Quote of the Week : “I don’t think he (i.e. Bashar al-Assad) has to go” – Former US President Bill Clinton on Fareed Zakaria’s GPS program on CNN on Sunday morning September 22nd – this must have been a ‘slip of the tongue’; for, all public bravado aside, Washington sees no option to him somehow staying on; for without a strong man at the top Syria, like Egypt, Libya, Iraq & Somalia, would likely become another ‘failed state’, split asunder into a kaleidoscope of religious-, ethnic-, & clan-, based fiefdoms in perpetual warfare with each other.
Quote of the Week No. 2 : “Nothing is as permanent as a temporary government program” – Milton Friedman (as Bernanke is now finding out, they’re easy to start but hard to kill; for there is never a ‘Goldilocks”, “just right”, moment to do so).
Two a propos of nothing observations :
· The prattle one hears on TV from ex pats claiming no longer to feel “safe” in Kenya is a turn-off. For terrorists can strike at will almost any time almost anywhere in the world, the basic problem being that, while terrorism ‘preventers’ have tens or hundreds of thousands, if not millions, of potential targets to watch 24/7/365, a task that is both impossible & impossible to sustain, terrorists only have to pick one target to attack at a time of their choosing. It’s a bit like driving vs. flying; many people worry about travelling by air while few fear travelling by car; and yet statistically ‘death by car’ has a far greater probability than ‘death by plane’. Those who dwell on the risk they might be killed in a terrorist attack merely play into the terrorists’ hands;
· Much is written about the US seeking to maintain its position in the Middle East. This is akin to driving down the road by looking in the rearview mirror. Washington policy decision makers have long dreamt of being shot of the place. And now, with energy independence rightly or wrongly seemingly around the corner, they see themselves as able, at long last, “to get out of Dodge”. While once upon a time Middle East oil was critical to the US economy since it was a huge energy importer, that is now going to be China’s, & to a lesser extent India’s, cross to bear. So from being key to US foreign policy, the Middle East will shift to its periphery (which will fit in neatly with the US’s historic proclivity to isolationism). If so, this will have major implications for Israel that it seemingly is as yet blind to since it continues to operate as if the historic power & influence of the Jewish lobby in Washington will last forever, ignoring the fast-growing clout of the Muslim lobby, rooted in its growing numbers, its higher-than-average birth rate & its concentration in a few “swing states”. Pity the Israelis!
On July 31st of this year the US Bureau of Economic Analysis changed the way it treats contributions to defined benefit pension plans in its GDP growth calculations. Whereas hitherto it had dealt with them on a “cash accounting” basis (including them when the employer actually made the cash payment to the pension plan), on that date it shifted to an “accrual accounting” basis (i.e. including them when the employer undertook to make the payment), since this would “more closely align the accrual of retirement benefits with the employee’s work.” At a time of a massive underfunding of pension plans this seems like a scam to make it look as if GDP is growing faster than it really is by including in its calculation the creation of paper-, as well as real-, goods. One market observer commented this reminded him of when Enron convinced its auditors it was kosher to “book” as current revenue the implied revenue stream from new ideas they had hatched but not yet implemented (& we all know how that ended up, with Enron experiencing a credibility crisis & going TU, and some of those who hatched the idea ending up doing ‘hard time’ – anyone out there who could enlighten the rest of us?
In 1996 China, Kazakhstan, Kyrgyzstan, Russia & Tajikstan, meeting in Shanghai agreed to “deepen military trust in border regions”. One year later this resulted in a “Treaty on Reducing Military Forces in Border Regions”. When Uzbekistan joined them in 2001 it became known as the Shanghai Cooperation Organization (SCO), leading, one year later, to a bilateral Russia-China “Treaty of Good-Neighbourliness and Friendly Cooperation” (which was what it had been all about from the outset since these two share a long, largely indefensible, & occasionally fought-over, border, and Moscow had, & still has, concerns about China’s growing influence in Eastern Siberia & the four ‘minion countries’ about becoming sandwiched in any future military clash between them). Four other countries (Afghanistan, India, Mongolia & Pakistan) have observer status (deemed indicative of intent to become, at some point, a full member – the US apparently sought such status in 2006 but was turned down but if India were ever to become a full member this would be greatly boost the group’s geopolitical status), recently the number of countries with “dialogue partner” status went from two (Belaurus & Sri Lanka) to three when Turkey joined them, & three entities (ASEAN, CIS & Turkmenistan) have “guest attendant” status, while SCO itself has observer status at the UN, the EU, ASEAN, CIS & the Organization of Islamic Cooperation. Its six members account for 60% of Eurasia’s landmass & 25% of the world’s population (the latter of which would double if the four observer nations were included), but account for just 14% of global GDP for the six & 17% for the ten.
Issa Kalantari (age 61) has an MSc in Physiology & Biochemistry from Iowa State & a PhD in Agricultural Physiology from the University of Nebraska. He was Iran’s Minister of Agriculture during both terms of President Rafsanjani (who would have been a shoo-in in this year’s Presidential election had he been allowed to run) & the first term of President Khatami (i.e. for 12 years from 1989), & is now said to be an adviser to President Rouhani. On June 9th, in an interview with the newspaper Ghanoon (i.e. Law), he said “Our main problem that threatens us, that is more dangerous than Israel, America or political fighting is the issue of living in Iran… the Iranian plateau is becoming uninhabitable … Groundwater has decreased and no one is thinking about this … I am deeply concerned about future generations … If this situation is not reformed, in 30 years Iran will be a ghost town … All the bodies of natural water are drying up … deserts in Iran are spreading and I am warning you that South Alborz (the mountain range between the Caspian Sea and Tehran & the Iranian Plateau) and East Zagros (the mountain range separating Tehran & the Iranian Plateau from the Persian Gulf) will be uninhabitable and people will have to migrate. But where? Easily I can say that of the 75 million people in Iran, 45 million will have uncertain circumstances … If we start this very day, it will take 12-15 years to balance.” – this kind of thinking may well be behind President Rouhani’s, & Iran’s, change in tone & his plan to get a nuclear deal done quickly (which must have been endorsed by the Supreme Leader). But his message applies to more than just Iran; for he may just be “the canary in the coal mine’ for Mankind. And his warning about the compelling future need for people to migrate from water-scarce, no longer inhabitable, places to more viable ones will in the decades ahead compound the effect of global population growth (in part because in many cases, the most threatened regions of the world also have the highest fertility rates) & become the key issue driving geopolitics – [the Ghanoon (Law) newspaper was launched online two years-, & published its first, twelve-page hard copy one year-, ago. It claims to be privately-owned & non-governmental, devoid of party-, faction-, or group affiliations, solely funded from subscriptions & advertisements, and guided by the Supreme Leader Ayatollah Ali Khameni’s quote that “Law is the distance between right & wrong.”]
According to Faith Birol, the IEA’s Chief Economist, the shale-driven low gas prices have encouraged a major shift in the US from coal-, to natural gas-, fueled power generation, thereby cutting US greenhouse gas emissions. But they have also resulted in a decline in global thermal coal prices that has caused power generators elsewhere to switch to coal from more costly gas & oil. So, while the US may be looking better, the global effect on emissions has been a ‘wash’.
On the subject of “real gold”, i.e. the physical-, rather than paper-, variety, China appears to be looking at its present price as a buying opportunity; thus in the first seven months of this year it imported 27.8MM ounces, more than it had in all of 2012, and in the first half of the year physical delivery of gold from the Shanghai Gold Exchange amounted to 35MM ounces, equivalent to 80% of the newly-mined production. And to top it all off, Goldman just announced a new US$1,050 near-term gold price target which, if the past is any indication may mean that it wants to go “long” gold & needs some suckers to panic & drive the price down). And while on the subject of the precious metals, the outlook for platinum & palladium is said to have become very positive, regardless of what happens to gold (& silver); for global inventories are low, demand by the electronics industry, especially in the emerging economies, is rising while supply is constrained (& could become more so as 80% of newly mined platinum & almost half of newly mined palladium comes from South Africa (with a bit from Zimbabwe) & the lion’s share of the rest from Russia), and ETF holdings at last report were up 52% & 18% respectively this year.
As usual US economic news is mixed. In July the S&P/Case Shiller Composite Index of single family dwelling prices in 20 metropolitan areas was up 0.6% MoM & 12.4% YoY (the most in 7½ years) although the euphoria this engendered ought to be tempered by the fact the MoM increase was significantly less than the 0.8% expected & June’s 0.9%. In the latest reported week the 30-year fixed rate residential mortgage rate was down 21 bps (.21%) WoW to 4.17% & the 15-year rate 17 bps to 3.19%. On the other hand, September’s Consumer Confidence Index was down two points to 79.8, below the 80.0 expected, & the Richmond Fed’s Manufacturing Composite Index came in at 0, well below August’s 14 & the 11 expected. And following the decision at last week’s FOMC meeting not to start “tapering” yet, a majority of economists surveyed by Bloomberg now expect a decision to have been deferred until at least December.
The Alberta government is talking about the need for public servants’ pension reform, among others by delaying the scope for early retirement under the ’85 & out’ rule (that allows retirement with a full pension when age & years of service add up to 85, i.e. someone who joined at age 25 can retire at age 55, which is hellishly expensive : the old rule of thumb 30 years ago, when life expectancies were much lower than today, was that funding retirement at age 60 required twice the pension fund assets of retirement at age 65, & retirement at age 55 4x as much). But it was quick to reassure the already retired that their pensions wouldn’t be touched, despite the fact this is patently unfair to the younger generations, since it was the now retired who, often grossly, undercontributed during their working years relative to the pension entitlements they “earned”. Elsewhere in Alberta there were a couple of interesting examples of what can happen at the intersect of public interests & public ‘servants’ self-interests. The University of Alberta must find tens of millions of dollars in savings to balance its books. It has asked its teaching-, & support-, staff to help it do so. Science department heads have offered to re-open wage negotiations with a view to reducing their salaries to help maintain the quality of education. And management? It has proposed putting its scholarship program on the block (to save significantly less than $1MM of the savings needed) while four of its vice-presidents are in the $600,000+ total compensation “club” & that of the president herself is North of $1.2MM, 40% more than her counterpart at the University of Calgary & over 2x that of the president of the University of Toronto. In the second case, in 2011, when other School Board Superintendents in Alberta got a fraction thereof by way of salary increases, the salary of Edmonton’s Public School Superintendent was hiked 15% to $263,311. This was a “golden handshake” gesture; for he retired this year with his pension based on his last five years’ salary; so this will be a gift that will keep on giving (to him), & keep on costing (the taxpayer), for years to come, since not only will his annual pension be significantly higher than it would otherwise have been but he contributed at the higher level for only for two years, while getting the higher benefits for possibly decades (a back-of-the-envelope calculation suggests that in the first year or so of his retirement the increment in his pension will be a return of his incremental pension contribution during last two years of his career & that for the rest of his like his incremental pension will be on the taxpayers’ tab).
Climate change deniers are elated at word that the forthcoming report of the UN’s Intergovernmental Panel on Climate Change (that is published once every six years) will report little, if any, global temperature increases in the past 15 years. But this ignores the fact that, even without such increases, glaciers have kept melting & Arctic ice disappearing faster than ever, and that ocean levels have continued rising & once-in-a-century rain dumps have become all but everyday events. They conveniently overlook the difference between “no increase” & a “decline” – the former is meaningless unless heralding a trend reversal – & ignore the momentum effect on the environment of past temperature increases.
GLEANINGS II – 530
Thursday September 26th, 2013
WHAT THE DEADLY ATTACK IN A KENYA MALL WAS REALLY ABOUT
(ThinkProgress, Ken Menkhaus)
· It’s all about al-Shabaab weakness & suggests desperation in a jihadist group beset by internal power struggles & plummeting public support. It sought to prompt a backlash in Kenya’s government & its people against the million Somalis in their midst who fled their country since 1991 to resettle in Kenya, many of whom now have business & real estate interests there that al Shabaab in the past avoided disrupting for fear of a backlash.
· Rather paradoxically a weakened al-Shabaab is more of a threat to Kenya & the world, incl. the US, than a strong one ever was. In Somalia, while still among the strongest armed groups there, it is in serious decline, having lost, in the past two years, control of most urban areas & of the revenues generated by Kismayo & other ports. Its internal divisions exploded in armed conflicts earlier this year causing the death of several of its top leaders & a splintering of its rank & file. Most foreign mujahedeen have become disillusioned & left. And, finally, fewer Somalis at home & in the diaspora now support it. This suggests the Westgate attack was a high-risk gamble to reverse al Shabaab’s prospects by causing a Kenyan backlash against its Somali residents that would enable it to recast itself as their protector & to reframe the conflict in Somalia as one between Somalis & foreigners, rather than one between those Somalis who want peace & a return to normalcy and a toxic jihadist movement.
· Al-Qaeda’s leaders have long been disapproved of al-Shabaab’s violence against civilians which they believe damages their ‘brand’ & the attack on a shopping centre full of civilians of all religions & nationalities is likely to further widen the gap between them. But while the Kenyans must choose not to take their anger out on the Somalis in their midst (elsewhere the author opined that “If they respond to this tragedy with restraint and respect for due process and rule of law, they will do more to undermine Shabab than all of the counter-terrorist operations inside Somalia.”), the Somalis must not refuse to act decisively against al-Shabaab; for it is a Somali problem the Somali hoi polloi must solve (& have every interest in, & most to gain by, solving)
The mood in Kenya is reflected in the answer a Kenyan general gave when asked if he could forgive a terrorist, “God forgives. Our task is to arrange their meeting.” (Menkhaus lectures on developments in the Horn of Africa at Davidson College in Davidson, North Carolina, a private liberal arts college with an enrolment < 2,000 that nevertheless has managed to produce 23 Rhodes scholars over the years, more than many much larger colleges & universities).
CENTRAL BANKING’S SUDDEN CREDIBILITY GAP (Andrew Coyne, Postmedia News)
· For four months the Fed signaled it would soon start “tapering” its massive purchases of UST paper & MBS (aka QE3) only to blink when the moment of decision arrived on the grounds the economy was still too weak. This elicited two types of responses : elation in the markets that the Fed had not ‘snatched away the punchbowl’ so the party could keep going & concern as to what this might do longer-term to the Fed’s credibility. For even before this about-face, central banks generally had been finding markets increasingly loath to believe them, despite their efforts to go to unprecedented lengths to take them into their confidence, as witnessed by the recent rise in longer term interest rates despite the fact that the whole object of QE3 was to put pressure on them. This leads to a dilemma for central bankers, namely that it isn’t enough to make sure that markets understand their policy decisions but, more importantly, that they believe that central banks will be able & willing to ‘walk the walk as well as talk the talk’ regardless.
Our whole banking system is based on credibility. Once that is questioned, in a best case scenario it will take a display of brute power, with much collateral damage, to restore it, while in the nightmare scenario it could lead to a system collapse with unforeseen consequences.
OBAMA’S SYRIA ACTIONS “MISCONCEIVED, BADLY CALCULATED”
(NewsMax, Greg Richter)
· This was Kissinger’s & Zbigniew Brzezinski’s judgment on Fareed Zakaria’s GPS program on CNN on Sunday September 15th. They said that the Russian proposal to broker a deal with Syria over its chemical weapons had gotten Obama “off the hook” since both countries have a common interest in avoiding military action in Syria. According to Kissinger Putin is driven by fear events in Syria will lead to a radicalization of the region, with Brzezinski adding Putin also saw an opportunity to diminish America’s pre-eminence in it, saying “Our hegemony is declining … even though we are still the main player”. Both believe Assad must go but think that Washington lacks a clear, coherent strategy to make him do so, “of which we are now seeing the consequences.”
In Brzezinski’s youth his father was Polish Ambassador to Nazi Germany from 1931 to 1935 & to the Soviet Union from 1936 to 1938 (during Stalin’s reign of terror), before being posted to Ottawa in 1938. Educated at McGill, Harvard & Harvard Law School, he taught at Harvard & Columbia, became an expert on the Soviet Union (whose demise he predicted 20 years before it happened), was Carter’s National Security Adviser from 1977 to 1981 & associated peripherally with the Reagan & Clinton administrations and now, at age 85, with Johns Hopkins University. He is far sounder academically than the self-promoting Kissinger & likely has forgotten more about the Soviet Union & its successor states than Kissinger ever knew (for the record, I was introduced to his work in university, 55 years ago & have been a fan ever since).
US ‘OVERTLY BLACKMAILING’ MOSCOW ON SYRIA (The Voice of Russia)
· Interviewed on Channel One, Russia’s main TV channel, before leaving for the US for the UN General Assembly’s opening session & meetings with US Secretary of State John Kerry, Foreign Minister Sergei Lavrov said Washington is trying to blackmail Russia & force its “upside-down” Syria peace scenario onto the international community. He accused it of undue politicking in the Syrian crisis & using its civil war to “assert its supremacy … (and) make the region dance to its tune.” He called on Washington to accept that the world now is a “polycentric” one in which it can no longer force through its views. And he charged the West sees the Russia-US deal on Syria’s chemical weapons not as a way to get rid of them, but as ‘a chance to push through a brute force resolution in the UN, topple the regime, gloss over the opposition’s actions, assign the blame to Bashar Assad and get a free hand for military scenarios’.
Not a promising position to take prior to going to New York, given Russia’s key role in defusing the Syrian chemical weapons’ situation. But in this global diplomatic ‘tag team wrestling’ contest Obama & Kerry are clearly outmatched by Putin & Lavrov (the latter of whom was Russia’s Ambassador to the UN for 10 years prior to before becoming Foreign Minister in 2004).
WORLD BALANCE RESHAPED (Strategic Culture Foundation, Nikolai Bobkin)
· The US tends to put out-of-favour countries on its “rogue states” list. But it now is itself becoming internationally isolated as Washington’s global center status is lost due to Obama’s short-sighted & strategically-wrong policy on Syria. Its “foes of convenience” game with Syria & Iran has failed because nobody was prepared to join it in its fight against them & its claims to Middle East domination are being resolutely rejected.
The Strategic Culture Foundation is a Moscow-based think tank.
SCO GLIMPSES A NEW EURASIA IN BISHEK (Asia Times Online, Brendan P. O’Reilly)
· The basis for a new Eurasian order was laid in faraway Kyrgyzstan at the annual SCO Summit on September 13th, which brought together heads of states opposed to US global dominance, from Russia’s Putin through China’s Xi Jinping to Iran’s new President, Hassan Rouhani (although UN sanctions have kept Iran from membership). For the US-Russian agreement on Syria heralds a waning of the US’ global influence with the SCO emerging as an increasingly relevant regional & global force.
· While the six founding SCO members’ originally-stated goal was to combat the “three evil” ‘isms’ (terrorism, separatism & extremism), it has since morphed into a political, economic & military alliance opposed to the West’s global dominance. So this year’s Summit rebuffed the West’s geopolitical aims in the three most dangerous global hot spots, Iran, North Korea & Syria. It expects Rouhani’s moderate credentials to result in a negotiated solution to the US-Iran nuclear stand-off that will end the UN sanctions & pave the way for it joining the SCO. It also issued strong statements in favour of a negotiated deal on North Korea & in opposition to any military action against Syria.
· While Russia & China always were against any presence of US military ‘assets’ in Central Asia, the four ‘stans’ initially were more welcoming (to the point of becoming part of the supply chain for the Afghanistan war), But they have become much less so, in part due to Russian & Chinese pressure but also because their governments felt more & more threatened by the West’s support for local forces pushing for political reform.
Zbigniew Brzezinsky once noted “Control of the Eurasian landmass is the key to global domination and control of Central Asia is key to control of the Eurasian landmass”. Meanwhile, the Summit endorsed Putin’s initiative on Syria & presented Iran’s new President with an opportunity to declare that, in any deal to allay US concerns about his country’s nuclear program, it must recognize Iran’s right, under the Nuclear Non-Proliferation Treaty, to enrich uranium for peaceful purposes. And it can hardly be a coincidence that, on September 22nd, on the eve of Rouhani’s departure for New York, Iran’s atomic energy boss, Ali Salehi Akbar, announced that the next day Iran would take control of the Russian-built Bushehr nuclear power station “although it will remain under a Russian guarantee for two years with Russian experts remaining in place to give technical assistance”. All this means that any negotiated US-Iran deal will be seen in much of the rest of the world as a Washington climb-down.
JPMORGAN IN TALKS TO SETTLE ITS GIVERNMENT PROBLEMS FOR $11 BILLION (Reuters, David Henry & Karen Freifeld)
· After running up a US$5+BN legal bill over the past two years fighting off regulators & incurring US$ 8+BN in losses, penalties & compensation payments in the London Whale episode, it is now said to be in talks with, among others, the US department of Justice, the SEC, the Department of Housing and Urban Development, and the New York State to settle all its outstanding federal & state problems for US$11BN in the hope of easing the regulatory pressure it has been under for months (it recently revealed there were over a dozen probes of its affairs ongoing worldwide). This amount, while painful, would be manageable; for the bank last year had net income of US$21.3BN (which is expected to be still higher this year) &, as of the end of June a net worth of US$209BN.
Same old, same old : management screws up, shareholders pay & nobody goes to jail (except the odd minion). Why would anyone in his right mind want to own a piece of a bank that, while not long ago justly regarded as the ‘class act’ in US banking, now under Jamie Dimon seems intent on challenging Goldman for the title as the world’s “most client-unfriendly bank’?
CLOSING THE PAY GAP (NYT, Editorial)
· One of the most far-reaching, but also most direct & easily-understood, provisions of the vast & complex Doo-Frank financial reform bill would require public companies to compute & disclose the ratio of their CEOs’ compensation relative to that of their ‘typical employee’. For over three years corporate America has fought this idea, claiming it would be a logistical nightmare &, in any case, “meaningless”. But last week the SEC came out with a strong, common sense draft rule that would tell the companies to just implement the law, that it says it will spend the next 60 days gathering public input on. Colour this paper’s input as strongly in favour of action on this matter.
Maybe, just maybe, those in charge, from President Obama down, have discovered that they do, after all, ‘have balls’. If so, things could get interesting on the regulatory front, albeit less so for corporate America, & specifically for the ‘Wall Street banks’, especially if, as expected, the Republican Party were to lose public support in the upcoming budget cum debt limit schmozzle.
OUR CHAT WITH JEREMY GRANTHAM (WSJ, Ian Salisbury)
· He is so concerned about food, resources becoming increasingly costly & climate change that he sounds like a Greenpeace activist. He points out that commodity prices came down 70% in a century, only then to triple in a decade. While very bullish on phosphorous/phosphate as being critical to Mankind’s survival, he’s worried that 85% of the world’s low-cost, high quality phosphorous is located in one country, Morocco, i.e. that it is more constrained in its sources of supply, while more important to human welfare, than oil. He also likes oil, the metals (except aluminum & iron ore, of which there is “too much”), fertilizers, & food (the pressure on which, he says, is worse than on anything else), and loves farmland, but wouldn’t own coal or the tarsands (which ‘will be put out of business when the price of solar-, & wind-, power comes down further’). And he decries politicians’ & business leaders’ ‘short-termism, saying it’s hard to get people to change when they think they’re doing OK, causing the vested interests to fight like hell to maintain the status quo, being interested only in growth & how good things are.
He is the founder, and now the CEO & Chief Investment Strategist of Boston-based money manager GMP. His long-term track record is outstanding; the primary reason why it now has AUM of US$100+BN has been his ability to spot trends long before others trip over them.
US ‘OVERTLY BLACKMAILING’ MOSCOW ON SYRIA (The Voice of Russia)
· Interviewed on Channel One, Russia’s main TV channel, before leaving for the US for the UN General Assembly opening session & to meet with US Secretary of State John Kerry, Foreign Minister Sergei Lavrov said Washington is trying to blackmail Russia & force its “upside-down” Syria peace scenario onto the international community. He accused it of undue politicking in the Syrian crisis & using its civil war to “assert its supremacy … (and) make the region dance to its tune”, and said Washington should accept the world now is a “polycentric” one in which it can no longer force through its views, charged that the West sees the Russia-US deal on Syria’s chemical weapons not as a way to get rid of them but as “a chance to push a brute force resolution in the UN .. to topple the regime … to gloss over the opposition’s actions … to assign the blame to Bashar Assad and to get a free hand for military scenarios.”
Evidence that at this critical juncture Moscow thinks it has Washington “on the run”?
CANADA HAS GONE FROM SQUEAKY CLEAN INNOCENCE TO OIL-HUNGRY CAPITALISM IN JUST A FEW SHORT YEARS (International Business Times)
· The World Bank maintains a black list of companies guilty of corruption ineligible (in theory at least; it has seldom enforced this rigidly & there are lots of loop holes to get around it) to receive, or take part in, in its projects for up to 10 years, or even forever. The number of companies on it soared this year to 250, from 60 last year, with no fewer than 119 of the newcomers coming from Canada (one being the troubled Montreal-based SNC Lavalin). A report leaked in 2010 commissioned by the Prospectors and Developers Association of Canada found that of the 171 high-profile incidents, incl. conflicts with local communities, environmental & human rights abuses & unethical behavior, in the global mining industry in the previous decade, 34 had implicated Canadian companies, 4x those from Australia & the UK. And in 2009 Bill C-300, to make Canadian companies operating abroad comply with international human rights & environmental standards was introduced in the Canadian Parliament but was defeated.
The numbers are distorted by the fact that the Toronto Stock Exchange is the premier place in the world for mining companies to list their shares. But that does not excuse the inaction by Ottawa & the Toronto Stock Exchange. Having said that, offering ‘inducement’ to politicians & influence peddlers in the developing world is almost impossible to avoid if one wants to get, or stay in, business in countries where corruption is the order of the day, especially when Chinese or Indian competitors are known not to have any ‘aversion to corruption’ scruples.
ECB OPEN TO OFFERING MORE LOANS TO BANKS (DJ, Brian Blackstone)
· On September 23rd, in testimony to the European Parliament, ECB President Mario Draghi said “We are ready to use any instruments, including another [long-term refinancing operation] (LTRO) if needed, to maintain the short-term money markets on the level that is warranted by our assessment of inflation in the medium term” (a more specific statement than his in recent weeks when he suggested that another round of cheap loans was merely one option), & he went on to say the ECB will keep interest rates at current record-low levels, or reduce them further, over an “extended period’.
· Starting in late 2011, the ECB doled out 1+TR Euros (US$1.38TR) in three year loans (one-third of which has since been repaid which Draghi called a “good sign”) to hundreds of banks that were having trouble funding themselves in the traditional interbank market. These loans were used in part to fund the rolling over of their own bonds & in part to make a “spread” by buying government bonds with little, if any, of it funding loans to their non-government, private sector clients).
Things haven’t changed. The smaller banks in struggling Eurozone countries still cannot fund themselves in the interbank market & those who can are likely to use any LTRO money to buy higher-yielding government bonds, playing it safe by overweighting the bonds of countries that least need it, with still little, if any, going to grow their private client loan portfolio.