Geopolitics

[Guest]

Haven't been a fan of Fareed Zakaria, but liked the little I heard on his new book:
'Post-American World' Offers New Role for U.S.
If anyone's read it, please post reviews, thoughts.

[acharya]

PERHAPS 60% OF TODAY'S OIL
PRICE IS PURE SPECULATION
by F. William Engdahl
May 2, 2008

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

First, the crucial role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the ICE Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil—West Texas Intermediate and North Sea Brent.

A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex President, James Newsome, sitting on the board of DME and most key personnel British or American citizens.

Brent is used in spot and long-term contracts to value as much of crude oil produced in global oil markets each day. The Brent price is published by a private oil industry publication, Platt’s. Major oil producers including Russia and Nigeria use Brent as a benchmark for pricing the crude they produce. Brent is a key crude blend for the European market and, to some extent, for Asia.

WTI has historically been more of a US crude oil basket. Not only is it used as the basis for US-traded oil futures, but it's also a key benchmark for US production.

‘The tail that wags the dog’

All this is well and official. But how today’s oil prices are really determined is done by a process so opaque only a handful of major oil trading banks such as Goldman Sachs or Morgan Stanley have any idea who is buying and who selling oil futures or derivative contracts that set physical oil prices in this strange new world of “paper oil.”

With the development of unregulated international derivatives trading in oil futures over the past decade or more, the way has opened for the present speculative bubble in oil prices.

Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the “tail that wags the dog.”

A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”

What the Senate committee staff documented in the report was a gaping loophole in US Government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months.

The Senate report was ignored in the media and in the Congress.

The report pointed out that the Commodity Futures Trading Trading Commission, a financial futures regulator, had been mandated by Congress to ensure that prices on the futures market reflect the laws of supply and demand rather than manipulative practices or excessive speculation. The US Commodity Exchange Act (CEA) states, “Excessive speculation in any commodity under contracts of sale of such commodity for future delivery . . . causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.”

Further, the CEA directs the CFTC to establish such trading limits “as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” Where is the CFTC now that we need such limits?

they seem to have deliberately walked away from their mandated oversight responsibilities in the world’s most important traded commodity, oil.

Enron has the last laugh…

As that US Senate report noted:

“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC,including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”

The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated:

“The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”

In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.”

Then, apparently to make sure the way was opened really wide to potential market oil price manipulation, in January 2006, the Bush Administration’s CFTC permitted the Intercontinental Exchange (ICE), the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of US crude oil futures on the ICE futures exchange in London – called “ICE Futures.”

Previously, the ICE Futures exchange in London had traded only in European energy commodities – Brent crude oil and United Kingdom natural gas. As a United Kingdom futures market, the ICE Futures exchange is regulated solely by the UK Financial Services Authority. In 1999, the London exchange obtained the CFTC’s permission to install computer terminals in the United States to permit traders in New York and other US cities to trade European energy commodities through the ICE exchange.

The CFTC opens the door

Then, in January 2006, ICE Futures in London began trading a futures contract for West Texas Intermediate (WTI) crude oil, a type of crude oil that is produced and delivered in the United States. ICE Futures also notified the CFTC that it would be permitting traders in the United States to use ICE terminals in the United States to trade its new WTI contract on the ICE Futures London exchange. ICE Futures as well allowed traders in the United States to trade US gasoline and heating oil futures on the ICE Futures exchange in London.

Despite the use by US traders of trading terminals within the United States to trade US oil, gasoline, and heating oil futures contracts, the CFTC has until today refused to assert any jurisdiction over the trading of these contracts.

Persons within the United States seeking to trade key US energy commodities – US crude oil, gasoline, and heating oil futures – are able to avoid all US market oversight or reporting requirements by routing their trades through the ICE Futures exchange in London instead of the NYMEX in New York.

Is that not elegant? The US Government energy futures regulator, CFTC opened the way to the present unregulated and highly opaque oil futures speculation. It may just be coincidence that the present CEO of NYMEX, James Newsome, who also sits on the Dubai Exchange, is a former chairman of the US CFTC. In Washington doors revolve quite smoothly between private and public posts.

A glance at the price for Brent and WTI futures prices since January 2006 indicates the remarkable correlation between skyrocketing oil prices and the unregulated trade in ICE oil futures in US markets. Keep in mind that ICE Futures in London is owned and controlled by a USA company based in Atlanta Georgia.

In January 2006 when the CFTC allowed the ICE Futures the gaping exception, oil prices were trading in the range of $59-60 a barrel. Today some two years later we see prices tapping $120 and trend upwards. This is not an OPEC problem, it is a US Government regulatory problem of malign neglect.

By not requiring the ICE to file daily reports of large trades of energy commodities, it is not able to detect and deter price manipulation. As the Senate report noted,

“The CFTC's ability to detect and deter energy price manipulation is suffering from critical information gaps, because traders on OTC electronic exchanges and the London ICE Futures are currently exempt from CFTC reporting requirements. Large trader reporting is also essential to analyzE the effect of speculation on energy prices.”

The report added,

“ICE's filings with the Securities and Exchange Commission and other evidence indicate that its over-the-counter electronic exchange performs a price discovery function -- and thereby affects US energy prices -- in the cash market for the energy commodities traded on that exchange.”

Hedge Funds and Banks driving oil prices

In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds, and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.”

The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.

Perhaps 60% of oil prices today pure speculation

Goldman Sachs and Morgan Stanley today are the two leading energy trading firms in the United States. Citigroup and JP Morgan Chase are major players and fund numerous hedge funds as well who speculate.

In June 2006, oil traded in futures markets at some $60 a barrel and the Senate investigation estimated that some $25 of that was due to pure financial speculation. One analyst estimated in August 2005 that US oil inventory levels suggested WTI crude prices should be around $25 a barrel, and not $60.

That would mean today that at least $50 to $60 or more of today’s $115 a barrel price is due to pure hedge fund and financial institution speculation. However, given the unchanged equilibrium in global oil supply and demand over recent months amid the explosive rise in oil futures prices traded on Nymex and ICE exchanges in New York and London it is more likely that as much as 60% of the today oil price is pure speculation. No one knows officially except the tiny handful of energy trading banks in New York and London and they certainly aren’t talking.

By purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $115 per barrel, if the futures price is even higher.

As a result, over the past two years crude oil inventories have been steadily growing, resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices.

Compelling evidence also suggests that the oft-cited geopolitical, economic, and natural factors do not explain the recent rise in energy prices can be seen in the actual data on crude oil supply and demand. Although demand has significantly increased over the past few years, so have supplies.

Over the past couple of years global crude oil production has increased along with the increases in demand; in fact, during this period global supplies have exceeded demand, according to the US Department of Energy. The US Department of Energy’s Energy Information Administration (EIA) recently forecast that in the next few years global surplus production capacity will continue to grow to between 3 and 5 million barrels per day by 2010, thereby “substantially thickening the surplus capacity cushion.”

Dollar and oil link

A common speculation strategy amid a declining USA economy and a falling US dollar is for speculators and ordinary investment funds desperate for more profitable investments amid the US securitization disaster, to take futures positions selling the dollar “short” and oil “long.”

For huge US or EU pension funds or banks desperate to get profits following the collapse in earnings since August 2007 and the US real estate crisis, oil is one of the best ways to get huge speculative gains. The backdrop that supports the current oil price bubble is continued unrest in the Middle East, in Sudan, in Venezuela and Pakistan and firm oil demand in China and most of the world outside the US. Speculators trade on rumor, not fact.

In turn, once major oil companies and refiners in North America and EU countries begin to hoard oil, supplies appear even tighter lending background support to present prices.

Because the over-the-counter (OTC) and London ICE Futures energy markets are unregulated, there are no precise or reliable figures as to the total dollar value of recent spending on investments in energy commodities, but the estimates are consistently in the range of tens of billions of dollars.

The increased speculative interest in commodities is also seen in the increasing popularity
of commodity index funds, which are funds whose price is tied to the price of a basket of various commodity futures. Goldman Sachs estimates that pension funds and mutual funds have invested a total of approximately $85 billion in commodity index funds, and that investments in its own index, the Goldman Sachs Commodity Index (GSCI), has tripled over the past few years. Notable is the fact that the US Treasury Secretary, Henry Paulson, is former Chairman of Goldman Sachs.

story end
© 2008 F. William Engdahl
Editorial Archive

http://www.financialsense.com/editorials/e.../2008/0502.html

[acharya]

'Merger deal with America's United Steelworkers finalised'

London (AP): Britain's largest union said today it has finalised the details of a planned merger with America's United Steelworkers that would create the first trans-Atlantic labour organisation.

UNITE, which represents more than 2 million workers in the transport, energy and public sectors, among others, is set to join United Steelworkers, which has some 850,000 members in the United States, Canada and the Caribbean.

UNITE spokesman Andrew Murray said "the finishing touches" were worked out at a meeting between UNITE and Steelworkers representatives last week.

The unions have joined forces because both have been left behind by globalisation, Murray said.

"We're dealing with global companies that can move capital - and employment - around the world, at will in many cases," he said. "While big business is global, and labour is national, we're going to be at a disadvantage."

Murray said the new super-union's structure was still being worked on. He said its two component parts would maintain their separate identities, at least at first. He added that the new grouping hoped to enlist other foreign unions.

"There's a number of legal complexities," he said. "This is only very much a first step."

Murray said an official announcement would be made at the Steelworkers' Constitutional Convention in Las Vegas, Nevada, beginning in June.

[acharya]

EU Foreign Ministers approve partnership talks with Russia

Brussels (AP): European Union Foreign Ministers approved much delayed plans on Monday to begin talks with Russia aimed at forging a new ``strategic partnership.''

Slovenian Foreign Minister Dimitrij Rupel, whose country holds the EU presidency, said all 27 EU nations had now given the green light to start negotiations at summit talks with Russia's new President Dmitry Medvedev in June.

Rupel hoped that Russian and European negotiators could agree on a far-reaching pact to widen economic and political ties in a year's time. A new agreement, outlining closer cooperation, would replace a decade-old deal with Moscow.

``We are not in front of some quick fix, but indeed the process has started,'' said Rupel. ``We want to work together in many areas.''

Lithuania had blocked a negotiating mandate to take to the summit, demanding Russia first improve its ties with its immediate neighbors, notably with Georgia and Moldova. It dropped its veto last week after its concerns were included in the mandate for the negotiations.

Efforts to begin talks last year also faltered over a now-resolved trade dispute between Poland and Russia over meat exports.

The delays irked Moscow. Medvedev's trip to China last week, his first trip abroad as Russia's new president, was seen as a slap to Russia's western neighbors.

But Rupel played down Medvedev's symbolic choice of China instead of European countries.

``China is a very important country and I think that the president has all the reasons to travel there,'' Rupel said, adding that EU and Russian officials meet regularly.

Most EU nations are eager to get closer ties with Moscow back on track, notably to secure more stable oil and gas supplies amid rising energy prices and supply concerns.

The EU also wants to persuade Moscow to open its vast energy sector to investors from Western Europe and seeks further cooperation in the fields of criminal investigation, fighting corruption, human trafficking and drugs. The bloc also wants to bolster human rights and democratic reforms.

[dhu]

The commenter needs to add in Western Missionary and macaulayite into the nexus. Too much has been wasted on trying to find perfect logic within the 4M nexus.

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->It is no coincidence that symbols of Islam (crescent/star) and communism (hammer/sickle) have a rather strong resemblance--in addition to the fact that Islam (especially as practiced by Arabs and many Pakistanis including dominant factions in military and politics) and communism are both based on hatred. The only difference is that Islam follows a transcendental (but false) god, while <b>communism deifies "the system".</b>

Basically, seeds of Naxal-Islamist nexus were laid when Pakistan decided to approach China for "friendship" after India's lacklustre performance against China in 1962 war (due to Nehru and Menon being PM and DefMin respectively) with the assumption that China would support them materielly in an attack against India (an assumption which certainly was a factor in Pakistan's 1965 misadventure). link<!--QuoteEnd--><!--QuoteEEnd-->

[Guest]

<b>The Secret Bilderberg Conference 2008 </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Bilderberg <b>Confirmed: Westfields Marriott In Chantilly June 5-8</b>
Jim Tucker - "possible" that Athens story was a ruse to misdirect people

Veteran Bilderberg sleuth Jim Tucker has confirmed via three separate sources that the Bilderberg Group will meet this year in Chantilly Virginia at the Westfields Marriott hotel from June 5-8. Tucker told The Alex Jones Show that the earlier story claiming Bilderberg had already met in Athens Greece was a possible ruse to misdirect attention from the real scene of the crime.

The Bilderberg Group comprises around 200 top elitists in government, banking, business, media and academia who meet annually in semi-secrecy and shape the destiny of the world yet are subject to little or no mainstream media scrutiny.

As we discovered last week, original reports that Bilderberg had already met in Athens Greece turned out to be incorrect after Dutch newspapers and the Dutch Embassy let slip that Netherlands Prime Minister <b>Jan Peter Balkenende was set to attend Bilderberg in Chantilly after a meeting with George W. Bush. </b>

The Bilderberg gathering is now set to take place from June 5-8 and as expected, it will be held at the Westfields Marriott hotel, the same venue of the 2002 meeting. Tucker called the Dutch Embassy and was passed over to the Dutch Embassy in the United States, who confirmed that the meeting would be in Chantilly.
............
<!--QuoteEnd--><!--QuoteEEnd-->

[Guest]

<!--QuoteBegin-Mudy+Jun 1 2008, 10:36 PM-->QUOTE(Mudy @ Jun 1 2008, 10:36 PM)<!--QuoteEBegin--><b>The Secret Bilderberg Conference 2008 </b><!--QuoteBegin--><div class='quotetop'>QUOTE<!--QuoteEBegin-->Bilderberg <b>Confirmed: Westfields Marriott In Chantilly June 5-8</b>
Jim Tucker - "possible" that Athens story was a ruse to misdirect people

Veteran Bilderberg sleuth Jim Tucker has confirmed via three separate sources that the Bilderberg Group will meet this year in Chantilly Virginia at the Westfields Marriott hotel from June 5-8. Tucker told The Alex Jones Show that the earlier story claiming Bilderberg had already met in Athens Greece was a possible ruse to misdirect attention from the real scene of the crime.

The Bilderberg Group comprises around 200 top elitists in government, banking, business, media and academia who meet annually in semi-secrecy and shape the destiny of the world yet are subject to little or no mainstream media scrutiny.

<!--QuoteEnd--><!--QuoteEEnd-->
[right][snapback]82255[/snapback][/right]
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No doubt, this 'little' group of mostly "white supremacists'' will have several items on their agenda to discuss about in this year's conference - a list of "how to..."

1) economic and political domination of china


2) economic and political domination of India

3) completely ridding Myanmar, or "Burma,' as it is still referred to by the western press, of the current regime, and install someone partial to the western interests

4) keeping Russia in check militarily

5) keeping Pakistan amply armed, so it can create constant disturbances for India and keep India weak and disunited

6) keeping africa weak and in perpetual conflict, and ensure that no leader of any African country ever becomes too powerful to question the western economic interests in the region

etc..etc..etc..

Seems like between champagne and caviar, these boys and girls have plenty to chat about...creating a new world order.

[Capt M Kumar]

And then they become prime minister. Now what you are doing is what the Jews did 30-40 years ago when they came to England after the War. They took over the local councils and they became mayors. Now they are in Parliament. The Indians are now taking over the local councils. There are mayors all over England who are Indian. You are young enough, I suspect, to live to see an Indian prime minister in England.

http://www.indianexpress.com/story/317358._.html

[Guest]

<!--QuoteBegin-Capt M Kumar+Jun 3 2008, 04:38 AM-->QUOTE(Capt M Kumar @ Jun 3 2008, 04:38 AM)<!--QuoteEBegin-->And then they become prime minister. Now what you are doing is what the Jews did 30-40 years ago when they came to England after the War. They took over the local councils and they became mayors. Now they are in Parliament. The Indians are now taking over the local councils. There are mayors all over England who are Indian. You are young enough, I suspect, to live to see an Indian prime minister in England.

http://www.indianexpress.com/story/317358._.html
[right][snapback]82289[/snapback][/right]
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Even more curious is his bit about the "Indian race" and their curiosity about "personal things." Yes, now I'm definitely more curious about this man's racial overtone. Can't help pondering about this - its in my "Indian-race" genes.

Is he leaving from India directly to attend the Bilderberg conference, by any chance?

[acharya]

Zeit, German

The Oil Crisis is
Changing Globalization


By Philip Faigle

Translated By Ron Argentati

June 2, 2008



German - Zeit - Original Article (German)

Four years ago the US economist Jeremy Rifkin was certain that if oil prices rose above $50 a barrel the global economy would be endangered. Today, he still believes he is correct. Why?

Timid statements aren’t Jeremy Rifkin’s style. The economist and author of numerous best sellers likes to measure world events with big steps. In the past decade alone he has predicted The End of Work, laid to rest Market Capitalism and called forth the age of the Network Economy. With such powerful words, he rose to be an advisor to governments, but lost status among many economists. By the end of the 1980s, Time magazine called him The Most Hated Man in Science.

Four years ago he presciently predicted that rising oil prices combined with a weakening dollar would plunge the USA into a serious crisis and cause a “perfect storm” that would blow down the economy if the price surpassed $50 a barrel. Within a year, the cost of oil nearly doubled that mark and since has hit a record $135 a barrel and the European and American economies appear relatively unscathed. Therefore the question, “Professor Rifkin have you been overtaken by realities?”

“Not in the least,” the economist says today, four years later, in a Zeit Online interview. “With the surpassing of the $50 line, a new era began.” Since then, the world has been heading toward a time of tight oil supplies and the economic engines have been stalling. Economic activity already paid a price in dynamics, airlines have been driven to their knees by rising jet fuel prices and truckers are demonstrating against high diesel and gasoline prices. Added to that, consumer spending in the USA is down due to the high price of oil. As incomes are stagnating, prices for heating, electricity and gas are rising, leaving less money in consumer’s pockets. In short, Rifkin still sees his $50 wager as correct.

Rifkin also fields a second argument: the food crisis in developing countries. In the 100 poorest countries, high oil prices are exacerbating hunger and poverty. Because higher energy costs have made the growth and production of foodstuffs more expensive, millions today are more threatened by hunger and starvation than they were six months ago. “These people stand at the brink of a possible disaster,” Rifkin says. “What we are witnessing is a dramatic, breathtaking social exclusion of a large portion of humanity.” That has nothing to do with a stable world economy.

But what happened to the argument that industrialized nations need far less oil to achieve the same results today than they did several decades ago? Doesn’t that at least permit industrialized nations to confront bottlenecks with greater objectivity?

It actually is “good news” that many industries learned lessons from the two oil shocks of the 1970s, Rifkin says. Many companies in the industrialized west need less oil today to produce automobiles, machines or medicines. But worldwide, relatively few companies take the subject seriously enough. Others are only now beginning to act. “It has to be accelerated,” says Rifkin. Because high prices for oil, gasoline and natural gas are already changing the rules of globalization.

The economists’ argument isn’t new and it goes like this: Until now, there have been incentives for western companies to transfer production to cheap-labor countries because energy costs were low and transporting goods between nations was relatively cheap. As kerosene and gasoline prices rise, however, exporting work to other nations becomes less profitable. This is why developing countries with their cheap labor markets are less able to attract capital than previously.

It also means that labor costs will lessen in importance and energy costs will become more important. Thus, the odds are changing: “Those who decrease their energy costs and minimize their carbon emissions will profit. But those who do not will be caught in the trap of rising gasoline and oil prices,” Rifkin says.

Economists agree that developing countries such as China and India will be especially impacted because their factories use far more oil than their western counterparts. These countries, therefore, will have no opportunity for further growth as long as they remain dependent on old energy sources like uranium, gas and coal. Prices for these conventional energy sources will rise along with oil prices.

“India and China must employ energy more efficiently and usher in a third industrial revolution,” says Rifkin. Otherwise, a battle for remaining resources and international conflicts will take place as it did back when industrialization began.

Is there any chance that oil prices will at least temporarily come down? Perhaps, says Rifkin, albeit not to levels the market was accustomed to for decades. “Oil may sink to $80 or $90 per barrel, but never again below $50,” he says. That’s because it’s not just the oil producing countries that determine the price. The weak dollar, for example, forces them to compensate by raising prices. “Such an argument misses the larger picture,” says Rifkin. “For years, we have been consuming three times as much crude oil as we are discovering. The fact is, we’re approaching the point where half the available oil will be used up, so-called Peak Oil,” he says.

How long it will take for what Rifkin calls the “endgame” to be played out depends, among other things, on when the peak point of oil production takes place. Here there are no sure insights. Economists are only certain that the world faces a long period of oil scarcity. “I don’t think we’ve yet understood the meaning of this moment,” he says.

[acharya]

The end of a neo-con

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Mike Steketee, National affairs editor | May 31, 2008

FRANCIS Fukuyama is the American public intellectual who pronounced the end of history 19 years ago and was a neo-conservative, an idea and an ideology that both suggest he is out of date.

To the contrary, his visit to Australia this week demonstrated that he has a great deal to say that is incisive and challenging. Now a supporter of Barack Obama, the Johns Hopkins University professor of international political economy epitomises the great shift taking place in American democracy, one that this year may swing the most aggressively conservative and unilateral US administration in modern history all the way to one led by a black president who advocates engagement with Iran, American enemy No.1.

The contrast between Fukuyama and George W. Bush, the candidate he supported eight years ago, is stark. The latter, as former Bush press secretary Scott McClellan put it this week, is "a gut player" who operates in a White House bubble where outside views are excluded. Fukuyama, on the other hand, has the kind of intellectual curiosity that led him last year to the Papua New Guinea highlands to pursue his interest in building the institutions required to avoid failed states.

After the September 11 attacks, he and other prominent neo-conservatives signed a letter to Bush arguing for the overthrow of Saddam Hussein. But he pulled back before the invasion in 2003, arguing that the US should seek UN Security Council support, that Iraq was the wrong target for combating terrorism and that the administration was underestimating the difficulty of establishing a stable democracy. Fukuyama recanted his neo-conservatism because he saw where it was leading.

Why was it, he asked, that the warnings the neo-cons made about the unintended consequences of social engineering in domestic policy were being ignored in the wholesale reconstruction they were attempting in Iraq?

These days, there are few sterner critics of the war. This is how he summed it up in my interview with him this week: "Even if it comes out right at the end, it was a tremendous waste of resources. We have invested so far five years worth of effort, 30,000 casualties, $1 trillion in overt expenses and probably another trillion in delayed expenses. Politically, it was counter-productive: it produced more terrorism and more nuclear proliferation than it stopped."

Fukuyama argues that the invasion hastened the nuclear programs of Iran and North Korea. All that is missing from his tally are a few hundred thousand dead Iraqis.

He does say the surge is a success and adds that, as long as the US is prepared to maintain 130,000 troops in the country, the situation will remain stable. But he also believes most forces will be withdrawn in the next four years, whoever ends up in the Oval Office.

His argument is that, even under Republican John McCain, the failure to significantly draw down troops by the next presidential election in 2012 would create significant political problems. What happens to Iraq after the troop withdrawals is "anyone's guess", but he harbours significant doubts that Iraq will be able to stand on its own feet.

Fukuyama believes the threat of terrorism has been exaggerated, an approach that stemmed from the fear after September 11 that the next terrorist act would involve a nuclear bomb. The consequence of overreacting through the use of torture and pre-emptive war, he says, has been to create more anti-Americanism, more terrorism and more nuclear proliferation.

Fukuyama sees the politics of the presidential election year as too quirky to predict an outcome but he does not rule out a McCain victory. What he does regard as inevitable is substantially increased Democratic majorities in both houses of Congress, leaving him wondering whether a president McCain would be able to get much done. He also doubts whether, despite the dramatic shift in the politics of climate change in the US, the rhetoric from all the candidates will be matched by hard economic decisions.

Fukuyama thinks it important for the next US administration to make some big symbolic breaks with the past, such as ruling out the use of torture, which is incompatible with the US claim to promote human rights. He argues that the Bush administration's mindset was anchored in the collapse of the Soviet Union following the hard line Ronald Reagan took against it. The first did not automatically follow the second but Fukuyama's point is that it does help explain the uncompromising approach Bush's Republican administration took to foreign policy.

From next year, he sees a much greater emphasis on soft power: the US leading by example and greater consultation and co-operation with other countries. What he advocates as a more imaginative multilateralism would involve a greater role for existing regional security organisations such as NATO and the development of a new one in northeast Asia bringing together China, Japan, Russia, South Korea and the US.

As for the end of history, an overly literal interpretation of the title of Fukuyama's 1992 book, The End of History and the Last Man, has led to his arguments being widely dismissed, on the basis that a few things have happened since the fall of the Berlin Wall. Fukuyama concedes that, "I was probably a bit over-eager" about the speed with which democracy would spread after the Cold War.

But what he was putting forward was much more than a prediction. It was a thesis about modernisation: that, as countries develop, the desire for freedom and participation grows, leading to the eventual triumph of democracy. Geoffrey Garrett, chief executive of the University of Sydney's US Studies Centre, which brought Fukuyama to Australia, calls it "the emblematic idea of the 1990s".

It does not have universal application. Singapore is rich without being democratic, while India became a democracy despite being one of the world's poorest countries.

And what about the Islamic rejection of modernisation? Fukuyama argues this does not invalidate his thesis because radical Islam is not a viable alternative to democratic government. Radical Islamists had come to power only in Iran and for a period in Afghanistan and had influence in Saudi Arabia. China has managed spectacular development while remaining an authoritarian state and Fukuyama concedes that this looks like the strongest challenge to the idea that economic growth leads to democracy.

But he argues it is early days, with China only half as rich as South Korea and Taiwan in the 1980s, when they became democracies.

"In China right now you have maybe 200(million) to 300 million people who are either middle class or elites that have benefited greatly from China's modernisation and growth," he told a US Studies Centre audience. "I think very few of those people want democracy because they understand that if you open up the political system, there are so many people left behind in Chinese society that there'll be enormous demands for redistribution that will then kill this goose that's laying the golden egg."

The situation could be different in another 10 to 15 years, when China reached a per capita income of $8000 a year - about South Korea's level in the '80s - and with wealth more evenly distributed. The past year has seen about 4000 acts of violent social protest in China over issues such as developers stealing land from peasants and poisons being dumped into water supplies: the kind of issues that create the need for democracy.

Fukuyama envisages that China as a great power may be more like a 19th-century Germany and France: nationalistic but not with a universal doctrine it wants to impose on the rest of the world. But he takes out the saver that ambitions tend to expand with power, so that China's present modest international goals may change.

Francis Fukuyama engaged in a dialogue at the US Studies Centre at the University of Sydney on May 28. For a transcript go to:

[acharya]

Gas slowly turns into liquid gold in many US states
Front page / World / Americas
30.05.2008 Source: Pravda.Ru

In the USA high prices have turned car gas into “liquid gold.” Gas has also become a major attraction for thieves against such a background. They steal petrol not only at gas stations, but also from gas tanks of private cars, buses and trucks.


In most of such cases, swindlers drill holes in gas tanks to obtain the necessary quantity of fuel.

“It’s a new trend; I’ve never heard of such things until gas prices soared up,” said Dale Fortin, the owner of a car repair garage in Denver.

Bruce Burnham, the owner of a truck park in Louisiana, stated that more than 20 of his clients had fallen victims to “gas thieves.”

Such incidents began to appear after Hurricane Katrina in 2005, when gas prices started growing in the USA. Afterwards, the prices dropped a while, although their growth resumed again soon. Law-enforcement agencies and insurance firms ring the alarm: covetous criminals disregard public and their own security. A spark may cause ignition or even an explosion when perpetrators use an electric drill in an attempt to steal gas.

“They use wireless electric drills to make holes in gas tanks. Heating and frictional energy may set off ignition. It is highly hazardous for criminals and other people,” stated John White, a policeman in Denver.

According to law-enforcement agencies, owners of pick-up trucks and sports vehicles fall victims to such crimes in most of cases.

All modern cars in the USA are outfitted with plastic tanks. They are much safer for drilling. The current retail price of the lowest-quality gas has exceeded the level of $3.9 per gallon (1 gallon=3.78 liters), the American Automobile Association (AAA) said. The cost to replace the damaged gas tank may reach $500.

The growing gas prices affect not only car owners, but also police officers. In a great number of US cities and towns policemen use bicycles instead of cars. Like any other organization police stations approve a yearly budget that includes gas costs. “Last year our gas cost was 2.4 dollars per gallon,” Robert Cox, Police Chief of Clive, Iowa, told ITAR-TASS. “Annually we need about 17,000 gallons of gas,” he added.

However, now petrol prices have grown up to almost $4. “It aggravates the situation as our organization is funded by the city and the state,” Cox said.

Thus, it was decided to resort to bicycles that patrol policemen used only occasionally.

However, from a certain point of view bicycles are even better than cars, for they can go along narrow passages. Naturally, they cannot chase criminals who flee by cars but in the countryside bicycles are much more convenient than bulky cars. The most obvious disadvantage of bicycles is the lack of comfort in bad weather.

[acharya]

‘Brutal increase in global prices’

ROME: The summit's main message was due to be: "We firmly resolve to use all means to alleviate the suffering caused by the current crisis, to stimulate food production and to increase investment in agriculture." Some question the use of the summit. President Abdoulaye Wade of Senegal, a sceptic of international attempts to solve hunger and critic of the FAO, said it was a waste of time.

"There's been a brutal rise in prices (of food) and we were told there was a threat hanging over the world and all the heads of state were called to attend. I thought it was going to be to answer the question about what should be done, but it wasn't that at all," Wade said. "It was just a conference like any other and that's why I was disappointed," said Wade, one of more than 40 heads of state and government who attended the Rome summit. British-based poverty campaign group Oxfam was more upbeat.

Although the summit was not meant to produce promises of aid or set new global policies, it has set the tone on food and hunger for more concrete talks in the coming months. Group of Eight leaders meet in Japan in July, by which time a food crisis task force set up by UN Secretary-General Ban Ki-moon is due to have issued a concrete action plan. The summit's talks on the potential benefits to poor farmers from new global trade rules will feed into a push to conclude the so-called Doha round of World Trade Organisation talks, which reach a potentially conclusive phase in the coming weeks.

The United States, which is diverting increasing amounts of its maize harvest into automobile fuel, came under attack from some countries and poverty campaigners who have called for a rethink of policies to promote fuel made from foodstuffs. reuters

[Guest]

<!--QuoteBegin-acharya+Jun 6 2008, 10:22 AM-->QUOTE(acharya @ Jun 6 2008, 10:22 AM)<!--QuoteEBegin--><b>British-based poverty campaign group Oxfam was more upbeat. </b>

[right][snapback]82410[/snapback][/right]
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Ofcourse they are.. More misery, more souls to save....

[acharya]

The gods of greed

They promised economic stability, order and prosperity. But instead the world's bankers have delivered chaos, debt and uncertainty - and then blamed the feeble governments that surrendered control of the global economy to them. In the first of three extracts from their new book, Larry Elliott and Dan Atkinson explain how the reckless speculation of a super-rich elite has left us all the poorer

Illustration: David Parkins

March 2008 was no time to be a welfare scrounger in Gordon Brown's Britain. That month saw a much-trumpeted move, the latest of many since Labour came to power in 1997, to end the so-called "sick-note culture".

On March 17, Dame Carol Black, the government's national director for health and work, declared that absence and worklessness related to sickness were costing the country £100bn a year, and it was announced that ministers were to look at replacing the doctor's sick note with a "fit note", detailing what people can do rather than what they cannot when they are on leave for health reasons. This was of a piece with the "tough love" approach of Brown and his predecessor to those on welfare benefits. It was all about reminding those who wanted to get their hands on public money that rights came with responsibilities.

Four days later, the chief executives of Britain's five largest banking institutions - Barclays, HBOS, HSBC, Lloyds TSB and Royal Bank of Scotland - met the Bank of England. In the jargon of the City, they wanted governor Mervyn King to widen the types of collateral against which the Bank would lend to the clearing banks. In plain English, they wanted him to lend taxpayers' money against much flakier assets than would normally be considered acceptable.

Why did they need this handout? Because banks themselves had stopped lending each other money. The collapse of the US housing market, and the complex financial instruments that had been spun off from it, had caused chaos in the money markets. The victims of last year's "subprime crisis" included two of the world's most respected banks, America's Bear Sterns and France's BNP, while the "credit crunch" that followed claimed Britain's Northern Rock. Those banks that escaped unharmed were sure of only one thing: with so many of their peers exposed to incalculable risks, there was more bad news to come.

That fear seems amply justified. Speculation has left the global economy more vulnerable to a financial collapse than at any time since 1929. According to the supposedly sophisticated models used by market practitioners, a stock-market crash such as the one in 1929 was likely once in 10,000 years. They said the same, however, about the stock market crash of 1987, the collapse of the hedge fund Long Term Capital Management in 1998 and the subprime crisis. The obvious conclusion is that these models are flawed. The International Monetary Fund (IMF) recently described the crisis that erupted last August as "the largest financial shock since the Great Depression". George Soros, the billionaire speculator who knows a thing or two about financial upsets, says the world is facing the "most serious crisis of our lifetime".

Fortunately for the banks, in Brown's Britain they are seen as a cut above the average benefits scrounger. A month after they visited King, the governor announced a £50bn "special liquidity scheme" to provide emergency loans to struggling institutions. It was a similar story across the Atlantic. Over the weekend of March 15 and 16, America's central bank, the Federal Reserve Board, launched a rescue for Bear Stearns, the country's fifth-largest investment bank. To smooth a takeover by JP Morgan Chase, the Fed assumed up to $30bn (£15bn) of Bear's more doubtful assets. Were this act of corporate welfare not sufficient, the Fed also announced that it was to provide emergency liquidity to the market. For good measure, it cut interest rates.

What was most extraordinary about all of this was not the bailing-out of City and Wall Street types who had spent decades, like surly teenagers, insisting that they wanted only to be free from the stuffy, paternal state institutions to which they now turned for help. Rather it was the failure of those same institutions to insist on any quid pro quo. In the real world, when a wild-child son or daughter comes home, tail between their legs, their "boring" parents usually require them to clean up their act in return for financial support and use of their old bedroom. Not so in the world of banking and finance. In remarks to the press in March, the British treasury actually ruled out tougher controls.

But then there is plenty of evidence that, in Britain as elsewhere, those in government could see little wrong with the system as it is. Democratically elected governments have, over the past three decades, willingly ceded control of the world economy to a new elite of freebooting super-rich free-market operatives and their colleagues in national and international institutions like the IMF, the World Bank and the World Trade Organisation. These New Olympians, who earn that title by their remoteness from everyday life and their lack of accountability, have gained this control on a prospectus every bit as false as much of the promotional material for the "exotic securities" of which they are so fond. The charge sheet is as follows:

· They promised economic stability - and have delivered chaos and volatility.

· They promised an economic order based on enterprise, thrift and personal effort - and have delivered one based on chronic indebtedness and wild speculation.

· They promised a "transparent" future in which all costs and prices would be clearly laid out - and have delivered a world of bizarre, occult financial knowledge.

· They promised a greatly expanded middle class of property- and share-owning individuals - and have unleashed havoc on professional and white-collar career structures.

But then none of this ought to be surprising. The New Olympians are unconcerned with - in fact, hostile to - job security (other than their own), social tranquillity and the traditional aspiration for both the good life and the quiet life. They roll their eyes when they hear that the Detroit car worker, the Argentinian shopkeeper or the Cornish fisherman is complaining that their way of life is under threat. Like it or lump it, the New Olympians say. That's just the way it has to be. Meanwhile, elected politicians bend over backwards to make life as pleasant as possible for them.

That was vividly illustrated in February when the British government backtracked on its extremely modest proposals to increase taxes on some of the heroes of business and finance. These were the wealthy "non-domiciled residents" who, while living in the UK, claimed their residence to be elsewhere and paid tax only on income shown to have been earned in Britain. In his pre-Budget report in October 2007, the chancellor, Alistair Darling, had proposed a tougher regime for those 20,000-odd non-doms who had been in Britain for seven years or more, a regime that included the payment of an annual £30,000 flat tax to the exchequer. The backlash from the assembled bankers, ship-owners and other tycoons was predictable, as their political and media apologists lauded their contribution to economic growth and employment and warned of disaster should these philanthropists take themselves elsewhere.

Vince Cable, the Liberal Democrats' treasury spokesman, noted the bizarre nature of the campaign being waged: "We hear stories that a high proportion of non-doms will flee ... It is also claimed that public discussion of non-dom taxation is dangerous because it might frighten these fragile creatures away. This is effective propaganda. We are in the absurd position that some taxpayers on modest incomes have started to feel sorry for the wealthy tax-avoiders."

To be fair, at least 100 Labour MPs failed to accept that global competition means that all workers except CEOs and top directors must accept lower real wages and pensions and poorer working conditions. Nor did they find it convincing that globalisation makes all types of labour more abundant, except chief executives. Brown and Darling, however, seemed to have swallowed the argument. The charge would stay, it was announced, but into the waste-bin went earlier, hated suggestions of making non-doms report on the source of their earnings abroad. Furthermore, there was a categorical statement that the tax changes would not be retrospective.

Growth under the Blair and Brown governments has relied excessively on speculation in two forms: that in the City and that by home-owners. Economically, the legacy is a debt-sodden, lopsided and unequal country in which the pay of those at the top rises at 10 times the rate of those at the bottom. Instead of taking on the City, however, the government has turned its attentions to the workforce - both blue-collar and white-collar - which has to be made ready for the global challenge from China and India by being re-skilled and re-educated and by learning how to be "entrepreneurial". Furthermore, the majority is routinely subjected to ever more illiberal, intrusive and obnoxious interference from state agencies, whether in terms of visual surveillance and the proposed identity card scheme, or in terms of being instructed to change their "attitudes" on a range of subjects.

In the period before the New Olympian takeover, market capitalism proved remarkably good at providing both peace of mind and material advancement. Living standards rose rapidly, financial crises were rare, banking crises rarer still. The New Olympian regime, by contrast, has offered neither faster growth in living standards (for at least 99% of the population) nor peace of mind. The modern era has been characterised by slower growth in average real incomes, higher levels of debt to maintain living standards, greater job insecurity and financial crises that have become more frequent and more far-reaching. The only class that has benefited unambiguously from the new world order has been that of the New Olympians, just as the only creed that has been accepted has been their creed.

The ancient Greeks believed their 12 most important gods and goddesses lived on Mount Olympus. They all had a special significance. Zeus, the lord of the gods, ruled the sky; he was responsible for thunder and lightning. Poseidon, his brother, was the king of the sea; he could ensure that a traveller returned safely home to port. Aphrodite was the goddess of love, Ares the god of war, Apollo the god of the sun and music. Today, there are another dozen governing spirits that hover above and direct our daily lives.

First among these modern gods is globalisation. The ancient Greeks worshipped Zeus; today's cosmopolitan elite pays homage to a world without borders. From the acceptance that economic power had shifted from the nation state to the global market, everything else stems. Governments that seek to meddle with the global market do so at their peril. Rather than tame globalisation, they are supposed to ready their citizens to compete in a world of cut-throat competition. Rather than putting tariffs on foreign steel or banning a foreign company from buying their ports (as the US has done) or seeking to prevent cheap food from undercutting their farmers (as the French have done), they should invest in education, skills and science in the belief that this will "brain-up" their population and create a knowledge economy that will find an upmarket niche in a world awash with cut-price goods. This, of course, is Brown's approach. Whether or not it works is another matter. As the twin engines of the economy struggle, there is little evidence of the knowledge economy riding to the rescue. Indeed, the managerial incompetence that marked the opening of Heathrow Terminal 5 suggests a national shortage of grey matter.

The twin brother of globalisation is communication. The development of powerful digital technology has transformed the way the world works. Had a French bank run into difficulties as a result of financing Napoleon's wars in 1807, for example, it would have taken days for the news to arrive in London, and weeks for it to get to New York. Yet when BNP announced that it was having problems, every dealer in Wall Street and Canary Wharf knew within seconds.

Nation states, despite the impact of globalisation and communication, retain considerable power. They control the flow of imports into their markets; they have controls on the movement of capital; they run industries that are considered to be strategic; they believe that some sectors of the economy - health and education - should be shielded from the full blast of competition. These are, however, impediments to the smoother running of the global market and thus need to be removed. The World Trade Organisation - a supranational body with punitive powers for governments that transgress its rules - started a new round of talks in November 2001 designed to open up markets in agriculture, manufacturing and services. The IMF and the World Bank insist that poor countries receiving financial assistance should abandon state control of their mines, banks and energy companies. In Brussels, the European Commission is dedicated to the removal of the restrictive practices and state subsidies that throw sand into the machinery of the single market. The next three gods are, therefore, liberalisation, privatisation and competition

The sector of the economy to benefit most from these developments was finance. International banks had always tended to have global reach, they could benefit more than any other sector from more rapid communication, it was in their interests to have barriers on capital removed, they picked up hefty fees for organising privatisations, and competition allowed them to wipe out weaker competition. What was not really apparent until last year was how powerful this sixth god - financialisation - had become. In countries like Britain, the expansion of the City of London had been the engine of the economy's growth - the fastest-growing parts of the finance sector expanded at around 7% a year between 1996 and 2006. Meanwhile, manufacturing output stagnated. Financialisation, it was argued by its proponents, was good for a country like Britain. It allowed the country to specialise in what it was good at, made London the hub of global finance, encouraged innovation and - by allowing the market to decide where capital should go - made the economy more stable. Whether this proves to be true in the long term remains to be seen. In the short term, economic growth did not accelerate, productivity did not surge, there was no miracle cure to the balance of payments and only rare glimpses of trickle-down.

Until last year, it was easy to argue that these first six gods were beneficial to the global economy, and at worst, neutral. Privatisation in developing countries, for example, was heralded as a way of preventing corrupt ruling cliques from siphoning off profits into Swiss bank accounts. Globalisation was specialisation on a grand scale: the logical conclusion to the sort of division of labour that Adam Smith and David Ricardo had envisaged 200 years ago. The modern world not only means that we can keep in touch by email with our cousins in Cape Town and buy an agreeable Malbec from an Argentinian vineyard in the foothills of the Andes, but also allows our pension fund to buy shares in an Indian software company. On paper, this life of greater choice, freedom and opportunity sounds splendid. It is certainly preferable that modern communication technology allows Mozart's clarinet concerto to be heard on a CD player in any living room rather than being the exclusive preserve of the court of the Austro-Hungarian emperor in Vienna. In reality, however, the world doesn't work this way - and that's because the remaining six gods have such potentially dangerous properties. These are speculation, recklessness, greed, arrogance, oligarchy and excess

Speculation is not always harmful. Britain's 15 years of uninterrupted economic growth from 1992 onwards was the direct consequence of sterling being forced to leave the European exchange rate mechanism following an attack on the pound orchestrated by Soros. Freed from the need to use excessively high interest rates to defend sterling, growth picked up and unemployment came down. Yet the activities of the big banks and the hedge funds in the first half of 2007 had no noble purpose: far from rectifying a glaring public policy error, they exploited a problem in the private sector - the granting of mortgages in the US to those who couldn't really pay them. Financialisation had created an inverted pyramid. Instead of having a broadly based productive economy supporting a financial sector that had speculation as one of its lucrative but less important activities, a diminished productive sector supported an ever-bigger financial sector that saw speculation as the very reason for its existence.

It would be naive to believe that greed could ever be expunged from financial markets: the pursuit of riches is, and always has been, a factor motivating those who buy and sell shares, bonds, currencies and commodities. Nor is it uncommon to find that the brokers and dealers do rather better out of asset-price bubbles than their customers; as long ago as 1940 the Wall Street veteran Fred Schwed wrote a book called Where Are the Customers' Yachts? Every so often, however, the money lust becomes so pronounced that it crosses the dividing line between cupidity and criminality. Since 2002, a wave of mis-selling has been evident in the US real estate market, with tales of pensioners with only a tiny amount outstanding on their loans tricked into remortgaging their homes at ruinous rates of interest by unscrupulous mortgage brokers.

In January, panellists at the World Economic Forum in Davos were asked how the big banks of North America and Europe had failed to spot the potential losses from subprime lending. The one-word answer from a group that included the chairman of Lloyd's of London and the chief risk officer of the insurance company Swiss Re was "greed". As one participant put it: "Those running the big banks didn't have the first idea what their dealers were up to, but didn't care because the profits were so high."

It goes without saying that those responsible for the speculative bubble of early 2007 could not conceive that one day it would burst. That was where the arrogance kicked in. The super-heroes of the New Olympian order were the brightest and the best of their generation. Their activities were making massive profits, a good chunk of which were being paid out in seven-figure bonuses that kept property markets humming in the Cotswolds and the Hamptons. Could they really be guilty of crass stupidity? Even when cracks did start to appear, the New Olympian class managed to blame everyone but themselves.

Bob Diamond, the American chief executive of Barclays Capital in London, earned £22m in 2006 and was the sort of person who saw no reason why his money-making activities should be curtailed by red tape. But in August and September 2007, once the going had got tough, Diamond conducted a vigorous campaign against the Bank of England's Mervyn King for failing to provide the same sort of help to banks in the UK as was being provided by the Fed or the European Central Bank, which had stepped in after BNP's problems. As one commentator noted, this state of affairs was tantamount to the police being forced to provide a getaway car to bank robbers for fear that even greater damage would be caused by not doing so.

The response to the market meltdown helps illustrate the final two principles that govern the modern world. One is that, despite the lip-service paid to democracy, western societies are in effect run by moneyed oligarchies, who have as little time for their wage slaves as did the ruling elite of ancient Athens. In February 2008, two weeks after Darling's U-turn on the taxation of non-doms, Brown and his ministers opposed a private member's bill designed to give greater rights in the workplace to agency workers - part-timers who face some of the lowest wages and toughest working conditions of any group.

It is tempting to say that the final god of modern finance is weakness, because it was certainly apparent in late 2007 and early 2008 that the apparent strength of the financial markets was illusory. The happy-go-lucky mood evaporated instantly, with the write-down of losses accompanied by some token sackings of executives and followed by more stringent lending for the real victims of the credit crunch - individuals and businesses forced to pay more when they borrowed. Weakness, though, cannot really be included as a principle of the New Olympians, since nobody willingly seeks to be weak. Rather, our 12th and last principle is excess. It is an axiom of the global order that there is never too much of anything: never too much growth, never too much speculation, never too high a salary, never too many flights, never too many cars, never too much trade. It was for that reason, perhaps, that the financial crisis was accompanied by rising inflation - as demand for oil and food pushed up prices globally - and by almost daily evidence of the impact of global warming. Losses in the financial markets; hardship for pensioners facing dearer heating and food; climate change. There were no prizes for guessing which the New Olympians considered the most pressing issue for policy makers.

The gods promised us paradise if only we would obey and pamper their hero-servants and allow their strange titans and monsters to flourish. We did as they asked, and have placidly swallowed the prescriptions of the lavishly rewarded bankers, central bankers, hedge fund managers and private equity tycoons, while turning a blind eye to the rampaging of the exotic derivatives, the offshore trusts and the toxic financial instruments. Had they delivered, there would, at least, be a debate to be held as to whether the price was too high, in terms of the loss of democratic control and widening social inequality. But they have not. Chronic financial instability and the prospect of, at best, years of sluggish economic activity are the fruits of their guidance.

These gods have failed. It is time to live without them.

© Larry Elliot and Dan Atkinson 2008

[ramana]

Meanwhile Pioneer, 11 June 2008

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Club of Four talks shop

India, Russia, China and Brazil should work together on global issues, writes Dmitry Kosyrev

It is difficult to judge the results of the Foreign Ministers' meetings of the Club of Four -- tomorrow's world leaders -- by the documents, which they have produced. <b>There were two meetings -- RIC (Russia, India, and China) and BRIC (Brazil and the same three) -- on May 15 and May 16 respectively.</b>

<b>There were also bilateral meetings in between</b>. Russia's Foreign Minister Sergei Lavrov discussed President Dmitry Medvedev's coming Chinese visit with his colleague Yang Jiechi. Later, he met Mr Pranab Mukherjee to talk about the not-so-great 'Year of Russia' in India. Mr Celso Amorim from Brazil, too, had bilateral meetings with his colleagues.

<b>All in all, the meetings produced two communiques.</b> But for the most part such documents are written in advance and then adopted routinely. Quite often, many questions reflected in the communique are not even seriously discussed for obvious reasons. <b>In this case, for one, it is clear that all four powers stand for a multi-polar world and the UN's central role. This is only natural because each of them is a pole -- a powerful global and regional centre of influence. Predictions about at least two of them -- China and India -- becoming the world's biggest economies are making the Club of Four even more enthusiastic about a multi-polar future.</b>

It is also clear that the future leaders are strong enough to talk about rights and freedoms without double standards, and with respect for all global civilisations. These ideas are expressed in the communiques. One of them mentions, for instance, that unilateral proclamation of Kosovo's independence contradicts international law. Incidentally, Brazil's Foreign Minister was not concerned over Kosovo, and the BRIC's communique does not mention it. But multi-ethnic Russia, India and China know too well what happens if each terrorist outfit starts proclaiming the independence of the seized territory.

If this similarity of positions was predictable, was it worth meeting in Yekaterinburg in order to remind the world what the claimants to global leadership think? This question requires a positive answer because the negotiating marathon produced more interesting results.

<b>These results are very different because for the RIC this is the eighth meeting, and for BRIC only the third.</b>

<b>Russia, India and China have declared very confidently for the first time that the long-standing idea of trilateral communication at top and diplomatic level is working. It has produced many spin-offs, which always testifies to success.</b> They are not very visible to the outside world -- at one time the movement towards integration in the EU or ASEAN looked pretty much the same.

In this case, <b>we see trilateral co-operation in agriculture, regular meetings of businessmen and academic experts, and contacts in healthcare and medicine.</b> Russia has proposed promoting trilateral cultural programmes. This is almost tantamount to an organisation.

The RIC meeting in Harbin (China) last October is a point of departure. The next meeting will be held in India, and there is no doubt that RIC will advance its cause.

<b>Three Ministers made interesting statements on the region which lies at the juncture of the RIC borders in Central Asia.</b> This is the region in which RIC has the biggest influence. The communique does not comment on India's desire to join the Shanghai Cooperation Organisation (SCO). This is a long-standing and complicated issue. <b>But Moscow and Beijing welcome India's more active role in the SCO as an observer.</b> This is an obvious step forward.

Iran is also playing a major role in the region. Although RIC does not approve of Tehran's constant challenges to the West, it does not deny Iran the right to develop a civilian nuclear programme. In the past, China and Russia also controlled the discussion of this situation at different talks. But India's position has become clearer, especially after Iran's President Mahmoud Ahmadinejad's recent visit to New Delhi. Importantly<b>, the RIC countries consider the EU and the United States their key economic partners, and will not cast challenges to them without reason. But they want to protect the stability of their region together, and this is what they decided to do in Yekaterinburg.</b>

<b>Compared to RIC, the BRIC results are not so impressive.</b> The Brazilian Minister was primarily interested in opening new markets for his country and co-operation with new partners. This is a long-standing policy. <b>In trade, Brazil has long departed from the Latin American focus on the New World markets. Brazilians have been talking with Africans and Arabs. Experts believe that this ability to diversify ties will help Brazil to play a special role in the world in the future.</b>

<b>The BRIC meeting made a special emphasis on energy for two reasons. First, India and China are importers of energy resources; and, second, Brazil favours bio-fuel and nuclear energy. In this sense, it is more like India than China.</b>

The four countries are already used to discussing common problems. <b>Hopefully, they do not allow anyone to put them at loggerheads in the drive for markets, resources or political advantages.</b> As for fully-fledged economic co-operation, they are still trying to develop it.

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[acharya]

http://www.livemint.com/2008/06/08233106/I...ong-or.html?d=1

New Delhi: With the pressure to conclude the Doha Round of trade talks mounting at the World Trade Organization, or WTO, some developed countries are seeking to corner India whereby it may be left with the option of either going along with an unfavourable deal or being branded as a “deal breaker” if it chooses to dig its heels in, a government official has said.

The Doha Round of trade negotiations, which began in 2001 to remove tariff barriers and give a fillip to global trade, is yet to manage a consensus.
The fears of the Indian government come about in the the backdrop of expectations, in some quarters, that a meeting of world trade ministers may be convened in late June or early July to work out a deal.
“There is no date set for a ministerial but the hope is the officials will make enough progress for one in late June or early July,” US trade representative Susan Schwab said in a telephone interview to Reuters on Friday.
Matters have co

[Capt M Kumar]

In a landmark judgment, a British court stops executive assistance in a Saudi arms case

Related Stories

Law’s long armsTerms of abuseGrowing intoleranceA PIL for every ill?

In a recent landmark judgment, a division bench of the High Court in the United Kingdom thwarted the government’s attempt under Saudi pressure to terminate investigations by the Serious Fraud Office (SFO) into allegations of bribery by BAE Systems (BAE) in relation to the Al-Yamamah military aircraft contracts with Saudi Arabia.
http://www.indianexpress.com/story/322513._.html

[acharya]

Free-Trade Era May Be Nearing End Amid Food, Growth Concerns

By Matthew Benjamin and Mark Drajem
Enlarge Image/Details

June 13 (Bloomberg) -- After six decades of ever-expanding international commerce, the high tide of free trade is ebbing.

As tens of thousands of South Koreans protest U.S. beef imports, rising commodity prices push nations to keep more food for domestic consumption and the U.S. chooses a new president who might be less supportive of free trade than his immediate predecessors, the world may be facing the end of a cycle that began in the immediate aftermath of World War II.

The liberalization of global trade has come ``to a screeching halt,'' said Fred Bergsten, director of the Peterson Institute for International Economics in Washington. ``It'll take years to rebuild the foundations of free-trade policy.''

The cause is more political than economic. ``This is a challenging time to be in the pro-trade wing of any party in virtually any country,'' U.S. Trade Representative Susan Schwab said June 12 at the U.S. Chamber of Commerce. ``It's hard to be for open trade, whether you are in India or the European Union or in China.''

Fueling the backlash is a convergence of trade-related anxieties: national-security concerns, worries about food safety and sufficiency, the desire to protect local jobs and the environment. In addition, the benefits of trade are often widely dispersed -- think low prices at Wal-Mart -- and entail high adjustment costs, including the loss of manufacturing jobs.

Beggar-Thy-Neighbor

The modern era of trade dates to the late 1940s, when the U.S. and United Kingdom pushed for the establishment of a global organization to avoid the beggar-thy-neighbor policies often blamed for exacerbating the Great Depression.

The General Agreement on Tariffs and Trade, established in 1948, succeeded in cutting industrial duties in developed countries from an average of 40 percent to about 4 percent over six decades.

Now known as the World Trade Organization, it is stuck in negotiations that began in 2001 over U.S. and European agricultural subsidies. The Doha Round, as the talks are called, has also been held up by disagreements between rich and poor countries about how much to reduce import taxes.

``The Doha Round isn't dead yet, but it's being pushed around a nursing home,'' said Doug Goudie, director for international trade at the National Association of Manufacturers in Washington.

The EU's Concerns

European Union trade negotiators expressed concern this week about ``a re-emergence of protectionist sentiment in the U.S.'' after Congress approved a new $289 billion farm bill that extends price supports and other subsidies developing nations oppose.

The bill ``heads agriculture policies in the wrong direction at a decisive juncture'' of WTO negotiations, a group of agriculture-exporting countries led by Brazil said in a June 3 statement. ``The unfair competition brought by subsidies hinders the process of market liberalization.''

Reservations about a new WTO agreement have grown into a general aversion to free trade in many countries, including France and Italy, where cheap imports are blamed for job losses. That's causing some governments to rethink their pro- trade policies.
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Most important is the U.S., the world's largest economy and biggest importer. Democrats, who took control of Congress in 2007, have postponed a decision on a trade deal with Colombia by amending so-called fast-track authority, which guards against amendments and filibusters and requires a timely vote.

Undermining the Foundation

Their action ``undermined the whole foundation of U.S. trade policy,'' Bergsten said, adding that it creates a loss of confidence in the U.S. to lead the way on trade. Luis Guillermo Plata, Colombia's trade minister, said April 11 that U.S. rejection of the accord would be tantamount to imposing ``trade sanctions'' on one of America's staunchest allies.</b>

Meanwhile, Democratic presidential candidate Barack Obama says that if elected, he might reopen the world's largest trade deal, the North American Free Trade Agreement with Canada and Mexico. The Illinois senator, 46, says the pact should include new labor and environmental standards.

Mexican farmers want to renegotiate Nafta too: They shut down Mexico City's main boulevard in January to protest the pact, which they say hasn't done enough to protect them from cheaper U.S. imports of sugar, beans, corn and milk.

All these developments ``are portents that the politics of trade are certainly becoming more difficult,'' said Claude Barfield, a trade expert at the American Enterprise Institute in Washington.

Shaking South Korea

Nowhere is that more evident than in South Korea, where public anger related to a pact aimed at increasing trade with the U.S. by 20 percent is shaking the government of President Lee Myung Bak. Lee has seen his popularity plunge from 50 percent when he took office in February to 17.1 percent in a poll this month by Korea Research and the YTN cable news network; his cabinet this week offered to resign over the dispute.

On June 10, about 80,000 South Koreans flooded the streets of Seoul to protest a proposal to resume beef imports from the U.S. Korea must remove the five-year-old ban, which was designed to prevent the possible spread of mad-cow disease, before the U.S. Congress will consider approving the trade agreement, Senate Finance Committee Chairman Max Baucus of Montana said June 11.

Extending the ban would affect South Korean exports of products such as automobiles and semiconductors to the U.S., Lee said the same day.

New Barriers

The 60 percent increase in the price of rice, wheat, corn and other food commodities since the beginning of 2007 has led some nations to erect new barriers to exports to make sure they have adequate supplies at home.

India, the world's second-biggest producer of rice and wheat, has banned shipments of the food grains. Egypt, Vietnam and Indonesia have also banned certain food exports. And Philippines President Gloria Macapagal-Arroyo said her country wants to become self-sufficient in food production by 2010.

``For a long time, it made sense to buy food from the international market,'' Arthur Yap, the Philippines agriculture minister, said in an interview. ``The situation has changed.''

Doug Irwin, an economic historian at Dartmouth College in Hanover, New Hampshire, and author of ``Free Trade Under Fire,'' said much of the current opposition to trade may subside when commodity prices fall and the U.S. economy recovers.

``Free trade is always being attacked,'' Irwin said. ``The question is, how high is the threat level?''

To contact the reporters on this story: Matthew Benjamin at mbenjamin2@bloomberg.netMark Drajem in Washington at mdrajem@bloomberg.net

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Australia: a free-thinking ally of U.S.

P. S. Suryanarayana

India remains in the shadow of cross-currents among Australia, Japan, China, and the U.S. on several issues, including nuclear non-proliferation.

Under charismatic Prime Minister Kevin Rudd, Australia has turned into a new-style ‘non-aligned’ or autonomous partner of the United States. Canberra was indeed Washington’s nodding ally until the exit of John Howard as Prime Minister a few months ago.

A relevant question in this new context is whether the global political order is gradually becoming a ‘non-polar system.’ As outlined by U.S. analyst Richard Haas, ‘a non-polar world’ will be dotted by numerous powers and also non-state actors with varying degrees of real influence. These issues have come into prominence, as a result of Mr. Rudd’s vigorous visit to Japan at this time, following his recent proactive tours of China and the U.S.

Unlike Australia under Mr. Rudd, two other long-standing allies of the U.S. — Japan and South Korea, both now led by old-fashioned loyalists of America — are passing through parallel phases of domestic political uncertainty. And, the challenges of long-term political survival, facing Japanese Prime Minister Yasuo Fukuda and South Korean President Lee Myung-bak, can be traced to their separate but similar pro-U.S. stances. Mr. Lee recently came under fire for having ordered the resumption of U.S. beef imports into South Korea. Mr. Fukuda had assumed office to ‘resolve’ the crisis over Japan’s logistical support for Washington in its “war on terror” in the Afghan theatre.

Now, after holding talks with Mr. Fukuda in Tokyo on June 12, Mr. Rudd said the “broad and deep” Australia-Japan relationship “is embedded in the political cultures [of] both countries.” This, in Mr. Rudd’s view, “can endure differences [like those on whaling] as in fact our relationship with the United States endures differences [such as those over its continuing occupation of Iraq].” He also noted that Canberra and Tokyo would expand their maritime surveillance exercises and draw up new “plans in relation to defence logistics” which would be spelt out later.
Trilateral security cooperation

And, on “taking forward” Australia’s existing “trilateral security cooperation” with the U.S. and Japan, he was emphatic about the need for “a practical way” that would not alarm China or any other power. Cited in this regard was the imminent possibility of a military-conducted trilateral exercise to meet natural disasters.

Important in this scenario is that neither Australia nor Japan has now sought to co-opt India. By design or otherwise, India was part of the “core group” which the U.S. organised to rush navy-driven aid to the victims of the 2004 tsunami in Indonesia. The short-lived “core group” later ‘inspired’ a Japanese proposal, under Mr. Fukuda’s predecessor Shinzo Abe, for a quadrilateral forum of Asia-Pacific democracies, namely the U.S., Japan itself, Australia, and India. Unsurprisingly, China was not amused and made its position clear. At that stage, Australia, under Mr. Howard still, did not warm up to this idea of a four-power forum.

High-placed Japanese and Indian sources have told this correspondent that the U.S. was at first very lukewarm to Mr. Abe’s proposal before reluctantly agreeing to it. Obviously, Washington was not satisfied with the cost-benefit calculations behind a possible strategic expansion of the U.S.-Japan-Australia framework to include India in China’s neighbourhood. And significantly, at this moment, neither Mr. Fukuda, U.S.-loyalist with a ‘realistic’ attitude towards China, nor Mr. Rudd has cared to pick up this idea of a quadrilateral forum from the scrapheap of contemporary history. However, India remains in the shadow of cross-currents among Australia, Japan, China, and the U.S. on several issues, including nuclear non-proliferation.

Asked, in Kyoto on June 9, about the chances of his altering course and agreeing to sell Australian uranium to India sometime in the future, Mr. Rudd made the following telling comment. “I understand full well the arguments put by the Government of India, and I have had presentations on this matter from the Government of the United States about the importance of India’s particular circumstances. We are very mindful of that. However, I would remind you of where our policy stands. .... We believe it’s important to maintain the integrity of the [Nuclear] Non-Proliferation Treaty [NPT].”

Pledging to keep the “fragmenting” NPT intact, and without blaming India, a non-signatory, he announced his move to form an international commission on nuclear non-proliferation and disarmament. Australia would be one of the co-chairs, and Japan was later “spontaneous” in discussing the initiative.

Diplomats in the region have noted how Mr. Rudd, widely seen as being not just friendly but really empathetic as well towards China in a big way, has now sought to make common cause with Japan on its traditional priorities. One of them is non-proliferation, especially because Japan still swears by the NPT despite neighbouring North Korea’s nuclear weaponisation, now the subject of China-hosted Six-Party Talks. The other common cause relates to climate change, given Mr. Rudd’s political passion for planet-sustaining environment and given Japan’s leadership role in this domain. As for China’s place in his worldview, Mr. Rudd had said, after his talks with the Chinese Prime Minister Wen Jiabao in Beijing on April 10, that “it is important to embrace this relationship.” At the same time, “we need to deal in a frank and straightforward way with disagreements when they arise,” he noted. He discussed Tibet with the Chinese leaders then; and significantly now, his absence on tour from Australia, during Dalai Lama’s visit there, is seen as a China-friendly gesture.
Expanding 6-Party Talks

On a wider canvas, Mr. Rudd has discussed with Chinese and U.S. leaders “the desirability of the Six-Party Talks being expanded into a broader security dialogue across East Asia.” And, he saw “a supportive attitude emerging” from both Beijing, a prime mover behind the talks, and Washington, a player eager to prolong its “forward military presence” in the region.

Relevant to Australia’s own regional stakes are its Defence Minister Joel Fitzgibbon’s comments in an interview to this correspondent in Singapore in early June. Canberra’s “U.S. alliance,” he said, “is one of the first pillars of our defence policy and will continue to be so into the future.” He also indicated that Australia would not like to see its independent ties with India and China through the “prism” of zero-sum calculations.

As a free-thinking ally of the U.S., Mr. Rudd has, therefore, proposed the creation of an Asia Pacific Community over time. He seeks to engage all the major players by making common cause wherever possible and discussing differences whenever necessary.