Sunday, 18 May 2008
Wednesday, 7 May 2008
The Ultimate Weapon of Mass Destruction:
"Owning the Weather" for Military UseEnvironmental warfare is defined as the intentional modification or manipulation of the natural ecology, such as climate and weather, earth systems such as the ionosphere, magnetosphere, tectonic plate system, and/or the triggering of seismic events (earthquakes) to cause intentional physical, economic, and psycho-social, and physical destruction to an intended target geophysical or population location, as part of strategic or tactical war." (Eco News)
Read more on this article here
Star Trek
In the Star Trek universe, most advanced planets and colonies utilise weather control, often referred to as weather modification grids or weather modification nets. A small, but long-established TNG-era (ca 2369) colony was a weather control facility for approximately a hundred years. Most advanced civilizations apparently employ weather control standard equipment.
Weather control technology in 2270s required special facilities, modern TNG- and DS9-era technology consists of multiple mid-size devices positioned strategically, networked and controlled from more-or-less arbitrary places.
For example, the planet Risa has its climate controlled to be a tropical paradise. Perhaps one of the few modern exceptions of planets apparently without weather control technology is Ferenginar with continuous rain. (It could be the weather control is set for never ending rain, or is expensive to maintain.)
references:
Since GLOBAL educational systems has been deliberately dumbed down to prevent citizens from being well trained in logic, mathematics, and science, most people do not believe that man controls the weather. There is scientific evidence that scientists do control the weather using Tesla Technology, which he developed from 1886-1928 ["The Fantastic Inventions of Nikola Tesla", by Nikola Tesla and David H. Childress, 1993.] As you read about our capabilities to control the weather, remember that the brilliant mystic scientist, Nikola Tesla, made the key discoveries almost 100 years ago! We do not know how far advanced Tesla was with his work on controlling the weather and its storms, but we feel fairly confident that the terrible storms and drought in the late 1920's may have been brought on by a deliberate use of Tesla technology.
and read here :HAARP and Advances in Tesla Technology
Monday, 5 May 2008
The FED
*Traders yesterday on the floor of the Chicago Board
of Trade before the Federal Reserve announced it
was reducing interest rates.
*Federal Reserve building, Washington, D.C.
One of the more mysterious areas of the economy is the role of the Fed. Formally known as the Federal Reserve, the Fed is the gatekeeper of the U.S. economy. It is the central bank of the United States -- it is the bank of banks and the bank of the U.S. government. The Fed regulates financial institutions, manages the nation's money and influences the economy. By raising and lowering interest rates, creating money and using a few other tricks, the Fed can either stimulate or slow down the economy. This manipulation helps maintain low inflation, high employment rates, and manufacturing output.
In this article, we'll visit the mystical world of the Fed and talk about terms like monetary policy, discount rates, and open market operation. We'll find out just what kinds of tasks fill Ben S. Bernanke's day, and see how his and the Federal Reserve Board's decisions affect our everyday lives.
In this article, we'll visit the mystical world of the Fed and talk about terms like monetary policy, discount rates, and open market operation. We'll find out just what kinds of tasks fill Ben S. Bernanke's day, and see how his and the Federal Reserve Board's decisions affect our everyday lives.
Goldman Sachs reveals credit crunch hit
Goldman Sachs, Wall Street's most powerful investment bank, has revealed a $2bn credit write-down, its biggest jolt to date from the crisis threatening to engulf the world's financial markets.
News from the banking and financial services sector
Goldman, which has largely thrived amid the turmoil elsewhere on Wall Street, reported losses of about $1bn on mortgage loans and securities, and a further $1bn from non-investment grade credit, for the three months to the end of February. However the bank's 53pc drop in profit to $1.51bn for the quarter was less steep than Wall Street analysts had been forecasting.
Lloyd Blankfein, chief executive and chairman of Goldman, said: "Market conditions are clearly very difficult. Although market conditions present many challenges at the moment, they also offer considerable opportunities."
The results come as Wall Street's leading investment banks rally around ailing rival Lehman Brothers after the Federal Reserve Bank of New York urged them to support the institution in order to try and preserve financial stability.
Goldman's writedown is based partly on the declining value of its 4.9pc stake in Industrial & Commercial Bank of China (ICBC), which is held separately on Goldman's balance sheet.
The share price of ICBC, which conducted the world's biggest ever initial public offering in 2006, has fallen sharply. Goldman invested $2.3bn for its minority shareholding in ICBC, which is listed on the Hong Kong and Shanghai stock exchanges
But today's writedown shows how the financial turbulence is now affecting even the most stellar performers.
Senior managers at Goldman have warned against complacency in recent months as rivals have staggered from one set of asset writedowns to another.
News from the banking and financial services sector
Goldman, which has largely thrived amid the turmoil elsewhere on Wall Street, reported losses of about $1bn on mortgage loans and securities, and a further $1bn from non-investment grade credit, for the three months to the end of February. However the bank's 53pc drop in profit to $1.51bn for the quarter was less steep than Wall Street analysts had been forecasting.
Lloyd Blankfein, chief executive and chairman of Goldman, said: "Market conditions are clearly very difficult. Although market conditions present many challenges at the moment, they also offer considerable opportunities."
The results come as Wall Street's leading investment banks rally around ailing rival Lehman Brothers after the Federal Reserve Bank of New York urged them to support the institution in order to try and preserve financial stability.
Goldman's writedown is based partly on the declining value of its 4.9pc stake in Industrial & Commercial Bank of China (ICBC), which is held separately on Goldman's balance sheet.
The share price of ICBC, which conducted the world's biggest ever initial public offering in 2006, has fallen sharply. Goldman invested $2.3bn for its minority shareholding in ICBC, which is listed on the Hong Kong and Shanghai stock exchanges
But today's writedown shows how the financial turbulence is now affecting even the most stellar performers.
Senior managers at Goldman have warned against complacency in recent months as rivals have staggered from one set of asset writedowns to another.
This article is from The Telegraph
JP Morgan's $1.3bn sub-prime hit
US bank JP Morgan Chase has said its earnings for the last three months of 2007 fell 34% as a result of its exposure to soured US mortgage loans.
Net income was $2.97bn (£1.5bn) in the quarter to the end of December, down from $4.53bn a year earlier.
The bank said it had to cut the value of investments linked to the US mortgage market by $1.3bn.
Other US and European banks, including Citigroup and Merrill Lynch, have also had to cut the value of their holdings.
Also on Wednesday, Wells Fargo said the home loans crisis had led to its first drop in quarterly profits since 2001.
Wells Fargo, the biggest bank on North America's West Coast, reported a 38% decline in net income to $1.36bn for its last three months of 2007.
However, the losses at JP Morgan and Wells Fargo were smaller than those of many of their peers.
On Tuesday, Citigroup reported a $9.83bn net loss for the last three months of 2007 after having to cut the value of its investments by $18.1bn.
Shares in JP Morgan rose 1.7% to $24.51, one of the few winners on Wall Street, while Citigroup fell 2.6% to trade at $26.24. Citigroup has lost more than half its market value since the beginning of 2007.
Net income was $2.97bn (£1.5bn) in the quarter to the end of December, down from $4.53bn a year earlier.
The bank said it had to cut the value of investments linked to the US mortgage market by $1.3bn.
Other US and European banks, including Citigroup and Merrill Lynch, have also had to cut the value of their holdings.
Also on Wednesday, Wells Fargo said the home loans crisis had led to its first drop in quarterly profits since 2001.
Wells Fargo, the biggest bank on North America's West Coast, reported a 38% decline in net income to $1.36bn for its last three months of 2007.
However, the losses at JP Morgan and Wells Fargo were smaller than those of many of their peers.
On Tuesday, Citigroup reported a $9.83bn net loss for the last three months of 2007 after having to cut the value of its investments by $18.1bn.
Shares in JP Morgan rose 1.7% to $24.51, one of the few winners on Wall Street, while Citigroup fell 2.6% to trade at $26.24. Citigroup has lost more than half its market value since the beginning of 2007.
Further problems
Denting earnings was the fact that JP Morgan cut the value of its investments linked to the US mortgage market by $1.3bn.
Chief executive Jamie Dimon said the bank had set aside $2.54bn in anticipation of further losses stemming from defaults on home loans and credit card repayments.
This was more than the $1.79bn it set aside in its previous quarter, and comes as consumers are having to deal with falling house prices, and higher energy and petrol costs.
JP Morgan's investment bank division was worst affected, with its profits slumping 88% to $124m. The company's credit card services arm was also hit, with profit down 15%.
Many of the problems facing banks today stem from a long period of low interest rates, which saw consumers borrow heavily and often beyond their means.
That was fine while interest rates stayed low, but as borrowing costs started to rise many consumers found it difficult to keep up with their loan and mortgage payments.
Default levels jumped to records, slashing the value of investments that had been linked to the mortgages and credit card debts, and plunging the global banking system into a credit crunch and lending crisis.
Denting earnings was the fact that JP Morgan cut the value of its investments linked to the US mortgage market by $1.3bn.
Chief executive Jamie Dimon said the bank had set aside $2.54bn in anticipation of further losses stemming from defaults on home loans and credit card repayments.
This was more than the $1.79bn it set aside in its previous quarter, and comes as consumers are having to deal with falling house prices, and higher energy and petrol costs.
JP Morgan's investment bank division was worst affected, with its profits slumping 88% to $124m. The company's credit card services arm was also hit, with profit down 15%.
Many of the problems facing banks today stem from a long period of low interest rates, which saw consumers borrow heavily and often beyond their means.
That was fine while interest rates stayed low, but as borrowing costs started to rise many consumers found it difficult to keep up with their loan and mortgage payments.
Default levels jumped to records, slashing the value of investments that had been linked to the mortgages and credit card debts, and plunging the global banking system into a credit crunch and lending crisis.
This article is taken from BBC 16 January 2008
UBS boss quits amid $19bn write-down
UBS, already one of the biggest victims of the US sub-prime crisis, has been forced to write off another $19bn (£9.6bn) from the value of its mortgage assets, forcing its under-fire chairman to step down.
The Swiss bank said today it was seeking fresh capital through a rights issue, after admitting that its losses from so-called "toxic debts" -- securities underpinned by US home loans whose value has plunged in recent months - had doubled. Chairman Marcel Ospel, who had previously fought off calls for his resignation, will step down at its AGM later this month.
The latest write-down was caused by another drop in the value of the company's holdings in securities backed by US mortgages, and doubles its overall sub-prime losses. It pushed the company into a loss of SFr12bn (£6bn) for the first quarter of 2008.
The write-down is larger than City experts had expected, and takes UBS's total sub-prime losses to more than £18bn. It sparked optimism that the turmoil in the financial markets may finally be approaching a turning point, as banks had previously been criticised for not admitting the full scale of the damage.
UBS's shares, which have fallen 44% this year, jumped more than 12% today. The news also lifted banking stocks in London, where they dominated the list of biggest risers on the FTSE 100. Alliance & Leicester gained 6.5%, RBS was up 7%, Barclays was up 5.9% and HBOS 7.9%.
UBS said it would issue new shares in an attempt to raise Sfr15bn, and is also setting up a new unit to hold "certain currently illiquid US real estate assets".
"With these measures we have created the basis to weather one of the most difficult periods in the history of the industry," said Marcel Rohner, chief executive.
Speaking on a conference call, Ospel said he took the decision to resign last night.
UBS's admission was swiftly followed by a $3.9bn write-down from Deutsche Bank today, and the two announcements appeared to give investors confidence that the financial sector is finally addressing the full extent of its sub-prime losses.
Martin Slaney, head of derivatives at GFT Global Markets, said the banking sector share rises could show that the bear market is reaching a bottom.
"Investors seem to be saying that the worst is over. This is a very significant move for the markets – if it is sustained," said Slaney.
"It appears that the rights issue and managerial restructuring announced along side the write-downs by UBS will keep their major shareholders content for now," he added.
The collapse of the US sub-prime market has prompted a swathe of multibillion pound write-downs as the banks found themselves holding assets for which there was no longer any demand. Last year, UBS made its first annual loss ever after posting write-downs of over £9.2bn.
The Swiss bank said today it was seeking fresh capital through a rights issue, after admitting that its losses from so-called "toxic debts" -- securities underpinned by US home loans whose value has plunged in recent months - had doubled. Chairman Marcel Ospel, who had previously fought off calls for his resignation, will step down at its AGM later this month.
The latest write-down was caused by another drop in the value of the company's holdings in securities backed by US mortgages, and doubles its overall sub-prime losses. It pushed the company into a loss of SFr12bn (£6bn) for the first quarter of 2008.
The write-down is larger than City experts had expected, and takes UBS's total sub-prime losses to more than £18bn. It sparked optimism that the turmoil in the financial markets may finally be approaching a turning point, as banks had previously been criticised for not admitting the full scale of the damage.
UBS's shares, which have fallen 44% this year, jumped more than 12% today. The news also lifted banking stocks in London, where they dominated the list of biggest risers on the FTSE 100. Alliance & Leicester gained 6.5%, RBS was up 7%, Barclays was up 5.9% and HBOS 7.9%.
UBS said it would issue new shares in an attempt to raise Sfr15bn, and is also setting up a new unit to hold "certain currently illiquid US real estate assets".
"With these measures we have created the basis to weather one of the most difficult periods in the history of the industry," said Marcel Rohner, chief executive.
Speaking on a conference call, Ospel said he took the decision to resign last night.
UBS's admission was swiftly followed by a $3.9bn write-down from Deutsche Bank today, and the two announcements appeared to give investors confidence that the financial sector is finally addressing the full extent of its sub-prime losses.
Martin Slaney, head of derivatives at GFT Global Markets, said the banking sector share rises could show that the bear market is reaching a bottom.
"Investors seem to be saying that the worst is over. This is a very significant move for the markets – if it is sustained," said Slaney.
"It appears that the rights issue and managerial restructuring announced along side the write-downs by UBS will keep their major shareholders content for now," he added.
The collapse of the US sub-prime market has prompted a swathe of multibillion pound write-downs as the banks found themselves holding assets for which there was no longer any demand. Last year, UBS made its first annual loss ever after posting write-downs of over £9.2bn.
This article is from The Guardian
Barclays discloses £1.3bn credit crunch hit
Barclays, the UK's third-biggest bank, will write down £1.3 billion on securities linked to the US sub-prime mortgage market collapse after taking a £800 million hit in October alone.The Times reported this morning that the bank would bring forward its trading update by more than ten days to quell speculation that it needed to write off £10 billion.
Shares in Barclays, which were suspended briefly last Friday when the bank was forced to issue a statement denying £10 billion in write downs, rose 5.9 per cent to 564.5p in early trading today after plunging to 474.5p at the end of last week.
The bank detailed this morning that up to the third-quarter ending September 30, its investment banking arm, Barclays Capital, wrote down £500 million on the value of its US mortgage-backed securities.
However, in October, after further deterioration in the US mortgage market, the value of Barclays Capital's assets linked to home loans fell by a further £800 million, bring the total writedown to £1.3 billion.
Pre-tax profit after the write-offs at Barclays Capital reached £1.9 billion for the 10 months to October, which Barclays said was ahead of last year.
John Varley, the Barclays chief executive, said today that the bank has now written down the value of its sub-prime mortgage backed collateralised debt obligations (CDOs) and its second lien loans to zero.
He said: "I am well satisfied with our absolute and our relative performance." Mr Varley also said that the bank would not change its dividend policy.
However, the bank still has £2.6 billion worth of exposure to the US sub-prime market through EquiFirst, the US mortgage business Barclays acquired for $225 million this year, which has been subject to job cuts as the pipeline of new mortgages has dried up.
Barclays Capital also detailed this morning that it was still sitting on £7.3 billion of unsold leveraged debt, down from £9 billion.
But Bob Diamond, the Barclays Capital president, said that sentiment in the market was beginning to change, adding that in the first quarter next year he expected "the new issue pipeline will be operating again".
In contrast, Mr Diamond said that he expected the problems associated with the US sub-prime market to take "up to two years" to work through the system.
Mr Diamond said today: "The diversity of our business, our strong risk management and our focus on execution and clients has allowed Barclays Capital to deliver year-to-date performance in 2007 ahead of last year's record October year-to-date profits.''
Pre-tax profit after the write-offs at Barclays Capital reached £1.9 billion for the 10 months to October, which Barclays said was ahead of last year.
John Varley, the Barclays chief executive, said today that the bank has now written down the value of its sub-prime mortgage backed collateralised debt obligations (CDOs) and its second lien loans to zero.
He said: "I am well satisfied with our absolute and our relative performance." Mr Varley also said that the bank would not change its dividend policy.
However, the bank still has £2.6 billion worth of exposure to the US sub-prime market through EquiFirst, the US mortgage business Barclays acquired for $225 million this year, which has been subject to job cuts as the pipeline of new mortgages has dried up.
Barclays Capital also detailed this morning that it was still sitting on £7.3 billion of unsold leveraged debt, down from £9 billion.
But Bob Diamond, the Barclays Capital president, said that sentiment in the market was beginning to change, adding that in the first quarter next year he expected "the new issue pipeline will be operating again".
In contrast, Mr Diamond said that he expected the problems associated with the US sub-prime market to take "up to two years" to work through the system.
Mr Diamond said today: "The diversity of our business, our strong risk management and our focus on execution and clients has allowed Barclays Capital to deliver year-to-date performance in 2007 ahead of last year's record October year-to-date profits.''
This article is from Times Online
A bank by any other name
Nationalising Northern Rock
A bank by any other name
A bank by any other name
Feb 21st 2008From The Economist print edition
Bad enough for Labour, but no Black Wednesday
Bad enough for Labour, but no Black Wednesday
WHEN the once-unthinkable finally happened, there was a weary inevitability about it. In the six months since Northern Rock's cash dried up and it turned to the central bank for help, would-be rescuers of the stricken mortgage lender had fallen one by one by the wayside. By the time Alistair Darling, the chancellor, announced on February 17th that Northern Rock was to be nationalised, only the Sunday timing was unexpected. And for all the party-political outcry that erupted on the news, there was little doubt that Parliament would pass a law bringing the bank into public ownership.
The truth is that there was never much chance a private-sector buyer could be found willing and able to get the bank on an even keel and to repay the government promptly its £55 billion ($108 billion) in loans and guarantees. So two things are interesting now. The first is what sort of fist the bank's new managers will make of things (see article). The second is how much damage his reluctant decision to nationalise it will do to Gordon Brown, the prime minister.
The truth is that there was never much chance a private-sector buyer could be found willing and able to get the bank on an even keel and to repay the government promptly its £55 billion ($108 billion) in loans and guarantees. So two things are interesting now. The first is what sort of fist the bank's new managers will make of things (see article). The second is how much damage his reluctant decision to nationalise it will do to Gordon Brown, the prime minister.
For nationalisation is, in the New Labour lexicon, the economic policy that dares not speak its name. The very word summons up the dark days of the 1970s, when Labour presided over failing state-owned firms and bitter strikes, and was then voted out of office for 18 years. The party's right wing fought for decades to expunge nationalisation from the movement's creed, but not until Tony Blair was leader did they manage to ditch the commitment to “common ownership of the means of production”. Labour politicians of Mr Brown's generation particularly are scarred by the experience; economic policy during his time as chancellor was resolutely market-oriented. .................However ominous the symbolism, Britain's first nationalisation for a generation has not killed Mr Brown's government in the way that Black Wednesday finished the Tories. But it could prove one of the thousand cuts that do.
This article is from The Economist Feb 21st 2008
Northern Rock hit by credit crunch
Northern Rock led another day of heavy selling in the City on Wednesday, as two leading economists voiced fears that the world-wide credit squeeze is only just beginning. The British mortgage lender suffered a 38½p share slump to a three-year low of 687½p following warnings that it faces a potential 'funding gap' because market liquidity is evaporating.
The decline helped drag the FTSE 100 down 34.2 points to 6109.3. The Dow Jones fell 167 poi
nts to close at 12,861 despite another small credit injection by the Federal Reserve.
Alex Potter, of Collins Stewart, said Northern Rock has to raise sums equivalent to 4.4 times its capitalisation from wholesale money markets to fund its business. But it has become more costly to tap this source of capital.
If the 'irrational' gyrations in wholesale credit markets persist 'you are starting to run the risk of profit warnings', he said, adding that other lenders are also exposed.
Northern Rock spokesman Brian Giles said the bank was well positioned, partly because of 'pro-active' fundraising earlier in the year. Still, 'throttling back' lending activity could be an option if tough conditions persist.
Avinash Persaud, chairman of financial advisers Intelligence Capital, and George Magnus, of UBS, warned recent pain is a mere foretaste of what is to come. Persaud will tell a forthcoming meeting of top government officials that the next period of volatility will prove 'even more vicious than the first', as rising credit costs hammer equities.
Magnus said that although defaulting US mortgages lie at the 'epicentre' of the current turmoil, the problem has 'migrated not only geographically but to areas of the economy that have nothing to do with housing'.
For example, the leveraged buyout loan market has 'pretty much seized up,' as banks struggle-to shift over £150bn of debt from their books.
Legendary private equity firm KKR confirmed the bleak outlook, saying share values still don't reflect the difficulties of raising finance. One of its divisions faces hundreds of millions of dollars of losses on repackaged mortgages.
Fund managers are fleeing the financial sector as the market turmoil threatens to squeeze bank profits. Merrill Lynch said its latest survey showed money managers were piling cash into bank accounts and reducing holdings of firms exposed to the equity and debt market malaise.
About 43% said they are 'underweight' on the banking sector in its August survey, compared with 29% in July. Merrill's survey showed that on average fund managers have lifted their cash position 4.4% from 3.4% as they sell shares.
But that doesn't mean they are ready to turn their backs on the equity market. David Bowers, independent consultant to Merrill Lynch, said: 'People still see value in equities.'
The decline helped drag the FTSE 100 down 34.2 points to 6109.3. The Dow Jones fell 167 poi
nts to close at 12,861 despite another small credit injection by the Federal Reserve.Alex Potter, of Collins Stewart, said Northern Rock has to raise sums equivalent to 4.4 times its capitalisation from wholesale money markets to fund its business. But it has become more costly to tap this source of capital.
If the 'irrational' gyrations in wholesale credit markets persist 'you are starting to run the risk of profit warnings', he said, adding that other lenders are also exposed.
Northern Rock spokesman Brian Giles said the bank was well positioned, partly because of 'pro-active' fundraising earlier in the year. Still, 'throttling back' lending activity could be an option if tough conditions persist.
Avinash Persaud, chairman of financial advisers Intelligence Capital, and George Magnus, of UBS, warned recent pain is a mere foretaste of what is to come. Persaud will tell a forthcoming meeting of top government officials that the next period of volatility will prove 'even more vicious than the first', as rising credit costs hammer equities.
Magnus said that although defaulting US mortgages lie at the 'epicentre' of the current turmoil, the problem has 'migrated not only geographically but to areas of the economy that have nothing to do with housing'.
For example, the leveraged buyout loan market has 'pretty much seized up,' as banks struggle-to shift over £150bn of debt from their books.
Legendary private equity firm KKR confirmed the bleak outlook, saying share values still don't reflect the difficulties of raising finance. One of its divisions faces hundreds of millions of dollars of losses on repackaged mortgages.
Fund managers are fleeing the financial sector as the market turmoil threatens to squeeze bank profits. Merrill Lynch said its latest survey showed money managers were piling cash into bank accounts and reducing holdings of firms exposed to the equity and debt market malaise.
About 43% said they are 'underweight' on the banking sector in its August survey, compared with 29% in July. Merrill's survey showed that on average fund managers have lifted their cash position 4.4% from 3.4% as they sell shares.
But that doesn't mean they are ready to turn their backs on the equity market. David Bowers, independent consultant to Merrill Lynch, said: 'People still see value in equities.'
Morgan Stanley hit by credit crunch
Morgan Stanley became the first US investment bank to truly bear the brunt of the credit crunch as it reported a 17pc drop in profits in the last three months.In full: the credit crisis
Worst of crisis is over, Lehman claims
The bank, reporting its first dip in profits under the reign of chairman and chief executive John Mack, announced a $940m write-down to the value of loans on its balance sheet.
The bank's outgoing chief financial officer, David Sidwell, admitted: "There were amazing market disruptions during this quarter."
His successor, Colm Kelleher, who takes over later this year, said the credit crisis has been worse than the slump that followed the Russian crisis and the collapse of Long-Term Capital Management in 1998.
Morgan Stanley's fixed income took a hit, down 3pc on the same quarter last month with revenues of $2.2bn. Mr Mack admitted the fall was driven by significantly lower credit revenues due to wider spreads, lower liquidity and higher volatility.
Revenues from trading commodities also fell - however these were partially offset by record trading in currency and interest rates.
But there was good news from other parts of the bank, including equity trading, with revenue up 16pc to $1.8bn, however that was marred by a $480m loss from what the bank referred to as "unfavourable positioning."
Investment banking produced $1,4bn in revenue, up 45pc, boosting overall group revenues 130c to $7.96bn.
Shares in Morgan Stanley, in spite of the profit fall, were trading up $1.03 at $69.54 in early trading in New York as the markets surged following Tuesday's decision to cut the Federal Funds rate by 0.5pc, a decision which forced many hedge funds to close short positions across the banking sector.
Morgan is the second of four big US investment banks to report quarterly results this week, after Lehman announced its results on Tuesday. Goldman Sachs and Bear Stearns are due to release their numbers tomorrow.
His successor, Colm Kelleher, who takes over later this year, said the credit crisis has been worse than the slump that followed the Russian crisis and the collapse of Long-Term Capital Management in 1998.
Morgan Stanley's fixed income took a hit, down 3pc on the same quarter last month with revenues of $2.2bn. Mr Mack admitted the fall was driven by significantly lower credit revenues due to wider spreads, lower liquidity and higher volatility.
Revenues from trading commodities also fell - however these were partially offset by record trading in currency and interest rates.
But there was good news from other parts of the bank, including equity trading, with revenue up 16pc to $1.8bn, however that was marred by a $480m loss from what the bank referred to as "unfavourable positioning."
Investment banking produced $1,4bn in revenue, up 45pc, boosting overall group revenues 130c to $7.96bn.
Shares in Morgan Stanley, in spite of the profit fall, were trading up $1.03 at $69.54 in early trading in New York as the markets surged following Tuesday's decision to cut the Federal Funds rate by 0.5pc, a decision which forced many hedge funds to close short positions across the banking sector.
Morgan is the second of four big US investment banks to report quarterly results this week, after Lehman announced its results on Tuesday. Goldman Sachs and Bear Stearns are due to release their numbers tomorrow.
This article is from Telegraph.co.uk 21/09/2007
US banks Citigroup and Merrill Lynch reveal fresh $15bn loss
CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.
In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.
Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.
Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.
It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.
The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.
The world’s biggest banks have suffered losses and write-downs totalling almost $250 billion since the beginning of 2007, according to analysts. Last week the IMF shocked markets by saying that global losses from the credit crisis could rise to $945 billion.
JP Morgan is expected to offer the only glimmer of hope from this week’s results, posting a small profit, in spite of huge exposures to leveraged loans.
Some of the world’s biggest banks are beginning to work on new solutions to relieve tension in the financial markets.
Deutsche Bank is understood to be talking to a number of private-equity funds about a disposal of some of its backlog of loans to venture-capital firms.
The value of leveraged loans sitting on Deutsche’s balance sheet is greater than its shareholder equity. The bank is planning to sell on the loans to the private-equity funds at a loss to free up its balance sheet, according to market sources.
The plan mirrors a similar move by Citi to sell $12 billion of its leveraged-loan portfolio to private-equity firms including Blackstone, Apollo and Texas Pacific Group.
The Citi deal is hoping to close the deal in time for this week’s results. It is one of a number of significant moves by Vikram Pandit, Citi’s new chief executive.
But the sale could be hampered by problems with the planned inclusion of loans related to EMI, the music business. Citi bankrolled its buyout last year by Terra Firma Capital Partners, and still holds about $5 billion of EMI debt.
It was reported yesterday that Citi had been forced to remove some of these loans from the sale after buyers complained they did not have sufficient financial information on EMI.
Citi announced plans to sell its Diners Club credit-cards business to Discover last week, and is also considering a sale of its German retail-banking operations.
City insiders believe job losses are inevitable. Pandit is thought to be considering a radical reshaping of the bank’s equity research organisation. Insiders say that it may be slimmed down to focus on its top 300 clients, rather than providing a wider service to investors.
Some banks are looking to use the crisis to steal a march on their competitors. HSBC last week revealed its intention to use the tightening credit conditions as an opportunity to boost its 3% share of the UK mortgage market.
Abbey, which is owned by Spain’s Santander, has written close to 20% of all the mortgages handed out in Britain in the first quarter, according to sources close to the company. The bank is funding its expansion in the market by attracting more money from savers, analysts say.
In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.
Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.
Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.
It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.
The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.
The world’s biggest banks have suffered losses and write-downs totalling almost $250 billion since the beginning of 2007, according to analysts. Last week the IMF shocked markets by saying that global losses from the credit crisis could rise to $945 billion.
JP Morgan is expected to offer the only glimmer of hope from this week’s results, posting a small profit, in spite of huge exposures to leveraged loans.
Some of the world’s biggest banks are beginning to work on new solutions to relieve tension in the financial markets.
Deutsche Bank is understood to be talking to a number of private-equity funds about a disposal of some of its backlog of loans to venture-capital firms.
The value of leveraged loans sitting on Deutsche’s balance sheet is greater than its shareholder equity. The bank is planning to sell on the loans to the private-equity funds at a loss to free up its balance sheet, according to market sources.
The plan mirrors a similar move by Citi to sell $12 billion of its leveraged-loan portfolio to private-equity firms including Blackstone, Apollo and Texas Pacific Group.
The Citi deal is hoping to close the deal in time for this week’s results. It is one of a number of significant moves by Vikram Pandit, Citi’s new chief executive.
But the sale could be hampered by problems with the planned inclusion of loans related to EMI, the music business. Citi bankrolled its buyout last year by Terra Firma Capital Partners, and still holds about $5 billion of EMI debt.
It was reported yesterday that Citi had been forced to remove some of these loans from the sale after buyers complained they did not have sufficient financial information on EMI.
Citi announced plans to sell its Diners Club credit-cards business to Discover last week, and is also considering a sale of its German retail-banking operations.
City insiders believe job losses are inevitable. Pandit is thought to be considering a radical reshaping of the bank’s equity research organisation. Insiders say that it may be slimmed down to focus on its top 300 clients, rather than providing a wider service to investors.
Some banks are looking to use the crisis to steal a march on their competitors. HSBC last week revealed its intention to use the tightening credit conditions as an opportunity to boost its 3% share of the UK mortgage market.
Abbey, which is owned by Spain’s Santander, has written close to 20% of all the mortgages handed out in Britain in the first quarter, according to sources close to the company. The bank is funding its expansion in the market by attracting more money from savers, analysts say.
This article is from Timesonline April 13, 2008
Merrill Lynch files biggest loss in 93 years
The investment bank Merrill Lynch has slumped to the biggest loss in its 93-year history as its finances were pummelled by $7.9bn (£3.9bn) of liabilities from the summer's credit crunch, prompting an apology from its chief executive.In another sign of investment banking volatility, the Wall Street Journal reported last night that Bank of America, the US's second largest bank, is laying off 3,000 staff from its corporate and investment banking unit, which reported a 93% drop in earnings. The bank said it was rebuilding rather than retreating from the sector.
Merrill revealed yesterday that, excluding one-off items, it lost $2.3bn over the three months to September, compared to a profit of $3.1bn a year ago. Its $7.9bn exposure to mortgage-related securities was far greater than the $4.5bn forecast in a profit warning three weeks ago.
As Merrill's shares dived by more than 6%, chief executive Stan O'Neal faced cross-examination by analysts about why his firm had lost far more than its rivals during debt market volatility which was sparked around the world by defaults on American sub-prime mortgages.
"No one, no one is more disappointed than I am in that result," Mr O'Neal said on a conference call. "I'm not going to talk around the fact that mistakes were made. I am accountable for those mistakes, just as I am accountable for the firm's performance as a whole."
Since Merrill's profit warning early this month, Mr O'Neal said an independent evaluation concluded that Merrill's liability was greater than it initially disclosed.
The credit agency Standard & Poor's downgraded Merrill's rating, describing the figures as "startling". It was the firm's first quarterly loss since 2001 and Merrill was alone among big Wall Street investment banks in going into the red over the crisis.
Heads have rolled, including the bank's chief of fixed-income trading, Osman Semerci, fired this month. Critics suggested that Mr O'Neal and his senior colleagues could be under threat.
As it reviews its operations, Merrill indicated that it may sell non-core businesses. The bank employs 64,200 people globally, including about 5,000 in London.
David Trone, a banking analyst at Fox-Pitt Kelton in New York, said: "There's a huge credibility problem here. People were misled - there was bad guidance." He noted, that Merrill's asset management division had mitigated the bank's problems by turning in a 70% increase in divisional profits to $953m.
By the close in New York, shares in Merrill Lynch were down 5.8% to $63.22.
This article is from The Guardian October 25 2007
Bank Loses Billions In US Mortgage Crisis
Banking giant HSBC has lost £8.7bn as a result of the credit crunch - most of that in its US mortgage and consumer credit arm.Bank under pressure to revamp
It has been by far the worst affected by the financial crisis in the US housing market, losing more than its four major rivals put together.
HSBC is the last of the "big five" British banks to report its earnings.
The UK's other major banks - Barclays, Royal Bank of Scotland (RBS), Lloyds TSB and Halifax and Bank of Scotland - have already reported their annual results.
Together with a number of smaller High Street lenders, they have made an estimated collective loss of about £5bn from the US sub-prime meltdown.
But despite this it has made £12.2bn in annual pre-tax profits, up 10% on the previous year.
Analysts had been expecting anywhere between £11.8bn and £13.3bn - the figure for the 12 months before was £11.1bn.
HSBC is the last of the "big five" British banks to report its earningsIt has seen high-risk or sub-prime US borrowers struggle to meet loan repayments over the past year as interest rates have increased, leading to record default rates and repossessions.
It has shut hundreds of branches in its US consumer banking division, HSBC Finance Corporation, (HFC), over the past year as the credit crunch took its toll.
The scale of the losses is expected to increase pressure on the bank's management from activist shareholders to overhaul its policy with regard to its troubled US arm.
Knight Vinke Asset Management, owner of less than 1% of HSBC, has called on the bank to sever all ties with HFC.
The investment group wants directors to focus instead on growing markets in Asia.
In November, HSBC gave an upbeat view on trading in the UK, which it said was driving a strong performance in its European arm, and UK lending was seeing signs of improvement in the third quarter.
Looking ahead, the group warned: "The outlook for the rest of 2008 is uncertain. The economic slowdown and the credit outlook in the US may well get worse before they get better."
This article is from Sky News March 03, 2008
The Subprime Market's Rough Road
Rising defaults and delinquencies by home buyers with shaky credit are wreaking havoc in parts of the mortgage industry and stirring concerns about a stumble in the U.S. economy.
Foreclosure rates on "subprime" loans -- those made to borrowers with poor credit records -- more than doubled last year from 2005, according to a UBS report. Some firms that specialized in those loans now face large losses or even bankruptcy. This past week, Accredited Home Lenders Holding Co. reported a $37.8 million loss for the fourth quarter -- three times wider than analysts expected. Also this past week, ResMae Mortgage Corp. became at least the 20th subprime lender to close or be sold when it filed for bankruptcy.
• Review & Outlook: How Expansions Die 2/17/07
• Page One: Borrowers With Risky Loans Fall Behind12/05/06
• Page One: Market Places Bets on Loan Defaults10/30/06
The subprime shakeout is having a spillover effect on bigger financial institutions such as HSBC Holdings PLC, Merrill Lynch & Co. and J.P. Morgan Chase & Co. They eagerly bought up these high-risk loans in 2005 and 2006 because they offered higher interest rates. Now the firms are trying to cut their losses and force mortgage originators to buy back some of the risky loans.
Federal Reserve Board Chairman Ben Bernanke offered an upbeat assessment of the economy in testimony before Congress this past week. But the threat of foreclosures in the subprime lending industry remains a significant cloud in the outlook.
Here is a closer look at the problem:
Why did subprime loans get so popular? Subprime loans made up 12.75% of the $10.2 trillion mortgage market in 2006, up from 8.5% in 2001, according to Inside Mortgage Finance. The homeownership rate has grown to 69% from 65% over the past decade, about half of which came from subprime lending, according to a study by the Federal Reserve Bank of Chicago.
Seeking new clients at a time when home values were soaring in many markets, emboldened lenders raced to offer easy credit with exotic loans, such as "piggyback" loans requiring no down payment and "no-doc" loans that let borrowers state their incomes without supporting documentation.
Subprime lenders charge higher interest rates -- sometimes four percentage points more than on loans to more credit-worthy borrowers. Investors, eager for bigger returns, have fueled demand by purchasing securities that are backed by these mortgages. That has enabled many mortgage originators to turn around and sell their loans after making them, enabling more loans and reducing their risk.
But once home prices started dropping, some borrowers began defaulting on their mortgages. One study by the Center for Responsible Lending predicts that as many as one out of every five subprime borrowers who took out reduced payment or low-documentation loans between 1998 and mid-2006 could lose their homes.
Who stands to lose should the industry collapse? Firms that specialized in subprime mortgages are feeling pain right now, as are financial institutions that lent to those firms. But the subprime market is fairly fragmented: The top three subprime lenders had a roughly 21% market share combined last year, and the top 10 controlled less than 60% of the market, according to a UBS report.
Because so many of these mortgages were used to back bonds that were then sold off to investors world-wide, the risk has been spread more broadly through the economy. In 2005, two-thirds of home mortgage originators were securitized, according to the FDIC. Investors in the derivatives market who sold protection against the riskier loans stand to lose money if defaults increase.
POINT OF VIEW
"Several credible reports say that we are facing a tidal wave of defaults and foreclosures, which could strip these families of their major, if not their only, source of wealth and long-term economic security."
--Federal Reserve Chairman Ben Bernanke
Some hedge funds and banks, on the other hand, made the opposite bet, and will make money as borrowers default.
Could the collapse of the subprime market presage a bigger unraveling of the economy? Mr. Bernanke voiced concern about the subprime-mortgage industry on Capitol Hill this past week, but gave an otherwise upbeat assessment of the economy, which has seen unemployment reach near-record lows, strong corporate profits, steady gross domestic product growth and moderate interest rates.
But some worry that the subprime shakeout will lead to tightened credit restrictions on all borrowers, which could hurt consumer spending. Credit tightening also could cause further pain in the housing market, dashing hopes that the worst of the housing slump is over.
Foreclosure rates on "subprime" loans -- those made to borrowers with poor credit records -- more than doubled last year from 2005, according to a UBS report. Some firms that specialized in those loans now face large losses or even bankruptcy. This past week, Accredited Home Lenders Holding Co. reported a $37.8 million loss for the fourth quarter -- three times wider than analysts expected. Also this past week, ResMae Mortgage Corp. became at least the 20th subprime lender to close or be sold when it filed for bankruptcy.
• Review & Outlook: How Expansions Die 2/17/07
• Page One: Borrowers With Risky Loans Fall Behind12/05/06
• Page One: Market Places Bets on Loan Defaults10/30/06
The subprime shakeout is having a spillover effect on bigger financial institutions such as HSBC Holdings PLC, Merrill Lynch & Co. and J.P. Morgan Chase & Co. They eagerly bought up these high-risk loans in 2005 and 2006 because they offered higher interest rates. Now the firms are trying to cut their losses and force mortgage originators to buy back some of the risky loans.
Federal Reserve Board Chairman Ben Bernanke offered an upbeat assessment of the economy in testimony before Congress this past week. But the threat of foreclosures in the subprime lending industry remains a significant cloud in the outlook.
Here is a closer look at the problem:
Why did subprime loans get so popular? Subprime loans made up 12.75% of the $10.2 trillion mortgage market in 2006, up from 8.5% in 2001, according to Inside Mortgage Finance. The homeownership rate has grown to 69% from 65% over the past decade, about half of which came from subprime lending, according to a study by the Federal Reserve Bank of Chicago.
Seeking new clients at a time when home values were soaring in many markets, emboldened lenders raced to offer easy credit with exotic loans, such as "piggyback" loans requiring no down payment and "no-doc" loans that let borrowers state their incomes without supporting documentation.
Subprime lenders charge higher interest rates -- sometimes four percentage points more than on loans to more credit-worthy borrowers. Investors, eager for bigger returns, have fueled demand by purchasing securities that are backed by these mortgages. That has enabled many mortgage originators to turn around and sell their loans after making them, enabling more loans and reducing their risk.
But once home prices started dropping, some borrowers began defaulting on their mortgages. One study by the Center for Responsible Lending predicts that as many as one out of every five subprime borrowers who took out reduced payment or low-documentation loans between 1998 and mid-2006 could lose their homes.
Who stands to lose should the industry collapse? Firms that specialized in subprime mortgages are feeling pain right now, as are financial institutions that lent to those firms. But the subprime market is fairly fragmented: The top three subprime lenders had a roughly 21% market share combined last year, and the top 10 controlled less than 60% of the market, according to a UBS report.
Because so many of these mortgages were used to back bonds that were then sold off to investors world-wide, the risk has been spread more broadly through the economy. In 2005, two-thirds of home mortgage originators were securitized, according to the FDIC. Investors in the derivatives market who sold protection against the riskier loans stand to lose money if defaults increase.
POINT OF VIEW
"Several credible reports say that we are facing a tidal wave of defaults and foreclosures, which could strip these families of their major, if not their only, source of wealth and long-term economic security."
--Federal Reserve Chairman Ben Bernanke
Some hedge funds and banks, on the other hand, made the opposite bet, and will make money as borrowers default.
Could the collapse of the subprime market presage a bigger unraveling of the economy? Mr. Bernanke voiced concern about the subprime-mortgage industry on Capitol Hill this past week, but gave an otherwise upbeat assessment of the economy, which has seen unemployment reach near-record lows, strong corporate profits, steady gross domestic product growth and moderate interest rates.
But some worry that the subprime shakeout will lead to tightened credit restrictions on all borrowers, which could hurt consumer spending. Credit tightening also could cause further pain in the housing market, dashing hopes that the worst of the housing slump is over.
This article is from The Wall Street Journal February 17, 2007
Biofuels, food prices and malnutrition
This article is atken from uk msn Money written by Nick Louth
March 07 2008
China's booming economy, a spate of poor harvests across the world and the growing trend to turn food into fuel for our cars are causing millions of people to go hungry.
The international price of wheat, maize (corn), soya beans and dozens of other foods has at least doubled in the last two years and in some cases nearly trebled.
World grain reserves are at their lowest ebb since 1960, and the US stockpile has not been this low since 1948.
The granary is almost emptyThe United States, the world's biggest granary, no longer has much surplus grain to export because most of the spare crop is being turned into ethanol for cars. Australia, another big grain producer, has been devastated by drought. The situation has been so bad Down Under that every four days on average an indebted farmer has committed suicide.
Saudi Arabia, which perhaps surprisingly is a big global wheat producer, is going to stop production of the crop altogether. Despite the high market prices, the irrigation requirements are depleting Saudi underground aquifers, water that took thousands of years to accumulate. Production, which was heavily subsidised, is being cut by 12% a year and will cease by 2016, turning Saudi Arabia from a large wheat exporter into an importer.
Rice is nice...if you can afford itNow the price of rice has begun to soar too, caused by bad weather, soaring demand and loss of paddy fields to urban encroachment.
Rice, on which two thirds of the world's population depend, has seen prices up 75% in the last year at nearly $500 tonne (£251), a level not seen since 1989. Vietnam, India and Egypt, three of the world's key suppliers are restricting exports to make sure they can meet domestic demand.
Robert Zeigler, director at the International Rice Research Institute in Manila, said policymakers should be concerned. "If history is any indicator, we should be worried because rice shortages have in the past led to civil unrest," he told the Financial Times.
Last month, the United Nations World Food Programme said the cost of its programmes to provide food to 78 million hungry people in 80 countries would rise from $2.9 billion (£1.5 billion) to $3.5 billion (£1.8 billion). The World Food Programme, which is entirely funded by voluntary donations, doesn't yet have the extra money.
In a small way, we can help. The World Food Programme has an addictive little word game, ideal for children, which tests your vocabulary. Advertisers to fund the donation of 20 grains of rice for each word correctly defined. Try the free rise game here
No great difficulties for the westWe certainly notice the price of food increasing here. Bread prices have risen, eggs have gone up by 30% in a year and meat prices are on the rise too, reflecting the increased cost of animal feed.
It is no coincidence that this week saw 500 disgruntled British pig farmers demonstrate in Downing Street about the poor prices they get from supermarkets, which after paying for feed leave them out of pocket.
But it is in developing nations that food prices really bite. We spend less than 15% of our disposable income on food in the west. In India, Bangladesh and the Philippines that figure is at least half and often much more among the poorest families.
A price rise that is an inconvenience for us can make the difference between eating adequately and going hungry.
Food, the ultimate political issue Hunger and malnutrition have real, political effects. One of the causes of the Tiananmen Square riots in China in 1988 was soaring food prices.
Mexicans were already demonstrated about the rising cost of flour for tortillas a year ago, while just last month Indonesians took to the streets in Jakarta to bemoan the cost of soya beans which had jumped 50% in just one month.
The fact that rich westerners are able to buy grains just to power their cars while those in the third world struggle to afford one meal a day has not gone unnoticed.
Countries like India and Mexico have subsidised flour prices to ease the effect on the poor. Other big importers, like Algeria, Egypt and Iran, may be forced to do the same.
The reasons why...China's economic growth is probably the biggest single reason for soaring food prices.
With hundreds of millions of people having left the land to work in the cities over recent decades, incomes are rising and the demand for meat, principally pork and chicken, is soaring. Industry figures suggest that three-quarters of the increased demand for soya beans is coming from China where they are used to fatten pigs.
In the US huge federal subsidies to farmers to grow corn to turn into ethanol for fuel have been prompted by the rising price of oil. This has led to a surge in corn acreage, as farmers switched from other grains. This in turn has led to shortages and price rises in soya beans, wheat, barley and other crops.
In Europe, the same route has been followed. The European commission plans to mandate that by 2010, 5.7% of vehicle fuel must come from biomass. This will come from rape seed oil, sugar beet, wheat and some agricultural waste.
Hans-Willem Windhorst, of the University of Vechta in Germany, has calculated that for the EU to meet its 2020 target for biofuels, of 10% of all vehicle fuel, a quarter of all European arable land will have to be turned over to producing biofuels.
Forests destroyedBrazil is the world's biggest soya bean exporter and much of it goes to feed pigs. As the newly-wealthy urban population of China eats more pork, soaring prices encourage Brazilian farmers to burn down rain forest to grow more.
The soaring price of timber, again partly fuelled by Chinese demand, makes that even more worthwhile. But for global warming, loss of rainforest is a disaster.
The same thing has happened in Africa, Malaysia and Indonesia, prompted by surging prices for palm oil.
What can be done?Nothing can be done about Chinese demand, or about the poor harvests that have hit many different crops recently. There is some good news as after torrential rain in recent weeks, Australia's drought is over in most areas. Next year's wheat harvest may be good. It certainly needs to be.
The one really unnecessary part of this is turning food into biofuel. While there are plenty of second generation biofuels on the drawing board which would use plant waste and other non-food materials to substitute into fuel, most of the subsidy money is still going into turning food into fuel.
For that, there's really no excuse.
March 07 2008
China's booming economy, a spate of poor harvests across the world and the growing trend to turn food into fuel for our cars are causing millions of people to go hungry.
The international price of wheat, maize (corn), soya beans and dozens of other foods has at least doubled in the last two years and in some cases nearly trebled.
World grain reserves are at their lowest ebb since 1960, and the US stockpile has not been this low since 1948.
The granary is almost emptyThe United States, the world's biggest granary, no longer has much surplus grain to export because most of the spare crop is being turned into ethanol for cars. Australia, another big grain producer, has been devastated by drought. The situation has been so bad Down Under that every four days on average an indebted farmer has committed suicide.
Saudi Arabia, which perhaps surprisingly is a big global wheat producer, is going to stop production of the crop altogether. Despite the high market prices, the irrigation requirements are depleting Saudi underground aquifers, water that took thousands of years to accumulate. Production, which was heavily subsidised, is being cut by 12% a year and will cease by 2016, turning Saudi Arabia from a large wheat exporter into an importer.
Rice is nice...if you can afford itNow the price of rice has begun to soar too, caused by bad weather, soaring demand and loss of paddy fields to urban encroachment.
Rice, on which two thirds of the world's population depend, has seen prices up 75% in the last year at nearly $500 tonne (£251), a level not seen since 1989. Vietnam, India and Egypt, three of the world's key suppliers are restricting exports to make sure they can meet domestic demand.
Robert Zeigler, director at the International Rice Research Institute in Manila, said policymakers should be concerned. "If history is any indicator, we should be worried because rice shortages have in the past led to civil unrest," he told the Financial Times.
Last month, the United Nations World Food Programme said the cost of its programmes to provide food to 78 million hungry people in 80 countries would rise from $2.9 billion (£1.5 billion) to $3.5 billion (£1.8 billion). The World Food Programme, which is entirely funded by voluntary donations, doesn't yet have the extra money.
In a small way, we can help. The World Food Programme has an addictive little word game, ideal for children, which tests your vocabulary. Advertisers to fund the donation of 20 grains of rice for each word correctly defined. Try the free rise game here
No great difficulties for the westWe certainly notice the price of food increasing here. Bread prices have risen, eggs have gone up by 30% in a year and meat prices are on the rise too, reflecting the increased cost of animal feed.
It is no coincidence that this week saw 500 disgruntled British pig farmers demonstrate in Downing Street about the poor prices they get from supermarkets, which after paying for feed leave them out of pocket.
But it is in developing nations that food prices really bite. We spend less than 15% of our disposable income on food in the west. In India, Bangladesh and the Philippines that figure is at least half and often much more among the poorest families.
A price rise that is an inconvenience for us can make the difference between eating adequately and going hungry.
Food, the ultimate political issue Hunger and malnutrition have real, political effects. One of the causes of the Tiananmen Square riots in China in 1988 was soaring food prices.
Mexicans were already demonstrated about the rising cost of flour for tortillas a year ago, while just last month Indonesians took to the streets in Jakarta to bemoan the cost of soya beans which had jumped 50% in just one month.
The fact that rich westerners are able to buy grains just to power their cars while those in the third world struggle to afford one meal a day has not gone unnoticed.
Countries like India and Mexico have subsidised flour prices to ease the effect on the poor. Other big importers, like Algeria, Egypt and Iran, may be forced to do the same.
The reasons why...China's economic growth is probably the biggest single reason for soaring food prices.
With hundreds of millions of people having left the land to work in the cities over recent decades, incomes are rising and the demand for meat, principally pork and chicken, is soaring. Industry figures suggest that three-quarters of the increased demand for soya beans is coming from China where they are used to fatten pigs.
In the US huge federal subsidies to farmers to grow corn to turn into ethanol for fuel have been prompted by the rising price of oil. This has led to a surge in corn acreage, as farmers switched from other grains. This in turn has led to shortages and price rises in soya beans, wheat, barley and other crops.
In Europe, the same route has been followed. The European commission plans to mandate that by 2010, 5.7% of vehicle fuel must come from biomass. This will come from rape seed oil, sugar beet, wheat and some agricultural waste.
Hans-Willem Windhorst, of the University of Vechta in Germany, has calculated that for the EU to meet its 2020 target for biofuels, of 10% of all vehicle fuel, a quarter of all European arable land will have to be turned over to producing biofuels.
Forests destroyedBrazil is the world's biggest soya bean exporter and much of it goes to feed pigs. As the newly-wealthy urban population of China eats more pork, soaring prices encourage Brazilian farmers to burn down rain forest to grow more.
The soaring price of timber, again partly fuelled by Chinese demand, makes that even more worthwhile. But for global warming, loss of rainforest is a disaster.
The same thing has happened in Africa, Malaysia and Indonesia, prompted by surging prices for palm oil.
What can be done?Nothing can be done about Chinese demand, or about the poor harvests that have hit many different crops recently. There is some good news as after torrential rain in recent weeks, Australia's drought is over in most areas. Next year's wheat harvest may be good. It certainly needs to be.
The one really unnecessary part of this is turning food into biofuel. While there are plenty of second generation biofuels on the drawing board which would use plant waste and other non-food materials to substitute into fuel, most of the subsidy money is still going into turning food into fuel.
For that, there's really no excuse.
Supermarkets: what really needs to be done
May 02 2008
Supermarkets have not only shaped our weekly shop, but de-skilled our cooking and reshaped our bodies. They've driven the enlargement of the road system and changed the way we use transport.
They've shifted the focus of our communities away from traditional town centres and they've transformed our urban landscape. More than a third of the UK's consumer spending passes through their checkouts, but we have no direct say in how they behave.
These are the uncomfortable facts about what represents, after our employers, the most powerful commercial relationship in our lives. Tesco, Sainsbury, Asda, Morrison and the rest say that they are entirely shaped by what the consumer wants. How else did they grow so big? Opponents maintain they curtail not only retail choices but lifestyle and community ones. They are both right.
Angst and uneaseAt one level, government recognises the unease and angst that the power and dominance of supermarkets causes. They know something is deeply wrong, but seem incapable of addressing it.
There have been dozens of investigations into the industry by either the Competition Commission or the Office of Fair Trading over the last two decades. These have covered everything from allegations of bullying small suppliers to price-fixing relationships with big ones, from stockpiling land to destroying small grocery rivals.
New raids by the OFTJust this week the OFT demanded e-mails and documents from a number of supermarkets, plus big suppliers like Unilever, Reckitt Benckiser, Procter & Gamble and Mars in an attempt to find evidence of price-rigging in various products.
On Wednesday, the Competition Commission released the results of a two-year inquiry into supermarket land and planning issues. This inquiry, the third full-scale investigation into the industry in seven years, focused mainly on competition between supermarkets, rather than what they are doing to smaller retailers. As usual, they came up with some detailed recommendations none of which will significantly hinder the expansion of the industry.
Full details of the inquiry findings
Wrong tools for the jobThis ants' nest of regulatory activity always fails to address the real problem, because the regulators have a narrow remit and the wrong tools for the job.
Take the Competition Commission. It was designed, under the original name of the Monopolies & Mergers Commission, to fight the creation through takeover of companies that would dominate an industry. Any company that exceeded a limit of 25% market share would be deemed a monopoly.
Tesco has 30% of the grocery market, but got there largely by growth not acquisition. The commission is reluctant to say that Tesco is operating against the public interest at 30% seeing that it was the public that put it there. But you could be sure that if Sainsbury wanted to buy Asda, to make an equivalent-sized firm, it would be ruled out. Yet surely a monopoly behaves like a monopoly, however it got there.
Doomed interventionsLikewise, The OFT probes into the treatment of small suppliers are as doomed as attempts to stop playground bullying.
Under the watchful eye of the OFT headmaster, they'll all say "please" and "thank you", but behind the bike sheds the six-foot tattooed 16-year-olds will have no trouble extracting dinner money from the new boys. It's intrinsic to relationships of such unequal power.
Same troubleIt is the size, power and economies of scale of supermarkets which power both the things about them that consumers like and those that we don't. Squeezed suppliers, heavy food miles, edge-of-town developments, ugly but functional architecture and the boarded-up shops of smaller retailers are the flip side of cheap convenience food, long opening hours and one-stop shopping.
The CC and OFT don't really examine the wider, softer issues of supermarkets, it's not in their remit. They won't make the connection between the generations of young adults who can't boil an egg, never walk to a shop and are often overweight and where they buy their ready-to-microwave food. It's part of a bigger story in society, of course, but it does need untangling.
Loss of consumer choiceSupermarkets like to say they are about choice, but they restrict choices to meaningless areas. We may be able to get 120 types of sugar-coated breakfast cereal in Asda or Tesco, but there's no-one who knows the difference between de-scaling a fish and skinning it, or how to prepare a rising rib of beef. Neither is there anyone to ask, as your local shopkeeper might, how the hip operation went, and how many A-levels James got.
We like the fact that we can get the latest Harry Potter book at half price from Tesco, but don't like the fact that competing bookshops are closing down. They stock thousands of titles rather than just 20 but lose money because no-one comes to buy the top-selling titles from them. That's a real loss of consumer choice.
To my mind, the threat of supermarkets transcends the Lilliputian tools of regulators, and is best described in the language of the conservationists: a threat to retail diversity from a dominant species.
The butcher, the baker, the jobless makerThere are many large towns in Britain now without a single independent greengrocer, butcher, fishmonger or baker. The skills which combine baking with business are being lost. Butchers retire and the shop closes, even when it has a loyal clientele, because there are few apprenticeship schemes to encourage a new generation in the craft.
A conservationist answer could be to create reserves around the thriving market towns which still survive, to protect independent shops in the same way as we do rare frogs or butterflies.
These could be designated retail heritage parks, safe from supermarket encroachment, with planning protection akin to those seen in national parks plus local apprenticeship schemes to keep continuity of skills.
Some answers are possibleThey would act as a beacon and a resource, aided by tourism, for the preservation of worthwhile commercial traditions. It would have spin offs in community and in architecture.
Wouldn't it be better for those lovely old Georgian or Victorian shops to have a living breathing local food business within it rather than a charity shop?
Elsewhere, where most local shops are already gone, planning rules could perhaps have a nationally enforced clause, that approval will only be given where 10% of a superstore's floor area is allocated to local food businesses, operating independently, but whose heating, light and rent would be covered by the supermarket.
So while you buy your Sainsbury baked beans and chicken tikka, you would have the benefit of local goat's cheese, wild game and organic vegetables from a farmer's market under the same roof.
While supermarkets may collectively baulk at the cost, those that agreed would have a powerful new competitive draw over rivals in the area. Impossible? No, it is exactly the regulatory approach which forced BT to open access to rivals.
None of this may come to pass. But it could, if we want it enough. I just hope someone in government is listening.
Browse books written by Nick Louth
Supermarkets have not only shaped our weekly shop, but de-skilled our cooking and reshaped our bodies. They've driven the enlargement of the road system and changed the way we use transport.
They've shifted the focus of our communities away from traditional town centres and they've transformed our urban landscape. More than a third of the UK's consumer spending passes through their checkouts, but we have no direct say in how they behave.
These are the uncomfortable facts about what represents, after our employers, the most powerful commercial relationship in our lives. Tesco, Sainsbury, Asda, Morrison and the rest say that they are entirely shaped by what the consumer wants. How else did they grow so big? Opponents maintain they curtail not only retail choices but lifestyle and community ones. They are both right.
Angst and uneaseAt one level, government recognises the unease and angst that the power and dominance of supermarkets causes. They know something is deeply wrong, but seem incapable of addressing it.
There have been dozens of investigations into the industry by either the Competition Commission or the Office of Fair Trading over the last two decades. These have covered everything from allegations of bullying small suppliers to price-fixing relationships with big ones, from stockpiling land to destroying small grocery rivals.
New raids by the OFTJust this week the OFT demanded e-mails and documents from a number of supermarkets, plus big suppliers like Unilever, Reckitt Benckiser, Procter & Gamble and Mars in an attempt to find evidence of price-rigging in various products.
On Wednesday, the Competition Commission released the results of a two-year inquiry into supermarket land and planning issues. This inquiry, the third full-scale investigation into the industry in seven years, focused mainly on competition between supermarkets, rather than what they are doing to smaller retailers. As usual, they came up with some detailed recommendations none of which will significantly hinder the expansion of the industry.
Full details of the inquiry findings
Wrong tools for the jobThis ants' nest of regulatory activity always fails to address the real problem, because the regulators have a narrow remit and the wrong tools for the job.
Take the Competition Commission. It was designed, under the original name of the Monopolies & Mergers Commission, to fight the creation through takeover of companies that would dominate an industry. Any company that exceeded a limit of 25% market share would be deemed a monopoly.
Tesco has 30% of the grocery market, but got there largely by growth not acquisition. The commission is reluctant to say that Tesco is operating against the public interest at 30% seeing that it was the public that put it there. But you could be sure that if Sainsbury wanted to buy Asda, to make an equivalent-sized firm, it would be ruled out. Yet surely a monopoly behaves like a monopoly, however it got there.
Doomed interventionsLikewise, The OFT probes into the treatment of small suppliers are as doomed as attempts to stop playground bullying.
Under the watchful eye of the OFT headmaster, they'll all say "please" and "thank you", but behind the bike sheds the six-foot tattooed 16-year-olds will have no trouble extracting dinner money from the new boys. It's intrinsic to relationships of such unequal power.
Same troubleIt is the size, power and economies of scale of supermarkets which power both the things about them that consumers like and those that we don't. Squeezed suppliers, heavy food miles, edge-of-town developments, ugly but functional architecture and the boarded-up shops of smaller retailers are the flip side of cheap convenience food, long opening hours and one-stop shopping.
The CC and OFT don't really examine the wider, softer issues of supermarkets, it's not in their remit. They won't make the connection between the generations of young adults who can't boil an egg, never walk to a shop and are often overweight and where they buy their ready-to-microwave food. It's part of a bigger story in society, of course, but it does need untangling.
Loss of consumer choiceSupermarkets like to say they are about choice, but they restrict choices to meaningless areas. We may be able to get 120 types of sugar-coated breakfast cereal in Asda or Tesco, but there's no-one who knows the difference between de-scaling a fish and skinning it, or how to prepare a rising rib of beef. Neither is there anyone to ask, as your local shopkeeper might, how the hip operation went, and how many A-levels James got.
We like the fact that we can get the latest Harry Potter book at half price from Tesco, but don't like the fact that competing bookshops are closing down. They stock thousands of titles rather than just 20 but lose money because no-one comes to buy the top-selling titles from them. That's a real loss of consumer choice.
To my mind, the threat of supermarkets transcends the Lilliputian tools of regulators, and is best described in the language of the conservationists: a threat to retail diversity from a dominant species.
The butcher, the baker, the jobless makerThere are many large towns in Britain now without a single independent greengrocer, butcher, fishmonger or baker. The skills which combine baking with business are being lost. Butchers retire and the shop closes, even when it has a loyal clientele, because there are few apprenticeship schemes to encourage a new generation in the craft.
A conservationist answer could be to create reserves around the thriving market towns which still survive, to protect independent shops in the same way as we do rare frogs or butterflies.
These could be designated retail heritage parks, safe from supermarket encroachment, with planning protection akin to those seen in national parks plus local apprenticeship schemes to keep continuity of skills.
Some answers are possibleThey would act as a beacon and a resource, aided by tourism, for the preservation of worthwhile commercial traditions. It would have spin offs in community and in architecture.
Wouldn't it be better for those lovely old Georgian or Victorian shops to have a living breathing local food business within it rather than a charity shop?
Elsewhere, where most local shops are already gone, planning rules could perhaps have a nationally enforced clause, that approval will only be given where 10% of a superstore's floor area is allocated to local food businesses, operating independently, but whose heating, light and rent would be covered by the supermarket.
So while you buy your Sainsbury baked beans and chicken tikka, you would have the benefit of local goat's cheese, wild game and organic vegetables from a farmer's market under the same roof.
While supermarkets may collectively baulk at the cost, those that agreed would have a powerful new competitive draw over rivals in the area. Impossible? No, it is exactly the regulatory approach which forced BT to open access to rivals.
None of this may come to pass. But it could, if we want it enough. I just hope someone in government is listening.
Browse books written by Nick Louth
Monday, 21 April 2008
Wednesday, 12 March 2008
France: Sarkozy Rolls Out His Tongue
http://www.newsweek.com/ - 17.03.2008 04:00
His outspoken style is unprecedented, unpopular, and now threatens to ruin his presidency.
French cartoonists are having great sport with their president, portraying him in the Adventures of Nicolas Sarkozy as the king of "bling," an impish Casanova full of swashbuckling tales of derring-do. Of course, he's provided some great material. Trading one glamorous wife for another, dashing off to Chad in November to rescue a group of French journalists in jail, declaring himself "ready" last week to rescue hostage Ingrid Betancourt from her guerrilla captors in the Colombian jungle. [See Tracy McNicoll's interview with Erik Orsenna on Sarkozy's method of exercising power.]
Sarkozy looks more like the protagonist of a bande dessinée, a graphic novel in the style of "Tintin" than the head of a well-oiled government machine. Less than a year ago, he campaigned to be "the purchasing-power president" who would lift the French economy and get a country accustomed to 35-hour weeks back to work. He has started the ball rolling on tough reforms, including ending special retirement privileges for certain public-sector employees and making work contracts more flexible. But he has failed to deliver fully due to a penchant for dwelling on issues that are much larger (God) and smaller (taxi fares) than those he campaigned on.
On many occasions, Sarkozy speaks as France's philosopher-in-chief, leader of a staunchly secular France riffing unprovoked about "the transcendent God." On others, he sounds like the mayor of France, intervening directly on issues like petitioning UNESCO to put French gastronomy on its world heritage list. Last month he invited the tobacconist union to the Elysée Palace to discuss the prospect of allowing special smoking rooms in cafés and bars that sell cigarettes. Meanwhile, the economy he was elected to fix is seeing growth projections drop, inflation rise and consumer confidence dip to its lowest level since France started measuring it in 1987.
While France has had grandiose presidents before, the micromanager in Sarkozy is unprecedented. Normally, details are left to the prime minister, who takes the hit when things go wrong. Now, the prime minister (François Fillon) has a far higher approval rating than the president—66 percent compared with 41 percent—the widest gap in modern French history.
To French voters, the Sarkozy show seems increasingly self-indulgent. Since the summer, he's lost 30 points in confidence polls. Only a third of the French now say Sarkozy's work is "heading in the right direction" and 56 percent say he "poorly embodies the presidential function." Candidates for municipal elections on March 9 and March 16, to some extent a referendum on Sarkozy, didn't even invite the president to campaign with them. The Socialist opposition, in disarray after Sarkozy's national victory, is now giving his UMP party a fight even in right-wing strongholds like Marseille, and is expected to win nationwide. "Why should a laborer, or an executive in an office, who elected the guy to raise their purchasing power, care about him rescuing Betancourt?" says BVA pollster Gaël Sliman. "They won't say it's bad. It might earn him a few points, but on the long term they feel it's not good that he's focusing on side issues."
Sarkozy's loose-lipped style also seems to be inspiring the circle of presidential advisers, who traditionally remain in the shadows. A handful of them are now vying with cabinet members for the spotlight, and even taking a more provocative line than Sarkozy himself. For instance, a magazine recently quoted Sarkozy's staff director and religious affairs adviser, Emmanuelle Mignon, casually dismissing the widespread perception that many cults wield a dangerous influence, raising concerns among secular French who deeply mistrust religious beliefs that fall outside the mainstream. She denied the remark, but the magazine held firm and Sarkozy was forced to reiterate his steadfastness against the perceived scourge.
The biggest concern is Henri Guaino, Sarkozy's speechwriter, who authored most of his campaign rhetoric but has proved the loosest cannon of all. On a continent increasingly concerned about signs that Sarkozy is going to ignore its free-market and budget rules, Guaino has in recent months called European competition policy "perfectly absurd," and dubbed the idea of a policy of budgetary rigor for France "the most stupid policy possible." But instead of silencing his voluble aides, Sarkozy has sent them on diplomatic missions, sidelining his highly experienced foreign minister, Bernard Kouchner. Last year Sarkozy sent adviser Claude Guéant, the secretary-general of the Elysée, to Libya to help negotiate the release of Bulgarian medics facing death sentences, and to Damascus to feel out a rapprochement with Syria. Kouchner was dismayed.
These private emissaries might be less controversial if they were more effective. In February Sarkozy sent Guaino to Berlin to promote his plan for a Mediterranean Union that would stand separate from the EU. German Chancellor Angela Merkel had made it clear she sees this vague idea as a divisive diversion from the task of strengthening the EU. Her advisers hoped Guaino was coming to show flexibility. Instead, he just repeated the same controversial idea, leaving "big disappointment" in Berlin, says Martin Koopmann, an expert on France at the German Council on Foreign Relations. Last week Sarkozy went to Germany himself to mend relations with Merkel by dropping the idea of a stand-alone Club Med.
Even members of Sarkozy's government and party are questioning his activist inner circle. Secretary of State for European Affairs Jean-Pierre Jouyet has worried aloud about advisers "substituting" for ministers. "The problem of discordant voices in the French orchestra is Mr. Guaino and sometimes other presidential aides," says Alain Lamassoure, a French member of the European Parliament who belongs to Sarkozy's party. "But in European matters, it's especially Mr. Guaino."
Sarkozy brought Guaino into the presidential campaign in 2006, hoping the writer could temper his image as an Atlanticist, economic liberal. Lately he's added only controversy. Last summer Sarkozy went to Senegal and gave a speech penned by Guaino, saying "never does it occur to the [African man] to invent himself a destiny," prompting French philosopher Bernard-Henri Lévy to call Guaino a racist. Guaino responded by calling Lévy a "pretentious little idiot." And when Sarkozy told a heckler at the Paris agricultural fair last month to "get lost, poor idiot," one cartoonist drew the president crediting Guaino for the line.
Guaino has dismissed the criticism, arguing that "democracy means free expression for everyone." Yet former presidential advisers say that's nonsense. François Mitterrand's speechwriter and cultural adviser, Erik Orsenna, says the former president repeatedly told advisers to stay in the background. The concern is that while ministers have huge bureaucracies to "channel data upward" and create well-crafted positions, advisers do not, says Orsenna, and "if an idea is not prepared it can come back like a boomerang."
Boomerang indeed. In February Sarkozy proposed teaching the Holocaust by assigning fifth graders to research individual French children killed by the Nazis. The idea appeared to have been pushed with minimal preparation and was widely panned. Simone Veil, a former Social Affairs minister, a stalwart Sarkozy ally and a Holocaust survivor, was seated next to Sarkozy at the Jewish community dinner where he presented the idea and was appalled by the prospect of forcing such young students to identify so closely with dead children. "My blood ran cold," she said.
The question now is whether Sarkozy can regain his lost luster. Jacques Attali, an ex-Mitterrand aide who works closely with Sarkozy, says that Sarkozy's win in his first attempt at running for president gave him "a sentiment of power, of infallibility" that is bound to ease over time, as he develops "a consciousness of the possibility of failure." That could come as soon as the municipal elections, perhaps compelling Sarkozy to shake up the Elysée Palace. Some of his supporters see a parallel with the early Clinton White House, where internal turmoil forced a cabinet shakeup. But a French biographer of Clinton, Gilles Delafon, sees a big difference. "Clinton was a learner," he says. "The unknown about Sarkozy is whether he is capable of learning. You could say Clinton didn't know the rules of the game in Washington. Sarkozy knows the rules, but is incapable of following them. That's why the real question is about him, about his character." And if he fails, history, too, may write his story as a comic-book caricature.
French cartoonists are having great sport with their president, portraying him in the Adventures of Nicolas Sarkozy as the king of "bling," an impish Casanova full of swashbuckling tales of derring-do. Of course, he's provided some great material. Trading one glamorous wife for another, dashing off to Chad in November to rescue a group of French journalists in jail, declaring himself "ready" last week to rescue hostage Ingrid Betancourt from her guerrilla captors in the Colombian jungle. [See Tracy McNicoll's interview with Erik Orsenna on Sarkozy's method of exercising power.]
Sarkozy looks more like the protagonist of a bande dessinée, a graphic novel in the style of "Tintin" than the head of a well-oiled government machine. Less than a year ago, he campaigned to be "the purchasing-power president" who would lift the French economy and get a country accustomed to 35-hour weeks back to work. He has started the ball rolling on tough reforms, including ending special retirement privileges for certain public-sector employees and making work contracts more flexible. But he has failed to deliver fully due to a penchant for dwelling on issues that are much larger (God) and smaller (taxi fares) than those he campaigned on.
On many occasions, Sarkozy speaks as France's philosopher-in-chief, leader of a staunchly secular France riffing unprovoked about "the transcendent God." On others, he sounds like the mayor of France, intervening directly on issues like petitioning UNESCO to put French gastronomy on its world heritage list. Last month he invited the tobacconist union to the Elysée Palace to discuss the prospect of allowing special smoking rooms in cafés and bars that sell cigarettes. Meanwhile, the economy he was elected to fix is seeing growth projections drop, inflation rise and consumer confidence dip to its lowest level since France started measuring it in 1987.
While France has had grandiose presidents before, the micromanager in Sarkozy is unprecedented. Normally, details are left to the prime minister, who takes the hit when things go wrong. Now, the prime minister (François Fillon) has a far higher approval rating than the president—66 percent compared with 41 percent—the widest gap in modern French history.
To French voters, the Sarkozy show seems increasingly self-indulgent. Since the summer, he's lost 30 points in confidence polls. Only a third of the French now say Sarkozy's work is "heading in the right direction" and 56 percent say he "poorly embodies the presidential function." Candidates for municipal elections on March 9 and March 16, to some extent a referendum on Sarkozy, didn't even invite the president to campaign with them. The Socialist opposition, in disarray after Sarkozy's national victory, is now giving his UMP party a fight even in right-wing strongholds like Marseille, and is expected to win nationwide. "Why should a laborer, or an executive in an office, who elected the guy to raise their purchasing power, care about him rescuing Betancourt?" says BVA pollster Gaël Sliman. "They won't say it's bad. It might earn him a few points, but on the long term they feel it's not good that he's focusing on side issues."
Sarkozy's loose-lipped style also seems to be inspiring the circle of presidential advisers, who traditionally remain in the shadows. A handful of them are now vying with cabinet members for the spotlight, and even taking a more provocative line than Sarkozy himself. For instance, a magazine recently quoted Sarkozy's staff director and religious affairs adviser, Emmanuelle Mignon, casually dismissing the widespread perception that many cults wield a dangerous influence, raising concerns among secular French who deeply mistrust religious beliefs that fall outside the mainstream. She denied the remark, but the magazine held firm and Sarkozy was forced to reiterate his steadfastness against the perceived scourge.
The biggest concern is Henri Guaino, Sarkozy's speechwriter, who authored most of his campaign rhetoric but has proved the loosest cannon of all. On a continent increasingly concerned about signs that Sarkozy is going to ignore its free-market and budget rules, Guaino has in recent months called European competition policy "perfectly absurd," and dubbed the idea of a policy of budgetary rigor for France "the most stupid policy possible." But instead of silencing his voluble aides, Sarkozy has sent them on diplomatic missions, sidelining his highly experienced foreign minister, Bernard Kouchner. Last year Sarkozy sent adviser Claude Guéant, the secretary-general of the Elysée, to Libya to help negotiate the release of Bulgarian medics facing death sentences, and to Damascus to feel out a rapprochement with Syria. Kouchner was dismayed.
These private emissaries might be less controversial if they were more effective. In February Sarkozy sent Guaino to Berlin to promote his plan for a Mediterranean Union that would stand separate from the EU. German Chancellor Angela Merkel had made it clear she sees this vague idea as a divisive diversion from the task of strengthening the EU. Her advisers hoped Guaino was coming to show flexibility. Instead, he just repeated the same controversial idea, leaving "big disappointment" in Berlin, says Martin Koopmann, an expert on France at the German Council on Foreign Relations. Last week Sarkozy went to Germany himself to mend relations with Merkel by dropping the idea of a stand-alone Club Med.
Even members of Sarkozy's government and party are questioning his activist inner circle. Secretary of State for European Affairs Jean-Pierre Jouyet has worried aloud about advisers "substituting" for ministers. "The problem of discordant voices in the French orchestra is Mr. Guaino and sometimes other presidential aides," says Alain Lamassoure, a French member of the European Parliament who belongs to Sarkozy's party. "But in European matters, it's especially Mr. Guaino."
Sarkozy brought Guaino into the presidential campaign in 2006, hoping the writer could temper his image as an Atlanticist, economic liberal. Lately he's added only controversy. Last summer Sarkozy went to Senegal and gave a speech penned by Guaino, saying "never does it occur to the [African man] to invent himself a destiny," prompting French philosopher Bernard-Henri Lévy to call Guaino a racist. Guaino responded by calling Lévy a "pretentious little idiot." And when Sarkozy told a heckler at the Paris agricultural fair last month to "get lost, poor idiot," one cartoonist drew the president crediting Guaino for the line.
Guaino has dismissed the criticism, arguing that "democracy means free expression for everyone." Yet former presidential advisers say that's nonsense. François Mitterrand's speechwriter and cultural adviser, Erik Orsenna, says the former president repeatedly told advisers to stay in the background. The concern is that while ministers have huge bureaucracies to "channel data upward" and create well-crafted positions, advisers do not, says Orsenna, and "if an idea is not prepared it can come back like a boomerang."
Boomerang indeed. In February Sarkozy proposed teaching the Holocaust by assigning fifth graders to research individual French children killed by the Nazis. The idea appeared to have been pushed with minimal preparation and was widely panned. Simone Veil, a former Social Affairs minister, a stalwart Sarkozy ally and a Holocaust survivor, was seated next to Sarkozy at the Jewish community dinner where he presented the idea and was appalled by the prospect of forcing such young students to identify so closely with dead children. "My blood ran cold," she said.
The question now is whether Sarkozy can regain his lost luster. Jacques Attali, an ex-Mitterrand aide who works closely with Sarkozy, says that Sarkozy's win in his first attempt at running for president gave him "a sentiment of power, of infallibility" that is bound to ease over time, as he develops "a consciousness of the possibility of failure." That could come as soon as the municipal elections, perhaps compelling Sarkozy to shake up the Elysée Palace. Some of his supporters see a parallel with the early Clinton White House, where internal turmoil forced a cabinet shakeup. But a French biographer of Clinton, Gilles Delafon, sees a big difference. "Clinton was a learner," he says. "The unknown about Sarkozy is whether he is capable of learning. You could say Clinton didn't know the rules of the game in Washington. Sarkozy knows the rules, but is incapable of following them. That's why the real question is about him, about his character." And if he fails, history, too, may write his story as a comic-book caricature.
Source: Newsweek
A Race to Remember
London's upcoming mayoral race pits an old, newt-keeping socialist against a bumbling conservative who seems to confuse soccer with rugby.By Stryker McGuire and Christopher Werth Newsweek Web Exclusive
Mar 11, 2008 Updated: 9:34 a.m. ET Mar 11, 2008
London waited 2,000 years to get its first directly elected mayor. Now that it has one, the quadrennial race for the job has become the liveliest electoral circus in the land. Credit for making up for lost time goes to Ken Livingstone, an ex-Trotskyite turned defender of globalization who was elected eight years ago and has crammed as much zest and controversy as possible into his two terms. This time around the Labour Party's "Red Ken" may have met his match in Boris Johnson, a demicelebrity of the Tory right known for his erudition—carefully concealed by his inability to string sentences together—and a mop of blond hair that, in full flight, resembles an exploding dandelion.
A city that rose from Londinium in Roman times to its current incarnation as the epicenter of Cool Britannia—where every second child is born to an immigrant mother, where the Square Mile financial district has surpassed Wall Street as the global financial capital—deserves a race like this. An old socialist known to keep newts as pets is up against an Old Etonian whose day job is member of Parliament for Henley-on-Thames, a posh suburb an hour from central London. Among a diverse pack of second-tier candidates in the May 1 election, the closest thing to a challenge comes from the Liberal Democrats' Brian Paddick, a gay former deputy assistant commissioner in the Metropolitan Police Service who once made headlines by instructing his officers not to penalize people for marijuana offenses.
Paddick seems a by-the-book Victorian compared with the two front runners. Livingstone, now 62, first rose to prominence as the fiery Labour Party leader of the Greater London Council (GLC) during the Thatcher years. He adopted knee-jerk, over-the-top positions—declaring, for example, that Britain's treatment of Irish Catholics was "as bad in 800 years as what Hitler did to the Jews in six." He declared political war on the Iron Lady herself, pronouncing the capital a nuclear-free zone and trying (but failing) to push through free public transportation. From his office across the Thames from the Palace of Westminster, he taunted the government's economic-reform agenda by hanging out a sign that tracked rising unemployment. Thatcher showed him who was boss, though: she abolished the GLC in 1986, leaving Livingstone unemployed.
It was a wiser Livingstone who ran for mayor in the first ever direct election, in 2000. At first Tony Blair's "New Labour" Party wanted nothing to do with the Old Labour relic; Blair said he would be a "disaster" as mayor. Livingstone won as an Independent and set out to tackle London's dilapidated transportation network. The London Underground showed little improvement, but Londoners gave the mayor generally high marks for his hefty "congestion charge" fees, then 5 pounds ($10), now 8 pounds ($16), on private cars entering central London and for upgrading the bus system (there are twice as many bus riders as tube passengers in London). Eventually, with the 2004 election in sight, Livingstone was so popular that Labour had no choice but to take him back into the party. He won with 55 percent of the vote.
The mayor's second term has been rockier than his first. Livingstone was part of the team that won the right for London to host the 2012 Summer Olympics, and he earned a Giuliani-like aura for his handling of the suicide-bomb attacks on London's transportation system in July 2005. But some of his more controversial acts—such as doing a deal with Venezuelan President Hugo Chávez to supply subsidized fuel for London buses or likening a Jewish newspaper reporter covering him to a "concentration camp guard"—attracted criticism. Livingstone's sheer longevity in office, set against the slow pace of progress in public services, has also begun to take a toll on his popularity. Worse, his administration has been hit with allegations of financial irregularities. Last week the mayor's adviser on racial matters, Lee Jasper, resigned following allegations of impropriety and cronyism, including his friendship with a woman involved in two organizations that received funds from the mayor's office. (Jasper denied any wrongdoing.)
Enter Alexander Boris de Pfeffel Johnson. Like Livingstone—of whom the former Labour leader Neil Kinnock once said, "Everyone likes Ken, except the people who know him"—the 43-year-old onetime editor of the Spectator magazine is a genial but polarizing figure. An Oxford-educated classics scholar who once lost a senior Conservative Party post for allegedly lying about an extramarital affair (the accusations were "an inverted pyramid of piffle," he said), Johnson sometimes seems remarkably blasé about the mayor's race. He was once asked how he thought London had improved since his childhood. He seemed flummoxed by the question. Someone in the audience helpfully yelled, "Restaurants!" Johnson perked up: "Yes, you eat well. Thank you! Who would have dreamed you could go into Tesco and buy mange-tout, or your newsagent for mango juice?"
A city that rose from Londinium in Roman times to its current incarnation as the epicenter of Cool Britannia—where every second child is born to an immigrant mother, where the Square Mile financial district has surpassed Wall Street as the global financial capital—deserves a race like this. An old socialist known to keep newts as pets is up against an Old Etonian whose day job is member of Parliament for Henley-on-Thames, a posh suburb an hour from central London. Among a diverse pack of second-tier candidates in the May 1 election, the closest thing to a challenge comes from the Liberal Democrats' Brian Paddick, a gay former deputy assistant commissioner in the Metropolitan Police Service who once made headlines by instructing his officers not to penalize people for marijuana offenses.
Paddick seems a by-the-book Victorian compared with the two front runners. Livingstone, now 62, first rose to prominence as the fiery Labour Party leader of the Greater London Council (GLC) during the Thatcher years. He adopted knee-jerk, over-the-top positions—declaring, for example, that Britain's treatment of Irish Catholics was "as bad in 800 years as what Hitler did to the Jews in six." He declared political war on the Iron Lady herself, pronouncing the capital a nuclear-free zone and trying (but failing) to push through free public transportation. From his office across the Thames from the Palace of Westminster, he taunted the government's economic-reform agenda by hanging out a sign that tracked rising unemployment. Thatcher showed him who was boss, though: she abolished the GLC in 1986, leaving Livingstone unemployed.
It was a wiser Livingstone who ran for mayor in the first ever direct election, in 2000. At first Tony Blair's "New Labour" Party wanted nothing to do with the Old Labour relic; Blair said he would be a "disaster" as mayor. Livingstone won as an Independent and set out to tackle London's dilapidated transportation network. The London Underground showed little improvement, but Londoners gave the mayor generally high marks for his hefty "congestion charge" fees, then 5 pounds ($10), now 8 pounds ($16), on private cars entering central London and for upgrading the bus system (there are twice as many bus riders as tube passengers in London). Eventually, with the 2004 election in sight, Livingstone was so popular that Labour had no choice but to take him back into the party. He won with 55 percent of the vote.
The mayor's second term has been rockier than his first. Livingstone was part of the team that won the right for London to host the 2012 Summer Olympics, and he earned a Giuliani-like aura for his handling of the suicide-bomb attacks on London's transportation system in July 2005. But some of his more controversial acts—such as doing a deal with Venezuelan President Hugo Chávez to supply subsidized fuel for London buses or likening a Jewish newspaper reporter covering him to a "concentration camp guard"—attracted criticism. Livingstone's sheer longevity in office, set against the slow pace of progress in public services, has also begun to take a toll on his popularity. Worse, his administration has been hit with allegations of financial irregularities. Last week the mayor's adviser on racial matters, Lee Jasper, resigned following allegations of impropriety and cronyism, including his friendship with a woman involved in two organizations that received funds from the mayor's office. (Jasper denied any wrongdoing.)
Enter Alexander Boris de Pfeffel Johnson. Like Livingstone—of whom the former Labour leader Neil Kinnock once said, "Everyone likes Ken, except the people who know him"—the 43-year-old onetime editor of the Spectator magazine is a genial but polarizing figure. An Oxford-educated classics scholar who once lost a senior Conservative Party post for allegedly lying about an extramarital affair (the accusations were "an inverted pyramid of piffle," he said), Johnson sometimes seems remarkably blasé about the mayor's race. He was once asked how he thought London had improved since his childhood. He seemed flummoxed by the question. Someone in the audience helpfully yelled, "Restaurants!" Johnson perked up: "Yes, you eat well. Thank you! Who would have dreamed you could go into Tesco and buy mange-tout, or your newsagent for mango juice?"
Johnson's bumbling is the stuff of legend. During a celebrity soccer game—perhaps confusing the sport with rugby—Johnson once charged into a German opponent, hurling him into the air. No less an authority than Arnold Schwarzenegger has commented on Johnson's shambling elocution. As the California governor listened to Johnson try to lay out his vision for London, an open mike caught Schwarzenegger whispering, "He's fumbling all over the place." And yet "Ken Leaving Soon," as Boris calls the mayor, is in trouble; the latest polls show him and Johnson running neck and neck. "I think there's no particular disgrace in making people laugh," Johnson says, adding quickly, "I'm a deeply serious person." What both Johnson and Livingstone are really serious about is winning; only one of them can have the last laugh on May 1.
Source: Newsweek
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