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Saturday, October 25, 2008

When elephants are fighting.....

One morning many years ago, I recall hearing a former Prime Minister/Finance Minister in a heated debate with his counterpart on one of the radio talk shows. The moderator tried to interrupt several times and finally, the former Prime Minister/Finance Minister said "When elephants are fighting, grass must not get involved". I must admit, it was a very effective statement - albeit that some may say that is harsh - because the moderator said nothing further while the two "elephants" went at it until the program ran out of time.

Now, the mascot for the Republican party is the elephant. Like true grass - not getting involved - I have watched in utter amazement the biggest fight of elephants that not even nature could parallel.
  • First, it was the internal revolution of the House Republicans as they opposed the Republican Administration's proposed solution to the crisis. Remember, after the hearings they refused to go to talks with the Democrats to find a middle ground and proposed a solution that no one said could work, including the Republican traders and the Republican administration. Oh yes, this was all in real time broadcast all over the world. and did I mention the Republicans are the ruling party?
  • Second, it was yet another internal revolution of the House Republicans who after the Republican leadership of Congress essentially promised that they had reached an agreement to vote in favor of the legislation, the world watched in real-time as the overwhelming majority of Republicans voted against the bill when it came to the floor
  • Third, the mass exodus from the current President's coattails is eye-popping. Everyone seems to be dissociating themselves from him and his policies although they acted differently for the last eight years. I mean, they did re-elect him and vote for his policies
  • Fourth, not to be outdone, now there are reports that White House "aides" have criticized the McCain campaign and expressing concern for the campaign's lack of interest in stemming what the polls suggest may be an Obama landslide. These "aides" it is reported, believe that McCain needs to show more interest in the loss of key Republican seats.
  • Fifth, conservative pundits and even former McCain supporters are coming out in droves against the selection of Governor Palin and the tone of the McCain campaign. Many of these people now report that they are being treated as outcasts by their own party.
  • Sixth, the McCain campaign is well, imploding is the only word I can think of. The two "mavericks" seem to be like oil and water - they just don't blend. It was always dangerous when the person who never went through the primary process - that is the VP pick - generated far more excitement from the base than the Presidential candidate. But now, after it has been obvious - at least to me - that Governor Palin appeared to believe that she was running for President, there are now actual reports that Governor Palin is just doing her own thing.

Well, I do believe that when elephants are fighting grass must not get involved. But the size of this fighting is extraordinary.

This is not just the ruling party having an internal revolution in front of the whole world.

This is not just the presidential and vice presidential "team" imploding in front of the whole world.

It's the type of fighting that really has me concerned:
  • refusing to talk which is unheard of in a democracy
  • rescinding promises threatening credibility in governance
  • fighting against your own President in such a visible way in front of the whole world threatening democracy, order and national security
  • a Presidential campaign with heated and unproven accusations about "socialism" "communism" "associations with terrorists" which is dangerously divisive and polarizing
  • the treatment of those who would speak their own opinions - so treasured in a democracy - which makes one believe that if it were possible to censor that people would be censored. Thank goodness for freedom of the press.
  • mutiny in a Presidential campaign which is unheard of for so many reasons, not least of which is that unity and support is the very reason there is a ticket, a "team"

Normally, I am happy to be grass. And I'm definitely not getting involved. But should all grass - meaning all non-elephants such as all people everywhere regardless of political affiliation or residence - really just allow themselves to be trampled into oblivion by this fight of mammoth proportions?

Friday, October 24, 2008

Does she not know? Or does she not care to know?

Today, I must confess I was really eager to hear Governor Palin's speech on how she would address the special needs of children.

When I started watching her first policy speech, I thought my comment would be related to what seemed to be a change in her dressing, and the visible new spectacles, changes made perhaps after the outrage over her $150,000 wardrobe (see article here), then her admission that that kind of dressing is not her style as she is "frugal" (see article here) and now today news that the most highly paid person on the entire McCain-Palin campaign is her makeup artist, not a policy advisor (see article here). Confused? I am. Isn't the country facing a contraction, recession, depression or some version thereof? Aren't people really hurting - losing homes, jobs, savings? This is odd and insensitive.

But alas, it got worse.

Then I listened some more, and I thought that my criticism would be the obvious inconsistency with previous speeches. Two previously announced spending freeze promises by the McCain campaign, and resistance to the fiscal stimulus in the face of the dire need of emergency funds for people, and here was promises for "full funding". Great, if she can find the money. But she's supporting causes that Senator McCain has not by his vote many times in his many years of service in the US Senate. Confused again? I am.

But alas, it got even worse.

Then I listened some more, and I read this article - Memo to Palin: Fruit Fly Research Has Led to Advances in Understanding Autism and listened to the clip therein:

She said:

"Where does a lot of that earmark money end up anyway? […] You’ve heard about some of these pet projects they really don’t make a whole lot of sense and sometimes these dollars go to projects that have little or nothing to do with the public good. Things like fruit fly research in Paris, France. I kid you not."

Is it me, or has Governor Palin mocked scientific research and then called for diversion of funds from scientific research? Now that always gets me worried.

In an earlier post (such as Can Governor Palin please clarify?) and elsewhere I have expressed concern for Governor Palin's dismissive stance on science as it relates to the environment.
  • My concern was not a pro-academia position, although I am pro-academia and pro-research.
  • My concern was not a "tree-hugging" position; although I do admit significant genuine affection for nature.
  • My concern was and is a survival stance. People should not be digesting life threatening toxins quite prevalent in Alaska (which can flow elsewhere). The Governor has not seemed to take any steps to either stem the inflow or clean up the messes. As VP, what would be her position on these toxins on a national and global basis?
But here's the real shocker.

Today, the research she objects to is directly related to assisting in finding out the causes of the special needs that was the subject of her policy speech; the special needs she's fully funding. Confused? I am.

From the article:

"[S]cientists at the University of North Carolina at Chapel Hill School of Medicine have shown that a protein called neurexin is required for..nerve cell connections to form and function correctly.

The discovery, made in Drosophila fruit flies may lead to advances in understanding autism spectrum disorders, as recently, human neurexins have been identified as a genetic risk factor for autism."

Now, is it that the Governor is so anti-science that she does not believe in finding out what causes these special needs so that they can be addressed in a thoughtful, structured and strategic manner? Because that is quite disturbing to me. Or, is it that the Governor is just uniformed? Because that is also quite disturbing to me.

Can someone ask Governor Palin what she thinks about funding for research in general? In anything - psychology, water, biology, religion, anything, any subject whatsoever. What about funding for life threatening diseases? Wait a minute, what does she think about health care providers? Should we even have those? They use science to do their work. What about science in schools? The leading countries in the world have significant numbers of their citizens excelling in science and engineering. Or has she missed that bit of news? Does Governor Palin know how many people are employed because of science whether as scientists, or because of the innovations science allowed to facilitate employment?

Respectfully, she is running for Vice President of the USA. 9 times in history, the VP has had to step up to the top job because of circumstances. This is a job with immense responsibility, not to the US but to the world.

Respectfully, can someone please inform Governor Palin that science and research is ALL about the public good.

Thursday, October 23, 2008

Bigger than Dr. Greenspan's briefcase

When Dr. Greenspan was the Chairman of the Federal Reserve, the mere size of his briefcase could send markets into jitters. Remember those days? Speculation would be rife about what he would say. And then he did say "it" - whatever "it" was - and every word and even inflection was interpreted and analyzed. Talk about pressure. Suppose he just woke up with a sore throat one morning? Unreal.

Anyway, the world rocked today and it wasn't the briefcase. It was Dr. Greenspan's admission of "shock" about a "flawed" market. Yes, it is on CSPAN. And it is well worth watching the hearings on the Hill where he appeared with Christopher Cox and John Snow who both had some gems too. But if you are pressed for time and you want one article to read, here's one from the International Herald Tribune: Greenspan 'shocked' that free markets are flawed

So where do we go from here?

The markets are flawed and operating in a way that is unsustainable to themselves. As I said, problems cannot be solved overnight. But we could do with some "cease and desist" orders right about now just to help things stabilize and minimize further damage. Oh, for the days when a Federal Reserve Chairman could just give a "look" to the markets and they would quake - in a good way. Now, we have had so much damage that we have some way to go to get back to that kind of necessary authority from the regulators.

Until then, in my humble view, the markets and all of us would be better served, if the markets and the players would be a little more discerning in what sways them. And then maybe they will stop the seemingly never-ending roller-coaster ride at every word from anybody. We are all exhausted.

Wednesday, October 22, 2008

Hold Up, Wait a Minute

If you have been following my posts, you know I want a certain kind of "new global financial architecture". The world needs a stronger, more stable, more equitable and more sustainable global financial and economic system.

I talked quite a bit of the need for the inclusion of the developing world
(and not just those developing countries in the G20, thank you very much President Bush) in the dialogues to create that system I have described in this post in particular: Oui, Oui, Oui.....BUT BUT BUT

President Bush said he wanted ideas. So here's another idea.
  • Please do not assume that people who have studied developing countries and hold fancy titles understand how to solve the problems of the developing world. Frankly, that has been half the problem we have had - people who have not lived with the issues so they really do not understand the significant nuances that make or break all the never-ending proposals from time immemorial to "save the world". The developing world has been studied - almost literally to death. And no, they don't just need money. They do need money, but they need a new approach.
  • EQUALLY, please do not assume that people who have lived in developing countries and have held fancy titles also understand how to solve the problems of the developing world, yes the developing world or even their own countries. Frankly, that has been the OTHER half of the problem we have had - people who have lived in developing countries can have a tendency to believe they know everything and therefore are unwilling to learn from others.
So, here's who should carefully be questioned before they are allowed to pontificate about how to "save the world":
  • People who have made questionable decisions previously that have resulted in the utter destruction of economies. Yes, some of those names have been floated
  • People that make a living from the study of the developing world. Therefore, if there is no developing world then there is nothing left to study. Yes, some of those names have been floated.
Generally speaking, foreigners do not understand others. Generally speaking, countries don't understand other countries. This is not about country size. This is not about language. It does not matter how much you are alike or have in common. The fact is that serious cultural differences do exist. And they exist not just between countries; they exist within countries. To me, all of that makes the world a wonderful place. Others have not shared that view.

So before we come up with a litany of "things to do" to "save the world" let's check history because there have been tons of "missteps" that have resulted in serious "consequences". (I'm overloading on the diplomacy tonight) We need a holistic view of our problems as a collection of peoples on a single planet; as an interconnected world of peoples.

We have to get to solutions for the common good; not for the good one of one country. That was in effect what President Sarkozy has said. Respect for man; respect for the planet; respect for generations - the words of President Sarkozy. If we keep talking like this, and walking like this, we may just be on our way to meaningful progress. Certainly in Jamaica's view, because the one thing that this incredibly diverse country agrees on is the supremacy of respect.

Rating the Ratings Agencies

Yesterday, I called for immediate action with regard to CDSs.

Today, I believe the case has been more than made for immediate action with regard to ratings agencies. I have previously expressed my concerns about how ratings agencies function; and further how they should be allowed to function in a crisis, especially a man-made crisis of confidence in the global financial system in which they played no small role.

Yes, it takes a while to fix problems. But it's quite straightforward to stem losses and prevent further problems. Whether you have the 4+ hours to watch the hearings today on the Hill on the Ratings Agencies (see CSPAN. I think these hearings should be required viewing, personally), or you just want to read a few news articles (see example from MarketWatch here: Ratings agencies 'put system at risk,' CEO says), the analysis takes you to the same simple conclusions:
  • Rating agencies were not helping prior to the crisis
  • Rating agencies - by their own admission - were making the problems worse
  • Rating agencies are not helping now
If we accept that:
  • there is still a liquidity crunch (crisis averted by extreme government intervention),
  • there is a credit crisis (although thawing solely because of extreme government intervention),
  • from now on credit will be difficult to come by,
  • people are expected to remain risk averse for some time given the crisis of confidence,
  • the impact of the crisis has seriously impacted current and future expected earnings as we see reported
  • the world is facing "contraction", "recession" or "depression" or whatever term you are most comfortable with,
then, which instrument, entity, country is going to get a favourable rating? If you have 10 ratings issued by a day - on anything - how many positive ratings can one reasonably expect on anything? If you expect one, even one, then you are extremely optimistic.

I've said before, if ratings agencies were not helpful before, and if they were not even accurate before, why do people believe that somehow allowing rating agencies to continue to "rate" in this environment is somehow constructive? This just further accerelates a downward spiral of the financial system.
  • Do people have faith in the ratings? No. But if a rating is negative, it creates panic and in the case of countries, just makes it more difficult for countries to recover.
  • Do people have faith in the ratings agencies? No. But the agencies are still there, so people feel like maybe they should listen
  • Do the ratings agencies believe they were right? No. They have said they were wrong. They have said why they were wrong - and many of these are serious systemic problems that cannot be solved overnight.
So, can somebody please explain to me the value of any body - and this includes the former Investment Banks - rating any body or anything right now?

Respectfully, the only way to prevent a complete collapse of the financial architecture is to inject some common sense into the process.

In principle, ratings agencies are a critical part of a functional market. In my humble view, they are an indispensable part of a functional market. But they must be credible. And that only comes with reform. If you live in a glass house, you really just cannot throw stones.

Besides, if they continue like this, the ratings agencies are just putting themselves out of business since they would have accelerated the complete unraveling of the financial system. So what would they have to rate?

Tuesday, October 21, 2008

The Role of the VP?

In an earlier post, Democracy or Dictatorship, I mentioned my discomfort with Governor Palin's answer to this question about the role of the VP in the debate. It made my top 10 list of things I wish I had never heard her say.

Well, watch this video - another Special Comment from MSNBC's Keith Olbermann

I must be missing something. Really. Because she keeps saying the same answer or some variation thereof, although she has been corrected over and over.

This is a serious matter. The Constitution is not convenient.

Talking's great, but it's time to walk

Did anyone catch that Op-Ed by Christopher Cox? You know him, the Chairman of the SEC, the former congressman. Well my two cents tonight is please read it. Here it is: Swapping Secrecy for Transparency

And if you don't find this really odd, please drop me a line because I am just shocked by this entire op-ed. Although the whole article is really, well just unbelievable in my view, let me zero in on a few things:
  • Where on earth were all the regulators when a market of instruments - yes, Credit Default Swaps (CDSs) - could be developed to the size that it exceeds the gross domestic product - that is the value of goods and services - of the entire totality of every single solitary country in the world? Did you catch that part? The CDS market is bigger that the value of the entire output of the whole world.
  • And if that doesn't disturb you, this market is not even regulated. Even countries have regulation - it's called "governments" because without them there would be anarchy. Didn't the people issuing and trading these things think that an unregulated situation would result in "anarchy" in the CDS market that would come back to bite them too?
  • And if that doesn't disturb you, the great AIG that was too big to fail, only - yes only - has 0.8% of these lovely instruments. Only 0.8% that got the whole world into such a crisis. Where are the other 99.2%? We have had every type of man-made disaster; I am really beyond thinking what else we can go through.
  • And if none of the above disturbs you, brace yourself for this one. There is no ban on CDSs - new or old. So, for those of us who study environmental pollution, normally the first thing to do is to contain the problem, you know - stop the inflow. Right now, there is no such thing.

Let me summarize where we are:
  • Global agreement on a set of principles. Excellent
  • Global agreement on need for some kind of reform - not sure what. Great start.
  • Agreement on a series of summits thanks largely to the efforts of Prime Minister Gordon Brown, President Sarkozy and President Barroso. President Bush agreed. Excellent.
  • Offer by the UN Secretary General Ban Ki-moon to host reform talks. Excellent
  • Ongoing hearings by Congress on Financial Regulation Reform. Excellent.
  • Appointment by United Nations General Assembly President Miguel d'Escoto Brockmann of A Panel to examine Global Finance Reform. Panel to be Chaired By Professor Joseph Stiglitz (who I suggested have a leadership role in an earlier post). Excellent. (See article here)
This is major progress. But respectfully, as much as they are important talks for incredibly complicated matters, they are some matters that need urgent ACTION

Without belittling in any way the need for comprehensive change, does anyone not think that the CDS market needs urgent attention?

As in yesterday.

It is not rocket science to 1) give a regulatory body or bodies jurisdiction over the CDS market and 2) devise with some basic rules. A market larger than the combined GDP of the whole world? Please, this seems very straightforward to me.

My vote is for quick and moderate ACTIONS. Let's not stifle innovation, but innovation must be responsible. And let's not go on witch hunts: people created CDSs, people traded CDSs, people presided over a market in which they were allowed to thrive - so this is no one person's fault. And the CDSs are just one small part of the comprehensive reform needed.

We have unprecedented global agreement for change. Can we deal with one very serious problem that all nations must have a vested interest in solving as priority? And maybe, just maybe, we can head off further crisis while we can.

Monday, October 20, 2008

A house divided against itself really cannot stand

Earlier this month, I wrote a post entitled: If I could say one thing to Governor Palin? Read Matthew 12:25. In this post, I expressed grave concern for the tone of the McCain-Palin campaign.

Well, the tone has intensified and spread in depth and breadth. The McCain-Palin campaign has robocalls, more rallies, more representatives with seriously divisive, negative and yes, erroneous information. It just has not stopped. Newspapers, General Colin Powell and even conservatives and one-time McCain supporters have called for it to end. And yet, the divisiveness and negativity not only remain; its getting worse - dangerously worse.

Well, Keith Olbermann has an excellent Special Comment on just this topic tonight on Countdown with Keith Olbermann on MSNBC. I think it is well worth your time to watch this video (click here).

Why teams matter

Senator Obama is QUITE RIGHTLY taking time off to spend with his ailing grandmother - a woman with whom he remains very close, a woman who raised him and gave him his values. (See article here)

So what does that mean for the campaign? Does this mean that the campaign should fold its hands and wait for him to come back? Absolutely not!

Senator Obama represents a change. He has built a well-oiled organization machinery built on change with many supporters of that change. He speaks passionately about what he will do for others and importantly, what others have to do for themselves. So, he is going to spend time with his grandmother:
  • Does that change the message? No.
  • Does that change the machinery? No.
  • Does that make him have less supporters? No.
What should it do is make more people come out. Speak stronger, Speak lounder.

My father believes strongly in teamwork - everything was about the value of teams when I was growing up. He always taught me that when a man is down, the rest of the team must take up the slack. Well, Senator Obama is not down, but he does need to be absent from the campaign trail for a while. And to me that means that the rest of the team must step up. And this is not just because of his absence. It is precisely because that is the very premise of his campaign of change - that it is all of the people who have to do something to realize that change.

Allow Senator Obama this time. It speaks volume for his character. I'll take a President who values his family - who are people too - this much any day over one that values other "things" that really have no comparable value.

So the campaign must go on. And it must go on strategically. The team owes itself and its leader the very best it has got.

Can Governor Palin please clarify?

Here on this blog and elsewhere I have posted articles and comments voicing my concern for many aspects of Governor Palin's beliefs.

To be clear: I do not expect that I will agree completely with anyone seeking public office - I have said before that I am an independent thinker. That "thinking" comes from a deep rooting in several years of study of science and business, as well as experience and socialization.

Tonight, let me express the number one issue that bothers me about Governor Palin's beliefs because it goes to the heart of the basic human instinct of survival. I have specifically referenced her very notable record as anti-environment. Well, this is not just being "anti-polar bears"; it is "anti-people". Read this article in the Telegraph: Sarah Palin: Pointing a loaded gun at the environment?

Blue is the quotation from the article, and bold is my emphasis

"As governor of Alaska, she presides over a breathtakingly beautiful wilderness - but it also happens to be a repository of toxic chemicals, including arsenic, mercury, lead and Polychlorinated Biphenyls (BCBs).

Clearly, this is not her fault.

She doesn't run the mining, energy development, oil, and other industries that cause the pollution.

But as governor it is within her power to do something about it. Only she hasn't. All too often she has either done very little, or made matters worse.

Palin's administration, for example, opposed legislation, put forward earlier this year, that would have banned the flame retardant Polybrominated Diphenyl Ethers (PBDEs), which affects brain development in young children, including memory and learning functions.

The toxic compound also causes thyroid problems, slow sexual maturation and significantly reduced sperm counts in adults.

Democratic state representative, Andrea Doll, from Juneau (Alaska's capital), tried to get Palin interested in her bill early on. "I told her about the bill," she says. "But she was totally not interested in any way, shape or form. It was that look on her face - that 'don't even go there' look."

Pollutants affect all of us. But in Alaska they are taking their toll. The birth defect rate in the state is twice the US national average; and on North Slope, the area that produces most of Alaska's oil, it's nearly four times the national average."

Does Governor Palin realize she needs people to govern? Who or what is she planning to be Vice President of? Since Governor Palin does not appear to be supportive of science, can someone explain to me what she thinks of years of proven research of the effect of the toxins mentioned? Can someone find out what she believes has caused the unusually high birth defect rate? Does Governor Palin have advisors who explain how toxins flow and spread and what they do and how difficult it is to remove them from the environment? Can Governor Palin just assure us that "We the People" are of paramount importance because her record here would not support that claim.

Now, is this my only concern with Governor Palin's beliefs? Absolutely not. But do I need to look much further than this? Hardly, people have to stay alive to have a opinion about her other beliefs. Personally, I have no intention of becoming an endangered species because keep reading the article - she doesn't appear to believe in protecting those either.

Ideology vs Terminology

Since the beginning of this crisis, I have noticed few - very few - consistencies. One of them is the obsession with terminology. People claim to be concerned with ideology when it is terminology that offends.

So today, Chairman Bernanke has endorsed the idea of a "fiscal package" and in a matter of seconds, the opposition was vocal and loudly so. The naysayers are opposed to an "economic stimulus".

Let's look at exactly what Chairman Bernanke's said in the hearings on Capitol Hill. His words are in blue, mine are in black. Words were made bold by me for emphasis.
  • "I understand that the Congress is evaluating the desirability of a second fiscal package." True
  • "Any fiscal action inevitably involves tradeoffs, not only among current needs and objectives but also--because commitments of resources today can burden future generations and constrain future policy options--between the present and the future." True, hence why "fiscal actions" are taken after much consideration and hesitation, and usually considered appropriate when the options are unacceptable.
  • "Such tradeoffs inevitably involve value judgments that can properly be made only by our elected officials." Absolutely true - "value judgments that can properly be made only by our elected officials". Only people that represent the people, who listen to people, who understand the real not theoretical problems can make this value judgment. So all the naysayers should consult those who are now unemployed because of the crisis, or fear unemployment because of the crisis, or have lost their homes because of the crisis or fear losing their homes because of the crisis, or have lost significant savings and investments because of the crisis. Respectfully, only those who have a credible voice in this debate at this time are those who understand the suffering that exists, and more importantly, the long term consequences and costs of inaction.
  • "Moreover, with the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear." True. It is a consensus - we are in an unprecedented time, how can anyone know with absolute certainty the solutions. Yet, inaction is clearly not it.
  • "All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate." True. My question - given that weakness and protracted slowdown are universal beliefs, what is a reasonable alternative to a fiscal package? Are people not to have money to survive? Are people not to have jobs? Are businesses not to remain open?
  • "Should the Congress choose to undertake fiscal action, certain design principles may be helpful. To best achieve its goals, any fiscal package should be structured so that its peak effects on aggregate spending and economic activity are felt when they are most needed, namely, during the period in which economic activity would otherwise be expected to be weak." True. in other words: Let's be selective and constructive in the design and only employ such measures when the situation warrants it. He already said the situation warrants it.
  • "Any fiscal package should be well-targeted, in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue; at the same time, it should go without saying that the Congress must be vigilant in ensuring that any allocated funds are used effectively and responsibly." True. In other words, get the most bang for the buck and do not waste precious resources
  • "Any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit." True - as small as possible to be sufficiently effective to head off a longer term expensive problem of extensive dependency of major portions of the population on the state.
  • "Finally, in the ideal case, a fiscal package would not only boost overall spending and economic activity but would also be aimed at redressing specific factors that have the potential to extend or deepen the economic slowdown". Absolutely true. So, not just money to deal with critical existing needs, but measures for employment are critical to keep people occupied and businesses in business so we can get back to wealth generation in addition to one-off measures that are immediately necessary but insufficient. To be clear: To delay immediate relief to argue over taxation ideology would be a colossal mistake. Immediate relief is absolutely necessary. Further, given that small businesses provide the majority of jobs, it is logical that they should have relief. However, select interest groups delaying immediate and targeted relief in order to get assistance that cannot produce a broad based impact is counterproductive at this time. Time is of the essence.
  • "As I discussed earlier, the extraordinary tightening in credit conditions has played a central role in the slowdown thus far and could be an important factor delaying the recovery." Yes, again, consensus here.
  • "If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses, and other borrowers." Absolutely. The intervention in the banking system was to protect depositors and restart the flow of credit. More measures to encourage the restoration of flow of credit are quite logical and in keeping with the agreed principles that the world leaders have endorsed.
  • "Such actions might be particularly effective at promoting economic growth and job creation." His final words and there it is: at the end of the day it is all about people. The measures taken thus far were designed for the banking system 1) to protect depositors and 2) restart the flow of credit. The measures recognize that the banking system serve a critical function for the real economy. But the measures were not direct intervention for the real economy where severe damage has been done - damage to the real economy, damage to companies, damage to employment, and damage to people. Until there are direct interventions to repair the damage, and restart the real economy itself there are serious social and economic implications that will just result in a longer term cost.
No matter how you look at it, a temporary intervention is far less costly - in dollars and in permanent damage to ideology.

So my solution to this problem? Rename "economic stimulus" as "economic survival" and rename "fiscal package" as "measures to save ideology". Because if anyone believes inaction is an option, then I think its quite likely that he or she may have to face the real possibility that "ideology" and "terminology" become luxuries - because in most of the world, they are just that.

Sunday, October 19, 2008

Why General Colin Powell is right

The news has been buzzing about a possible endorsement for Senator Obama by General Colin Powell. Well today it came on Meet the Press followed up by some additional comments in an impromptu interview with reporters. I think this article "Colin Powell endorses Obama" in the Huffington Post and especially the two videos are well worth watching.

To me, it is not the endorsement that makes General Powell right. Whether or not I agree with General Powell's choice for President is frankly irrelevant. He, like everyone else can vote for whomever he chooses. What makes him right is that people have a right to a choice based on fact, not fiction or worse, fear rooted in fiction. That is the fundamental belief of democracy - it is not a Republican way or a Democratic way, it is supposed to be the American way.

In explaining his endorsement, General Powell - one of the most respected voices in the US and the world - makes it clear that the nonsense just has to stop and has articulated his opinion based on fact. Some of these facts have been obscured in this process, so take the time to listen to him. General Powell has been more than clear - the American people not only deserve better; not only do they need better; they must have better.

Moderation or Extremism?

Generally speaking, things have been looking up since Friday:
  • I am indeed heartened by the offer by the Secretary General of the UN to host meetings to design the new global financal architecture.
  • Presidents Bush (US), Sarkozy (France and rotating President of the EU) and Barroso (EC) have all agreed on not just one summit to redesign the global financial architecture, they have agreed on a series of summits.
  • In particularly delightful news to me, President Bush has specifically called for the inclusion of developing countries (although he did not say which ones), and has called for some ideas.
Since President Bush has solicited ideas, here's my first idea:

Let's be very realistic about the world we live in because only then can we find sustainable solutions.

One such reality? Lawlessness is rampant - it is convenient and it is creative. It is aided by technology. But the lawless elements have a vested interest in remaining underground and not in the mainstream They do so to survive and thrive.

So that's the reality, but what does it have to do with the current financial situation? Everything. Because although it is not possible to eliminate crime completely, I am somewhat befuddled about what lawless elements are thinking since they are driving the reforms from moderate to extreme.

So let's take a example:

This weekend it is reported that President Sarkozy's personal bank account was broken into via the Internet. See AP report here. Now, President Sarkozy has said over and over and over that he is determined to reform the banking system and the global financial and economic architecture. Do the thieves believe he will be deterred from this determination? They should not believe that because President Sarkozy is not alone in his belief and there is unprecedented global - yes, global - government support and coordination to do whatever it takes to protect their peoples. That's not one person, those are not some people, those are whole systems working together.

Does anyone - leaders or citizens or even criminals - want a system that allows for their funds to be stolen via the Internet? Absolutely not.

Here's what I think criminals must have missed: Governments - not just world leaders - have the power to take extreme measures to prevent this.
  • Governments can decide the Internet "is not in the national interest" - that would get rid of the convenience of stealing.
  • Governments can decide that the existing currencies are "not in the national interest" rendering whatever is stolen absolutely useless.
So breaking into President Sarkozy's bank account via Internet will only strengthen resolve and support for sweeping - and yes, extreme - reforms. Does the rest of the world want extreme reforms? Not necessarily, we agree that we do not want to go back and that we want to go forward building on the successes of the past, and even learning from the failures of the past. But will we understand that we must have extreme measures if those measures protect funds and wealth? Without a doubt! The option of mainstream lawlessness and anarchy is unacceptable and unsustainable; the lawless know that too.

We had a very progressive weekend. We get the message loud and clear: Something has to change; it has to get better; global governments are going to get it done. Anyone willing to bet me that eliminating the possibility of stealing people's funds - especially world leader's funds - is not going to be on the agenda? Well, I bet that it will be because if it was not before, it is now. Look at the principles agreed to by the world governments to deal with this crisis, and we need not look further than the first one:
  • "Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure." In other words, stealing funds via Internet will not be tolerated.
Whether in the statement of principles, or statements in public, world leaders and government officials have shown no problem with terminology like "all necessary steps". And they are not just talking, they are walking.

My two cents? I support Canada's view: meaningful change with restraint and pragmatism so we do not create a system that is worse than what we had before. Since Canada has a keen understanding of sensitive socio-economic matters, let's have Canada speak up and speak loudly in this process.

Saturday, October 18, 2008

Doesn't the US have poor people too?

I must admit I am somewhat befuddled by Senator McCain's strategy. He is now using the word "socialist" in reference to Senator Obama's plan (which it is not). Here's one article in the Wall Street Journal McCain Suggests Obama Plan is Socialist

""That's the key to Barack Obama's whole plan," Sen. McCain said. "Since you can't reduce taxes on those who pay zero, the government will write them all checks called a tax credit. And the Treasury will have to cover those checks by taxing other people, including a lot of folks just like Joe. In other words, Barack Obama's plan to raise taxes on some in order to give checks to others it isn't a tax cut; it's just another government giveaway.""

I do not understand this. I must be missing something. Yes, the Government must facilitate the private sector, but the markets are dysfunctional. What happens to the people when the markets and the free market system do not work? And even if markets and the free market system did work, they do not work for everyone. What happens to those people? Senator McCain has already said more than once he believes in freezing spending. So I was wondering how the US Government was going to do some of the things it had an obligation to do - you know, the welfare and protection of people. How is it going to pay for those things? Governments use taxes, and when taxes are insufficient they borrow. Is Senator McCain saying he prefers to borrow? Or is he planning to just not do some of the things the US government is obligated to do - such as protect the people - because now, he seems to be opposed to helping people who are poor.

So I looked up poverty on the US Census bureau website. Here are the highlights:
  • "The official poverty rate in 2007 was 12.5 percent..." In other words, that's a lot of people - 12.5% of the population
  • "In 2007, 37.3 million people were in poverty, up from 36.5 million in 2006." In other words, not only are there a lot of poor people, that number is growing
Now, is there an expectation of a sharp increase in poverty? But of course if the US is headed for a recession, and worse for a depression and even worse for an extended period of either of these two scenarios.

Now, here's what I want to know:
  • When the US Constitution says "We the People", the word "people" does not include the poor? Because if I listen to Senator McCain, it appears that it does not. Not only is that wrong, it is uncaring. Governments have a responsibility to ALL people, especially the most vulnerable.
  • As much as Senator McCain does have international national security credentials having valiantly fought overseas for his country, does Senator McCain have domestic national security expertise? Does he have advisers who may have some experience with how people who are starving and without state assistance have to find means to survive? There are lots of countries around the world with internal strife. Lacking the basic necessities of life contributes significantly to this problem. Governments have a responsibility to keep the order and need resources to do it.
  • Is there anyone on the McCain campaign with public health experience? When people live in poverty, they focus on the basics for survival. Those basics do not always include the best hygienic measures which are somewhat luxurious because of cost. They also cannot afford basic medication. So does the McCain campaign have a way to recognize potential public health problems and quarantine them because public health threats do not respect words or artificial borders. These travel by air and water. Governments have a responsibility to mitigate risks and need resources to do so.
Can Senator McCain clarify whether or not he has a problem helping the poor in the US?

Can someone ask Senator McCain if he understands the difference between "government giveaway" and "finding necessary resources for the survival of the American people and the American Way".

Can someone ask Senator McCain what he expects to happen to the people who traditionally have not, or now temporarily because of the dire economic circumstance do not have the means to provide for themselves? Does he believe that they do not need assistance from the state? Does he believe that a stable country can exist without concern and spending of resources for the most vulnerable? Because if anyone - whether Senator McCain or any of his supporters - believes the poor are not his or her concern, they are sadly mistaken.

Friday, October 17, 2008

Mais oui

In an earlier post, entitled "Oui, Oui, Oui....BUT BUT BUT", I commended President Sarkozy but continued my lobby for the developing world. Today, I read this nice bit of news from edmontonsun.com Francophone countries urged to show leadership in economic crisis:

Three critical pieces of this:
  • Diverse Representation: "“La Francophonie must shoulder the need for change,” he [President Sarkozy] told the gathering which brings together representatives from 55 countries and 13 observer nations of the International Organization of la Francophonie." See Wikipedia link here for the countries. Note the wide representation by continent, size, wealth (or lack thereof), and importantly island nations that have special environmental needs. Jamaica may not be a member, but we do have a lot in common with some of these countries.
  • Concern: "Prime Minister Stephen Harper expressed his concerns about the effects of the financial crisis on developing countries, which make up the bulk of la Francophonie." Did I see "concern about the effects of the financial crisis on developing countries"? Yes!! Let's keep up those comments about concerns for developing countries. And then let's do more than be concerned, let's give them a voice in the reform.
  • What is the opportunity and what must be avoided: "“The crisis should be an opportunity, the opportunity to shake off old habits,” said Sarkozy, arguing for a new-style capitalism that is based on entrepreneurs and not speculators who brought “the world to the brink of the abyss.” As something that spans a large geographical region, la Francophonie has the duty to take its place on the chessboard of international politics and not let one country “impose its solutions on the world,” said the French president ..."" "Not let one country "impose its solutions on the world"" - music to my ears. This goes to the very heart of the failures of globalization - imposition of the will of any one country on others.
And, then I picked this nice piece up from AFP: Sarkozy pushes for Africa, South America on Security Council. We already know President Sarkozy understands the gravity of the problem, and the need for reform and the urgency attached to this situation. But, here's what shocked me:
  • "But, "how can we imagine solving the huge problems of the world when our Security Council does not have a permanent member from Africa ... or from South America," he [President Sarkozy] said." WOW! Now that's more like it!

So my response: "Mais oui!" Mais means but; oui means yes. However, placed together, "Mais oui" actually means "Of course!"

When we see the outcome of this weekend's Camp David Meeting, I think I may have a "Dear President" post to President Sarkozy. He is on a roll.

Thank you China! ......And please do, Canada

I just could not wait to post this article: News Analysis: Interests of developing countries need to be taken into account in new global financial system in ChinaView online. Is China talking about itself? No it's talking about developing countries in general.

Thank you China!

Since the developed world cannot ignore you, China, please do place these issues on the table.

Jamaica is a unique country in that it really has no enemies. Jamaica has more than allies; Jamaica has friends. And China is one of them. Jamaica's relationship with China is an exceptional, longstanding relationship based on respect and understanding:
  • China does not want Jamaica to be China. Jamaica does not want China to be Jamaica. China is China. Jamaica is Jamaica. Each country is respectful of the other country's right to have its own culture and beliefs.
  • Relative to the existing International Financial Institutions (the ones I keep lobbying for reform), China's terms and conditions for assistance are concessionary. China's terms and conditions have neither impoverished nor increased dependency
  • When developing or poor countries go to the US for aid - even for necessities- the US says that funds are limited because of budget cuts since wars have to be financed. Do the people in these countries that need aid go unaided? No, because China will ask those same countries, for example: "Do you still need water pipes to distribute the basic necessity of life - water - to your people? We will help"
  • When Jamaica has a need, China does not tell Jamaica "Do not need that". International Financial Institutions are happy to tell Jamaica and other developing countries what they should want or need. On the other hand, China will help Jamaica if it can. So, here's an example. Even though China does not play cricket, China financed and built a world class stadium in Jamaica at the Government's request so that Jamaica could meet its obligations in the Caribbean's agreement to host the World Cup of Cricket. Did you hear that part: China does not even play cricket. Cricket is important to Jamaica, and therefore China did not judge; China helped. It is not a small matter. How do you think the American or the British people would feel if they were told by banks they could not host the Olympics because they did not have the infrastructure and should not want it? You see, the banks would not even do that to them.
So, please do carry on the lobby for the developing world, China!

Some may ask, is China our only friend? No, we have lots. So, let me tell you about another very close friend - and that is Canada.

Today, thanks to canada.com, I read of President Sarkozy's praise of Canada in this piece: An interview with Nicolas Sarkozy. President Sarkozy said: "With its international leverage and new socio-economic model, at the crossroads of the European and American systems, Canada can make a vital contribution to the discussions on this financial situation."

Did you hear that Canada? We all knew Canada was important to this process. At least President Sarkozy has recognized that on his own. So, Canada, you have always been our friend in need; and a friend indeed. Now, please, once again, be a friend in DEED and remember your fellow Commonwealth countries, especially the developing ones.

Thursday, October 16, 2008

New MUST be better for ALL

Aptly described "Out of the Ashes" given the "fire", "fire", "fire" that was called by the US officials that set off the global panic, Prime Minister Gordon Brown has written a nice piece in the Washington Post (online tonight for publication tomorrow). As someone who just last night pleaded for him to keep pleading the case for a "new financial architecture", I commend the Prime Minister on his pleas.

But, I am even more convinced that I have to redouble my lobbying because the silence remains deafening about what will happen to developing countries.

The Prime Minister writes: "The global problems we face require global solutions. At the end of World War II, American and European visionaries built a new international economic order and formed the International Monetary Fund, the World Bank and a world trade body. They acted because they knew that peace and prosperity were indivisible. They knew that for prosperity to be sustained, it had to be shared." Good intentions, perhaps. Achieved? Definitely not. Long before the crisis was felt in the developed world, the developing world cried tears and blood about the imperfections of these institutions. Respectfully, visionaries from other countries need to be in this reform dialogue.

The Prime Minister writes: "Today, the same sort of visionary internationalism is needed to resolve the crises and challenges of a different age. And the greatest of global challenges demands of us the boldest of global cooperation." Agreed, but if the Prime Minister is serious about the reality of the crises and challenges, and the necessity of global cooperation, then we have to try NEW "visionary internationalism" . The "same sort" will not do.

The Prime Minister writes: "There are no Britain-only or Europe-only or America-only solutions to today's problems. We are all in this together, and we can only resolve this crisis together." Agreed. Does that "we" include the developing world? Because it MUST.

I look forward to the Prime Minister's next article, interview, statement and/or press conference. And remain hopeful that somewhere sometime very soon he will at least include some reference to how the needs and views of the developing countries of his fellow Commonwealth states that are developing countries would be included in this reform process. Because that would not only be a significant start, it would mark the difference between the beginning of the creation of "a new financial architecture" and that of a stronger, more stable, more equitable and more sustainable global financial and economic system.

Oui Oui Oui.....BUT BUT BUT

French is such a beautiful language..."oui oui oui" means "yes, yes, yes". I chose that for the title because President Sarkozy was spot on today in his responses to the questions and his palpable sense of urgency in the post-EU summit press conference. Thanks to CSPAN, you can see the video here. "Oui oui oui" was one of his answers to a question, and the video is well worth your time.

So here's my "BUT" "BUT" "BUT"......... the silence is deafening on the entire developing world except for the occassional references to aid. All this determination to have a new financial architecture (music to my ears) leads me to my next question: How do we get to a stronger, more stable, more equitable and more sustainable global financial and economic system?

Because let us not fool ourselves - a new financial architecture is NOT automatically a stronger, more stable, more equitable and more sustainable global financial and economic system.

Let me say this as clearly as I possibly can:

ALL the countries of the developing world - from the strongest to the weakest, from the smallest to the biggest, from the most peaceful to the most war-torn, from the safest to the most in danger of natural disaster etc. - are a necessary part of that dialogue about and determination of
a stronger, more stable, more equitable and more sustainable global financial and economic system.

Each of these descriptors: "stronger", "more stable", "more equitable", "more sustainable" ALL REQUIRE inclusion, not exclusion.

Let's put this in context:

Reuters had an excellent article today: FACTBOX: The financial system established at Bretton Woods

What is so important about this?
  • The world had a crisis......sounds familiar?
  • World leaders got together to solve it.....sounds familiar?
  • World leaders decided that there needed to be institutions and a system to avoid a repetition of that crisis....sounds familiar?
Here is the most important part about this. This is the very system that is part of this current crisis or has helped to facilitate this current crisis (whichever version you prefer) that world leaders are trying to solve and not repeat. I am not commenting on the original design. I am just joining the universal realization - finally - that this particular system is not working for anybody.

So how do we have a new financial architecture THAT IS a stronger, more stable, more equitable and more sustainable global financial and economic system?

Let's start talking about that dialogue mechanism because, respectfully, the developing world is used to making do with things that don't work well; it's the developed world that doesn't have that tolerance level. This system has not worked well for a while and I've said that we have cried literal blood and tears about it, pleading for a new system. But at least we can cry and plead. The last time I checked, global still meant the whole world (including us) and we are still a part of the financial and economic system. So, just in case anyone was unsure in this time of opacity and unpredictability, the developing world's contribution to transparency and predictability - at this time - is that we have no interest in jumping from the proverbial "frying pan" into the "fire".

So when is the summit for us to talk too?

Wednesday, October 15, 2008

What's wrong with all those indices?

Lots of people are wondering why the indices just cannot settle down. Everyday there is a new reason. Here's what I think you need to know, and this is just some basics, not every single factor:
  • Under normal conditions, the markets are impacted by any number of factors. One is the economic calendar. "Numbers" are released everyday - seriously, at least 3 every day for some indicator or another. Indicators are employment, retail sales etc. Whether or not the "number" beats "expectations" influences the market. After weeks of what we have been though, almost nothing is going to meet or beat "expectations". Generally, the stock, the sector or the market itself suffers when that happens.
  • Under normal conditions, the markets respond to earnings releases - companies indicate what the earnings are in the last quarter. Again, same thing: Numbers vs expectations. After what we have been through, almost nothing is going to meet or beat "expectations". Generally, the stock, the sector or the market itself suffers when that happens.
  • Under normal conditions, markets respond to policy statements, especially by the Chairman of the Federal Reserve. Usually, they ignore everyone else. These days, every time someone speaks they react to what is being said and they usually react negatively.
  • We are still in a liquidity and credit crunch. Companies and investors just need to sell stock to raise cash. Funds have people asking back for their money. With so much volatility and incessant talk of recession, why not?
  • Let's go back to my jungle explanation - there is massive "overgrowth" threatening the ecosystem. Those are the credit default swaps (CDS) that are choking the markets. They have not been handled. They are largely an invention of the US and the US Government is of the view that we have to wait for these $62 Trillion unregulated complex exotic financial instruments "work themselves out" (or something to that effect). Here's something that is also not a secret, turn on CNBC or Google it for yourself: CDS "working out themselves" means settlements of contracts that require significant amounts of cash in a short period of time. So according to the analysts, every time a "settlement wave" comes around, there is a selloff. People know that they are a large part of the problem and every time people are reminded that these CDS are still out there, the markets tank. The Chairman of the Fed Reserve, Ben Bernanke - you know, that one person the markets listen to no matter what - reminded us of that today
  • More importantly, nothing has changed on the regulatory front. So people were exposed to the need for urgent regulatory reform, and yet nothing has been done. Lax and absent regulations still exist. People are still doing things that caused the mess in the first place. There is no ban on creating derivatives, or credit default swaps. Ratings agencies have not changed. This is not a secret, people know that. And then the SEC makes statements like the one they did today that they are aware that people are spreading false rumors about companies. Now, did I mention that some people make money by betting that a stock price will go down? Therefore,some people have a vested interest in the price going down. As far as I know, if it is proved that a stock price is actually driven down - by say false rumors - that is against the law. But by the time you get around to proving that and finding the culprits, the damage has already been done. Good companies are weakened, unable to attract investment, unable to function, and people lose their jobs as good companies try to save costs so that these good companies can meet or beat "expectations" in the next quarter. Again, people believe that this "betting against the stock price" is "vital to market functioning" and I am not commenting on that belief. I am saying though that right now markets are dysfunctional, and people are paid in these stocks that other people benefit from the price going down. So how is this helpful? In a crisis, the good of the society is being placed behind the inventions of finance? I fully support inventions of finance, but they have to have a real economy to invent on or about. They do not exist in abstraction. So at some point the market regulators have to get real about these inventions because frankly, the fear that people have that the stock market indices will go down to zero is completely counterproductive to the objective of restoration of confidence in the markets themselves.
  • Global coordination thus far has focused on the banking system - to protect people's deposits and allow credit to flow to people and businesses. That was an indirect not direct assistance to the markets. It is only indirect because it puts the real economy back in focus. So for companies not publicly traded, and if you prefer to keep all your money in a bank and make no investments in the stock market for a while, you are relatively fine. When the banking system functions, the companies that are publicly traded who hire people have received tangible assistance to keep their doors open, and hopefully jobs as well. But they are still publicly traded so they need a functional - not dysfunctional - market. Can global coordination address the markets? Yes, that is what I am lobbying for everyday, but it is harder to achieve than just agreeing on banking. This is a real ideological divide. Nevertheless, there are immediate measures that can be taken but the US especially is completely resistant to those, and have already said so.
So the markets will continue to fall unless something is done.

Think of it like this. What is the difference between a virus and a cold? You can treat a cold, but generally viruses run their course and we treat the symptoms for relief. Well, the markets MAY have a virus that does have to run its course. You know like the flu. But can we treat the symptoms for relief in the meantime? Yes! Do I think the markets have a virus that MUST run its course. Frankly, no. And that is the value of the power of global coordination. Governments can fix this problem. Let's hope the US is ready, because the rest of the world is ready because it is not about to have a virus that it cannot recover from.

Dear Prime Minister

Dear Prime Minister Gordon Brown:

I am not one of your constituents, or a UK citizen. I live in Jamaica, one of your fellow member states of the Commonwealth.

If I may say so, I have been truly heartened by your actions in this crisis so far. If we were in some kind of "World Cup", you would be the "Man of the Match". Why?
  • After a somewhat rocky start, you led the nationalizations - the strong and decisive action in the UK to try to tangibly restore confidence and trust in the banking system for the general public primarily, and the banks themselves so that they could function to serve the real economy
  • You sound quite convincing these days when you speak about the Government's obligation to the British people. I am in no position to debate your record. Honestly, this is the closest I have ever followed your day by day statements. But thanks for reminding World Governments of their jobs
  • You have shown that you recognize that this financial and economic problem indeed poses massive cross-border systemic risks, and you presented a similar nationalization and government intervention plan of action to the Eurozone - of which they then quickly adopted parts as suitable for individual nations.

But today, something really extraordinary happened. The news was buzzing about the G8 willing to meet (good), and meet to discuss reform of the global financial system (great), and then I watch the video in this article in the BBC online and you mentioned "trade talks" and I thought - fantastic.

You see, I am in no way anti-globalization. I am anti-globalization that is unfair and unsustainable. Globalization has many benefits; but many of those benefits are not shared. Globalization is not perfect and there are those who need, yes need, protection without protectionism. Globalization CAN work better; and now finally globalization MUST work better.

In a time like this when some countries will have excess supply and others will have excess demand, then let us have those trade talks with fair terms and conditions to effect some immediate redistribution to keep people alive and economies going. Absolutely brilliant, Prime Minister, if that is the intention.

So when I read this same article in the BBC online, I note: "Speaking to reporters on Wednesday ahead of the EU summit in Brussels, Mr Brown made an impassioned plea for a global summit to reform the International Monetary Fund (IMF), to help regulate the world's financial systems."
"An impassioned plea."

Prime Minister, honestly I did not know quite how to take that. Yes, please please please reform the IMF. But please tell me that by "reform" you mean that there is more equity for ALL countries, including your fellow members of the Commonwealth - you know, especially the developing countries. Because, I watched the interview clip and I did not hear you make reference to the developing world. So did I miss it?

In earlier posts in the blog, I have talked about learning German. Do you know why? Because I truly believe that regardless of what happens, Chancellor Angela Merkel will not let her people go through this again. She will not allow a lax, opaque and absent regulatory system to persist. She just will not. So if Germany makes change unilaterally, the rest of the world will have to react. So far, everybody is coordinating and have said they are committed to that coordination. But I note, Prime Minister that in supporting your calls for global financial reform, Chancellor Merkel has specifically referenced the inclusion of developing countries in the discussions. I quote from this interesting article: 'A G8 summit will be held again this year, with the participation of developing countries,' the German leader said. Was she just speaking on your behalf too?

The Commonwealth has 53 independent states . Many of us are small open economies, developing economies. Although India and China are our dear friends (at least Jamaica's), we do not have the populations of India and China. Our needs are different. Some of us are weak, others of us are strong. Some of us are islands, some of us live in hurricane zones, some of us live in war torn areas, some of us just cannot afford the basic necessities of life - food, water, oil.

So here's my "plea", Prime Minister. Please remember us. Please remember that this new global financial architecture has to work for all of us too. Please do lead the charge to reform the IMF because if it has to stay, let it do better than it has done in the past. I, for one, would love to see institutions that can better serve the realities of today.

In closing, let me leave you with the words of one of the most famous men in history - Benjamin Franklin, Founding Father, Diplomat, Inventor, Author, Printer, Satirist, Political Theorist, Policitican, Scientist, Civic Activist, Statesman and founder of my alma mater, the University of Pennsylvania: "Well done is better than well said".

Please get it DONE.

Keep making your pleas, convince your colleagues and counterparts just as you did to stem the hemorrhaging in the global banking system. Convince the powers that be that there is a better way and talk to the experts and those of us who live with the impacts of the current dysfunctional globalization model so we can help you with understanding what does not work. And then after you convince people of the merits of a new system that is more equitable, convince them to ACT and ACT quickly.

And if you do achieve that "new day" I keep talking about: a stronger, more stable, more equitable and more sustainable global financial and economic system, I would not know how to thank you. But if you wish, I will happily try to convince my British friends to vote for you since I cannot.

Yours most sincerely,

Tuesday, October 14, 2008

Tonight's TV....get your popcorn.

Let's try something new tonight - videos.

First, thanks to Jim Lehrer's Newshour on PBS, here's a very nice video (Click here) summing up the global coordination and some insightful analysis by Professor Joseph Stiglitz and Professor Martin Feldstein about the likely impact of the coordination as well as proposed next steps. (Transcript here for those of you who prefer to read)

And then, since I cannot miss any opportunity to lobby for that "new day": A stronger, more stable, more equitable and more sustainable global financial and economic system, here's an interview with Professor Joseph Stiglitz again, but earlier this year : Sharing the Benefits of Globalization (click here) . This is about the IMF, the US and developing countries and globalization. Yes, globalization that I have talked about in earlier posts. That globalization that the US insisted the world had to have. That globalization that has resulted in such a fragile interconnected system that when the US sneezes, the rest of the world faces potential pneumonia.

By the way, for those of you who do not know who he is, Professor Joseph Stiglitz of Columbia University was the winner of the Nobel Memorial Prize in Economics Sciences in 2001. Here is his Wikipedia profile, a link to his bio on the Columbia University website, and a link for current articles on the crisis. It has been said that "his work explained the circumstances in which markets do not work well, and how selective government intervention can improve their performance". In the developing world, he is perhaps most famous for his criticism of globalization for its impacts on the developing world. He is a powerful voice for many who are rendered powerless by globalization.

Here's a thought:

Since Professor Stiglitz has already been appointed by French President Nicolas Sarzoky to chair a Commission on the Measurement of Economic Performance and Economic Progress (presumably in France), and since President Sarkozy now holds the rotating chair of the European Union, and since President Sarzoky has called for a new financial architecture (click here), can Professor Stiglitz' "terms of reference" somehow include say, perhaps design of a stronger, more stable, more equitable and more sustainable global financial and economic system? I am personally curious as to what he thinks that would look like. Then perhaps, other countries will seek the view of other Professors in various, but related, fields to give their views. And then perhaps somewhere in between we find a happy medium that works for the world.

One thing I know for sure, whoever leads that effort for a stronger, more stable, more equitable and more sustainable global financial and economic system and achieves a world commitment to it will be one of the most important people in all of history, and cement an extra special place in the history of the world for his or her country.

How does that affect my plans? Well, as I've already said - I have lined up a German tutor, and am still looking for a Mandarin tutor, so now if hypothetically President Sarkozy of France is the man that leads the effort for the "new day", then I would just need to add brushing up on my French.

Au revoir!

Monday, October 13, 2008

A new day ? Well, yes and maybe

After the unprecedented global coordination, today the markets reacted VERY positively.
  • All US indices were UP
  • The Dow had the best rally since 1933 with the biggest Dow point gain EVER at 936 points
Amazing what serious committed global Government coordination can do! See and hear the views of Professor Jeremy Siegel of The Wharton School of the University of Pennsylvania

Made me think of Bob Marley's "Positive Vibration":

"Why not help one another on the way?
Make it much easier.

Say you just cant live that negative way,

If you know what I mean;

Make way for the positive day,

Cause its a new day

And its a new time,

And its a new feelin'

Said its a new sign

Oh, what a new day"

Truly I would have been satisfied with that fantastic lift in the markets (even if its for the day) .... and called it a good day. But then, late in the day, Senator Obama gave a great speech in Ohio. Just to be clear, I am not commenting on the political campaigning. I am commenting on the urgent tone and language attached to the concrete measures to provide "immediate" social and economic relief to address the very problems with regard to the potential unraveling of the social fabric I outlined in yesterday's post My sigh of relief but.....

From the Obama-Biden website, the summary version:
Obama's Economic Rescue Plan:

"Job Creation: A New American Jobs Tax Credit. Obama is calling for a temporary tax credit for firms that create new jobs in the United States over the next two years."

"Relief to Families:
Penalty-Free Withdrawals from IRAs and 401(k)s in 2008 and 2009. Obama is calling for new legislation to allow families to withdraw 15% of their retirement savings – up to a maximum of $10,000 – without facing a tax-penalty this year (including retroactively) and next year. "

"Relief to Homeowners:
90 day foreclosure moratorium for homeowners that are acting in good faith. Financial institutions that participate in the Treasury’s financial rescue plan should be required to adhere to a homeowners code of conduct, including a 90-day foreclosure moratorium for any homeowners living in their homes that are making good faith efforts pay their mortgages. "

"Responding to the Financial Crisis:
A Lending Facility to Address the Credit Crisis for States and Localities. Obama is calling on the Federal Reserve and the Treasury to work to establish a facility to lend to state and municipal governments, similar to the steps the Fed recently took to provide liquidity to the commercial paper market."

Needless to say, Republicans began to oppose this just as it was said. And again, I am befuddled that completely different countries could find a way to work together for the common good of their respective peoples, yet the Republicans (the ruling party) resist common sense bipartisanship in a time of unprecedented economic and financial crisis in their own country to help their own people.

So let me try: The unraveling of the social fabric is a very real potential problem for all people regardless of political affiliation. Fear, uncertainty, job loss, financial loss, and home-ownership loss has happened and will continue to happen because the financial sector "fix" cannot "fix" those issues overnight. If the term "economic stimulus" offends the Republican ideology view, why not call it "economic survival and ideological preservation" because if people have no jobs, no home, cannot afford to buy food or heating oil, cannot afford to live and are so frightened that they become paralyzed, there is no economic recovery. And if there is no economic recovery - say hello to the real possibility of "permanent government intervention" because there will be no other option. And remember, people vote for other people to "represent" them. So if the Republicans plan to be the government, they will only have a Socialist state to govern because they were so fixated on ideology that they were unwilling to yield to short-term relief measures to prevent a long-term problem.

So let's go back to Bob Marley's "Positive Vibration":

"Why not help one another on the way?
Make it much easier.

Say you just cant live that negative way,

If you know what I mean;

And let's hope the American government can find - in some bipartisan way - for its people to sing with the rest of the world:

"Make way for the positive day,
Cause its a new day
And its a new time,

And its a new feelin'

Said its a new sign

Oh, what a new day!"

I, for one, am ready for a "new day" for the world: A stronger, more stable, more equitable and more sustainable global financial and economic system is long overdue.

So bring on more global coordination - careful, considered constructive global COORDINATION
because it looks like the rest of the world is committed to to that "new day".

And in the US, we'll be satisfied with some plain old COOPERATION
because it is up to US to show the rest of the world that they want that "new day " too.

Sunday, October 12, 2008

A golden, priceless and invaluable opportunity

"Dysfunctional markets" are what we are trying to be rid of.

Markets must function. Markets must serve the best interests of the real economy.

People understand that governments must "intervene" to achieve functional markets when they have been as dysfunctional as they are now. Yes, "oversight" must be permanent, but we'll take temporary "intervention", thank you. And yes, government intervention must have strings attached because taxpayers money must be monitored and used carefully. But, respectfully let's NOT have those "strings" result in:
  • the substitution of "bad decision making for greed" in the existing dysfunctional markets for "bad decision making for political favor" in the government-intervened markets
  • the substitution of "irresponsible lending because of incompetence" in the existing dysfunctional markets for more " irresponsible lending because of incompetence" in the government-intervened markets
  • the substitution of "excessive risk taking" in the existing dysfunctional markets for "stodgy bureaucratic conservatism that stifles market functioning" in the government-intervened markets
  • the substitution of "actual and alleged fraud and scandal" in the existing dysfunctional markets for "actual and alleged fraud and scandal" in the government-intervened markets
Is it assured that governments can avoid these ills? No. But can they try and take best steps to avoid them? Yes. And they can show us that they are trying and taking best steps to avoid them.

As it stands, it is the strong and decisive global Government coordination that has provided the greatest comfort in these days of panic and fear. But let's not pretend people believe governments are perfect, because they do not:
  • People are generally of the view that governments do not excel at management (to be diplomatic)
  • However, people do know governments have power.
  • So maybe, just maybe, people may find reason to have faith in governance if interventions are executed with due care to the primary objective which is the proper functioning of the markets without the long term need for government intervention.
Faith in governance? That would be a golden, priceless and invaluable opportunity indeed to build confidence, support social stability, and accelerate the domestic and global economic recovery and even growth. My two cents? I say it's worth a shot because frankly, the people have limited patience as it is.

My sigh of relief but......


The last few weeks have been exhausting. But even before that, we were all wondering when will we see the "bottom" of the financial sector problems.

Well to me, the "bottom" has come:
  • Governments have recognized the magnitude of the problems - especially the interconnected cross-border nature.
  • Governments recognize they have the power to solve problems.
  • Governments have agreed to coordinate, and are coordinating.
  • Governments have agreed on principles and priorities.
  • Governments have developed measures to be implemented urgently.
  • Governments have acted to solve problems, and promised even more action.
The uncertainty that paralyzes the credit markets and causes unprecedented market volatility does not impede the ability of Governments to act. Governments are certain about their mandate: they exist to serve the interest of people. After all these global coordination meetings, Governments are certain they are united in purpose, although naturally not in the exact measures for each independent country. So, the uncertainty that has plagued the credit and stock markets is frankly, some what immaterial, because the Governments can and will deal with that in a constructive manner - that was the value of the coordination. And there are certain principles that are non-negotiable for governments and governments have the power to do what they have to do to serve the interests of the people.

What are some especially positive indicators?
  • There is so much global coordination I cannot write enough posts to keep up with the meetings, press conferences, communiques and news releases.
  • There are so many countries that have agreed on common principles, that I stopped counting after the G7, G20, European Union, Countries of the IMF etc. Because that's almost everybody if I am not mistaken
  • The measures are tangible - such as government guarantees for interbank lending.
  • There are so many measures. A variety of measures are really a toolkit for countries to pick and choose to strengthen national financial systems without sacrificing the global financial system, or the welfare of other countries.
  • World leaders are learning to communicate in ways that offend neither the people NOR the markets. Their words are decisive, urgent and solutions oriented, and quite frankly refreshingly different from the usual bickering over who caused what to whom.
There will be a new financial architecture.
  • The world governments are committed to it. They send signal after signal that they are willing to exercise their immense powers for the good of the people, and the resuscitation of the system.
  • I have noted the voiced concerns for the developing world. And I can only hope that that will be backed up with some action, and that the developing world will assert itself so that the replacement financial architecture is not worse than the previous dysfunctional financial architecture. I must admit I remain concerned about the leadership role of the IMF. However, the IMF said it was going to design new instruments and learn from the past. I am hopeful, only hopeful, that the instruments do not create more problems. But I must admit, I was pleasantly shocked to hear the IMF plead for aid for poor countries.
So, to me, we have reached the "bottom" of the financial sector crisis because we have no option. And if that means over the next few weeks or days drastic action is taken, I am fully prepared for it because quite frankly, the world leaders made it clear that there had to be an end, and they are in this together.


What's Next?

Now it is time to rebuild, because even though the banking system is so immensely critical, it is not the be all and end all.

Look at history: We had people before we had banks, and we had people before we even had money.

The rebuilding of the social fabric must be addressed.
  • People have been shocked, frightened, and have suffered significant loss financially.
  • People have lost their homes and their jobs
  • People are still likely to lose their homes and job, even if the banking system is fixed.
  • Where are the social safety net measures?
  • Where are the measures to ensure people can afford medicine, heating oil and food?
  • Where are the temporary jobs?
  • Where are the temporary measures to keep people in their homes?
You see, one of the problems with the sharp market declines and apparent free fall was the impact it was having in the real economy, savings, investments and the psyche of the people. Given a choice between worrying about the markets and worrying about the social fabric, it is clear which is a bigger problem. If the social fabric unravels, there are serious implications for domestic economic recovery and national security, before we can even consider global economic growth.

Back to a little more Bob Marley 101

In the song Jamming, Bob Marley said: "We're jamming" - which could be taken to mean in this context that progress is being made: The financial sector is on the way to reform.

But in the same song, Bob also said: "Life is worth much more than gold".

So bring on even more global coordination - careful, considered and constructive global coordination that the people actually feel, and feel quickly.
Creative Commons License
Reasoning The Reasons by Deika Morrison is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.