entered into recession. The economy witnesses the increasing unemployment, reduced purchasing, lower consumer reliance, a greater number of mortgage impounds and a lower manufacturing level. In Q4 of 2008, GDP growth declined by 6.3%, the level of consumption felt by 4.3% and exports by 23.6%, the most dramatic drop since 1971. By Q1 of 2009 forecasts are that GDP remained poor due to the continuous unemployment growth [8.5% in March 2009] and the manufacturing industry decline [-0.8% in new orders durable goods in March 2009] as well.

In the first week of May 2009, corporate loan costs felt to the lowest level since October 2008. Thus US Government’s efforts to retrieve the battered credit markets are working. Banks remain reluctant to extend credit yet. There is much uncertainty with regard to capital reserves, as well as bases of assets, market value of the assets owned by lenders and credit quality. At this time, credit markets give support to the most consistent only.

Projection on US market
Compared to 2007, bankruptcies of companies reached 49%, getting 30,000 in 2008. Business insolvency did intensify for 10 consecutive quarters, and further complications are scheduled by late 2009. This year 62,000 bankruptcies are expected.

The short-term economic outlook for the United States remains poor, with a minor possibility of experiencing a slight improvement late 2009.

The most affected sectors are:
• The automotive sector, the expected production of vehicles ranges between 9.2 and 9.7 million cars, a considerable drop compared to latest 16-17 million.
• The metal market, this sector is also related to automotive products and capital, both sectors stagnating.
• The chemical products segment, in view of the demand, reduced inventories, high costs and financial positions have adversely affected their margins, their profits and liquidity.
• The Real Estate and commercial building sector, as lending continues to decline and there is a surplus of inventory in warehouses and office space.
• The paper and packaging markets, because demand is falling by the economic recession and high costs.
• The retail segment remains concerned by reduced consumption and high unemployment.
Among these markets, two are quite significant and representative to my liking as to give a symptomatic evaluation.

Metallurgy sector assessment

Impact of the global crisis in the metal industry
The economic slowdown has adversely affected the U.S. metal sector in terms of reduced volume and prices. The sector supplies products primarily to the automotive industry [30% of all steel sold in the United States], construction, infrastructure, machinery, aerospace and energy, all of whom are now in decline. Because of falling demand in the retail market, new orders for metal are running short, because customers are limited to free themselves of their stocks and new orders are only for projects already underway.
Aluminium producers significantly decline in their credit profile, and continue to suffer severe declines on credit levels as their capacity surplus, inventory and supply face a low demand in the retail market. The balance sheets are bad, the main producers and distributors still have high debt levels and access to capital markets is uncertain due to the restriction of credit.

Update on trends and basis: payment delays, outstanding invoices and insolvency
Delayed payments were boosted by the negative impact that the demand levels got on companies’ liquidity and current assets (current capital). At the beginning of collapse, industry levels of cash flows were strong. Except credit profile of the strongest buyers upset by volumes cutback and pricing reduction. It is quite possible that this trend will continue for the remaining 2009 –and it could lead to a higher rate of outstanding debts and insolvencies.

What should the metal suppliers take care of?
They should be careful with the next maturity of debts; also to generate cash from operations; free cash flows; the cycle of cash conversion; the margin of financial covenants; any other issue that might cause a requirement for immediate liquidity or a loss of liquidity. In order to sort out the potential decline on primary line, it is critical to cut costs, such as level of energy, labour or another function in the manufacturing process. Special attention should be given to buyer’s final market.

What is the short-term forecast for the sector?
Negative: For 2009 a continued fall in demand and a stabilization of the sector in 2010 with assistance from the Government are foreseeable. We are witnessing a process of realignment and consolidation of businesses, as cost containment and cash flow accumulation are to be maintained during 2009. Persistent weakening of the sector and an bad debts increasing are predictable until it can gather the necessary capacity to cope with falling demand.

Chemical sector assessment

Impact of the global crisis in the chemicals sector
The global crisis has resulted in a rapid drop in demand for commodities and specialty chemicals, leading to a significant dive in the credit profile of the sector. Demand decrease for paints, coatings, plastics, performance adhesives, or crystals in the automotive and construction sectors has led to a significant drop in the volume of demand and prices. From November 2008 until February 2009, new orders have practically disappeared –due to the credit freezing of markets and the obvious trend toward inventory reduction of end-users to facilitate drain inventories.
On the threshold of this decline, the sector did not amass huge amounts of cash flow. High energy and production costs of 2008 depleted the treasury and reduced margins in many businesses. As an area of intensive use of capital, the debt levels are unsurprisingly high, and should keep on increasing.

Update on trends and basis for payment delays, outstanding invoices and insolvency
The chemicals’ has experienced a significant increase on payment delays, outstanding, bankruptcies and selective unpaid –because of inventory reduction and limited access to external capital disturbed the cash levels of many buyers: the drop in demand has also been a negative factor for their levels of liquidity and capital. So far in 2009, several major chemical companies went to bankrupt and a significant decline in the credit profile is being experienced by most industry buyers. It is quite possible that this trend will persist during the second half of 2009, albeit at a slower pace.

What should the chemical suppliers take care of?
Companies should be careful about deteriorating prices and volume of their buyers. Drop of sales volume and prices has resulted in narrower margins, operating losses, interest coverage and little or no loss of liquidity. Controlling energy costs and raw materials is essential to strengthen up the potential dive on primary line within the manufacturing process. The ability to bear cost increases, cut costs and generate cash is essential to foresee the buyer’s payment capacity. Furthermore, they should pay special attention to the buyer’s final market.

What is the short-term forecast for the sector?
Negative. Throughout the months ahead demand will weaken. Any increase in energy costs could further damage cash and margin. Cost containment and cash accumulation are quite recommended all through 2009.

Obama’s Strategic Challenges Ahead

After the customary hundred days, President Obama would have signed 12 executive orders and 13 presidential decrees. He completed 13 official travel (including three abroad) and delivered ten messages to the nation, –three of them in prime time. That is, in a frenetic pace that would parallel the hyperactive Roosevelt. In addition, despite having lost almost 20 points in popularity since the investiture, he is yet one of the most popular presidents since the Kennedy era (62% approval roughly).

Foreign Policy

The first trial by fire with Russia will get on the START I Treaty renewal (Treaty on Strategic Offensive Arms Reduction) which expires in December 2009. In spite of the promising preliminary contacts, the withdrawal of accreditation to two Russian diplomats to NATO accused of espionage (in a case linked to Hermann Simm, Estonian Alto officer sentenced to filter information from the Alliance for the Russian secret services), coupled with the planned NATO exercises in Georgia by May, (judged “provocative” by Mendeiev,) have strained Russian-American relations. With these preambles, it is foreseeable that the agreement truncates and the tension will increase with the Anti-Ballistic Missile Shield (NDM), regarded by Putin as a direct threat to Russia. NDM considers the installation of missile base interceptors in Poland, on the one hand; and one radar in the Czech Republic. It would come on stream in 2010. On the assumption that Obama will continue forward, Russia would presumably respond by the installation of Iskander missiles in Kaliningrad (Russian enclave situated between Poland and Lithuania) and the deployment of three regiments in Kozlesk.

Appeasement.

On the European stage, we could attend the end of the honeymoon period involving Obama and Sarkozy. Disagreement on matters as government making in Israel, shortly prone to the Palestinian argument that it would not be dischargeable in the medium term that the EU was forced to revise the preferential economic agreements with Israel. They could focus on the beginning of a new EU-US trade war, subsequent to imposition of protectionist measures in both countries. As for instance the import of agricultural products, (plague “miner tomato European” and “outbreak swine” in the USA). And finally, the Obama’s request for a substantial increase of allied troops in Afghanistan could lead to a postponed affirmation of French sovereignty that would result in the departure of French troops from Afghanistan (and in a parallel way of other European allies) before the French 2012 presidential vote. Obama will be forced to engage actively in an opening course of action for a new peace process in the Middle East.  After limited progress done by his special emissary (former senator Mitchell), the situation would have worsened consequently to Benjamin Netanyahu’s cabinet arrangements. An unlikely coalition government with the Palestinian, the ongoing the policy of expanding Jewish settlements and the completion of the West Bank Wall coupled with the failure of talks between Hamas and Abbas to form a Palestinian unity government: these are the controversial issues.  Obama would be therefore compelled to participate personally in the negotiation process. He is supposed to focus on the future Palestinian state set up.  At the end, the process would render the signing of a peace treaty between the new Israeli Prime Minister Benjamin Netanyahu and the new President of the Palestinian Authority –which would be the representative of the new unity government that would emerge after the inevitable approach of Hamas and Fatah. That agreement would get the political blessing of Egypt, Russia, Syria and Iran. Saudi Arabia, USA, EU, Japan and United Arab Emirates would follow as necessary partners in the economic reconstruction of Gaza, with an estimated cost of $ 2,000 million. It should be comprehensive and binding for all Middle East countries and would seriously contribute to the establishment of a new “status quo” in the area –it goes without saying, once the nuclear dispute with Iran is resolved and the restoration of diplomatic relations between both countries is done.

Gradual withdrawal of troops from Iraq and transfer to Afghanistan.

Due to enlargement of the area of Taliban influence in Afghanistan, Pentagon considers transferring about 100,000 troops from Iraq by 2010 (where only about 50,000 remain until the final withdrawal in 2011). Taliban insurgents have gained a presence in 72% of the territory of Afghanistan, (increasing of 18% compared to November 2007) and are close to the capital Kabul. Taliban have established a kind of government de facto in some Afghan cities and towns. Regain of Russian military assistance (military advisers, logistics and information from spies, satellites) to the Taliban militia in their fight against the NATO forces deployed there, is a fact. In order to lengthen the conflict; along the deficient resolution of European allies to achieve gradual withdrawal from Afghanistan.  However, leaving U.S. alone could result in a dangerous Vietnamization of the conflict. Moreover, involving increasingly difficult to get approval on Budget from Congress, –embodied in the Obama’s petition for an additional $ 83,400 million to support military operations in Iraq and Afghanistan in 2009 (estimated costs of both wars would be of $ 8,000 million per month roughly).

Lifting the trade embargo on Cuba

Obama would pay special attention to its traditionally considered backyard, trying to halt the Russian influence in Latin America after the agreement signature for Friendship and Cooperation between Russia and Cuba (drawing on the political myopia of an administration obsessed with Busch Axis of Evil). Thus, after recent goodwill measures towards Cuba along with the start of informal talks, the lifting of trade embargo is essential. Just to help achieve the necessary empathy for the start of official bilateral round negotiations between both governments. Nevertheless, if no closer agreement is accomplish on those issues, the signing of a treaty on military cooperation between Russia in Cuba is predictable –getting specific military bases on Cuban territory with Iskander missiles and strategic aircraft with nuclear weapons. In addition, US-Pan American Alliance outset (led by Mexico, Brazil, Chile and Argentina) could merge massive economic assistance and preferential agreements with countries open to trade boycott. Same governments are well disposed to isolate the progressive populist regimes of Venezuela, Nicaragua, Ecuador and Bolivia to achieve their destabilization.

After the customary hundred days, President Obama would have signed 12 executive orders and 13 presidential decrees. He completed 13 official travel (including three abroad) and delivered ten messages to the nation, –three of them in prime time. That is, in a frenetic pace that would parallel the hyperactive Roosevelt. In addition, despite having lost almost 20 points in popularity since the investiture, he is yet one of the most popular presidents since the Kennedy era (62% approval roughly).

Foreign Policy

The first trial by fire with Russia will get on the START I Treaty renewal (Treaty on Strategic Offensive Arms Reduction) which expires in December 2009. In spite of the promising preliminary contacts, the withdrawal of accreditation to two Russian diplomats to NATO accused of espionage (in a case linked to Hermann Simm, Estonian Alto officer sentenced to filter information from the Alliance for the Russian secret services), coupled with the planned NATO exercises in Georgia by May, (judged “provocative” by Mendeiev,) have strained Russian-American relations.

With these preambles, it is foreseeable that the agreement truncates and the tension will increase with the Anti-Ballistic Missile Shield (NDM), regarded by Putin as a direct threat to Russia. NDM considers the installation of missile base interceptors in Poland, on the one hand; and one radar in the Czech Republic. It would come on stream in 201. On the assumption that Obama will continue forward, Russia would presumably respond by the installation of Iskander missiles in Kaliningrad (Russian enclave situated between Poland and Lithuania) and the deployment of three regiments in Kozlesk.

Dissension between Sarkozy and Obama.

On the European stage, we could attend the end of the honeymoon period involving Obama and Sarkozy. Disagreement on matters as government making in Israel, shortly prone to the Palestinian argument that it would not be dischargeable in the medium term that the EU was forced to revise the preferential economic agreements with Israel.

They could focus on the beginning of a new EU-US trade war, subsequent to imposition of protectionist measures in both countries. As for instance the import of agricultural products, (plague “miner tomato European” and “outbreak swine “in the USA). And finally, the Obama’s request for a substantial increase of allied troops in Afghanistan could lead to a postponed affirmation of French sovereignty that would result in the departure of French troops from Afghanistan (and in a parallel way of other European allies) before the French 2012 presidential vote.

Obama will be forced to engage actively in an opening course of action for a new peace process in the Middle East.  After limited progress done by his special emissary (former senator Mitchell), the situation would have worsened consequently to Benjamin Netanyahu’s cabinet arrangements. An unlikely coalition government with the Palestinian, the ongoing the policy of expanding Jewish settlements and the completion of the West Bank Wall coupled with the failure of talks between Hamas and Abbas to form a Palestinian unity government: these are the controversial issues.

Obama would be therefore compelled to participate personally in the negotiation process. He is supposed to focus on the future Palestinian state set up.  At the end, the process would render the signing of a peace treaty between the new Israeli Prime Minister Benjamin Netanyahu and the new President of the Palestinian Authority –which would be the representative of the new unity government that would emerge after the inevitable approach of Hamas and Fatah.

That agreement would get the political blessing of Egypt, Russia, Syria and Iran. Saudi Arabia, USA, EU, Japan and United Arab Emirates would follow as necessary partners in the economic reconstruction of Gaza, with an estimated cost of $ 2,000 million. It should be comprehensive and binding for all Middle East countries and would seriously contribute to the establishment of a new “status quo” in the area –it goes without saying, once the nuclear dispute with Iran is resolved and the restoration of diplomatic relations between both countries is done.

Gradual withdrawal of troops from Iraq and transfer to Afghanistan.

Due to enlargement of the area of Taliban influence in Afghanistan, Pentagon considers transferring about 100,000 troops from Iraq by 2010 (where only about 50,000 remain until the final withdrawal in 2011). Taliban insurgents have gained a presence in 72% of the territory of Afghanistan, (increasing of 18% compared to November 2007) and are close to the capital Kabul. Taliban have established a kind of government de facto in some Afghan cities and towns.

Regain of Russian military assistance (military advisers, logistics and information from spies, satellites) to the Taliban militia in their fight against the NATO forces deployed there, is a fact. In order to lengthen the conflict; along the deficient resolution of European allies to achieve gradual withdrawal from Afghanistan.  However, leaving U.S. alone could result in a dangerous Vietnamization of the conflict. Moreover, involving increasingly difficult to get approval on Budget from Congress, –embodied in the Obama’s petition for an additional $ 83,400 million to support military operations in Iraq and Afghanistan in 2009 (estimated costs of both wars would be of $ 8,000 million per month roughly).

Lifting the trade embargo on Cuba

Obama would pay special attention to its traditionally considered backyard, trying to halt the Russian influence in Latin America after the agreement signature for Friendship and Cooperation between Russia and Cuba (drawing on the political myopia of an administration obsessed with Busch Axis of Evil).

Thus, after recent goodwill measures towards Cuba along with the start of informal talks, the lifting of trade embargo is essential. Just to help achieve the necessary empathy for the start of official bilateral round negotiations between both governments.

Nevertheless, if no closer agreement is accomplish on those issues, the signing of a treaty on military cooperation between Russia in Cuba is predictable –getting specific military bases on Cuban territory with Iskander missiles and strategic aircraft with nuclear weapons. In addition, US-Pan American Alliance outset (led by Mexico, Brazil, Chile and Argentina) could merge massive economic assistance and preferential agreements with countries open to trade boycott. Same governments are well disposed to isolate the progressive populist regimes of Venezuela, Nicaragua, Ecuador and Bolivia to achieve their destabilization.