John Law in Venice: Today’s Economic History
38 minutes ago
Ever since Roman times Asia had been a purveyor of valued goods for the tribute-taking classes of Europe and had thereby exercised a powerful pull on Europe's precious metals. This structural imbalance of European trade with the East created strong incentives for European governments and businesses to seek ways and means, through trade or conquest, to retrieve the purchasing power that relentlessly drained from West to East. As Josiah Child's contemporary Charles Davenant observed, whoever controlled the Asian trade would be in a position to "give law to all the commercial world" (Wolf 1982: 125).
Until around 2001, you could argue that it was: China’s overall trade position wasn’t too far out of balance. From then onward, however, the policy of keeping the yuan-dollar rate fixed came to look increasingly bizarre. First of all, the dollar slid in value, especially against the euro, so that by keeping the yuan/dollar rate fixed, Chinese officials were, in effect, devaluing their currency against everyone else’s. Meanwhile, productivity in China’s export industries soared; combined with the de facto devaluation, this made Chinese goods extremely cheap on world markets.
The result was a huge Chinese trade surplus. If supply and demand had been allowed to prevail, the value of China’s currency would have risen sharply. But Chinese authorities didn’t let it rise. They kept it down by selling vast quantities of the currency, acquiring in return an enormous hoard of foreign assets, mostly in dollars, currently worth about $2.1 trillion.
It would be a grave mistake to underestimate the genuine admiration felt by most Americans for English values, or for that matter Scottish, Welsh and Irish values. The same cannot be said for the creed of the British Empire. With the exception of some fanatical Anglophiles of the English Speaking Union, and the romanticists of the 'white man's burden' (and perhaps a further more rational minority who regarded British rule as an instrument of progress), Americans did not admire British imperialism. If ever there were an example of one organ of the press catching the collective sentiment of the American public, it was the 'Open letter to the people of England' published by Life magazine in October 1942 at the time of the 'Quit India' movement:
[Olne thing we are sure we are not fighting for is to hold the British Empire together. We don't like to put the matter so bluntly, but we don't want you to have any illusions. If your strategists are planning a war to hold the British Empire together they will sooner or later find themselves strategizing all alone. . . .In the light of what you are doing in India, how do you expect us to talk aboutThe ideology of the American anti-colonial campaign was more than a reflection of
'principles' and look our soldiers in the eye?
self-interest. It was a force in itself which helped to shape the substance of defence, economic, and foreign policy. It was a set of principles that most Americans upheld. The essence of it was the belief that colonial subjects had the inherent right to become independent and to rule themselves.
These, then, are the four principles of peace: Democracy, an International Order, Restitution and Generosity. Their translation into precise details is a matter which cannot now be undertaken. But there are certain points to which it is essential that we should all now commit ourselves as publicly as we can, while our visions are still unclouded. There must be no annexations of German territory and no indemnities. There must be disarmament, but no expectation that Germany will remain disarmed while other nations are armed. There must be a genuine sharing of colonial benefits and responsibilities through the widest extension of the mandatory principle. There must be a new League of Nations, with the hesitations and half-commitments of the old removed. There must be an end of the more senseless forms of economic nationalism.
In the madness and the agony that is to come, we must cling fast to these principles. Only so can we be quite sure that, in defending democracy, we shall not betray it, and that the freedom for which we fight is that freedom for all men on which alone permanent peace can be built.
Following WWI, the League of Nations established a system of "Mandates." In theory, the Mandate system had the benevolent intention of preparing the "natives" of various regions for self government. In practice, the granting of mandates often represented nothing more than the granting of spoils to the different victorious allied governments. The basis of the mandate system was Article 22 of the Covenant of the League of Nations, which gave broad authority to the mandate powers regarding preparation for self-rule.
As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.
A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.
Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."
One of our main results suggests that it may be computationally intractable to price derivatives even when buyers know almost all of the relevant information, and furthermore this is true even in very simple models of asset yields.
The lemon problem clearly exists in real life (e.g., "no documentation mortgages"), and there will always be a discrepancy between the buyer's "model" of the assets and the true valuation. Since we exhibit the computational intractability of pricing even when the input model is known (N - n independent assets and n junk assets), one fears that such pricing problems will not go away even with better models. If anything, the pricing problem should only get harder for more complicated models. (Our few positive results in Section 5 raise the hope that it may be possible to circumvent at least the tampering problem with better design.) In any case, we feel that from now on computational complexity should be
explicitly accounted for in the design and trade of derivatives.
I remember one day my seven-year old son Shakir came home to complain that he had been punished in his religious studies class. When I asked him why, he replied: “The teacher asked me what Islam taught us, and I replied Arabic. So she made me stand in the corner.” - Irfan Husain, in The Dawn, Karachi
What plans did he have for the industrial development of the country? Did he hope to enlist technical or financial assistance from America?
"America needs Pakistan more than Pakistan needs America," was Jinnah's reply. "Pakistan is the pivot of the world, as we are placed" -- he revolved his long forefinger in bony circles -- "the frontier on which the future position of the world revolves." He leaned toward me, dropping his voice to a confidential note. "Russia," confided Mr. Jinnah, "is not so very far away."
This had a familiar ring. In Jinnah's mind this brave new nation had no other claim on American friendship than this - that across a wild tumble of roadless mountain ranges lay the land of the Bolsheviks. I wondered whether the Quaid-i-Azam considered his new state only as an armored buffer between opposing major powers. He was stressing America's military interest in other parts of the world. "America is now awakened," he said with a satisfied smile. Since the United States was now bolstering up Greece and Turkey, she should be much more interested in pouring money and arms into Pakistan. "If Russia walks in here," he concluded, "the whole world is menaced."
In the weeks to come I was to hear the Quaid-i-Azam's thesis echoed by government officials throughout Pakistan. "Surely America will build up our army," they would say to me. "Surely America will give us loans to keep Russia from walking in." But when I asked whether there were any signs of Russian infiltration, they would reply almost sadly, as though sorry not to be able to make more of the argument. "No, Russia has shown no signs of being interested in Pakistan."
This hope of tapping the U. S. Treasury was voiced so persistently that one wondered whether the purpose was to bolster the world against Bolshevism or to bolster Pakistan's own uncertain position as a new political entity. Actually, I think, it was more nearly related to the even more significant bankruptcy of ideas in the new Muslim state -- a nation drawing its spurious warmth from the embers of an antique religious fanaticism, fanned into a new blaze.
"The Pakistani military leadership cannot concede the proposed American strategy to confront the Al-Qaeda-Taliban network because it will risk losing its long-term “assets” for political adjustment in Afghanistan."
Options for war or peace
Najam Sethi’s E d i t o r i a l
Two inter-related and significant developments in Pakistan in the last seven days have hit world headlines. But there is an underlying third dimension that has not been explicitly debated. Consider.
Pakistan’s military leadership has whipped up the religio-nationalist media and opportunist political opposition to attack the Kerry-Lugar Bill as an unacceptable American attempt to undermine Pakistan’s sovereignty. But a close look at the Bill’s conditions doesn’t reveal any extraordinary trespass that is significantly different from the past under military regimes. So, why has GHQ rapped the US administration and the Zardari regime?
But the Pakistan army is also on the receiving end. The Al-Qaeda-Taliban network has smacked it squarely where it hurts. Four major terrorist attacks in seven days, including the audacious daylong siege of GHQ, and 114 killed, including a Brigadier and a Colonel. What is the message of the terrorists to the army’s leadership?
Is there a link between these two developments that explains what is going on?
A debate is raging in Washington DC. The US national security establishment led by the Pentagon in DC and General Stanley McChrystal in Kabul wants a 40,000-troop surge in Afghanistan. But the liberals in the Obama administration, media and think tanks want to bring the boys home and let Afghanistan boil in its own sordid juices. There is now a third option on the table from Joe Biden, the US vice-president. He wants the status quo on troop levels to be maintained. But he also wants US war-strategy to focus on the Al-Qaeda-Taliban network in Waziristan and Balochistan rather than in Afghanistan. In other words, he is advising a defensive and holding posture in Afghanistan and an offensive and forward position in Pakistan. Hence the recent debate about the pros and cons of targeting Mulla Umar’s “Quetta Shura” in Balochistan. This is also another way of pressuring the Pakistan army to go into Waziristan all guns blazing, stop protecting the Quetta Shura and finish the job itself.
Here’s the rub. The Pakistan army doesn’t like General McChrystal’s idea of an American troop surge or Mr Biden’s notion of an aggressive posture inside Pakistan’s tribal areas. Emotional issues of “occupation” and “sovereignty” aside, both options would amount to the same thing for GHQ: if successful, they would strengthen the current Washington-Kabul-New Delhi axis now calling the shots in Afghanistan and deprive Pakistan’s military of political leverage based on select pro-Pakistan and anti-India Taliban or Pakhtun “assets” in any future political dispensation in its backyard. The Pakistan military is also uneasy at the prospect of launching full–scale operations in Waziristan without first having fully mopped up Swat and motivated its soldiers for the tougher task ahead. The onset of winter and the regrouping of the Pakistan Taliban under Baitullah Mehsud’s successor Hakeemullah make the task even more daunting.
Obviously, the Al-Qaeda-Taliban network doesn’t like these options either. So the Afghan Taliban launched a well-planned and ferocious attack on the Indian embassy in Kabul and the Pakistani Taliban a desperate and audacious one on GHQ in Rawalpindi last week. This is meant to signal that, far from digging in to withstand the proposed US-Pakistan offensive in Waziristan, the Al-Qaeda-Taliban network is determined to carry the battle to the heartland of Afghanistan and Pakistan. Meanwhile, India and Pakistan are pointing to an ISI hand in the attack on India’s Kabul embassy and RAW’s behind the attack on GHQ respectively. Therefore the two America-sponsored options can be scuttled by a terrorist attack inside India that unleashes the demons of Mumbai and brings the two countries to the brink of war, diverting and diminishing attention from America’s “war against terror” and leading to political convulsion and possibly regime change in Pakistan.
The Pakistani military leadership cannot concede the proposed American strategy to confront the Al-Qaeda-Taliban network because it will risk losing its long-term “assets” for political adjustment in Afghanistan. It also cannot balk over a bold new operation in Waziristan alongside the Americans because that will lead to a blow to its wounded pride over the attack on GHQ. The media that backed it to the hilt over the red herring of the Kerry-Lugar Bill to deflect American pressure to up the ante against the Afghan Taliban in Waziristan is now demanding a similar “honour-saving” exercise from the army against the Pakistan Taliban. The problem, of course, is that, while we may talk of different categories and targets of Taliban, we are in fact dealing with a dangerous nexus between Al-Qaeda, Afghan Taliban, Pakistani Taliban and Pakistan Jihadi and sectarian parties and groups that has become one network aiming to seize Kabul and then Islamabad.
Clearly and realistically speaking, the powerful Pakistani military and national security establishment must be part of any regional solution. It must be accorded a greater role in America’s roadmap for determining Afghanistan’s future as a peaceful and stable state that is friendly and not hostile to Pakistan. If that doesn’t happen, the odds are that the Pakistani military will strike back. The Kerry-Lugar bill is the first casualty. If renewed tension with India and regime change in Pakistan follow, there will be no winners and losers in the region.
The Rig Veda, the most ancient Hindu scripture, says this: "Truth is One, but the sages speak of it by many names." A Hindu believes there are many paths to God. Jesus is one way, the Qur'an is another, yoga practice is a third. None is better than any other; all are equal. The most traditional, conservative Christians have not been taught to think like this. They learn in Sunday school that their religion is true, and others are false. Jesus said, "I am the way, the truth, and the life. No one comes to the father except through me."
You never, ever get a true dissident from a prominent Western country winning the award, despite the obvious appropriateness such a choice would represent. Our Western society quite openly embraces war as a means of solving problems and for quite some time now has fashioned its entire social and economic structure around the preparation for war.....That’s how this thing works. We ebb toward war most of the time. But sometimes, out of necessity, or when we run out of bullets, we ebb the other way. And it’s then that we give ourselves awards for our peace-loving behavior.
"Earlier this year, the business lobby went into high gear to prevent the Obama administration’s plans for corporate tax reform, with the Business Roundtable promising to spend “whatever it takes” to ensure that the reforms never saw the light of day. That determination seems to have had some effect, as the Wall Street Journal reported today that administration “has shelved a plan to raise more than $200 billion in new taxes on multinational companies following a blitz of complaints from businesses.”
As the Journal noted, the particular reform in question — which would have limited the ability of corporations to defer taxation on profits that they earn overseas — drew the ire of the corporate world, and “companies ranging from Microsoft Corp. to General Electric Co. to International Business Machines Corp. put the topic at the top of their Washington agendas.”
As to whether the prize was given too early in Mr. Obama’s presidency, he [Mr. Jagland, a former prime minister of Norway] said: “We are not awarding the prize for what may happen in the future but for what he has done in the previous year. We would hope this will enhance what he is trying to do.”
_ Myth: Candidates can be nominated until the last minute.
The nomination deadline is eight months before the announcement, with a strictly enforced deadline of Feb. 1.
_ Myth: The prize can be awarded posthumously.
The prize was award posthumously only once — in 1961, to former U.N. Secretary-General Dag Hammerskjold, after he was killed in a plane crash in Africa. The rules were amended in 1974 to prohibit posthumous prizes.
_ Myth: The prize is awarded to recognize efforts for peace, human rights and democracy only after they have proven successful.
More often, the prize is awarded to encourage those who receive it to see the effort through, sometimes at critical moments.
In February, the Obama DOJ went to court to block victims of rendition and torture from having a day in court, adopting in full the Bush argument that whatever was done to the victims is a "state secret" and national security would be harmed if the case proceeded. The following week, the Obama DOJ invoked the same "secrecy" argument to insist that victims of illegal warrantless eavesdropping must be barred from a day in court, and when the Obama administration lost that argument, they engaged in a series of extraordinary manuevers to avoid complying with the court's order that the case proceed, to the point where the GOP-appointed federal judge threatened the Government with sanctions for noncompliance. Two weeks later, "the Obama administration, siding with former President George W. Bush, [tried] to kill a lawsuit that seeks to recover what could be millions of missing White House e-mails."
In April, the Obama DOJ, in order to demand dismissal of a lawsuit brought against Bush officials for illegal spying on Americans, not only invoked the Bush/Cheney "state secrets" theory, but also invented a brand new "sovereign immunity" claim to insist Bush officials are immune from consequences for illegal domestic spying. The same month -- in the case brought by torture victims -- an appeals court ruled against the Obama DOJ on its "secrecy" claims, yet the administration vowed to keep appealing to prevent any judicial review of the interrogation program. In responses to these abuses, a handful of Democratic legislators re-introduced Bush-era legislation to restrict the President from asserting "state secrets" claims to dismiss lawsuits, but it stalled in Congress all year. At the end of April and then again in August, the administration did respond to a FOIA lawsuit seeking the release of torture documents by releasing some of those documents, emphasizing that they had no choice in light of clear legal requirements.
In May, after the British High Court ruled that a torture victim had the right to obtain evidence in the possession of British intelligence agencies documeting the CIA's abuse of him, the Obama administration threatened that it would cut off intelligence-sharing with Britain if the court revealed those facts, causing the court to conceal them. Also in May, Obama announced he had changed his mind and would fight-- rather than comply with -- two separate, unanimous court orders compelling the disclosure of Bush-era torture photos, and weeks later, vowed he would do anything (including issue an Executive Order or support a new FISA exemption) to prevent disclosure of those photos in the event he lost yet again, this time in the Supreme Court. In June, the administration "objected to the release of certain Bush-era documents that detail the videotaped interrogations of CIA detainees at secret prisons, arguing to a federal judge that doing so would endanger national security." In August, Obama Attorney General Eric Holder announced that while some rogue torturers may be subject to prosecution, any Bush officials who relied on Bush DOJ torture memos in "good faith" will "be protected from legal jeopardy." And all year long, the Obama DOJ fought (unsuccessfully) to keep encaged at Guantanamo a man whom Bush officials had tortured while knowing he was innocent.
n. An economy that is driven by or that disproportionately benefits wealthy people, or one where the creation of wealth is the principal goal.
[Blend of pluto- (wealth) and economy.]
Citigroup Plutonomy Report Part 1
Oct 16, 2005
- The World is dividing into two blocs - the Plutonomy and the rest. The U.S., UK, and Canada are the key Plutonomies - economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
- Equity risk premium embedded in "global imbalances" are unwarranted. In plutonomies the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers like savings rates, current account deficits, consumption levels, etc.
This imbalance in inequality expresses itself in the standard scary "global imbalances". We worry less.
I've written before about the powerful mental benefits of communing with nature - it leads to more self-control, increased working memory, lower levels of stress and better moods - but a new study by psychologists at the University of Rochester find that being exposed to wildlife also makes us more compassionate. Nature might be red in tooth and claw, but even a glimpse of greenery can make us behave in kinder, gentler ways.