$100 Bill: The Fed Has a $110 Billion Problem with New Benjamins - CNBC

The Fed Has a $110 Billion Problem with New Benjamins

Source: newmoney.gov

The new $100 note has highly sophisticated security features.

 

FED, FEDERAL RESERVE, BILL, NEW CASH, $100, TREASURY

Posted By: Eamon Javers | CNBC Washington, DC Correspondent

CNBC.com

| 07 Dec 2010 | 01:38 PM ET

A significant production problem with new high-tech $100 bills has caused government printers to shut down production of the new notes and to quarantine more than one billion of the bills in huge vaults in Fort Worth, Texas and Washington, DC, CNBC has learned.

Initially scheduled for release in February of 2011, the new bills were announced with great fanfare by officials at the Treasury Department and the Federal Reserve in April.

At the time, officials announced the new bills would incorporate sophisticated high-tech security features, including a 3-D security strip and a color-shifting image of a bell designed to foil counterfeiters.

But the production process is so complex, it has instead foiled the government printers tasked with producing billions of the new notes.

An official familiar with the situation told CNBC that 1.1 billion of the new bills have been printed, but they are unusable because of a creasing problem in which paper folds over during production, revealing a blank unlinked portion of the bill face.

A second person familiar with the situation said that at the height of the problem, as many as 30 percent of the bills rolling off the printing press included the flaw, leading to the production shut down.

The total face value of the unusable bills, $110 billion, represents more than ten percent of the entire supply of US currency on the planet, which a government source said is $930 billion in banknotes. For now, the unusable bills are stored in the vaults in "cash packs" of four bundles of 4,000 each, with each pack containing 16,000 bills.

Officials don’t know exactly what caused the problem. "There is something drastically wrong here," a person familiar with the situation said. "The frustration level is off the charts."

Because officials don’t know how many of the 1.1 billion bills include the flaw, they have to hold them in the massive vaults until they are able to develop a mechanized system that can sort out the usable bills from the defects.

Sorting such a huge quantity of bills by hand, the officials estimate, could take between 20 and 30 years. Using a mechanized system, they think they could sort the massive pile of bills, each of which features the familiar image of Benjamin Franklin on the face, in about one year.

The defective bills—which could number into the tens of millions, potentially representing billions of dollars in face value—will have to be shredded. American taxpayers have already spent an enormous amount of money to print the bills.

According to a person familiar with the matter, the bills are the most costly ever produced, with a per-note cost of about 12 cents—twice the cost of a conventional bill. That means the government spent about $120 million to produce bills it can’t use. On top of that, it is not yet clear how much more it will cost to sort the existing horde of hundred dollar bills.

First Bills Signed by Geithner

Officials say they remain optimistic that the majority of the 1.1 billion bills will eventually be cleared for circulation.

"A very high proportion of the notes will be fit for circulation," said Darlene Anderson of the Treasury Department. "We are working really hard to try to get a solution to the problem." Anderson said Treasury has seen encouraging results from several recent tests of the printing process. "We're trying to ensure that only the fittest of notes will enter circulation," she said.

The problem with the new hundred-dollar bills has remained largely hidden from public view, despite a press release issued by the Federal Reserve on October 1 that announced "a delay in the issue date" of the new bills and cited "a problem with sporadic creasing of the paper."

The redesigned bills are the first $100 bills to feature Treasury Secretary Tim Geithner’s signature. But to stave off a cash crunch as existing $100 bills deteriorate and can’t be replaced, the Federal Reserve has ordered renewed production of the current-design $100 bills, which feature Bush Treasury Secretary Hank Paulson's signature and do not have the new security features.

Officials say that is an important step, because there are 6.6 billion $100 notes in circulation at any given time, and they wear out quickly. Reprinting the current design bills will prevent any disruption in the global circulation of US currency.

The MasterFeeds: On Tomorrow's Secret Meeting To Plot The End Of Hi...

On Tomorrow's Secret Meeting To Plot The End Of High Frequency Trading

By Tyler Durden   Created 10/03/2010 - 17:35

The SEC's "definitive"(ly worthless) report on what happened on May 6^th was a dud, and was nothing more than a distraction-based smear campaign against Waddell and Reed (an experiment in which we can only hope W&R participated involuntarily): a firm which did something that was completely in its right to do. But is this unexpected? After all had the SEC confirmed that it is indeed HFT who is responsible for a broken market structure, it would have effectively destroyed itself: if and when the SEC does indeed confirm that the entire market topology over the past 5 years has been hijacked by young and pustular math Ph.D.'s with fast computers, the implications to fair markets would be orders of magnitude worse than the fallout associated with the Madoff scandal, and could serve as grounds for the unwind of the SEC itself, which would have to explain why it has been avoiding calls against HFT impropriety for years. So in a sense Mary Schapiro's conclusion is nothing less than a lass desperate act of self preservation. Which however means nothing in the grand scheme of things. Tomorrow, as the WSJ [1]reported a week ago, the Investment Company Institute, better known to Zero Hedge readers as the guys who track the now permanent weekly outflows from capital markets, is holding a secret meeting in which some of the participants "are determined to push for a plan to restrict high-frequency trading" (furthermore, the ICI was rather pissed about this particular leak, implying that things are really serious). While the SEC may have declared a market structure truce, and is peddling its usual worthless solution of circuit breakers (more on this below), actual market participants have had enough of seeing their profits plunge and seeing HFT extract more capital out of the market than the much maligned ten years ago market makers and specialists ever did.

Read the rest of the story here:

The MasterFeeds: On Tomorrow's Secret Meeting To Plot The End Of Hi...

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-- The MasterFeeds

America’s public servants are now its masters

By Mort Zuckerman

Published: September 9 2010 22:49 | Last updated: September 9 2010 22:49

There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.

Political tension is bound to grow when jobs disappear faster in the private than the public sector, just as compensation in the former is squeezed more. There was a time when government work offered lower salaries than comparable jobs in the private sector, a difference for which the public sector compensated by providing more security and better benefits. No longer. These days, government employees are better off in almost every area: pay, benefits, time off and security, on top of working fewer hours. Public workers have become a privileged class – an elite who live better than their private-sector counterparts. Public servants have become the public’s masters.

Take federal employees. For nine years in a row, they have been awarded bigger average pay and benefit increases than private-sector workers. In 2008, the average wage for 1.9m federal civilian workers was more than $79,000, against an average of about $50,000 for the nation’s 108m private-sector workers, measured in full-time equivalents. Ninety per cent of government employees receive lifetime pension benefits versus 18 per cent of private employees. Public service employees continue to gain annual salary increases; they retire earlier with instant, guaranteed benefits paid for with the taxes of those very same private-sector workers.

More troubling still is the inherent political corruption. Elected officials tend to be accommodating when confronted by powerful constituencies such as the public service unions that agitate for plush benefits and often provide (or deny) a steady flow of cash to election campaign funds. Their successors will have to cope with the inherited debt burden – and ultimately the nation’s taxpayers are stuck with the bill.

As Governor Arnold Schwarzenegger has pointed out, spending on retirement benefits for California’s state employees is growing at three times the rate of state revenues, now exceeding $6bn annually and growing at the rate of 15 per cent a year. In other states, however, the politics of public pensions appear to be changing. In Michigan, Governor Jennifer Granholm, a Democrat, recently enacted a teacher pension reform that should save about $3bn over 10 years by increasing the amount workers must contribute. Illinois raised its retirement age for newly hired public workers from as low as 55 to 67. Chris Christie, the Republican governor of New Jersey, decided that even if it took bruising clashes with public worker unions, public service compensation reform was essential for the fiscal health of the state. His stance surprised many, but it made him a national figure.

There is no quick fix to deal with the billions in unfunded liabilities. Public service employees are almost impossible to fire, except after a long process and only for the most grievous offences. What is more, the courts have ruled in many states that pension increases granted by elected bodies are vested benefits that must be paid no matter what, precluding politicians from going back and changing past agreements.

The only fair solution is to take the politicians out of the equation and have fully independent commissions in charge, fixing the scale of salaries and benefits for public-service workers and establishing an affordable second retirement tier for new employees. More reasonable retirement ages should be in order, such as 65 for general employees and 55 for public safety employees. This would take nothing away from the existing benefits of current employees.

A fundamental rethinking of the public workforce is necessary. Americans cannot maintain their essential faith in government if there are two Americas, in which the private sector subsidises the disproportionate benefits of this new public sector elite.

The writer is editor in chief of US News & World Report and chairman and co-founder of Boston Properties

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CNBC.com Article: US Probes Corruption in Big Pharmaceuticals

CNBC.com Article: US Probes Corruption in Big Pharmaceuticals
The US Department of Justice is scrutinizing payments by leading pharmaceuticals companies in markets around the world. The FT reports.
Full Story:
http://www.cnbc.com/id/38688879

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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

"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT | zero hedge

High Frequency Trading - HFT - OR THE SCAM IN THE MARKET....

"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" 

- Further Evidence Of Quote Stuffing Manipulation By HFT

By Tyler Durden

Created 07/31/2010 - 12:40

Published on zero hedge (http://www.zerohedge.com)

Recently we posted [1]a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, simply by masking a big block order which other algos interpret as bid interest and pull all offers progressively or step function higher (or vice versa, although we have rarely if ever seen the walking down of a stock over the past 18 months).

It is as if the HFT lobby has been given the green light by the powers that be that it is safe to activate merely the bid-size quote stuffing algorithms, and not worry: the fact that the market is so one sided in its quote stuffing patterns is sufficient reason to worry of a concerted effort to push stocks higher, initiated from the very top, and effected by not only the Primary Dealer community but by the end-market "liquidity providers."

Today, courtesy of Nanex [2]we demonstrate that this type of illegal stock manipulation continues rampant to this very day, and the SEC still fails acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices, which have given up responding to fundamentals and merely move up or down based on quote stuffing interventions by those who plead innocence and claim to only be providing liquidity. Well take a look at the millions in fake, and thus illegal, bids demonstrated below and tell us just how any of this manipulation is "providing liquidity" - the second the patterns break, the algos responsible for the churn pattern disappear, thus eliminating numerous levels of so called bid liquidity below the NBBO: break enough patterns and you have another flash crash as the market once again goes bidless.


So while the SEC continues to pander merely to the interests of the market manipulation lobby, and is now doing it in more style than ever by refusing to answer to FOIA requests going forward, here is Nanex with yet more evidence that we no longer have a market, but merely a daily recurring crime scene.

In our original Flash Crash Analysis report [3], we dedicated a section to an observed phenomena we termed "Quote Stuffing [4]", in which bursts of quotes (at very high rates) with extremely unusual characteristics were observed.

As we continue to monitor the markets for evidence of Quote Stuffing and Strange Sequences (Crop Circles), we find that there are dozens if not hundreds of examples to choose from on any given day. As such, this page will be updated often with charts demonstrating this activity.

The common theme with the charts shown on this page is they are obviously all generated in code and are algorithmic. Some demonstrate bizarre price or size cycling, some demonstrate large burst of quotes in extremely short time frames and some will demonstrate both. In most cases these sequences are from a single exchange with no other exchange quoting in the same time frame.

And here, for your viewing pleasure, are the illegal market manipulative churn patterns conducted exclusively by various HFT algos:

07-29-10
BATS "Flag Repeater". 15,000 quotes in 11 seconds, dropping the ASK price 1 penny each quote from $9.36 to $8.58 and back up again.

[5]

07-29-10
"The Crown". While not a large number of quotes, this NASDAQ/BATS Bidsize sequence was just too unusual to bypass.

[6]

07-28-10
BATS "Batsicles". BATS price cycling through a large price range, each intermittent with a stub quote, drop it down and start over.

[7]

07-27-10
NASDAQ "Blotter". One of the more unusual repeating Asksize cycles.

[8]

07-23-10
BATS "Stubby Triangles". Drop the quote from a valid price to 0.001 and then back up to a lower price level. When the new price level hits 0.001 as well, do it all over again at approx. 380 times a second.

[9]

07-23-10
NASDAQ "Flutter". 4000 quotes in 2 seconds, alternating the bid price/size in 3 increments and effecting the Best Bid along the way.

[10]

07-23-10
BATS "Periscopes". 8000 quotes in 3 seconds, alternating the bid price each quote. Pop the size up 1 every second or so.

[11]

07-22-10
NASDAQ "Double Dip". Symbol SH. 10,000 Quotes in 4 seconds, each affecting the Best Bid.

[12]

07-19-10
NASDAQ "Racing Stripe". Symbol WYNN. 2000 Quotes in one second, each affecting the Best Ask.

[13]

07-19-10
PACIFIC "Puzzle Pieces". Symbol IIC.

[14]

07-14-10
NASDAQ "Blue Bandsaw". Symbol SHG. (760 quotes in 1 second, taken from a total sampling of 10,000 quotes in 12 seconds)

[15]

07-13-10
BATS "60-Step". Symbol SAH. Take sixty steps up (a penny at a time) and one step down (0.60), reset and do it all over again (at approx. 700 times per second).

[16]

07-12-10
NASDAQ "Ask Mountain". Symbol IAU. Over 56,000 quotes in 10 seconds, all with same Ask Price and the Ask Size increasing or decreasing by 1 (to almost 40,000!).

[17]

h/t Dan

• Double Dip
• FOIA
• Freedom of Information Act
• Market Manipulation
• NASDAQ

---

Source URL: http://www.zerohedge.com/article/its-not-market-its-hft-crop-circle-crime-scene-further-evidence-quote-stuffing-manipulation-

Links:
[1] http://www.zerohedge.com/article/how-hft-quote-stuffing-caused-market-crash-may-6-and-threatens-destroy-entire-market-any-mom

[2] http://www.nanex.net/FlashCrash/CCircleDay.html
[3] http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html
[4] http://www.nanex.net/20100506/FlashCrashAnalysis_Part4-1.html
[5] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 1 Nanex.png
[6] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 2 nanex.png
[7] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 3 nanex.png
[8] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 4 nanex.png
[9] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 5 nanex.png
[10] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 6 nanex.png
[11] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 7 nanex.png
[12] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 8 nanex.png
[13] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 9 nanex.png
[14] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 10 nanex.png
[15] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 11 nanex.png
[16] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 12 nanex.png
[17] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/1 13 nanex.png

"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT | zero hedge

________________________

Sub-Saharan Africa economy: Strategic rise ViewsWire

Sub-Saharan Africa economy: Strategic rise
FROM THE ECONOMIST INTELLIGENCE UNIT
July 13th 2010

Rising global competition for commodities is giving a new strategic importance to resource-rich Sub-Saharan Africa. China and other emerging industrialised countries are vying with the subcontinent's former colonial powers to acquire long-term stakes in mines, oilfields and other commodity assets. With unprecedented volumes of investment on offer, the stakes are high not only for resource companies seeking to expand in Africa but also for the region itself. The challenge for African governments will be to manage their commodities better to avoid a repeat of the boom-and-bust years of the 1970s-90s.

Natural resources are hardly a new story for Sub-Saharan Africa. For decades the region has depended on exports of commoditiesóoil, hard minerals and cash cropsóto fund economic growth, though often with disappointing results. The collapse in commodity prices in the late 1970s and the mismanagement of revenue inflows resulted in weak growth and rising poverty, cementing the belief that Africa's dependence on commodities retarded its economic development. However, soaring emerging-market demand for commodities in recent years, coupled with the increasing scarcity of hydrocarbons and hard minerals, has changed the picture. Sub-Saharan Africa has become a prime target for adventurous foreign investorsówith Chinese companies playing a particularly prominent roleówith the result that the subcontinent once again has the opportunity to benefit from its natural wealth.

Sub-Saharan Africa is one of the most commodity-rich regions of the planet. The subcontinent contains the majority of known reserves of many key minerals, including 90% of the world's platinum-group metals, 90% of the world's chromium, two-thirds of the world's manganese, and 60% of its diamonds. It contains 60% of the world's phosphates, 50% of the world's vanadium, and 40-50% of the world's gold. Sub-Saharan Africa also boasts one-third of the planet's uranium reserves, one-third of its bauxite, and 10% of all oil reserves (the bulk of which are concentrated in the Gulf of Guinea in West Africa).

Most of these resources are underexploited. Uneven development has resulted in a handful of countries dominating commodity exports. The most important by far, both in terms of the diversity of its commodity base and the volume of its exports, is South Africa. The subcontinent's other commodity giant is the Democratic Republic of Congo, which sits on over half of the world's cobalt reserves and 25% of its diamonds, as well as having large quantities of rare metals such as coltan (used in mobile phones). Nigeria and Angola dominate oil production. However, other countries are starting to develop their commodity resources, and several are set to become major producers in the near future. They include Guinea and Angola (iron ore), Ghana (hydrocarbons), and Guinea-Bissau (bauxite and phosphates).

Sub-Saharan Africa also boasts a large agricultural sector. Much of this focused on the production of cash crops for export to the West during the colonial period and in the first years after independence. Since the late 1970s Africa has lost global importance as an exporter of many cash crops. The main exceptions have been coffee, cocoa and tea, for which CÙte d'Ivoire, Ghana, Uganda and Kenya remain key global producers, and more specialised crops like cashew nuts (Guinea-Bissau) and vanilla (Madagascar). However, increased competition from Asian and Latin American producers, coupled with a decline in Africa's terms of trade, has eroded profitability. Africa also continues to export large quantities of timber, particularly to China, but poor forestry management is threatening the sector's sustainability.

A scramble for access

Major emerging markets are playing a key role in the development of the region's commodities sector. Since the early 2000s China has invested heavily in African commodities, reflecting the two-pronged strategy of China's state-owned oil and mining companies: first, acquiring access to reserves through long-term contracts; and second, purchasing stakes in local ventures whenever possible. According to the Chinese government, by end-2008 total Chinese investment in Sub-Saharan Africa amounted to US$26bn, including stakes in oil and gas concessions in Sudan and the Gulf of Guinea, copper mines in Zambia, iron concessions in Gabon, and ferrochrome and platinum mines in South Africa.

China is not the only player around. Chinese interest is increasingly being matched by investment from Indian or Indian-linked firms, notably the steel manufacturing giants Tata Steel and ArcelorMittal, which are acquiring stakes in large coal concessions in Mozambique. Brazil is also stepping up its investment. Given the expertise of Brazilian companies in construction, engineering and the oil sector, it is likely that these firms will provide stiff competition for contracts in the next phase of Africa's infrastructure expansion.

Competition looks set to be particularly intense in the Gulf of Guinea, which continues to grow in strategic importance thanks to the steady increase in its proven oil reserves (a result of better deep-water drilling technology). The region is already the focus of military co-operation programmes between African governments and the US, EU and China. Tensions between these powers could increase as each seeks to establish a foothold in the region. Such a situation could prove advantageous to countries in the Gulf of Guinea if they are able to play off competing powers against each other. However, past experience indicates that such competition and strategic alliances can be used to prop up unsavoury regimes. This also poses potential difficulties for foreign investors. China is learning the hard way that its resource grabs can expose it to reputational risks over human-rights and environmental abuses.

Reaping the benefits?

There are plenty of other challenges. The region exports a lot of its commodities in unprocessed form, thus missing the chance to add value to them. For example, Guinea-Bissau exports its entire cashew crop (over 90% of the country's exports) to India for processing. The creation of low-tech processing operations could capture more of the value of the crop, as well as creating significant numbers of jobs. However, efforts to develop processing industries in Africa have proved disappointing owing to the constraints of the business environment, poor management and competition from processors in India and China.

Broader challenges include managing capital inflows better and maximising the economic benefits of foreign investments. Progress is occurring, with improved local-content provisions in mining contracts, the imposition of tighter environmental standards and greater transparency over commodity revenues. However, greater efforts are needed. African governments must ensure that infrastructure development does not just support the exploitation and export of minerals but also facilitates trade and the movement of people and goods. Local workforces must be trained in new skills and not just used for manual labour. A large proportion of oil and mineral revenues need to be held outside the countries in question in order to prevent currency appreciation that could render other industries uncompetitive.

If African governments can realise these aims, there is a good chance that the subcontinent's natural-resource endowment could provide major benefits to the population. Otherwise, the next wave of commodity development will merely entrench poor governance and corruption and further stifle economic development.

The Economist Intelligence Unit

Source: Global Forecasting Service

© 2010 The Economist Intelligence Unit Limited. An Economist Group business. All rights reserved.

Sub-Saharan Africa economy: Strategic rise Sub-Saharan Africa economy: Strategic rise ViewsWire
________________________


The MasterBlog

Scams: A Sucker Retires Every Minute - BusinessWeek

July 15, 2010, 4:00PM EST

Scams: A Sucker Retires Every Minute

More retirees are being targeted by financial fraudsters. Often, these scammers are themselves elderly

By Alexis Leondis

Annuities. Reverse mortgages. Life insurance pools. Principal-protected notes. The options being offered to senior citizens hoping to ensure a comfortable retirement are dizzying. And in a growing number of cases, that may be the intention as more scammers--often elderly themselves--try to con retirees. Though hard numbers are difficult to come by, many lawyers and advocates for the elderly say more seniors than ever are being lured into investment schemes that are unsuitable for people of their age or are outright swindles. "Seniors who suffer from isolation and diminished capacity make ideal targets," says Steve Riess, a San Francisco attorney who represents elderly victims of con artists peddling bogus investments.

One out of five Americans over the age of 65 has been the victim of a financial scam, according to the Washington-based Investor Protection Trust, a nonprofit that promotes shareholder education. That means more than 7.3 million seniors have been taken advantage of financially through inappropriate investments, high fees, or fraud, which insurer MetLife says comes at a cost of more than $2.6 billion a year. "Older people are being targeted because, as 1930s robber Willie Sutton said when asked why he robs banks, 'that's where the money is,'" says Kathleen Quinn, executive director of the National Adult Protective Services Assn. in Springfield, Ill.

Many of today's scammers have a particularly good understanding of their victims--because the fraudsters themselves are of retirement age, if not exactly retired. More elderly con artists than ever seem to be preying on retirees, perhaps because senior citizens put more confidence in someone their age, says Denise Voigt Crawford, president of the North American Securities Administrators Assn. "It's astounding that you can't even trust older people anymore," Crawford says.

In November, William Kirshner, 84, a financial adviser in Corpus Christi, Tex., was sentenced to five years in prison for stealing more than $100,000 from senior citizens and other clients who invested in promissory notes issued by his company. Ronald Keith Owens (above), 74, was sentenced to 60 years in prison in January 2009 for persuading investors, including retirees, to put more than $2.6 million into nonexistent bank-related investments. And William Walter Spencer, 68, a Franklin (Tenn.) financial adviser, sold elderly members of his church promissory notes that turned out to be bogus. He pleaded guilty to fraud in May and is expected to be sentenced in August.

Veterans are a big target. Several groups offer to help former soldiers sign up for a $2,000-a-month benefit from the Veterans Affairs Dept. in Washington. While the program is real, some groups are telling seniors they can only qualify if they liquidate their assets and purchase an annuity, which usually comes with a hefty sales commission.

Reverse mortgages, which let people aged 62 and older get cash out of their homes and are repaid when the borrower dies or moves, are a big part of many scams. One popular ruse is urging the elderly to finance annuity purchases with a reverse mortgage, despite a ban on cross-selling them with other financial products. Other unsuitable investments being pushed on seniors are pools of life insurance policies, similar to the bundles of home mortgages that helped fuel the financial crisis. Some of these have turned out to include policies that don't exist, and it's unclear whether they're supposed to be overseen by state insurance regulators or the Securities & Exchange Commission.

Principal-protected notes are another investment being pushed on the elderly, says John Gannon of the Financial Industry Regulatory Authority in Washington. He says seniors fall for these because the name makes it sound as if they're risk-free; in fact the principal isn't always protected, as holders of notes backed by Lehman Brothers learned when the firm collapsed. "Financial professionals, both legitimate and illegitimate, know there are assets seniors have that they can get their hands on," Gannon says. "They've figured out ways to get to all of them."

The new financial regulatory reform bill would crack down on advisers who market themselves as specialists in investments for seniors, and another measure would include harsher penalties for anyone committing securities fraud against the elderly. "We need better regulation of this industry," says 75-year-old Senator Herb Kohl (D-Wis.), who heads the Senate's Special Committee on Aging, "so seniors can tell the difference between professionals who offer clear and unbiased financial advice and bad actors...who steer them toward inappropriate financial products."

The bottom line: More retirees than ever are being targeted by financial swindlers, many of whom are themselves elderly.

Leondis is a writer for Bloomberg News.

Scams: A Sucker Retires Every Minute - BusinessWeek: "Scams: A Sucker Retires Every Minute
More retirees are being targeted by financial fraudsters. Often, these scammers are themselves elderly"

L'Oréality check - Not so pretty Sarkozy...

Not so pretty Sarkozy.. 

Nicolas Sarkozy's approval ratings

L'Oréality check

Nicolas Sarkozy's approval ratings have hit a record low in recent weeks

Jul 13th 2010 | From The Economist online

“CALUMNY and lies!” was how a defiant President Nicolas Sarkozy countered the allegations against him and Eric Woerth, his labour minister, in an hour-long interview on July 12th. By appearing on live prime-time television, Mr Sarkozy hoped to defuse apolitical crisis prompted by a party-financing and alleged tax-evasion scandal centred on Liliane Bettencourt, heiress to the L’Oréal cosmetics empire. In recent weeks, the Bettencourt affair has dragged Mr Sarkozy’s poll ratings down to a record low. Dire as Mr Sarkozy’s poll numbers seem, however, they are not yet as bad as those of Jacques Chirac, his predecessor. In 2006 Mr Chirac’s approval rating sank to a miserable 16%, four years into his second mandate.

                  

Click below for the interactive chart

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story_id=16580631

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Sleaze Factor | Foreign Policy

It's not just the third world where they like unmarked envelopes....

Sleaze Factor

Is there an epidemic of corruption in the world's democracies?

BY JOSHUA E. KEATING | JULY 12, 2010

From Angola to Uzbekistan, Haiti to Zimbabwe, in far too many countries around the world, blatant official corruption not only goes unpunished -- it's the norm. But while we normally associate bribery, cronyism, and extortion with fragile developing states, the leaders of some of the world's most stable and prosperous democracies have recently been investigated on criminal charges. Is this a case of those in glass houses shouldn't throw stones, or does it mean that we're getting better at catching powerful crooks?

FRANCE

The target: President Nicolas Sarkozy

The alleged crimes: Illegal cash payments

The investigation: French prosecutors recently investigated allegations that Sarkozy illegally received cash in unmarked envelopes from Liliane Bettencourt, France's richest woman, as a presidential candidate in 2007. According to Bettencourt's former accountant, the L'Oreal heir's financial advisor gave €150,000 to the treasurer of Sarkozy's campaign -- an allegation denied by both parties. The former treasurer, who is now labor minister, was officially cleared of wrongdoing, but opponents say the investigation by France's finance inspector was not impartial.

"L'affaire Bettencourt" is just the latest scandal to hit Sarkozy's administration, including the resignation of two junior ministers who spent thousands of dollars on cigars and Caribbean vacations, and a corruption scandal involving one of Sarkozy's closest friends and political allies who was implicated in a multimillion-dollar insider-trading scheme in 2007. But in the wake of the financial crisis and an unpopular pension-reform plan, this time the president might be fighting for his political career: On July 12, Sarkozy took the unusual step of appearing on national television to deny the charges.

Sarkozy's allies have denounced the allegations as a left-wing "political plot," and indeed there seem to be some large holesin the allegations made by Bettencourt's advisor. But Sarkozy's opponents will likely have little sympathy. His longtime political rival, former Prime Minister Dominique de Villepin, was the subject of a five-year investigation and trial over allegations that he faked documents that linked Sarkozy to bribes while the two politicians were angling for the presidency. De Villepin was cleared of the charges -- though three of his colleagues were convicted -- and has maintained that the investigation was nothing but a political vendetta by the president.

ITALY

The target: Prime Minister Silvio Berlusconi

The alleged crimes: Corruption, organized crime

The investigation: Berlusconi claims with pride that he is "the most legally persecuted man of all time." More than 109 cases have been brought against him, ranging from nonpayment of taxes to false accounting, bribery to prostitution. By his own count, he has been subjected to more than 2,500 court hearings. But despite the best efforts of prosecutors and political opponents, the 73-year-old Berlusconi seems unlikely to ever see the inside of a jail cell or be forced to step down.

The Teflon prime minister has managed four times to pass laws granting himself immunity from prosecution, though each of which has been judged unconstitutional by the courts. For his part, Berlusconi has accused the Italian judicial system of having an ingrained left-wing bias.

The most recent legal scandal involving Berlusconi concerns his longtime friend, business partner, and political ally Marcello Dell'Utri, who has been convicted of serving as a liaison between the mafia and Italy's political elite. In the course of the trial, a convicted Mafia hit-man testified that senior Mafia leaders had boasted of their ties to Berlusconi during the 1990s.

ISRAEL

The target: Former Prime Minister Ehud Olmert

The alleged crimes: Bribe-taking

The investigation: With internal probes into the 2008 offensive in Gaza and the controversial boarding of a pro-Palestinian flotilla earlier this year, Israel certainly doesn't lack for high-profile investigations. But the country is riveted by the ongoing corruption investigation against former Prime Minister Ehud Olmert, who was plagued by corruption charges throughout his term. New York businessman Morris Talansky claims he gave Olmert more than $150,000 for his campaign for mayor of Jerusalem in 1997, but the money was spent on fine hotels, cigars, and watches.

Perhaps more shockingly, Olmert is accused of charging multiple nonprofit groups -- including a charity for the disabled and the Yad Vashem Holocaust memorial -- for the same fundraising trips. Olmert announced his resignation in 2008 and wascharged with fraud a year later.

He has yet to be convicted, but investigations are ongoing. Most recently, Olmert was questioned over accusations that he accepted bribes in exchange for helping win contracts for a Jerusalem real estate developer. His administration didn't come off looking that clean either: A finance minister was investigated for embezzlement, a justice minister resigned after being convicted for sexual harassment, and President Moshe Katsav resigned amid scandal after allegations of sexual assault.

Olmert is the first Israeli head of government to be indicted on corruption charges, though current Prime Minister Benjamin Netanyahu has been the subject of investigations in the past. Foreign Minister Avigdor Lieberman is also under investigation for a number of crimes, including bribery, fraud, and money-laundering.

TAIWAN

The target: Former President Chen Shui-bian

The alleged crimes: Corruption, embezzlement

The investigation: Chen was named as a suspect in a $450,000 embezzlement case within hours of stepping down as president of Taiwan in 2008 and sentenced to life imprisonment less than a year later -- an ignominious end to the political career of the once renowned human-rights-lawyer-turned-politician.

Prosecutors had long been gunning for Chen, who enjoyed immunity from prosecution as president -- his wife and son-in-law were arrested on charges of forgery and insider trading while he was still in office. Chen's political opponents also maintained that Chen faked an assassination attempt in 2004 to win voter sympathy in his reelection bid.

Chen and his wife, who was also given a life sentence, continue to appeal their convictions. Their sentences were reducedfrom life imprisonment to 20 years in June when the court found that less money was involved in the corruption than previously thought. The former president remains in detention as his appeal continues.

But the current administration isn't squeaky clean either: President Ma Ying-jeou, Chen's political rival, was twice tried and acquitted on corruption charges before taking office.

* A deleted section of this article implied that President Lee Myung-bak of South Korea is being investigated in connection with allegations of illegal surveillance. While several senior South Korean officials are being investigated, including several in the prime minister’s office and one in the president’s office, Lee has not been named as a suspect. FP regrets the error.

Sleaze Factor - By Joshua E. Keating | Foreign Policy