G-20 Leaders gathering in London on 02 April represent 85% of the world's economy. At this meeting:
· The G-20 nations want to reach agreement on more co-ordinated action to revive the world economy, both through more interest rate cuts and more spending by governments to bring economies out of recession;
· Most of the G-20 countries will push for an action plan to prevent a future crisis by strengthening the international regulation of banks and other financial institutions;
· The Group also hopes to agree on a blueprint for future reform, including changes to the international organisations charged with regulating the world economy, such as the International Monetary Fund (IMF), to give a greater clout to poorer countries.
USA is on board with interest rate cuts and more spending by governments, but it is not articulating its views very clearly on reform of international financial architecture. And, on regulation of financial institutions, the US, if anything, is reluctant to appear to be strong proponent of stricter regulatory measures. US’s view on this issue has been at best muffled and confusing.
A report from the G20 working group on regulation has been reportedly leaked to the financial website breakingviews.com. Key recommendations include the strengthening of capital requirements, greater transparency, and more International Monetary Fund (IMF) oversight of systemic risks. It is said that the recommendations closely follow proposed reform of the UK's regulation.
This is where the problem is: A country which has itself made a mess of its economic management is trying to propose changes. The country is question is America’s lackey – Britain. Britain’s banks are in pathetic condition, the top ones needed the government to dole them out of trouble. Britain’s housing mortgage almost mimicked the disastrous American model.
Despite all this the wily schmuck British are trying to pre-empt other countries by drafting some document and throwing it out there. The Brits, whose international stature these days depends on the crumbs thrown their way by their patrons in Washington, generally try to propose something that pleases their American masters.
In case of the current economic mess the countries that have the legitimate credentials to offer changes regarding economic world order, regulation of financial systems are essentially two – Canada and India. The reasons are almost obvious to anybody who is non-partisan, unprejudiced and has some idea of international financial system.
Among the G-7 countries Canada’s banking system is the least affected by current economic turmoil. The financial regulatory framework in Canada seems to have acquitted itself fairly well. The Bank of Canada is presiding over the overall Canadian financial institutions in a reasonably competent manner – its Governor Mike Carney taking necessary steps to provide CPR to the Canadian economy. He also seems to be clued to the stimulus measures being rolled out by the Harper government.
Among developing economies, India has the best credentials, from various standpoints, to offer a suitable blueprint on regulatory framework as well as new economic world order. First, India has the 5th highest GDP (based on PPP) in the world (after US, China, Japan & Germany). India’s central bank has been implementing and managing necessary regulatory framework for the financial institutions in India in a very successful and effective manner for years.
When Asia Pacific countries reeled under currency meltdown in the 90’s, India remained unscathed simply because India’s central bank already had in place effective tools and regulatory structure to prevent any such disaster. India’s economy is predicated on one of the most sensible models – an economy which is around 60% based on internal consumption and rest on export. The Indian economic honchos have displayed a far greater sense of foresight and understanding than their peers in US, Germany, Britain, Japan and other G-20 countries.
USA has no moral or ethical standing to pontificate about new economic world order (including IMF, World Bank) and/or regulatory framework for financial institutions. The current economic global crisis has been engendered by diabolical mutilation of ethical dealings unleashed by the shameless greedy SOB’s of American financial institutions.
These shameless rogues of the US financial system seem incorrigible – they have the audacity to thumb their noses to present administration. The American public and the President et al were dealt with a resounding slap when the AIG executives pocketed bonuses in the excess of $200 Million – and horror of horrors, this amount coming out of government alms! Who knows what stratagems the other US banks and financial institutions are planning to bilk away huge bonus packets for themselves?
Of the other G-7 nations, Germany also seems to be floundering. Therefore, it is also not in the best position to lead any initiative for the required change. China doesn’t make a good candidate for being a leader of change because China’s regulatory framework is not backed by the checks and balances that a democratic country like India has. Brazil is still learning the ropes, and so are the other developing countries of the G-20 club.
In recent G-20 conclaves USA has been urging focus mainly on stimulus, and kind of downplaying need for expeditious action on changes in economic world order and regulation. It is a sad commentary of American intellectual level. A country which boasts of a string of Nobel Laureates in Economics is right now struggling to stay afloat and get back on track!
American budget deficits are turning cavernous by the week; Treasury Secretary Geithner is under pressure. He received implicit support though from his President in March but it will not be easy for him to grapple and subdue the gargantuan economic mess that engulfs the US. Moreover, the highly partisan skulduggery at the Capitol Hill tends to significantly weaken any policy initiative emanating from the White House.
So, in summary the G-20 meeting in April will be best served if Canada and India are given more leeway and opportunity to shape the economic framework of the future. If the US is allowed by the G-18 to ride roughshod over the sensible policy directions, and if their lackeys – the bootlicking schmuck Brits – get a freehand in drafting the policy directions, then God bless the world!
It is time the 18 countries of the G-20 club told the US and its poodle (Britain) to move over to the sidelines and let the more knowledgeable practitioners to fashion the economic future of the world. However, the US and Britain may offer meaningful suggestions, if they can. But if they resorted to dog-in-the-manger policy it will do no good to the current crisis, and it is the US which stands to lose maximum if the world economy goes in a deeper hole rather than come out it. President Obama and Gordon Brown would do well to lend their ears more rather than their tongues!
Sunday, March 22, 2009
Saturday, March 14, 2009
PRESIDENT OBAMA’S AFGHANISTAN POLICY AND THE FLY IN THE OINTMENT - ISI
In his first primetime press conference on 09 Feb when US President Obama didn’t mention the word ‘Taliban’ while responding to a question on his administration’s Afghanistan policy, it was clear something was cooking. The omission of the word ‘Taliban’ came as a bit of a surprise because till this presser whenever President Obama spoke about threats to US from Afghan-Pakistan area, he always mentioned Al-Qaeda and Taliban in the same breath.
Be that as it may, it is now clear that US does not wish to look at Taliban through one coloured lens – US wishes to distinguish between ‘good’ Taliban and ‘bad’ Taliban. Ostensibly, the motivation for this thinking comes from supposed success in Iraq where some Sunni elements hostile towards US apparently switched sides and started working with the coalition forces in fighting insurgency.
Clearly, US is trying to devise a strategy for Afghanistan which will prevent it from getting bogged down in that area in Vietnam-like manner. Hopefully, lessons learned from Vietnam are apparently being applied to make sure that US doesn’t have to leave Afghan theatre with a bloody nose, mutilated prestige and negative gain on the ledger.
Extending the logic of success in Iraq to Afghanistan is conceptually tenable. But what about translating that in to reality? Are the scenarios identical? What are the additional challenges? Surely, US strategists must have carried out necessary SWOT and other analyses – one hopes they did so! Incidentally, one had hoped that US had done necessary home work about post-Saddam scenario in Iraq also but sadly that proved to be so hopelessly untrue!
Anyway, it seems that US thinks that Taliban being a Sunni outfit will be amenable more or less in the same way as the Iraqi Sunni elements turned out to be. As well, the American policy makers are hoping that there will be support from Pakistan in making the new policy initiative successful. It seems that Afghan President Hamid Karzai is also in favour of this vector of new US Afghan policy.
But here is the fly in the ointment – Pakistan – and this could be potentially serious. Why? Because, Pakistan (through ISI) was a co-sponsor of Taliban when Soviets had occupied Afghanistan. But after the Soviets withdrew from that region, Pakistan (through ISI) continued to keep Taliban alive because it served them in more than one way.
By keeping Taliban alive and active, Pakistan’s dangerously shrewd and mean SOB's in politics and in ISI could continue to have foothold in Afghanistan, devilishly prise out American aid, keep fingering India, and last but not the least hold on to their positions of power.
Just to provide brief historical context, Pakistan’s former dictators Zial-ul-Haq and Pervez Musharraf were America’s darlings because they were so good in licking the boots of their American masters and also convincing them that US interests in the region are safe with them (Zia or Musharraf). Taliban was a good pawn in this political chess game Pakistan played for last so many years vis-à-vis US.
Washington probably understood how the mean schmuck Pakistanis (including ISI) were pulling wool over US eyes but the Americans chose to ignore (if they didn’t understand the Pakistani game, then God bless them!). Anyway, after 9/11 things changed, albeit very slowly, in Washington. During his second term President Bush started realising there was more benefit in cooperating with India (e.g. civil nuclear cooperation).
In order to win India’s confidence US started to acknowledge, more in private though, the dangers posed by ISI's support to Taliban and Al-Qaeda. Slowly, US started to acknowledge in public also the areas where Musharraf had to do more with regard to Pakistan's support to Taliban and Islamic insurgents than his usual theatricals.
But the 26/11 Mumbai attack completely changed everything. This attack reinforced the fact that Pakistan was indeed the epicentre of Islamic terrorism, and was playing double game with US with regard to Taliban and even Al-Qaeda. The reported killing of American intelligence operatives, and the Jews in the Mumbai attack forced the Americans to take serious note of Pakistan’s dubious role in the whole game.
Consequently, the Americans are infuriated, rightly so, and they want to get down to the bottom of the sinister plot. So are the Israelis, and given their unfettered clout in Washington they are kicking their American counterparts to punish the perpetrators. Both US and Israelis know the diabolical role of ISI in all this.
US probably is aware that Pakistan hates President Karzai and Pakistan will do everything possible to destabilise him. Taliban is one of the instruments Pakistan uses to play its dirty game against Karzai and anybody and everybody who support Karzai – including the American troops and ISAF. Pakistan plays this sinister game through ISI. No wonder American troops and ISAF are finding their task in containing Taliban getting difficult by the day.
Ultimately, Americans are now realising that it is about time they wielded the hobnailed boot with Pakistan and some how brought a stop to ISI’s support to Taliban. US knows (so does Canada and other constituents of ISAF) that unless ISI is disciplined and Pakistan stops providing safe haven to Taliban and Al-Qaeda elements in FAR and NWFP, chances of gaining any upper hand against the Taliban insurgency in Afghanistan is next to impossible.
US Admiral Michael Mullen, chairman of the US Joint Chiefs of Staff, eventually couldn’t be more candid about ISI. In an interview with PBS broadcast recently he said that (Pakistan Army Chief and de-facto boss of ISI) Kayani "certainly is aware of the concerns that I have with respect to his intelligence agency, ISI".
"They (ISI) have been very attached to many of these extremist organizations," Mullen said warning that "in the long run, they have got to completely cut ties with those in order to really move in the right direction". Kayani, he said, had appointed in Lt Gen Ahmad Shuja Pasha, "one of his best guys", as the new director of ISI. "I'm encouraged with his views and I'm encouraged with how he sees the problem." But "it's going to take some time to get at it inside ISI".
So, in summary, the new US Afghan policy of engaging with ‘good’ Taliban may not bear any fruit whatsoever unless and until the chief actor of the dangerous Islamic insurgency game – Pakistan and ISI – is properly corralled and contained. US should learn from history (their strategists have a bad habit of not reading history) that elements in modern day Pakistan and the Afghan-Pak border areas could be contained only through sledge hammer policy (refer to early 20th century Sikh ruler Maharaja Ranjit Singh and his general Hari Singh Nalwa’s tactics in the region).
One hopes President Obama and his advisors will learn from history and move forward carefully with force (and some carrots) without getting fooled by Pakistani chicanery. Only if they can do so, they will be able to minimise losses to American troops and ISAF and at the same time achieve their objective of containing Islamic insurgency threat to USA and other western countries. And while doing so for God’s sake US should not get blindsided and/or misguided by agenda-driven advice from the wily British. USA has for so long been deceived and misguided by British advice on South Asian matters. It is time US used its own brain while developing strategies for the Afghan-Pakistan theatre.
Be that as it may, it is now clear that US does not wish to look at Taliban through one coloured lens – US wishes to distinguish between ‘good’ Taliban and ‘bad’ Taliban. Ostensibly, the motivation for this thinking comes from supposed success in Iraq where some Sunni elements hostile towards US apparently switched sides and started working with the coalition forces in fighting insurgency.
Clearly, US is trying to devise a strategy for Afghanistan which will prevent it from getting bogged down in that area in Vietnam-like manner. Hopefully, lessons learned from Vietnam are apparently being applied to make sure that US doesn’t have to leave Afghan theatre with a bloody nose, mutilated prestige and negative gain on the ledger.
Extending the logic of success in Iraq to Afghanistan is conceptually tenable. But what about translating that in to reality? Are the scenarios identical? What are the additional challenges? Surely, US strategists must have carried out necessary SWOT and other analyses – one hopes they did so! Incidentally, one had hoped that US had done necessary home work about post-Saddam scenario in Iraq also but sadly that proved to be so hopelessly untrue!
Anyway, it seems that US thinks that Taliban being a Sunni outfit will be amenable more or less in the same way as the Iraqi Sunni elements turned out to be. As well, the American policy makers are hoping that there will be support from Pakistan in making the new policy initiative successful. It seems that Afghan President Hamid Karzai is also in favour of this vector of new US Afghan policy.
But here is the fly in the ointment – Pakistan – and this could be potentially serious. Why? Because, Pakistan (through ISI) was a co-sponsor of Taliban when Soviets had occupied Afghanistan. But after the Soviets withdrew from that region, Pakistan (through ISI) continued to keep Taliban alive because it served them in more than one way.
By keeping Taliban alive and active, Pakistan’s dangerously shrewd and mean SOB's in politics and in ISI could continue to have foothold in Afghanistan, devilishly prise out American aid, keep fingering India, and last but not the least hold on to their positions of power.
Just to provide brief historical context, Pakistan’s former dictators Zial-ul-Haq and Pervez Musharraf were America’s darlings because they were so good in licking the boots of their American masters and also convincing them that US interests in the region are safe with them (Zia or Musharraf). Taliban was a good pawn in this political chess game Pakistan played for last so many years vis-à-vis US.
Washington probably understood how the mean schmuck Pakistanis (including ISI) were pulling wool over US eyes but the Americans chose to ignore (if they didn’t understand the Pakistani game, then God bless them!). Anyway, after 9/11 things changed, albeit very slowly, in Washington. During his second term President Bush started realising there was more benefit in cooperating with India (e.g. civil nuclear cooperation).
In order to win India’s confidence US started to acknowledge, more in private though, the dangers posed by ISI's support to Taliban and Al-Qaeda. Slowly, US started to acknowledge in public also the areas where Musharraf had to do more with regard to Pakistan's support to Taliban and Islamic insurgents than his usual theatricals.
But the 26/11 Mumbai attack completely changed everything. This attack reinforced the fact that Pakistan was indeed the epicentre of Islamic terrorism, and was playing double game with US with regard to Taliban and even Al-Qaeda. The reported killing of American intelligence operatives, and the Jews in the Mumbai attack forced the Americans to take serious note of Pakistan’s dubious role in the whole game.
Consequently, the Americans are infuriated, rightly so, and they want to get down to the bottom of the sinister plot. So are the Israelis, and given their unfettered clout in Washington they are kicking their American counterparts to punish the perpetrators. Both US and Israelis know the diabolical role of ISI in all this.
US probably is aware that Pakistan hates President Karzai and Pakistan will do everything possible to destabilise him. Taliban is one of the instruments Pakistan uses to play its dirty game against Karzai and anybody and everybody who support Karzai – including the American troops and ISAF. Pakistan plays this sinister game through ISI. No wonder American troops and ISAF are finding their task in containing Taliban getting difficult by the day.
Ultimately, Americans are now realising that it is about time they wielded the hobnailed boot with Pakistan and some how brought a stop to ISI’s support to Taliban. US knows (so does Canada and other constituents of ISAF) that unless ISI is disciplined and Pakistan stops providing safe haven to Taliban and Al-Qaeda elements in FAR and NWFP, chances of gaining any upper hand against the Taliban insurgency in Afghanistan is next to impossible.
US Admiral Michael Mullen, chairman of the US Joint Chiefs of Staff, eventually couldn’t be more candid about ISI. In an interview with PBS broadcast recently he said that (Pakistan Army Chief and de-facto boss of ISI) Kayani "certainly is aware of the concerns that I have with respect to his intelligence agency, ISI".
"They (ISI) have been very attached to many of these extremist organizations," Mullen said warning that "in the long run, they have got to completely cut ties with those in order to really move in the right direction". Kayani, he said, had appointed in Lt Gen Ahmad Shuja Pasha, "one of his best guys", as the new director of ISI. "I'm encouraged with his views and I'm encouraged with how he sees the problem." But "it's going to take some time to get at it inside ISI".
So, in summary, the new US Afghan policy of engaging with ‘good’ Taliban may not bear any fruit whatsoever unless and until the chief actor of the dangerous Islamic insurgency game – Pakistan and ISI – is properly corralled and contained. US should learn from history (their strategists have a bad habit of not reading history) that elements in modern day Pakistan and the Afghan-Pak border areas could be contained only through sledge hammer policy (refer to early 20th century Sikh ruler Maharaja Ranjit Singh and his general Hari Singh Nalwa’s tactics in the region).
One hopes President Obama and his advisors will learn from history and move forward carefully with force (and some carrots) without getting fooled by Pakistani chicanery. Only if they can do so, they will be able to minimise losses to American troops and ISAF and at the same time achieve their objective of containing Islamic insurgency threat to USA and other western countries. And while doing so for God’s sake US should not get blindsided and/or misguided by agenda-driven advice from the wily British. USA has for so long been deceived and misguided by British advice on South Asian matters. It is time US used its own brain while developing strategies for the Afghan-Pakistan theatre.
Sunday, March 1, 2009
DOES AMERICAN FREE MARKET CONCEPT MEAN PROFIT BY HOOK OR CROOK, AND NO RESPONSIBILITY TOWARDS THE WORK FORCE?
Through this blog I want to raise a conceptual discussion amongst economists of all stripes as to how the markets should run or be made to run. Why can this world not have an economic model which is more inclusive of the frailties of human nature? The motive for this conceptual discussion came from reading Berkshire Hathaway Inc’s annual report of 2008, and an article on Bloomberg.
Warrant Buffet is one of the richest persons on this planet, and his perspective on money matters has always been very insightful. His narrative in Berkshire’s annual report is always a treat for its readers – its report for 2008 was no exception. But then, what has Oracle of Omaha’s document got to do with the heading of this blog? Plead read on, you will see the connection.
Let me quote Buffet from page 11 of the report which deals with home mortgages: “At that time (Y2008?, italics added), much of the industry employed sales practices that were atrocious. Writing about the period somewhat later, I described it as involving 'borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent'”.
He further states on same page: “To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was involved……..The resulting mortgages were usually packaged (“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and it did.”
Wait! What the hell was going on in the United States – lenders happily making out loans that borrowers couldn’t repay out of their incomes?! And, Wall Street selling mortgages to unsuspecting investors?! Is this what free market is supposed to be – that any organisation can do anything to rack up huge profits, at least in the short-term, and the top executives can fill their pockets with millions of ill-gotten bonuses?
Is free market concept supposed to have no oversight on the diabolical and self-serving CEOs who may be going berserk in the market tearing down ethics and honesty to shreds? Is this what economist Milton Friedman’s concept of free markets was or is? Is Friedman feeling happy in his grave watching what unbridled greed of human nature has done to the world?
Did it never occur to the ‘great’ Friedman that free market concept should also bequeath on the top executives (of organisations which deal with tonnes of money) some kind of responsibility towards the millions of people working in hundreds of thousands of organisations which could directly or indirectly get potentially exposed to risks and losses due to the shenanigans of the people who run the said (financial) organisations?!!
Today millions and millions of people have lost jobs because of an imploding market around the globe caused by the shameless, villainous ‘confidence tricksters’ of United States (and some of their ilk in Europe) who funnelled hundreds of billions of dollars in a housing bubble. Do these immoral wicked rotten executives of the mortgage lending companies and the various banks realise the pain, the tears and the suffering of the millions – the shattered dreams, disrupted future, lost opportunities of those hapless people?
Why did the policy makers in US in different periods of 1900s not pay heed to the sane concept of another top economist – James Tobin? It seems Tobin’s experience of the depression as a teenager in the 1930s gave him a lifelong loathing of unemployment.
The Bloomberg article, referred to above, writes: “As a young professor I did a paper where I analyzed the optimal unemployment rate,” said Joseph Stiglitz, a professor at Columbia University in New York, who knew Tobin at Yale. “Tobin went livid over the idea. To him the optimal unemployment rate was zero.”
The article mentions at another place: “Like Keynes, Tobin was an advocate for the role of government in maintaining full employment, said James Galbraith, an economist at the University of Texas in Austin. The current economic and financial crisis has validated that philosophy, said Galbraith, a former Tobin student and the son of the late John Kenneth Galbraith, who was a friend of Tobin.”
“It’s clear that the position that the federal government has a responsibility for the level of employment, for the economy, has prevailed,” Galbraith said. “The position that the Fed can walk away from the level of employment has completely collapsed….”
My question is: why couldn’t Friedman’s and Tobin’s ideas be married and a governing economic model more inclusive of the frailties of human nature be developed and implemented – in US and other economies? Has the current economic crisis not demonstrated that any economic model ignoring the role of frailties of human nature is incomplete and flawed, if I may?
The issue is not whether Friedman is great or Tobin is greater. The issue is there got to be a economic model that is practical in nature, and not one which is predicated on idealistic premises – idealistic premises, like, humans will always act responsibly, humans will never succumb to greed, self-aggrandisement etc.
Tobin (Nobel Prize winner in 1981) in an essay written for the Nobel committee mentioned, “The miserable failures of capitalist economies in the Great Depression were root causes of worldwide social and political disasters.” Economics “offered the hope, as it still does, that improved understanding could better the lot of mankind.”
Tobin’s friend and colleague William Brainard says, “He (Tobin) believed financial markets could serve a valuable service in diversifying risk and moving capital in efficient ways.” “But he was not someone who believed the market always got it right and that private incentives were always aligned with the public good.”
Almost a clairvoyant, Tobin seems to be now in hindsight. But what he said and believed in appears to be more prescriptive and applicable for the ways we humans behave. We must keep in mind that this world is still not made up of people like Mr. Spock of Star Trek who was paragon of logical mind.
After this massive economic bloodletting can we now decide to mend our thinking and redefine the way the markets ought to run so that people don't lose jobs again at such a massive scale? Or, will we again relapse in complacency once we are out of this horrible downturn?
Mistakes teach us to learn from it so that we don’t repeat them. Ideology of any political party or of an individual should not be allowed to cloud the objectivity of human thinking. The greater good of the society is supreme and should be so. Let the political leaders of the present realise this and lay the foundation for the future.
Warrant Buffet is one of the richest persons on this planet, and his perspective on money matters has always been very insightful. His narrative in Berkshire’s annual report is always a treat for its readers – its report for 2008 was no exception. But then, what has Oracle of Omaha’s document got to do with the heading of this blog? Plead read on, you will see the connection.
Let me quote Buffet from page 11 of the report which deals with home mortgages: “At that time (Y2008?, italics added), much of the industry employed sales practices that were atrocious. Writing about the period somewhat later, I described it as involving 'borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent'”.
He further states on same page: “To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was involved……..The resulting mortgages were usually packaged (“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and it did.”
Wait! What the hell was going on in the United States – lenders happily making out loans that borrowers couldn’t repay out of their incomes?! And, Wall Street selling mortgages to unsuspecting investors?! Is this what free market is supposed to be – that any organisation can do anything to rack up huge profits, at least in the short-term, and the top executives can fill their pockets with millions of ill-gotten bonuses?
Is free market concept supposed to have no oversight on the diabolical and self-serving CEOs who may be going berserk in the market tearing down ethics and honesty to shreds? Is this what economist Milton Friedman’s concept of free markets was or is? Is Friedman feeling happy in his grave watching what unbridled greed of human nature has done to the world?
Did it never occur to the ‘great’ Friedman that free market concept should also bequeath on the top executives (of organisations which deal with tonnes of money) some kind of responsibility towards the millions of people working in hundreds of thousands of organisations which could directly or indirectly get potentially exposed to risks and losses due to the shenanigans of the people who run the said (financial) organisations?!!
Today millions and millions of people have lost jobs because of an imploding market around the globe caused by the shameless, villainous ‘confidence tricksters’ of United States (and some of their ilk in Europe) who funnelled hundreds of billions of dollars in a housing bubble. Do these immoral wicked rotten executives of the mortgage lending companies and the various banks realise the pain, the tears and the suffering of the millions – the shattered dreams, disrupted future, lost opportunities of those hapless people?
Why did the policy makers in US in different periods of 1900s not pay heed to the sane concept of another top economist – James Tobin? It seems Tobin’s experience of the depression as a teenager in the 1930s gave him a lifelong loathing of unemployment.
The Bloomberg article, referred to above, writes: “As a young professor I did a paper where I analyzed the optimal unemployment rate,” said Joseph Stiglitz, a professor at Columbia University in New York, who knew Tobin at Yale. “Tobin went livid over the idea. To him the optimal unemployment rate was zero.”
The article mentions at another place: “Like Keynes, Tobin was an advocate for the role of government in maintaining full employment, said James Galbraith, an economist at the University of Texas in Austin. The current economic and financial crisis has validated that philosophy, said Galbraith, a former Tobin student and the son of the late John Kenneth Galbraith, who was a friend of Tobin.”
“It’s clear that the position that the federal government has a responsibility for the level of employment, for the economy, has prevailed,” Galbraith said. “The position that the Fed can walk away from the level of employment has completely collapsed….”
My question is: why couldn’t Friedman’s and Tobin’s ideas be married and a governing economic model more inclusive of the frailties of human nature be developed and implemented – in US and other economies? Has the current economic crisis not demonstrated that any economic model ignoring the role of frailties of human nature is incomplete and flawed, if I may?
The issue is not whether Friedman is great or Tobin is greater. The issue is there got to be a economic model that is practical in nature, and not one which is predicated on idealistic premises – idealistic premises, like, humans will always act responsibly, humans will never succumb to greed, self-aggrandisement etc.
Tobin (Nobel Prize winner in 1981) in an essay written for the Nobel committee mentioned, “The miserable failures of capitalist economies in the Great Depression were root causes of worldwide social and political disasters.” Economics “offered the hope, as it still does, that improved understanding could better the lot of mankind.”
Tobin’s friend and colleague William Brainard says, “He (Tobin) believed financial markets could serve a valuable service in diversifying risk and moving capital in efficient ways.” “But he was not someone who believed the market always got it right and that private incentives were always aligned with the public good.”
Almost a clairvoyant, Tobin seems to be now in hindsight. But what he said and believed in appears to be more prescriptive and applicable for the ways we humans behave. We must keep in mind that this world is still not made up of people like Mr. Spock of Star Trek who was paragon of logical mind.
After this massive economic bloodletting can we now decide to mend our thinking and redefine the way the markets ought to run so that people don't lose jobs again at such a massive scale? Or, will we again relapse in complacency once we are out of this horrible downturn?
Mistakes teach us to learn from it so that we don’t repeat them. Ideology of any political party or of an individual should not be allowed to cloud the objectivity of human thinking. The greater good of the society is supreme and should be so. Let the political leaders of the present realise this and lay the foundation for the future.
Saturday, February 21, 2009
PRESIDENT OBAMA AND PRIME MINISTER HARPER EMERGE MORE STATESMAN-LIKE THAN ANYTHING ELSE!
President Obama’s first foreign foray took him to Canada. The 19 Feb visit was short in terms of hours, but it was long on ‘conceptual’ substantiveness – and both sides accomplished whatever was planned to be covered during the visit. At the end of the talks the President of United State and Prime Minister of Canada looked more like statesmen than politicians.
The significant part of President Obama’s visit was the half hour one-on-one chat between the two leaders. This tête-à-tête was supposed to be of 10 minutes but the fact that it got extended signifies that the two leaders hit it off well and found a lot of common ground. Both agreed to use each other’s first name in subsequent conversations – that says a lot about establishment of mutual respect and rapport.
People’s general perception is that Harper was previous US president George W’s buddy, but people in the know say that Canadian PM was actually never comfortable in Dubya’s company. It doesn’t seem improbable given that one (Bush) was from a rich background, and a former president’s son and the other comes from middle class. Clearly, there is more common between Obama and Harper.
Now, to the substantiveness. Some folks were looking for so-called ‘substantive’ pronouncements after the talks between the two leaders, and were probably disappointed. But the fact of the matter is that this visit was basically for following reasons:
· Get to know each other;
· Get first hand idea of each other’s perception on issues, like, recession, energy, trade (including protectionism), Afghanistan;
· Lay the foundation for further build up on issues of mutual interest
On all the above counts the visit was a success. The press conference after the talks gave a clear indication of ‘conceptual’ substantiveness. The most important being the agreement on a ‘clean energy dialogue’. President Obama exhibited a very realistic position on the so-called clean energy. He comprehends the GHG issues in a practical perspective whether related to coal based power plants in US, or the oilsands industry of Canada.
His assertion that there was no silver bullet to solve the energy needs of the world was a clear indication that he realises that there was no point in getting carried away by the environmental predictions of doom, instead what is important is to figure out a course of action on global warming which encompasses all the major players, including, China and India.
Obviously, there will have to be follow up from both sides on this conceptual agreement. The scope of this conceptual agreement can potentially expand to include Mexico since President Obama appeared keen to formulate a pan-North American initiative on clean energy.
PM Harper did a good job of mentioning how could Canada tighten its own environmental regulatory laws and compete when its neighbour to the south had no tight regulatory framework, and then went on to praise Obama for now showing leadership on the issue. Harper very cleverly passed on the onus of non-regulation to Bush.
The environmental activists in Canada who seem to be intellectually one-dimensional don’t even know the difference between the amount of GHG emitted from US coal based units and GHG emitted from oilsands units in Canada. These intellectually under-developed two-legged creatures only know how to badmouth oilsands and make a spectacle of themselves by going up on a bridge to hang a poster.
The other conceptual understanding related to the border issue. Harper’s pitch on Canada’s perception of North American security threats was clearly aimed at the American media. At the same time he made it clear that US-Canada border should be managed in such a manner that it should not hinder cross-border trade.
On the issue of trade, whereas President Obama made an observation about environmental and labour clauses should be part of main body of NAFTA, PM Harper made his views known in no uncertain terms that Canada hopes that US will adhere to all the international trade agreements. Harper was clearly alluding towards the ‘Buy American’ clause purportedly included in the USD787 billion US economic stimulus package. So, the two sides got a clear understanding of each other’s position.
The discussion on recession focussed more on how to synergise efforts on both sides of the border to maximise the impact of the stimulus packages implemented in the respective countries. There was, again, a conceptual agreement to coordinate efforts on auto sector. President Obama made it clear that US will keep Canada in the loop on the policy decisions made regarding the big three auto makers.
On Afghanistan, again, there was a conceptual understanding on both sides. Obama didn’t press Canada to extend its troop presence beyond 2011; however, the two sides felt that Afghanistan needs more than simply military solution. The corollary to it is that Canada may be requested to look in to the possibility of contributing in non-military way before and after 2011.
All in all, the working visit of the US President accomplished all that was envisaged by both sides. As well, President Obama made sure to demonstrate his good preparation for this visit by stopping at a market place to buy beaver tail and Canadian cookies for his daughters. Unlike other dignitaries he also took out a crisp Cdn$20 bill to pay for the items he bought. The shopkeeper, however, showed his good gesture by refusing to accept the payment.
President Obama’s parting remark at the press conference was “I would like to come back to Canada”, and after a pregnant pause added, “when it warms up”. One hopes he wasn’t alluding to ‘warming up’ on the part of Canadian leadership. One would hope that PM Harper was warm enough in his conversations with Obama. Harper’s demeanour didn’t seem to suggest anything otherwise. Or, did we fail to notice something that was cleverly hidden under the smiles of the two leaders?!!
The significant part of President Obama’s visit was the half hour one-on-one chat between the two leaders. This tête-à-tête was supposed to be of 10 minutes but the fact that it got extended signifies that the two leaders hit it off well and found a lot of common ground. Both agreed to use each other’s first name in subsequent conversations – that says a lot about establishment of mutual respect and rapport.
People’s general perception is that Harper was previous US president George W’s buddy, but people in the know say that Canadian PM was actually never comfortable in Dubya’s company. It doesn’t seem improbable given that one (Bush) was from a rich background, and a former president’s son and the other comes from middle class. Clearly, there is more common between Obama and Harper.
Now, to the substantiveness. Some folks were looking for so-called ‘substantive’ pronouncements after the talks between the two leaders, and were probably disappointed. But the fact of the matter is that this visit was basically for following reasons:
· Get to know each other;
· Get first hand idea of each other’s perception on issues, like, recession, energy, trade (including protectionism), Afghanistan;
· Lay the foundation for further build up on issues of mutual interest
On all the above counts the visit was a success. The press conference after the talks gave a clear indication of ‘conceptual’ substantiveness. The most important being the agreement on a ‘clean energy dialogue’. President Obama exhibited a very realistic position on the so-called clean energy. He comprehends the GHG issues in a practical perspective whether related to coal based power plants in US, or the oilsands industry of Canada.
His assertion that there was no silver bullet to solve the energy needs of the world was a clear indication that he realises that there was no point in getting carried away by the environmental predictions of doom, instead what is important is to figure out a course of action on global warming which encompasses all the major players, including, China and India.
Obviously, there will have to be follow up from both sides on this conceptual agreement. The scope of this conceptual agreement can potentially expand to include Mexico since President Obama appeared keen to formulate a pan-North American initiative on clean energy.
PM Harper did a good job of mentioning how could Canada tighten its own environmental regulatory laws and compete when its neighbour to the south had no tight regulatory framework, and then went on to praise Obama for now showing leadership on the issue. Harper very cleverly passed on the onus of non-regulation to Bush.
The environmental activists in Canada who seem to be intellectually one-dimensional don’t even know the difference between the amount of GHG emitted from US coal based units and GHG emitted from oilsands units in Canada. These intellectually under-developed two-legged creatures only know how to badmouth oilsands and make a spectacle of themselves by going up on a bridge to hang a poster.
The other conceptual understanding related to the border issue. Harper’s pitch on Canada’s perception of North American security threats was clearly aimed at the American media. At the same time he made it clear that US-Canada border should be managed in such a manner that it should not hinder cross-border trade.
On the issue of trade, whereas President Obama made an observation about environmental and labour clauses should be part of main body of NAFTA, PM Harper made his views known in no uncertain terms that Canada hopes that US will adhere to all the international trade agreements. Harper was clearly alluding towards the ‘Buy American’ clause purportedly included in the USD787 billion US economic stimulus package. So, the two sides got a clear understanding of each other’s position.
The discussion on recession focussed more on how to synergise efforts on both sides of the border to maximise the impact of the stimulus packages implemented in the respective countries. There was, again, a conceptual agreement to coordinate efforts on auto sector. President Obama made it clear that US will keep Canada in the loop on the policy decisions made regarding the big three auto makers.
On Afghanistan, again, there was a conceptual understanding on both sides. Obama didn’t press Canada to extend its troop presence beyond 2011; however, the two sides felt that Afghanistan needs more than simply military solution. The corollary to it is that Canada may be requested to look in to the possibility of contributing in non-military way before and after 2011.
All in all, the working visit of the US President accomplished all that was envisaged by both sides. As well, President Obama made sure to demonstrate his good preparation for this visit by stopping at a market place to buy beaver tail and Canadian cookies for his daughters. Unlike other dignitaries he also took out a crisp Cdn$20 bill to pay for the items he bought. The shopkeeper, however, showed his good gesture by refusing to accept the payment.
President Obama’s parting remark at the press conference was “I would like to come back to Canada”, and after a pregnant pause added, “when it warms up”. One hopes he wasn’t alluding to ‘warming up’ on the part of Canadian leadership. One would hope that PM Harper was warm enough in his conversations with Obama. Harper’s demeanour didn’t seem to suggest anything otherwise. Or, did we fail to notice something that was cleverly hidden under the smiles of the two leaders?!!
Monday, February 16, 2009
PRESIDENT OBAMA, YOUR CANADA VISIT SHOULD LEAVE BEHIND HOPE FOR BOTH CANADA, AND USA!!
Mr. President,
Canada is eagerly awaiting your visit on 19 Feb. Canadians are thankful that on your first international trip you have chosen Canada. The visit is short – for only about 6 hours – but it is coming at a time when the world is facing the worst economic downturn since the 1930’s.
As you should know by now, US is Canada’s largest trading partner. Canada is also the number one crude oil supplier to US in terms of million barrels per day. You may probably have been told that this crude oil comes from both conventional and unconventional sources – the unconventional source being oilsands, the second largest source of crude oil after Saudi Arabia.
Lumber, beef, engineering goods, agricultural products, and so on – whole host of stuff is exported from Canada to US. In short, Canada’s economy is heavily inter-twined with that of US. Not only trade, these two countries have strategic defence cooperation too – NORAD being a prime example.
Canada is hurting now because the consumers in US are in trouble, not spending as before. The whole world is hurting – Japan reporting their worst trade figures on 16 Feb mainly because their exports have fallen off the cliff. China’s exports too are down. Why? Because the largest consumer society in the world, i.e., US is in recession. By the way, this is not the opportune time to debate whether such huge consumerism is good or bad.
Be that as it may, the question that is paramount in the minds of the Canadians is: what is going to be the outcome of US President’s visit? Will he reassure the Canadians that there will be no protectionism in US policies? Will he reassure Canada that cooperation between the two countries will continue to thrive in oil and gas sector? Is this visit going to reinforce the message that Canada is a trusted, dependable ally and that both countries will continue to cooperate and expand their relationship in an environment of friendship, goodwill and trust.
Mr. President, there may be some issues where the countries may have different perspectives but they are not so divergent so as to impinge on any issue of bilateral nature. Canadians know you are a champion of environment protection and alternative sources of energy is a topic which is close to your heart. But Canadians too are aware of the challenges of global warming, and they are already doing their part to mitigate the situation.
And, this environment thing brings one to the main point. Mr. President, the crux of the matter is that Canadians are hoping that your concern for environment will not become a stumbling block in the area of cooperation in crude supplies to US from Canada, and this specifically relates to oilsands. You may have been briefed about concerns of environmentalists regarding oilsands. One hopes you have been briefed about the measures too that Alberta province has already put in place to meet those concerns.
Mr. President, it needs to be mentioned (you may be already aware though) that scientists till date don’t know the real factors that cause global warming – what they know, however, is that GHG is one of the contributing factor. The scientists also know that GHG contributes to less than 10% of entire global warming phenomenon (but they don’t mention it in the same breath as the catastrophic consequences they narrate almost like a horror story).
The point is, therefore, why oilsands should be singled out and made a whipping boy for all the supposed global warming dangers this world is allegedly facing when the global warming phenomenon itself is not understood fully by the scientific community? Just sensationalising an issue, or creating scare in the minds of people doesn’t help.
A substance in itself is not good or bad, it all depends how it is turned in to a useful thing by humans. Uranium ore in itself is not so dangerous or useful, it all depends how it is processed – whether to turn it in to a nuclear device of destruction or source of energy. Similarly, if oilsands is processed properly and its related environmental aspects are handled adequately, surely then it shouldn’t be a cause of worry to human race, should it?!
Mr. President, you said the other day during your prime time news conference that you want US to be less dependent on ‘foreign oil’ – from Middle East. Canada can contribute significantly towards this objective of US. And no body should carry any feeling of guilt if Canada’s vast oil source helps US, because oilsands is not going to do anything to exacerbate global warming.
Moreover, Mr. President, you are a very sensible and pragmatic person. You are not afraid of embracing the reality. For example, during your recent prime time presser you mentioned a figure of 4.0 million (jobs created or saved) but in later speeches you mentioned a moderated figure of 3.5 million (jobs created or saved). One hopes similar pragmatism will be evident in the matter of cooperation between US and Canada in oil and gas sector.
Crude oil supply from Canada took up a large chunk of this epistle because this could be one of the touchy subjects for discussion between you and Mr. Harper. Thankfully, the other potential sticking point about protectionism has already been addressed suitably in the recent meeting of G-7 finance ministers in Rome. So, hopefully, there should not be any reason for concern from Canada’s side. However, you may like to reinforce the Rome message when you are in Ottawa.
So, as you can see there is cooperation and cooperation only that pervades the relationship between these two great countries. There is hardly any issue that could potentially bring in any stressful moments during the talks – even the arctic sovereignty issue is a matter where the countries have more to gain by forming allied front rather than taking separate lines of action.
The issue of how to save the big three auto makers in both US and Canada may make both sides a bit uncomfortable but given necessary maturity and understanding on both sides this issue will hopefully not bring any sourness between the two leaders.
In the past there have been many instances of sour relationship between the leaders of US and Canada. In one of the worst instances it is said that US President Johnson got so incensed when then Canandian Prime Minister Pearson (while visiting US) called for American withdrawal from Vietnam that Johnson is said to have pinned Pearson to the wall by holding his collars and yelled “You have pissed on my rug”!
One hopes nothing of that sort will happen between you and Mr. Harper. On the contrary PM Harper may like to brush up his knowledge about Chicago White Sox, and you may like to get some briefing on maple syrup as well as on what to say when a Canadian greets saying “Howdy”!
Mr. President, this is the time when the respective leaders need to be source of hope to millions, and not be a harbinger of any impending bad news, least of which should be anything to do with disagreements between them. This is not a good time for nitpicking.
If the Canadians saw you and Mr. Harper standing shoulder to shoulder (metaphorically speaking) at this hour of extremely challenging times, and telling the media how the two countries have agreed to cooperate and expand ties further in all fields including oil and gas, it will bring cheer to millions of Canadians and they will thank you, Mr. President, for the same. And, you know very well that any expanded cooperation will do more good than harm to an average American.
Did we ask for too much?
Sincerely.
Canada is eagerly awaiting your visit on 19 Feb. Canadians are thankful that on your first international trip you have chosen Canada. The visit is short – for only about 6 hours – but it is coming at a time when the world is facing the worst economic downturn since the 1930’s.
As you should know by now, US is Canada’s largest trading partner. Canada is also the number one crude oil supplier to US in terms of million barrels per day. You may probably have been told that this crude oil comes from both conventional and unconventional sources – the unconventional source being oilsands, the second largest source of crude oil after Saudi Arabia.
Lumber, beef, engineering goods, agricultural products, and so on – whole host of stuff is exported from Canada to US. In short, Canada’s economy is heavily inter-twined with that of US. Not only trade, these two countries have strategic defence cooperation too – NORAD being a prime example.
Canada is hurting now because the consumers in US are in trouble, not spending as before. The whole world is hurting – Japan reporting their worst trade figures on 16 Feb mainly because their exports have fallen off the cliff. China’s exports too are down. Why? Because the largest consumer society in the world, i.e., US is in recession. By the way, this is not the opportune time to debate whether such huge consumerism is good or bad.
Be that as it may, the question that is paramount in the minds of the Canadians is: what is going to be the outcome of US President’s visit? Will he reassure the Canadians that there will be no protectionism in US policies? Will he reassure Canada that cooperation between the two countries will continue to thrive in oil and gas sector? Is this visit going to reinforce the message that Canada is a trusted, dependable ally and that both countries will continue to cooperate and expand their relationship in an environment of friendship, goodwill and trust.
Mr. President, there may be some issues where the countries may have different perspectives but they are not so divergent so as to impinge on any issue of bilateral nature. Canadians know you are a champion of environment protection and alternative sources of energy is a topic which is close to your heart. But Canadians too are aware of the challenges of global warming, and they are already doing their part to mitigate the situation.
And, this environment thing brings one to the main point. Mr. President, the crux of the matter is that Canadians are hoping that your concern for environment will not become a stumbling block in the area of cooperation in crude supplies to US from Canada, and this specifically relates to oilsands. You may have been briefed about concerns of environmentalists regarding oilsands. One hopes you have been briefed about the measures too that Alberta province has already put in place to meet those concerns.
Mr. President, it needs to be mentioned (you may be already aware though) that scientists till date don’t know the real factors that cause global warming – what they know, however, is that GHG is one of the contributing factor. The scientists also know that GHG contributes to less than 10% of entire global warming phenomenon (but they don’t mention it in the same breath as the catastrophic consequences they narrate almost like a horror story).
The point is, therefore, why oilsands should be singled out and made a whipping boy for all the supposed global warming dangers this world is allegedly facing when the global warming phenomenon itself is not understood fully by the scientific community? Just sensationalising an issue, or creating scare in the minds of people doesn’t help.
A substance in itself is not good or bad, it all depends how it is turned in to a useful thing by humans. Uranium ore in itself is not so dangerous or useful, it all depends how it is processed – whether to turn it in to a nuclear device of destruction or source of energy. Similarly, if oilsands is processed properly and its related environmental aspects are handled adequately, surely then it shouldn’t be a cause of worry to human race, should it?!
Mr. President, you said the other day during your prime time news conference that you want US to be less dependent on ‘foreign oil’ – from Middle East. Canada can contribute significantly towards this objective of US. And no body should carry any feeling of guilt if Canada’s vast oil source helps US, because oilsands is not going to do anything to exacerbate global warming.
Moreover, Mr. President, you are a very sensible and pragmatic person. You are not afraid of embracing the reality. For example, during your recent prime time presser you mentioned a figure of 4.0 million (jobs created or saved) but in later speeches you mentioned a moderated figure of 3.5 million (jobs created or saved). One hopes similar pragmatism will be evident in the matter of cooperation between US and Canada in oil and gas sector.
Crude oil supply from Canada took up a large chunk of this epistle because this could be one of the touchy subjects for discussion between you and Mr. Harper. Thankfully, the other potential sticking point about protectionism has already been addressed suitably in the recent meeting of G-7 finance ministers in Rome. So, hopefully, there should not be any reason for concern from Canada’s side. However, you may like to reinforce the Rome message when you are in Ottawa.
So, as you can see there is cooperation and cooperation only that pervades the relationship between these two great countries. There is hardly any issue that could potentially bring in any stressful moments during the talks – even the arctic sovereignty issue is a matter where the countries have more to gain by forming allied front rather than taking separate lines of action.
The issue of how to save the big three auto makers in both US and Canada may make both sides a bit uncomfortable but given necessary maturity and understanding on both sides this issue will hopefully not bring any sourness between the two leaders.
In the past there have been many instances of sour relationship between the leaders of US and Canada. In one of the worst instances it is said that US President Johnson got so incensed when then Canandian Prime Minister Pearson (while visiting US) called for American withdrawal from Vietnam that Johnson is said to have pinned Pearson to the wall by holding his collars and yelled “You have pissed on my rug”!
One hopes nothing of that sort will happen between you and Mr. Harper. On the contrary PM Harper may like to brush up his knowledge about Chicago White Sox, and you may like to get some briefing on maple syrup as well as on what to say when a Canadian greets saying “Howdy”!
Mr. President, this is the time when the respective leaders need to be source of hope to millions, and not be a harbinger of any impending bad news, least of which should be anything to do with disagreements between them. This is not a good time for nitpicking.
If the Canadians saw you and Mr. Harper standing shoulder to shoulder (metaphorically speaking) at this hour of extremely challenging times, and telling the media how the two countries have agreed to cooperate and expand ties further in all fields including oil and gas, it will bring cheer to millions of Canadians and they will thank you, Mr. President, for the same. And, you know very well that any expanded cooperation will do more good than harm to an average American.
Did we ask for too much?
Sincerely.
Sunday, February 15, 2009
STIMULUS PACKAGES GALORE WORLDWIDE, BUT WHAT ABOUT PUNISHING THOSE RESPONSIBLE FOR THIS ECONOMIC MESS?
Two words have become household words all around the globe – 'stimulus package' – as the world tries to grapple with the worst economic situation since the 1930’s. US President Obama made several pit stops to campaign for quick passage of the stimulus package his administration put together. Eventually, a package watered down to USD787 Billion was passed by the US Congress.
Similarly, European countries are also implementing their stimulus packages. Situation in eurozone is also spurring urgent action after some quite dismal economic news. European economies contracted in the fourth quarter of last year, with some countries registering the worst figures in decades. The eurozone economy shrank by 1.5% in Q4 2008 and 1.2% on the year. Germany's economy shrank by 2.1% compared with the previous quarter, its worst quarterly performance since 1990.
Canada announced its own economic stimulus package recently in their parliament. Australia too made known their economic measures. China has already put in to motion a huge two year stimulus package to arrest downward slide of their economy. India has also implemented its own package in two instalments, some more may follow.
The G-7 meeting of its Finance Ministers and heads of the central banks in Rome on 14 Feb agreed to avoid protectionism and work in concert to pull the world out the current economic morass. The next meeting will be of G-20 countries in April to review progress of the steps agreed to by the Group in Dec 2008 meeting in Washington.
The above is a quick recap of steps being taken by the countries, which control more than 80% of world economy, to come out of the economic woes the world has gotten into. All this news is encouraging for the millions who lost their jobs, lost their homes, went in to bankruptcies, and went from a life of hope to despair.
But amidst all the abovementioned frenetic activities and hullabaloo to get the world economy back on track, has the world forgotten about the people who brought about this situation in the first place? What about bringing those blighters to justice and punishing them? How can those ‘canine-offsprings’ just say sorry and wash their hands off the accountabilities they carried with their responsibilities?
Because of the unbridled greed of some money spinning wheeler dealers in US (and to some extent in UK, and Germany) a housing bubble got created and this bubble gobbled up trillions of dollars. Between 2004 and 2006 US interest rates rose from 1% to 5.35%, triggering a slowdown in the US housing market.
Homeowners, many of whom could only barely afford their mortgage payments when interest rates were low, began to default on their mortgages. Default rates on sub-prime loans - high risk loans to clients with poor or no credit histories - rose to record levels. The impact of these defaults were felt across the financial system world over as many of the mortgages had been bundled up and sold on to banks and investors.
The questions are: what the hell was the US Fed Chairman doing during the years (2004-2006) when the seeds of the global disaster were being sown? Why could he not get out of his self imposed dogmatic intellectual strait-jacket of free-market mechanism principles? Why the hell was there no oversight of what was going on in the American financial market?
The people who have lost their jobs, their homes, their hard earned savings and probably many years of their future would like to know who were those female parent-fornicators who authorised the sub-prime racket to start! Who were those wedlock-products who encouraged this greed infested activity to engulf the society? Who was authorising the sub-prime mortgage business in Freddie Mac or Fannie May?
Why in God’s name nobody – either from Fed Reserve or SEC or some other Federal agency – bothered to take notice of what was going on in the sub-prime market? The sub-prime racket was not just a 4-6 month event which could have gone unnoticed. It went on for months, and yet nobody took notice?
Why did somebody in the Fed not take notice of the warning bells rung by Prof Krugman (who won Nobel Prize for Economics in 2008)? Prof Krugman was repeatedly warning about the dangerous path US economy was treading on.
And then, who were those female parent-fornicators in the big banks of US and Europe who blindly authorised investing in securitised mortgages? Some of these wedlock-product bank executives took home millions of dollars as bonuses!! Why and how are these canine-offsprings allowed to go scot free and not punished?
So, the question is: why have those people responsible for bringing about this financial mess in US, which caused domino effect world over, not been brought to justice? Why should they not be punished? In fact, why are they not being punished? Why should they not be thrown in to some Gitmo kind of prison and made to ruminate over the cataclysmic financial disaster they caused to happen?
Are these people not some kind of criminals? They may not have committed homicide, or rape. But the truth is that they have ‘raped’ the financial system. Their rapacious greed has robbed millions of innocent investors of their hard earned savings. The sub-prime mortgage can be compared to an organised ‘racket’ to ‘swindle’ millions of ordinary people who were ‘enticed’ by the rosy situations.
These people are responsible for having caused untold miseries to millions around the world, why should they not be flogged - publicly? It would be primitive, is it? Let it be primitive, but at least it will send a strong message to the world. Go ask the laid off worker what is primitive or not primitive – he doesn’t bother for all this intellectual debates which are luxury of the well-heeled. He/she wants secure economic future!
So, what is the plan for bringing these perpetrators of the current financial wrong-doing to justice? Is there no law under which these cold-blooded white collared diabolical schmucks can be tried and punished? Can these female parent-fornicators just say ‘I’m deeply sorry’ and can go un-punished?
The millions of people affected by the current economic upheaval are cursing those rascals day in and day out. Whether or not the actual perpetrators of current economic crisis (and those who were supposed to keep an oversight on them, and didn’t do their job) get punished by the law of this planet only time will say, but one thing is clear that if there is something called ‘natural justice’ these gutter insects will burn in the hell fire during their lifetime.
Similarly, European countries are also implementing their stimulus packages. Situation in eurozone is also spurring urgent action after some quite dismal economic news. European economies contracted in the fourth quarter of last year, with some countries registering the worst figures in decades. The eurozone economy shrank by 1.5% in Q4 2008 and 1.2% on the year. Germany's economy shrank by 2.1% compared with the previous quarter, its worst quarterly performance since 1990.
Canada announced its own economic stimulus package recently in their parliament. Australia too made known their economic measures. China has already put in to motion a huge two year stimulus package to arrest downward slide of their economy. India has also implemented its own package in two instalments, some more may follow.
The G-7 meeting of its Finance Ministers and heads of the central banks in Rome on 14 Feb agreed to avoid protectionism and work in concert to pull the world out the current economic morass. The next meeting will be of G-20 countries in April to review progress of the steps agreed to by the Group in Dec 2008 meeting in Washington.
The above is a quick recap of steps being taken by the countries, which control more than 80% of world economy, to come out of the economic woes the world has gotten into. All this news is encouraging for the millions who lost their jobs, lost their homes, went in to bankruptcies, and went from a life of hope to despair.
But amidst all the abovementioned frenetic activities and hullabaloo to get the world economy back on track, has the world forgotten about the people who brought about this situation in the first place? What about bringing those blighters to justice and punishing them? How can those ‘canine-offsprings’ just say sorry and wash their hands off the accountabilities they carried with their responsibilities?
Because of the unbridled greed of some money spinning wheeler dealers in US (and to some extent in UK, and Germany) a housing bubble got created and this bubble gobbled up trillions of dollars. Between 2004 and 2006 US interest rates rose from 1% to 5.35%, triggering a slowdown in the US housing market.
Homeowners, many of whom could only barely afford their mortgage payments when interest rates were low, began to default on their mortgages. Default rates on sub-prime loans - high risk loans to clients with poor or no credit histories - rose to record levels. The impact of these defaults were felt across the financial system world over as many of the mortgages had been bundled up and sold on to banks and investors.
The questions are: what the hell was the US Fed Chairman doing during the years (2004-2006) when the seeds of the global disaster were being sown? Why could he not get out of his self imposed dogmatic intellectual strait-jacket of free-market mechanism principles? Why the hell was there no oversight of what was going on in the American financial market?
The people who have lost their jobs, their homes, their hard earned savings and probably many years of their future would like to know who were those female parent-fornicators who authorised the sub-prime racket to start! Who were those wedlock-products who encouraged this greed infested activity to engulf the society? Who was authorising the sub-prime mortgage business in Freddie Mac or Fannie May?
Why in God’s name nobody – either from Fed Reserve or SEC or some other Federal agency – bothered to take notice of what was going on in the sub-prime market? The sub-prime racket was not just a 4-6 month event which could have gone unnoticed. It went on for months, and yet nobody took notice?
Why did somebody in the Fed not take notice of the warning bells rung by Prof Krugman (who won Nobel Prize for Economics in 2008)? Prof Krugman was repeatedly warning about the dangerous path US economy was treading on.
And then, who were those female parent-fornicators in the big banks of US and Europe who blindly authorised investing in securitised mortgages? Some of these wedlock-product bank executives took home millions of dollars as bonuses!! Why and how are these canine-offsprings allowed to go scot free and not punished?
So, the question is: why have those people responsible for bringing about this financial mess in US, which caused domino effect world over, not been brought to justice? Why should they not be punished? In fact, why are they not being punished? Why should they not be thrown in to some Gitmo kind of prison and made to ruminate over the cataclysmic financial disaster they caused to happen?
Are these people not some kind of criminals? They may not have committed homicide, or rape. But the truth is that they have ‘raped’ the financial system. Their rapacious greed has robbed millions of innocent investors of their hard earned savings. The sub-prime mortgage can be compared to an organised ‘racket’ to ‘swindle’ millions of ordinary people who were ‘enticed’ by the rosy situations.
These people are responsible for having caused untold miseries to millions around the world, why should they not be flogged - publicly? It would be primitive, is it? Let it be primitive, but at least it will send a strong message to the world. Go ask the laid off worker what is primitive or not primitive – he doesn’t bother for all this intellectual debates which are luxury of the well-heeled. He/she wants secure economic future!
So, what is the plan for bringing these perpetrators of the current financial wrong-doing to justice? Is there no law under which these cold-blooded white collared diabolical schmucks can be tried and punished? Can these female parent-fornicators just say ‘I’m deeply sorry’ and can go un-punished?
The millions of people affected by the current economic upheaval are cursing those rascals day in and day out. Whether or not the actual perpetrators of current economic crisis (and those who were supposed to keep an oversight on them, and didn’t do their job) get punished by the law of this planet only time will say, but one thing is clear that if there is something called ‘natural justice’ these gutter insects will burn in the hell fire during their lifetime.
Saturday, February 7, 2009
ARE SOME CANADIAN & EUROPEAN OIL COMPANIES LESS MONEY SAVVY THAN SOME OF THE US COMPANIES?
The present economic downturn has hit Canada too fairly badly, and jobs are evaporating by the day. The January job loss figures indicate that Ontario province suffered the most. This is understandable due to the contagion of auto industry ills crippling the big three American auto companies affected the companies to the north of the border.
But the province which till middle of last year was riding a wave of big investments is also suffering from increasing number of full time job losses – Alberta. Till last year Alberta’s economy was riding high, fuelled by big investments in oilsands projects. But suddenly a lightning bolt hit these projects in Q4 last year.
As per Canadian Energy Research Institute (CERI) its own 2008 forecast of oil sands production of 3.4 million billion per day by 2015 has been scaled back to 2.9 million billion per day, gathering pace to 3.7 million per day to 5.4 million billion per day by 2030, compared with its previous target of 5 million billion per day.
CERI further states that Canadian oil sands is going to stagnate, capital investment over the next 11 years will be cut 31% from a forecast made only 3 months ago and will need WTI prices above USD 70 per barrel to resume growth and expansion.
A number of mega oilsands projects have been put on hold, and almost all the projects are being reviewed from the point of view of CAPEX cost reduction. What is hurting the job market is the stalling of engineering work done in Calgary and Edmonton, and absence of new construction jobs related to oilsands.
But what is most curious is that the mega projects of some Canadian oil companies like Petrocanada and Suncor, CNRL have had to face major axing consequent to these companies hitting panic buttons. Their balance sheets and cash flow have suddenly come under such tremendous pressure that they have had to cancel large chunks of the projects, and mothball the remaining alive portions.
European player Shell cancelled its second upgrader expansion and put on hold their upstream expansion part. Other Europeans companies like Total and Statoil were chickening out even before the lightning struck the oilsands. These two companies had already been dithering for quite sometime.
Interestingly, on the other hand, Canadian oil companies developing their oilsands assets in collaboration with US based oil companies, like Encana (partnering with ConocoPhillips) and Husky (with BP) don’t seem to have run in to such panicky situation. Albeit, they also have had to scale back investment in some of their new projects but not in that drastic manner as Petrocan and Suncor have had to do.
But most interestingly, Imperial Oil whose majority shareholder is ExxonMobil (69.6%) didn’t have to press any panic button. Imperial is going ahead with their Kearl project, said to be a $7-8 billion Imperial Oil and ExxonMobil Canada project. Exxon are known to be notoriously conservative in their investment and economic rate of return analyses.
However, this can’t be said about another American company – ConocoPhillips – whose in-situ oilsands project in Surmont (in partnership with Total) has been put on a very slow track. It is not clear whether cash flow considerations were the only reason for slowdown or Total’s lack of enthusiasm was a contributing factor too.
At any rate, however, the above throws up a question: Why did the US based companies not have to drastically alter their oilsands project development plans? Why did they not seem to be pressing panic buttons and manifesting knee-jerk reactions? Are the US based oil companies better in their working out their investment strategies? Are their economic analyses models more stringent and powerful?
Surely, the world at large doesn’t get to know the details of project planning and investment decision making by various companies, therefore, one would not be in a position to provide conclusive answers to above questions. But then the folks losing their jobs in Alberta must be wondering why the heck the CEO’s of those companies, that went in to a paralytic limb late last year and started hacking down their oilsands projects, were paid the big bucks till recent past!!
It is the job of the top management to make sure that the investment decisions are rational, realistic and have been tried out for different scenarios. Why did some of the Canadian oil companies have to bite so much that they could not chew? If they didn’t have a US partner who could process their bitumen (if they went for bitumen only route) why did they not look for a partner before opting for the whole meal deal project implementation strategy, i.e., going all the way to upgraders in the first phase itself, or think of a safer project investment model?
One wonders what kind of intelligent thinking some of these companies did before committing such huge outlays! Do they realise that because of their unreasonable over-exuberance various engineering and construction companies in Alberta mobilised huge work forces, and now the same work force is being laid off in droves?!!
Some of those CEO’s will say in their defence that nobody in the world could predict the recession coming to US and the consequent slowdown in fastest growing economies like China and India, and hence their assumptions of oil price (we don’t know what they were) were justified. But that does not mean that they ought to have considered a high crude price and worked out their current and future revenues. Why were they not conservative in their assumptions and what prevented them to develop manageable portions of new projects – manageable with respect to revenue generation during project implementation phase?
May be there is lot to learn from the way ExxonMobil folks carry out their project development and economic analyses. It is not for nothing that this company has such a huge cash reserve that it could, if it wanted, buy any oil company in the world.
And, you know what, it is said that Exxon likes to implement new projects during economic downturns so that the project costs be kept relatively less. They can afford to do so –because of their strong cash position. So, you see – they set themselves up for making more money; because when good times return their revenues improve while their initial CAPEX had been lesser (because they set up their project during economic downturn). Makes sense, doesn’t it!
One feels sad to see so many engineers, tradespeople getting out of their jobs in Alberta only because some folks who in their own flawed wisdom – one can certainly they their wisdom was flawed – contributed towards huge growths in engineering and construction companies in Alberta. Currently, those companies don’t have projects to assign their folks to!
Now, all eyes are on US president’s visit. Will Mr. Obama’s visit on 19 Feb bring more bad news for oilsands projects, or, will he provide some words of comfort with regard to continued cooperation with Canada in developing this resource on a long term basis? Surely, US wishes to move away from dependence on foreign oil from ‘hostile regimes’. Be that as it may, the families of the jobless are praying for some good news – are the Gods listening?
But the province which till middle of last year was riding a wave of big investments is also suffering from increasing number of full time job losses – Alberta. Till last year Alberta’s economy was riding high, fuelled by big investments in oilsands projects. But suddenly a lightning bolt hit these projects in Q4 last year.
As per Canadian Energy Research Institute (CERI) its own 2008 forecast of oil sands production of 3.4 million billion per day by 2015 has been scaled back to 2.9 million billion per day, gathering pace to 3.7 million per day to 5.4 million billion per day by 2030, compared with its previous target of 5 million billion per day.
CERI further states that Canadian oil sands is going to stagnate, capital investment over the next 11 years will be cut 31% from a forecast made only 3 months ago and will need WTI prices above USD 70 per barrel to resume growth and expansion.
A number of mega oilsands projects have been put on hold, and almost all the projects are being reviewed from the point of view of CAPEX cost reduction. What is hurting the job market is the stalling of engineering work done in Calgary and Edmonton, and absence of new construction jobs related to oilsands.
But what is most curious is that the mega projects of some Canadian oil companies like Petrocanada and Suncor, CNRL have had to face major axing consequent to these companies hitting panic buttons. Their balance sheets and cash flow have suddenly come under such tremendous pressure that they have had to cancel large chunks of the projects, and mothball the remaining alive portions.
European player Shell cancelled its second upgrader expansion and put on hold their upstream expansion part. Other Europeans companies like Total and Statoil were chickening out even before the lightning struck the oilsands. These two companies had already been dithering for quite sometime.
Interestingly, on the other hand, Canadian oil companies developing their oilsands assets in collaboration with US based oil companies, like Encana (partnering with ConocoPhillips) and Husky (with BP) don’t seem to have run in to such panicky situation. Albeit, they also have had to scale back investment in some of their new projects but not in that drastic manner as Petrocan and Suncor have had to do.
But most interestingly, Imperial Oil whose majority shareholder is ExxonMobil (69.6%) didn’t have to press any panic button. Imperial is going ahead with their Kearl project, said to be a $7-8 billion Imperial Oil and ExxonMobil Canada project. Exxon are known to be notoriously conservative in their investment and economic rate of return analyses.
However, this can’t be said about another American company – ConocoPhillips – whose in-situ oilsands project in Surmont (in partnership with Total) has been put on a very slow track. It is not clear whether cash flow considerations were the only reason for slowdown or Total’s lack of enthusiasm was a contributing factor too.
At any rate, however, the above throws up a question: Why did the US based companies not have to drastically alter their oilsands project development plans? Why did they not seem to be pressing panic buttons and manifesting knee-jerk reactions? Are the US based oil companies better in their working out their investment strategies? Are their economic analyses models more stringent and powerful?
Surely, the world at large doesn’t get to know the details of project planning and investment decision making by various companies, therefore, one would not be in a position to provide conclusive answers to above questions. But then the folks losing their jobs in Alberta must be wondering why the heck the CEO’s of those companies, that went in to a paralytic limb late last year and started hacking down their oilsands projects, were paid the big bucks till recent past!!
It is the job of the top management to make sure that the investment decisions are rational, realistic and have been tried out for different scenarios. Why did some of the Canadian oil companies have to bite so much that they could not chew? If they didn’t have a US partner who could process their bitumen (if they went for bitumen only route) why did they not look for a partner before opting for the whole meal deal project implementation strategy, i.e., going all the way to upgraders in the first phase itself, or think of a safer project investment model?
One wonders what kind of intelligent thinking some of these companies did before committing such huge outlays! Do they realise that because of their unreasonable over-exuberance various engineering and construction companies in Alberta mobilised huge work forces, and now the same work force is being laid off in droves?!!
Some of those CEO’s will say in their defence that nobody in the world could predict the recession coming to US and the consequent slowdown in fastest growing economies like China and India, and hence their assumptions of oil price (we don’t know what they were) were justified. But that does not mean that they ought to have considered a high crude price and worked out their current and future revenues. Why were they not conservative in their assumptions and what prevented them to develop manageable portions of new projects – manageable with respect to revenue generation during project implementation phase?
May be there is lot to learn from the way ExxonMobil folks carry out their project development and economic analyses. It is not for nothing that this company has such a huge cash reserve that it could, if it wanted, buy any oil company in the world.
And, you know what, it is said that Exxon likes to implement new projects during economic downturns so that the project costs be kept relatively less. They can afford to do so –because of their strong cash position. So, you see – they set themselves up for making more money; because when good times return their revenues improve while their initial CAPEX had been lesser (because they set up their project during economic downturn). Makes sense, doesn’t it!
One feels sad to see so many engineers, tradespeople getting out of their jobs in Alberta only because some folks who in their own flawed wisdom – one can certainly they their wisdom was flawed – contributed towards huge growths in engineering and construction companies in Alberta. Currently, those companies don’t have projects to assign their folks to!
Now, all eyes are on US president’s visit. Will Mr. Obama’s visit on 19 Feb bring more bad news for oilsands projects, or, will he provide some words of comfort with regard to continued cooperation with Canada in developing this resource on a long term basis? Surely, US wishes to move away from dependence on foreign oil from ‘hostile regimes’. Be that as it may, the families of the jobless are praying for some good news – are the Gods listening?
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