Tuesday, 26 August 2008

more economical woes ahead

Nobel prize winners warn financial system is still not out of the woods

By Ambrose Evans-Pritchard,
International Business Editor, in Lindau, Germany

1:27am BST 22/08/2008

A top caste of Nobel Prize economists has warned that the world's financial system may not start to recover for at least another year, leaving banks at mounting risk of an insolvency crisis.

"There is a tremendous amount of de-leveraging still necessary in the United States and Europe," said Myron Scholes, the father of complex derivatives.

"I'm not exactly sure when it's going to end. There are many financial institutions that need to add capital or sell assets, but it's getting more difficult," he said, at the annual gathering of Laureates on Lake Constance hosted by Sweden's Riksbank.

Mr Scholes, co-founder of the hedge fund Long-Term Capital Management, has had a brush with a systemic melt-down. His fund was almost $100bn (£53bn) underwater in the 1998 financial crisis after Russia's default caused bets on Italian and Spanish bonds to turn bad. The US Federal Reserve came to the rescue by slashing interest rates.

Joseph Stiglitz, the former head of the White House Council of Economic Advisers, said the crisis would cost the US $1.5 trillion over the next three years. But this is just the start. The downturn is engulfing most of the global economy.

"This has spread to Europe, and will probably spread to China," he said.

He said the European Central Bank was making a serious error trying to squeeze inflation. "There is no theoretical justification for this," he said.

"They seem to have recognised that there are other risks beside inflation, so there is a glimmer of hope," he said.

"A lot has changed since the wage-price spiral of the 1970s. Labour unions are weaker, and globalisation acts as discipline on wage demands," he added.

Mr Stiglitz said the watchdogs had failed to prevent the credit bubble because they were themselves captives of ideology. "There was a party going on and the regulator didn't want to be a party pooper. They encouraged people to take out floating-rate mortgages at 1pc."

"Banks didn't just fail to manage their credit risk, they created credit risk. We have to bear the consequences," he said.

He cautioned against a punishment policy that would further damage the banking system, saying it was Japan's refusal to bail out the banking system in the 1990s over fears of moral hazard that led to the protracted slump.

Mr Scholes, an unrepentant free-marketeer, said governments had been a key cause of the debacle.

"It is necessary to remind people of risk. I hope there is not a rush to regulation, because the costs might be higher than the benefits," he said.

Moves to restrict lending by the mortgage giants Fannie Mae and Freddie Mac six years ago are a textbook case of what can go wrong. Other lenders operating outside any normal restraint muscled in on their once stodgy home loan business.

Berkeley Professor Daniel McFadden said the crunch was now moving into the broader economy, threatening a number of companies with bankruptcy.

He said the disastrous errors of recent years bring into question the whole assumption of "market efficiency" that lies at the core of modern economics.

He proposed a body like the US Food and Drug Administration to certify new types of securities and derivatives.

But at root, the failure is one of moral care. "Amid a rush to profit, what's been lost is the idea that a banker has some responsibility to protect the client's interest," he said.

Information appearing on telegraph.co.uk is the copyright of Telegraph Media Group Limited and must not be reproduced in any medium without licence.

Wednesday, 20 August 2008

l'axe du bien


20 aout 2008

En 2001, Shaul Mofaz a ordonné que Tsahal tue 70 Palestiniens par jour

Le Premier ministre israélien, Ehud Olmert, mis en cause dans de nombreuses affaires de corruption, a fini par renoncer à son poste. Il se maintiendra cependant en place jusqu’aux élections législatives de septembre bien que sa popularité soit la plus basse d’un chef de gouvernement dans le monde.

Son départ annoncé ouvre une double compétition. D’abord pour la présidence du parti Kadima, entre la ministre des Affaires étrangères Tzipi Livni et le ministre des Transports Shaul Mofaz ; puis entre le prochain président de Kadima et celui du Likoud, Benyamin Netanyahu, pour le poste de Premier ministre.

C’est dans ce contexte électoral que deux célèbres journalistes, Ofer Shelah (Yedioth Aharonot) et Raviv Drucker (Channel 10), publient une nouvelle édition de leur biographie très documentée de Shaul Mofaz, intitulée Boomerang.

Alors que la presse vient de révéler que Mme Livni était une ancienne espionne du Mossad et qu’elle avait supervisé depuis Paris des assassinats politiques en Europe, les deux auteurs soulignent le côté encore plus dur du général Mofaz.

Selon les témoignages recueillis, au début de la Seconde Intifada (alors qu’Ariel Sharon était Premier ministre), le général Mofaz (alors chef d’état major des armées) ordonna aux généraux de brigade de « faire passer un message » aux Palestiniens pour qu’ils cessent leur révolte. « Je veux 10 Palestiniens morts par jour dans chaque [zone contrôlée par une] brigade », déclara-t-il. Le général Yitzak Eitan (alors commandant du Commandement central), fit observer que cela signifiait 70 Palestiniens tués par jour et demanda que cet ordre lui soit confirmé par écrit avant de l’exécuter.

Sunday, 10 August 2008

crimea increasingly a possible casus belli

Ukraine threatens to bar Russian warships

Sun Aug 10, 2008 5:49am EDT

KIEV, Aug 10 (Reuters) - Ukraine said on Sunday it reserved the right to temporarily bar Russian warships dispatched to the Georgian coast from returning to their Ukrainian base of Sevastopol.

"Ukraine ... reserves the right to bar warships and vessels which could take part in the action (conflict with Georgia) from returning to Ukrainian territory until the conflict is solved," a Ukrainian Foreign Ministry statement.

Moscow, involved in a military conflict with Tbilisi over Georgia's breakaway region of South Ossetia, said earlier on Sunday its warships have arrived at Georgia's Black Sea coast. Russia's Black Sea Fleet is based in the Ukrainian port of Sevastopol.

"The Ukrainian side warns the Russian side against the possibility of the Black Sea warships taking part in the conflict over South Ossetia," said the statement posted on the ministry website www.mfa.gov.ua

Russia has accused ex-Soviet Ukraine, a strong pro-Western ally of Tbilisi, of supplying weapons to the Caucasus state and encouraging it to strike South Ossetia.

According to some Russian news agencies, the Russian warships were tasked to prevent weapons and military hardware from being shipped to Georgia.

Other news agencies said the warships were there to take part in a possible "humanitarian operation." (Reporting by Sabina Zawadski, writing by Oleg Shchedrov, editing by Mary Gabriel)

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