Philippe Val receives the Morris Abram 2015 Award for Human Rights @UNWatch

What happened to the Left?

Islam has taken the passionate spot in the hearts of the world's intellectuals of the Left.

"We must not speak of Islam, because it stigmatizes the 'victim'"

Unfortunately it's only in French, but the speech is excellent.

Discours: Philippe Val reçoit le Prix Morris Abram 2015 pour les Droits de l'Homme



 See the video on YouTube here.

Is It Time for the Jews to Leave Europe?

Jeffrey Goldberg’s excellent piece in The Atlantic on Jews and their future in Europe.  It’s not 1933, but it’s definitely not pretty.

For half a century, memories of the Holocaust limited anti-Semitism on the Continent. That period has ended—the recent fatal attacks in Paris and Copenhagen are merely the latest examples of rising violence against Jews. Renewed vitriol among right-wing fascists and new threats from radicalised Islamists have created a crisis, confronting Jews with an agonizing choice.

Is It Time for the Jews to Leave Europe?

“All comes from the Jew; all returns to the Jew.”

— Édouard Drumont (1844–1917), founder of the Anti-Semitic League of France

I. The Scourge of Our Time

The French philosopher Alain Finkielkraut, the son of Holocaust survivors, is an accomplished, even gifted, pessimist. To his disciples, he is a Jewish Zola, accusing France’s bien-pensant intellectual class of complicity in its own suicide. To his foes, he is a reactionary whose nostalgia for a fairy-tale French past is induced by an irrational fear of Muslims. Finkielkraut’s cast of mind is generally dark, but when we met in Paris in early January, two days after the Charlie Hebdo massacre, he was positively grim.

“My French identity is reinforced by the very large number of people who openly declare, often now with violence, their hostility to French values and culture,” he said. “I live in a strange place. There is so much guilt and so much worry.” We were seated at a table in his apartment, near the Luxembourg Gardens. I had come to discuss with him the precarious future of French Jewry, but, as the hunt for theCharlie Hebdo killers seemed to be reaching its conclusion, we had become fixated on the television.

Finkielkraut sees himself as an alienated man of the left. He says he loathes both radical Islamism and its most ferocious French critic, Marine Le Pen, the leader of France’s extreme right-wing—and once openly anti-Semitic—National Front party. But he has lately come to find radical Islamism to be a more immediate, even existential, threat to France than the National Front. “I don’t trust Le Pen. I think there is real violence in her,” he told me. “But she is so successful because there actually is a problem of Islam in France, and until now she has been the only one to dare say it.”

Suddenly, there was news: a kosher supermarket in Porte de Vincennes, in eastern Paris, had come under attack. “Of course,” Finkielkraut said. “The Jews.” Even before anti-Semitic riots broke out in France last summer, Finkielkraut had become preoccupied with the well-being of France’s Jews.

We knew nothing about this new attack—except that we already knew everything. “People don’t defend the Jews as we expected to be defended,” he said. “It would be easier for the left to defend the Jews if the attackers were white and rightists.”

I asked him a very old Jewish question: Do you have a bag packed?

“We should not leave,” he said, “but maybe for our children or grandchildren there will be no choice.”

Reports suggested that a number of people were dead at the market. I said goodbye, and took the Métro to Porte de Vincennes. Stations near the market were closed, so I walked through neighborhoods crowded with police. Sirens echoed through the streets. Teenagers gathered by the barricades, taking selfies. No one had much information. One young man, however, said of the victims, “It’s just the Feuj.” Feuj, an inversion of Juif—“Jew”—is often used as a slur.

I located an acquaintance, a man who volunteers with the Jewish Community Security Service, a national organization founded after a synagogue bombing in 1980, to protect Jewish institutions from anti-Semitic attack. “Supermarkets now,” he said bleakly. We made our way closer to the forward police line, and heard volleys of gunfire. The police had raided the market; the suspect, Amedy Coulibaly, we soon heard, was dead. So were four Jews he had murdered. They had been shopping for the Sabbath when he entered the market and started shooting.

France’s 475,000 Jews represent less than 1 percent of the country’s population. Yet last year, according to the French Interior Ministry, 51 percent of all racist attacks targeted Jews. The statistics in other countries, including Great Britain, are similarly dismal. In 2014, Jews in Europe were murdered, raped, beaten, stalked, chased, harassed, spat on, and insulted for being Jewish. Sale Juif—“dirty Jew”—rang in the streets, as did “Death to the Jews,” and “Jews to the gas.”

The epithet dirty Jew, Zola wrote in “J’Accuse …!,” was the “scourge of our time.” “J’Accuse …!” was published in 1898.

The Hyper Cacher kosher supermarket in the Porte de Vincennes neighborhood of Paris in the aftermath of the January 9 attack that killed four Jews

The resurgence of anti-Semitism in Europe is not—or should not be—a surprise.

We're All State Capitalists Now -- By Niall Ferguson | Foreign Policy

We're All State Capitalists Now

If there is one issue on which the rival candidates for the U.S. presidency agree, it's that America's global leadership will endure. Mitt Romney insists it is not a "post-American century," while Barack Obama declared in his State of the Union address that "anyone who tells you otherwise, anyone who tells you that America is in decline or that our influence has waned, doesn't know what they're talking about."
They must enjoy this kind of chest-beating in Beijing.
That a resurgent China poses a challenge to American power -- especially in the Asia-Pacific region -- has been clear for some time to those who know what they're talking about. The real question is whether the United States has a credible response. Should it apply some version of the "containment theory" that the late George Kennan recommended for dealing with the Soviet challenge after 1945? Or something more subtle, like the "co-evolution" suggested by former Secretary of State Henry Kissinger?
Leave aside the military and diplomatic calculus and consider only the economic challenge China poses to the United States. This is not just a matter of scale, though it is no small matter that, according to the IMF, China's GDP will overtake that of the United States within four years on the basis of purchasing power parity. Nor is it only about the pace of China's growth, though any Asian exporter forced to choose between China and America would be inclined to choose the former; their trade with China is growing far more rapidly than trade with the United States.
No, according to some commentators, the contest between the two Asian superpowers is also fundamentally a contest between economic models: market capitalism vs. state capitalism. Speaking at the World Economic Forum in Davos this January, David Rubenstein of the Carlyle Group expressed a widely held view that the Chinese model of state capitalism is pulling ahead of the U.S. market model. "We've got to work through these problems," Rubenstein said. "If we don't do [so], in three or four years … the game will be over for the type of capitalism that many of us have lived through and thought was the best type." I think this view is dead wrong. But it's interesting to see why so many influential people now subscribe to it.
Market capitalism has certainly had a rough five years. Remember the Washington Consensus? That was the to-do list of 10 economic policies designed to Americanize emerging markets back in the 1990s. The U.S. government and international financial institutions urged countries to impose fiscal discipline and reduce or eliminate budget deficits, broaden the tax base and lower tax rates, allow the market to set interest and exchange rates, and liberalize trade and capital flows. When Asian economies were hit by the 1997-1998 financial crisis, American critics were quick to bemoan the defects of "crony capitalism" in the region, and they appeared to have economic history on their side.
Yet today, in the aftermath of the biggest U.S. financial crisis since the Great Depression, the world looks very different. Not only did the 2008-2009 meltdown of financial markets seem to expose the fundamental fragility of the capitalist system, but China's apparent ability to withstand the reverberations of Wall Street's implosion also suggested the possibility of a new "Beijing Consensus" based on central planning and state control of volatile market forces.
In his book The End of the Free Market, the Eurasia Group's Ian Bremmer argues that authoritarian governments all over the world have "invented something new: state capitalism":

In this system, governments use various kinds of state-owned companies to manage the exploitation of resources that they consider the state's crown jewels and to create and maintain large numbers of jobs. They use select privately owned companies to dominate certain economic sectors. They use so-called sovereign wealth funds to invest their extra cash in ways that maximize the state's profits. In all three cases, the state is using markets to create wealth that can be directed as political officials see fit. And in all three cases, the ultimate motive is not economic (maximizing growth) but political (maximizing the state's power and the leadership's chances of survival). This is a form of capitalism but one in which the state acts as the dominant economic player and uses markets primarily for political gain.

For Bremmer, state capitalism poses a grave "threat" not only to the free market model, but also to democracy in the developing world.
Although applicable to states all over the globe, at root this is an argument about China. Bremmer himself writes that "China holds the key." But is it in fact correct to ascribe China's success to the state rather than the market? The answer depends on where you go in China. In Shanghai or Chongqing, for example, the central government does indeed loom very large. In Wenzhou, by comparison, the economy is as vigorously entrepreneurial and market-driven as anywhere I have ever been.
True, China's economy continues to be managed on the basis of a five-year plan, an authoritarian tradition that goes all the way back to Josef Stalin. As I write, however, the Chinese authorities are grappling with a problem that owes more to market forces than to the plan: the aftermath of an urban real estate bubble caused by the massive 2009-2010 credit expansion. Among China experts, the hot topic of the moment is the new shadow banking system in cities such as Wenzhou, which last year enabled developers and investors to carry on building and selling apartment blocks even as the People's Bank of China sought to restrict lending by raising rates and bank reserve requirements.
Talk to some eminent Chinese economists, and you could be forgiven for concluding that the ultimate aim of policy is to get rid of state capitalism altogether. "We need to privatize all the state-owned enterprises," one leading economist told me over dinner in Beijing a year ago. "We even need to privatize the Great Hall of the People." He also claimed to have said this to President Hu Jintao. "Hu couldn't tell if I was serious or if I was joking," he told me proudly.
Ultimately, it is an unhelpful oversimplification to divide the world into "market capitalist" and "state capitalist" camps. The reality is that most countries are arranged along a spectrum where both the intent and the extent of state intervention in the economy vary. Only extreme libertarians argue that the state has no role whatsoever to play in the economy. As a devotee of Adam Smith, I accept without qualification his argument in The Wealth of Nations that the benefits of free trade and the division of labor will be enjoyed only in countries with rational laws and institutions. I also agree with Silicon Valley visionary Peter Thiel that, under the right circumstances (e.g., in time of war), governments are capable of forcing the direction and pace of technological change: Think the Manhattan Project.
But the question today is not whether the state or the market should be in charge. The real question is which countries' laws and institutions are best, not only at achieving rapid economic growth but also, equally importantly, at distributing the fruits of growth in a way that citizens deem to be just.
Let us begin by asking a simple question that can be answered with empirical data: Where in the world is the role of the state greatest in economic life, and where is it smallest? The answer lies in data the IMF publishes on "general government total expenditure" as a percentage of GDP. At one extreme are countries like East Timor and Iraq, where government expenditure exceeds GDP; at the other end are countries like Bangladesh, Guatemala, and Myanmar, where it is an absurdly low share of total output.
Beyond these outliers we have China, whose spending represents 23 percent of GDP, down from around 28 percent three decades ago. By this measure, China ranks 147th out of 183 countries for which data are available. Germany ranks 24th, with government spending accounting for 48 percent of GDP. The United States, meanwhile, is 44th with 44 percent of GDP. By this measure, state capitalism is a European, not an Asian, phenomenon: Austria, Belgium, Denmark, Finland, France, Greece, Hungary, Italy, the Netherlands, Portugal, and Sweden all have higher government spending relative to GDP than Germany. The Danish figure is 58 percent, more than twice that of the Chinese.
The results are similar if one focuses on government consumption -- the share of GDP accounted for by government purchases of goods and services, as opposed to transfers or investment. Again, ignoring the outliers, it is Europe whose states play the biggest role in the economy as buyers: Denmark (27 percent) is far ahead of Germany (18 percent), while the United States is at 17 percent. China? 13 percent. For Hong Kong, the figure is 8 percent. For Macao, 7 percent.
Where China does lead the West is in the enormous share of gross fixed capital formation (jargon for investment in hard assets) accounted for by the public sector. According to World Bank data, this amounted to 21 percent of China's GDP in 2008, among the highest figures in the world, reflecting the still-leading role that government plays in infrastructure investment. The equivalent figures for developed Western countries are vanishingly small; in the West the state is a spendthrift, not an investor, borrowing money to pay for goods and services. On the other hand, the public sector's share of Chinese investment has been falling steeply during the past 10 years. Here too the Chinese trend is away from state capitalism.
Of course, none of these quantitative measures of the state's role tells us how well government is actually working. For that we must turn to very different kinds of data. Every year the World Economic Forum (WEF) publishes a Global Competitiveness Index, which assesses countries from all kinds of different angles, including the economic efficiency of their public-sector institutions. Since the current methodology was adopted in 2004, the United States' average competitiveness score has fallen from 5.82 to 5.43, one of the steepest declines among developed economies. China's score, meanwhile, has leapt from 4.29 to 4.90.
Even more fascinating is the WEF's Executive Opinion Survey, which produces a significant amount of the data that goes into the Global Competitiveness Index. The table below selects 15 measures of government efficacy, focusing on aspects of the rule of law ranging from the protection of private property rights to the policing of corruption and the control of organized crime. These are appropriate things to measure because, regardless of whether a state is nominally a market economy or a state-led economy, the quality of its legal institutions will, in practice, have an impact on the ease with which business can be done.
Table: Measures of the rule of law from the WEF Executive Opinion Survey, 2011-2012

(Note: Most indicators derived from the Executive Opinion Survey are expressed as scores on a 1-7 scale, with 7 being the most desirable outcome.)
It is an astonishing yet scarcely acknowledged fact that on no fewer than 14 out of 15 issues relating to property rights and governance, the United States now fares markedly worse than Hong Kong. Even mainland China does better in two areas. Indeed, the United States makes the global top 20 in only one: investor protection, where it is tied for fifth. On every other count, its reputation is shockingly bad.
The implications are clear. If we are to understand the changing relationship between the state and the market in the world today, we must eschew crude generalizations about "state capitalism," a term that is really not much more valuable today than the Marxist-Leninist term "state monopoly capitalism" was back when Rudolf Hilferding coined it a century ago.
No one seriously denies that the state has a role to play in economic life. The question is what that role should be and how it can be performed in ways that simultaneously enhance economic efficiency and minimize the kind of rent-seeking behavior -- "corruption" in all its shapes and forms -- that tends to arise wherever the public and private sectors meet.
We are all state capitalists now -- and we have been for over a century, ever since the modern state began its steady growth in the late 19th century, when Adolph Wagner first formulated his law of rising state expenditures. But there are myriad forms of state capitalism, from the enlightened autocracy of Singapore to the dysfunctional tyranny of Zimbabwe, from the egalitarian nanny state of Denmark to the individualist's paradise that is Ron Paul's Texas.
The real contest of our time is not between a state-capitalist China and a market-capitalist America, with Europe somewhere in the middle. It is a contest that goes on within all three regions as we all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it.
The character of this century -- whether it is "post-American," Chinese, or something none of us yet expects -- will be determined by which political system gets that balance right.

Read the article online here:

We're All State Capitalists Now -- By Niall Ferguson | Foreign Policy

We have a Winner! @EconEurope

The Economist (@EconEurope) 10/17/11 2:07 PM François Hollande wins the French Socialist primary and will now join battle to topple Nicolas Sarkozy next year. We have a Winner! THE decisive victory of François Hollande at the Socialist Party primary yesterday marks the countdown to France's 2012 presidential election. A former party leader and long-time apparatchik, Mr Hollande secured 57% of the vote, next to 43% for his rival, Martine Aubry, the mayor of Lille. His nomination was backed by all four of the defeated first-round candidates, and the margin of victory was clear, raising hopes among left-wing voters that he will be able to unify the party around his candidacy. In a telling image broadcast live last night, Mr Hollande embraced Ms Aubry and each of the defeated first-round candidates before cheering crowds outside the Socialist headquarters on the Paris left bank. It was a carefully orchestrated show of unity, after a campaign that had exposed not only ideological but personal differences among the candidates. Beside Mr Hollande stood a grinning Arnaud Montebourg, whose protectionist campaign for "deglobalisation" secured him a surprise 17%, and third place, in the first-round vote, and even Ségolène Royal, Mr Hollande's former partner and mother of their four children, who was beaten into fourth place in the first round with just 7%. In the end, Mr Hollande benefited from his poll lead as favourite both to win the nomination, and to beat Nicolas Sarkozy, the incumbent president, in next spring's election. Mr Montebourg, who took great delight between the first and second rounds in playing an extravagant courtship game with the two finalists, finally announced that he would vote for Mr Hollande—but only because he looked the better-placed to win the presidency. Mr Hollande has topped such polls ever since Dominique Strauss-Kahn, the former IMF managing director, was excluded from the race after his arrest in New York on sexual-assault charges that were later dropped. The Socialist primary exercise has put the party in extraordinarily buoyant mood. For one thing, turn-out, already high in the first round, was even stronger yesterday, with 2.8m votes cast by left-leaning voters. This has lent the party a fresh, modern air. For another, the Socialists now seem set to rally behind Mr Hollande, an instinctive consensus-seeker. Last time round, when Ms Royal won the primary to become the Socialists' 2007 presidential candidate, the party was deeply divided, and she led her somewhat solitary election campaign from outside the party hierarchy. This time, Mr Hollande has urged unity, and reached out to his defeated rival. Like the Labour Party ahead of Britain's 1997 general election, the French Socialists seem to be so fed up with losing elections that they will do whatever it takes to win. The last presidential election they won was in 1988. Although all polls suggest that Mr Hollande would beat Mr Sarkozy hands down were the presidential vote held today—one this month gave him 60% next to Mr Sarkozy's 40%—there are plenty of obstacles in the way. One is that Mr Hollande now has to try to reconcile the left wing of his party, represented by Mr Montebourg, with the social-democratic middle. He needs the left-wingers if only to stave off a far-left threat from outside the party, where a grumpy anti-establishment politician, Jean-Luc Mélenchon, enjoys support. Yet Mr Hollande also needs to appeal to the centre if he is to pick up voters disillusioned with Mr Sarkozy. This will mean some complicated political gymnastics, and will expose him to a charge of incoherence that the right has already identified. During the primary campaign, Mr Hollande called in one breath for ambitious deficit-reduction and in another for the creation of up to 70,000 new teaching jobs. Mr Sarkozy, who has yet to declare his candidacy, has been notably absent from the airwaves in recent months. Once he throws in his hat officially, the poll gap between the two politicians could narrow, not least because the president is a formidable campaigner. Mr Sarkozy will doubtless make much of the inexperience of Mr Hollande, who has never held a ministerial job. Mr Hollande will point to rising debt and deficits on Mr Sarkozy's watch. In the end, the choice will be only partly political: it will also be between a big hyperactive personality with experience but mixed results, and a largely charisma-free alternative in Mr Hollande, who campaigns as a "normal" candidate. After the whirlwind of Mr Sarkozy, that could just be what voters want. ow.ly/6ZpuQ

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Keynes and Hayek, the Great Debate (Part 1): Nicholas Wapshott - Bloomberg

This is a Four Part Series on Hayek and Keynes from Nicholas Wapshott's new book, “Keynes Hayek: The Clash that Defined Modern Economics.”

Part One is below:

Keynes and Hayek, the Great Debate (Part 1): Nicholas Wapshott

By Nicholas Wapshott - Oct 5, 2011

The greatest debate in the history of economics began with a simple request for a book. In the early weeks of 1927, Friedrich Hayek, a young Viennese economist, wrote to John Maynard Keynes at King’s College, Cambridge, in England, asking for an economic textbook written 50 years before: Francis Ysidro Edgeworth’s exotically titled “Mathematical Psychics.” Keynes replied with a single line on a plain postcard: “I am sorry to say that my stock of ’Mathematical Psychics’ is exhausted.”
Why did Hayek, an unknown economist with little experience, approach, of all people, Keynes, perhaps the best-known economist in the world? For Keynes, Hayek’s request was just another item in his bulging postbag. Cambridge’s economics prodigy retained no record of Hayek’s request, even though he was so conscious of the contribution he was making to posterity through his daring approach to the study of political economy that he had taken to hoarding each scribbled note and every last letter. His posthumously published papers, even when edited, fill dozens of volumes.
Hayek, meanwhile, seemed fully aware of the significance of his request. He treasured Keynes’s bald reply and preserved it for the next 65 years as a personal memento and professional trophy. The postcard sits today in the Hayek archive at the Hoover Institution on the Stanford University campus in California -- tangible evidence that Hayek had instigated the first contact in what would become an intense duel over the role of government in society and the fate of the world economy.

Scarce Resources

Edgeworth interested Hayek because one of the subjects he explored at length was a topic that would come to engage both Keynes and Hayek: how scarce resources can best maximize the “capacity for pleasure.” The forbiddingly titled “Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences,” published in 1881, was Edgeworth’s best-known work. It anticipated a great number of the debates that would entangle economists over the next century, including notions of “perfect competition,” “game theory” and, most important for the impending battle between Keynes and Hayek, the belief that an economy will reach a state of “equilibrium” with every able- bodied adult fully employed. Edgeworth was also an early expounder of theories about money and the monetary system, which by 1927 both Keynes and Hayek had already addressed at length.

Millionaires in Asia overtake Europe

FT.com / Global Economy

By Alice Ross

Published: June 22 2011 15:50 | Last updated: June 22 2011 15:50

A visitor looks at Chinese security personnel as she walks into a hall for the Top Essence luxury goods show in Beijing

Millionaires across the world are now richer than they were before the financial crisis, the latest sign that the wealthy have weathered the downturn far better than other groups.

Global wealth among individuals with $1m of investable assets or more rose to $42,700bn in 2010, up from $40,700bn in 2007, according to the Merrill Lynch Cap Gemini World Wealth Report.

Rising equity markets and Asian growth helped expand the fortunes of the global elite, with the number of Asian millionaires now exceeding that of Europe.

There were 3.3m millionaires in Asia-Pacific at the end of 2010, compared to 3.4m in the US and just 3.1m in Europe, the report found. There were 3m millionaires in both Europe and Asia at the end of 2009.

Strong stock markets last year were a key driver of the gains, with global equities rising 18 per cent on average, according to the report.

“The performance in many markets helped to contribute to the growth in wealth in 2010,” the report stated. “Equity and other asset classes rose in value, though not at the exuberant pace of 2009’s bounce-back.”

The countries with the most millionaires in the world remain the US, Japan and Germany respectively, with China and the UK in fourth and fifth place respectively. China now has 535,000 millionaires, according to the report, only about a sixth of those in the US.

The report also found that 83 per cent of the world’s global millionaires were over 45 years old and 73 per cent were male.

The report, one of the most comprehensive annual pieces of research into the world’s wealthiest individuals, indicates that millionaires in European countries with high levels of debt and sluggish economic growth are struggling to keep pace with their Asian peers.

Italy’s number of millionaires fell by 4.7 per cent in 2010, making it the only country in the study to record a drop. Spain fell down the league table from 12th to 14th place.

The ranks of millionaires in the UK showed an increase of only 1.4 per cent last year, compared to a 23.8 per cent rise in 2009. In contrast, the number of millionaires in the US grew by 8.3 per cent in 2010.

Adam Horowitz, head of UK, Ireland and Israel at Merrill Lynch Wealth Managers, said the contrast was likely to be due to differences between wealthy investors in the UK, where more people buy property, and the US, where people are more highly invested in equity markets.

The world’s millionaires also multiplied at a slower pace in 2010 than they did during the bounce back in equity markets in 2009, the report shows. The number of global millionaires rose by 8.3 per cent last year, down from a 17.1 per cent increase the previous year

FT.com / Global Economy - Millionaires in Asia overtake Europe

Everybody Loves(ed) Hosni - Foreign Policy

Everybody Loves Loved Hosni

For 30 years the world welcomed Egypt's president -- they shook his hand and looked the other way. But the time for photo ops is likely over. 

FEBRUARY 1, 2011

U.S. President Jimmy Carter brokered the 1978 peace talks between Israel and Egypt when Hosni Mubarak was President Anwar Sadat's vice president. (To sweeten the deal, Carter threw in generous U.S. military support to Egypt, setting the terms of the largely military-driven relationship between the two countries that has continued throughout Mubarak's rule.) Those talks resulted in the 1979 treaty between Egypt and Israel. And while Carter told a reporter on Jan. 30 that he felt he knew "Mubarak quite well," the former U.S. president also said that the Egyptian president had become "more politically corrupt" than he was during their Camp David days. "The United States wants Mubarak to stay in power," Carter commented, "but the people have decided."
AFP/Getty Images

The U.S. relationship with Egypt deteriorated in the early 1980s largely because of mutual distrust over relations with Israel. Egypt was angry that Washington failed to put pressure on Israel after it invaded Lebanon in 1982, while the United States complained that Egypt was slow to normalize relations with the Jewish state after the 1979 Camp David Accord. Mubarak visited U.S. President Ronald Reagan at the White House in 1985 in an attempt to rebuild the relationship. After the meeting, Reagan declared that he and Mubarak were "close friends and partners in peace."
Diana Walker//Time Life Pictures/Getty Images 

The odd couple at Europe’s helm

The odd couple at Europe's helm
From The International Herald Tribune:

PARIS — She makes fun, in private, of the way he walks and talks, of his rapid, jerky gestures and facial grimaces. He mocks her deliberation, her reluctance, her matronly caution.
She has compared him to Mr. Bean and to the French comic Louis de Funès, with his curly hair and large nose. He sometimes calls her ''La Boche,'' the offensive French version of ''Kraut,'' and goes out of his way to give her an embrace and a double-cheeked kiss in the French fashion, the kind of contact that he knows very well, aides say, she cannot stand.

While the agonies of the European Union — sovereign defaults, deficits and bubbles — unfold like a great wonk drama, at their core is something more intimate: the fractured tale of Angela Merkel and Nicolas Sarkozy. They have been photographed across Europe giving the appearance of happy partnership. They are the best hope Europe has for continued unity. But they do not like each other at all.

As with any couple in trouble, economic difficulty has added to the strain. Two years ago, at the beginning of the crisis, Mr. Sarkozy burst out in public, saying, ''France is acting, while Germany is only thinking about it!''

Later, before an E.U. meeting in Brussels on the Greek bailout, the French president was in a rage at his inability to persuade Mrs. Merkel to do more for that country.


http://www.nytimes.com/2011/01/16/magazine/16MerkelSarkozy-t.html

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Global Risk and Reward in 2011 by Nouriel Roubini - Project Syndicate

Global Risk and Reward in 2011

Nouriel Roubini

NEW YORK – The outlook for the global economy in 2011 is, partly, for a persistence of the trends established in 2010. These are: an anemic, below-trend, U-shaped recovery in advanced economies, as firms and households continue to repair their balance sheets; a stronger, V-shaped recovery in emerging-market countries, owing to stronger macroeconomic, financial, and policy fundamentals. That adds up to close to 4% annual growth for the global economy, with advanced economies growing at around 2% and emerging-market countries growing at about 6%.

But there are downside and upside risks to this scenario. On the downside, one of the most important risks is further financial contagion in Europe if the eurozone’s problems spread – as seems likely – to Portugal, Spain, and Belgium. Given the current level of official resources at the disposal of the International Monetary Fund and the European Union, Spain now seems too big to fail yet too big to be bailed out.

The United States represents another downside risk for global growth. In 2011, the US faces a likely double dip in the housing market, high unemployment and weak job creation, a persistent credit crunch, gaping budgetary holes at the state and local level, and steeper borrowing costs as a result of the federal government’s lack of fiscal consolidation. Moreover, credit growth on both sides of the Atlantic will be restrained, as many financial institutions in the US and Europe maintain a risk-averse stance toward lending.

In China and other emerging-market economies, delays in policy tightening could fuel a rise in inflation that forces a tougher clampdown later, with China, in particular, risking a hard landing. There is also a risk that capital inflows to emerging markets will be mismanaged, thus fueling credit and asset bubbles. Moreover, further increases in oil, energy, and commodity prices could lead to negative terms of trade and a reduction in real disposable income in net commodity-importing countries, while adding to inflationary pressures in emerging markets.

Moreover, currency tensions will remain high. Countries with large current-account deficits need nominal and real depreciation (to sustain growth via net exports while ongoing private- and public-sector deleveraging keeps domestic demand weak), whereas surplus countries (especially emerging markets) are using currency intervention to resist nominal appreciation and sterilized intervention to combat real appreciation. This is forcing deficit countries into real exchange-rate adjustments via deflation – and thus a rising burden of public and private debt that may lead to disorderly defaults.

Furthermore, several major geopolitical risks loom, including military confrontation between North and South Korea and the lingering possibility that Israel – or even the US – might use military force to counter Iran’s nuclear weapons program. There are also the political and economic turmoil in Pakistan and the risk of a rise in cyber-attacks – for example, in retaliation for criminal proceedings against WikiLeaks.

In the US, slower private-sector deleveraging – given the fiscal stimulus from the extension of unemployment benefits for 13 months, the payroll-tax cut, and maintenance of current income-tax rates for another two years – could lull policymakers into assuming that relatively large fiscal and current-account imbalances can continue indefinitely. This could generate financial strains over the medium term – and protectionist pressures in the short term.

Finally, in the face of political opposition to fiscal consolidation, especially in the US, there is a risk that the path of least resistance becomes continued monetization of fiscal deficits. Eventually (once the slack in goods and labor markets is reduced), this would push inflation expectations – and yield curves – higher.

But there are also several upside risks. The US corporate sector is strong and very profitable, owing to massive labor shedding, creating scope for increased capital spending and hiring to contribute to more robust and above-trend GDP growth in 2011. Similarly, the eurozone, driven by Germany, could lurch toward greater economic and political union (especially some form of fiscal union), thus containing the problems of its periphery.

Meanwhile, growth in Germany and the eurozone “core” may further accelerate given the strength of emerging markets, which may show even greater resilience, underpinning more rapid global expansion.

The attenuation of downside risks and pleasant surprises in developed and emerging economies could lead to a further increase in demand for risky assets (equities and credit), which would reinforce economic recovery via wealth effects and lower borrowing costs. Positive feedback from consumption to production, employment, and income generation – both within countries and across countries via trade channels – could further accelerate the pace of global growth, particularly if monetary policies in most advanced economies remain looser than expected, supporting asset reflation and thus demand and growth.

Indeed, after four years (2007-2010) of either recession or sub-par recovery, the process of balance-sheet repair – while not completed yet – is underway, and may result in less saving and more spending to boost growth in advanced economies. The damage from the financial crisis is still ongoing, but stronger growth can heal many wounds, especially debt-driven wounds.

So far, the downside and upside risks for the world economy are balanced. But if sound government policies in advanced and major emerging economies contain the downside risks that are more prevalent in the first half of this year – which derive from political and policy uncertainty – a more resilient global economic recovery could take hold in the second half of 2011 and into 2012.

Nouriel Roubini is Chairman of Roubini Global Economics (www.roubini.com), Professor at the Stern School of Business at NYU and co-author of Crisis Economics

Copyright: Project Syndicate, 2011.
www.project-syndicate.org
For a podcast of this commentary in English, please use this link:
http://media.blubrry.com/ps/media.libsyn.com/media/ps/roubini34.mp3

Global Risk and Reward in 2011 by Nouriel Roubini - Project Syndicate

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Who on Wall Street Got Fed Loans - NYTimes.com

Who on Wall Street Got Fed Loans? Hedge Funds Got Fed Help, Too

December 1, 2010, 4:30 pm By BEN PROTESS

5:54 p.m. | Updated
Wall Street banks weren’t the only ones approaching the Federal Reserve for help.
When the credit markets nearly froze up in the fall of 2008, the Federal Reserve Bank of New York helped hedge funds, mutual funds and other big investors buy highly rated securities backed by car loans and student debt, among other assets.
The institutional investors, which collectively borrowed $71 billion through the program, included such market giants as Pimco, T.Rowe Price and BlackRock.
In a statement, BlackRock said that it borrowed the funds “on behalf of both institutional and mutual fund clients.”
The California Public Employees Retirement System, the nation’s largest pension fund, also borrowed through the program, known as the Term Asset-Backed Securities Loan Facility, or TALF. The Major League Baseball Players Pension Plan was another pension fund participant in the program.
Hedge funds made the list as well. Magnetar Capital, an Illinois-based hedge fund, received seven loans from the Fed.
Magnetar was the subject of a ProPublica investigative report over the fund’s bets against risky mortgage-related securities that Magnetar itself sponsored.
The program was a “resounding success in providing liquidity to the consumer credit markets,” a Magnetar spokesman said in a statement.
Frontpoint Partners, the hedge fund that recently made news when a portfolio manager brushed up against an insider trading investigation (he was not charged), received a few dozen TALF loans.
“On behalf of clients, FrontPoint was an early participant in the Government TALF program,” said a spokesman for the firm. “With our clients, we were able to support the government in this important initiative.”
The Fed used the loans to entice investors into the largely frozen asset-backed securities market. Most of the loans came cheap and lasted for a year. The program ended earlier this year.
Morgan Stanley, which is in the process of spinning off FrontPoint, was the only investment bank on the list of TALF recipients under its own name.
The disclosures of loan recipients come from Federal Reserve’s release of volumes of previously undisclosed information about the trillions of dollars in loans it made during the financial crisis.
One crucial Fed lending program was the Primary Dealer Credit Facility, a cheap overnight loan system for banks that was similar to the Fed’s discount window.
You name the big broker-dealer, and they’re on that list. Goldman Sachs, Morgan Stanley, Bank of America and Citigroup all borrowed through this program.
One surprise, however, is that JPMorgan Chase borrowed only three times, all in the fall of 2008. The program started in March 2008 and ended February 2010.
Citigroup, Bank of America and Morgan Stanley kept borrowing through the spring of 2009.
There was a clear advantage to keep borrowing: As time went on, the Fed’s interest rate kept falling. When Bank of America drew its last loan in May 2009, the $375 million loan carried a nominal 0.5 percent rate.
In the same week in October 2008 that banks received TARP funds, Goldman took out overnight loans worth as much as $60 billion. Morgan Stanley borrowed as much as $34 billion in one day that week.
Foreign banks also received assistance. Societe Generale, headquartered in Paris, and the Italian bank Intesa Sanpaolo, received loans through the Fed’s Term Auction Facility, or TAF. So did a few Canadian banks as well as the Arab Banking Corporation. The firms all have offices in New York.
The Fed created the TAF program in late 2007 when some banks balked at borrowing from the Fed’s discount window. The program offered 28-day loans to generally healthy depository institutions.

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Who on Wall Street Got Fed Loans - NYTimes.com

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Financial Times: Big Mac index gives more than a taste of true worth

weOctober 03 2010 7:47 AM GMT
Big Mac index gives more than a taste of true worth
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By Steve Johnson
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Intervention has kept some emerging market currencies artificially weak, at the same time many have raised interest rates to stem inflation. It is only a matter of time before some allow their currencies to appreciate
Read the full article at: http://www.ft.com/cms/s/0/2736d936-cd89-11df-9c82-00144feab49a.html?ftcamp=rss

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Alek Boyd: UK's Labour Party turns rojo, rojito

UK's Labour Party turns rojo, rojito 

Alek Boyd

Well, the smart money lost the bet. The election of a Conservative government, after 13 years of Labour rule, got the radicals all worked up: Ed Miliband has just been elected as Labour's new party leader.

Before going into details, I think that this is a godsend to David Cameron and his coalition government. For Red Ed's election simply indicates a strong veer to the left. In fact, besides belonging to Gordon Brown's closest circle of collaborators, and being the unions candidate, he got most of Diane Abbott and Ed Balls second option votes, so it is clear that the most radical wing of the party carried him to victory. Fortunately, there's no space for radicals in democratic societies, and so, the Labour Party, by electing Brown's successor Ed over his graceless yet Blairite brother David, has taken the road to wilderness, a road that won't lead them back to power. And that is excellent news.

Now the comical thing is, that most Labour talking heads are singing from Ed's sheet about the party having lost the trust of millions of voters in the last general election -under Gordon Brown's leadership, and yet they have thrown their lot behind Brown's heir, instead of electing the successor of the only Labour leader that has won the party three consecutive elections. Priceless.

Alek Boyd: UK's Labour Party turns rojo, rojito

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The MasterLiving Blog: Shrinking Societies: The Other Population Crisis - BusinessWeek

The MasterLiving Blog: Shrinking Societies: The Other Population Crisis - BusinessWeek

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Drug Dealer's Bill of Choice Boosts the Euro Zone - WSJ.com

How Gangsters Are Saving Euro Zone

By STEPHEN FIDLER 

JULY 30, 2010

BRUSSELS BEAT

(Please see Corrections & Amplifications item below.)

Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone.

That's thanks to their demand, according to European authorities, for high-denomination euro bank notes, in particular the €200 and €500 bills. The European Central Bank issues these notes for a hefty profit that is welcome at a time when its response to the financial crisis has called its financial strength into question.

The high-value bills are increasingly "making the euro the currency of choice for underground and black economies, and for all those who value anonymity in their financial transactions and investments," wrote Willem Buiter, chief economist at Citigroup, in a recent research report. The business of issuing euro notes, produced at almost zero cost, is "wildly profitable" for the ECB, Mr. Buiter wrote.

When euro notes and coins went into circulation in January 2002, the value of €500 notes outstanding was €30.8 billion ($40 billion), according to the ECB.

Today some €285 billion worth of such euro notes are in existence, an annual growth rate of 32%. By value, 35% of euro notes in circulation are in the highest denomination, the €500 bill that few people ever see.

In 1998, then-U.S. Treasury official Gary Gensler worried publicly about the competition to the $100 bill, the biggest U.S. bank note, posed by the big euro notes and their likely use by criminals. He pointed out that $1 million in $100 bills weighs 22 pounds; in hypothetical $500 bills, it would weigh just 4.4 pounds.

More

• Real Time Brussels: ECB's 'Million Pound Note'
• Archive: Cocaine Boom Fuels Money Laundering

Police forces have found the big euro notes in cereal boxes, tires and in hidden compartments in trucks, says Soren Pedersen, spokesman for Europol, the European police agency based in The Hague. "Needless to say, this cash is often linked to the illegal drugs trade, which explains the similarity in methods of concealment that are used."

A spokeswoman for the ECB declined to comment on who uses the bills.

The ECB and its member governments are beneficiaries of the demand.

The profit a central bank gains from issuing currency—as well as from other privileges of a central bank, such as being able to demand no-cost or low-cost deposits from banks—is known as seigniorage. It normally accrues to national treasuries once the central banks account for their own costs.

The ECB's gains from seigniorage are becoming increasingly important this year.

The ECB has taken hundreds of billions of euros of assets of unknown quality on to its balance sheet as it has reacted to the global financial crisis.

It holds more than €600 billion in collateral from banks to which it has made loans, and more than €400 billion in securities it holds outright, including government bonds.

Overall, the ECB's balance sheet has grown to almost €2 trillion. It has a capital base of €78 billion. That creates leverage that makes it look like a "hedge fund on steroids," Mr. Buiter wrote. It wouldn't need to lose much on these assets to wipe out its thin cushion of capital.

That's where seigniorage comes in.

In recent years, the profits on its issue of new paper currency have been running at €50 billion. In 2008, the year of the Lehman Brothers crisis, it was €80 billion.

Even with conservative assumptions about future growth of currency in circulation—at, say, 4% a year, which is in line with the ECB's 2% inflation target plus a margin for economic growth—Mr. Buiter estimates future seigniorage profits for the central bank between €2 trillion and €6.9 trillion.

Thanks to seigniorage, he says, the ECB is "super solvent."

An ECB spokeswoman says there's no plan to withdraw high-value notes, national equivalents of which were used in six member states before the euro was launched. They will be retained when a redesigned series is issued in coming years.

Replacing them with small denominations would increase production and processing costs, she says.

Corrections & Amplifications

The volume of €500 notes in circulation is €285 billion, accounting for 35% by value of all euro notes outstanding. An earlier version of this article incorrectly said the €285 billion figure represented all euro notes.

There are 570 million €500 bills in circulation. The scale on a chart accompanying an earlier version of this article misrepresented the number as 570,000.

Write to Stephen Fidler at stephen.fidler@wsj.com

Drug Dealer's Bill of Choice Boosts the Euro Zone - WSJ.com