Posts of June 2015

Death Wish 6: Tsipras, Greek Financial Suicide Co-Pilot

♠ Posted by Emmanuel in Credit Crisis,Europe,Socialism at 6/30/2015 01:30:00 AM

Hitch a ride with the infantile Tsipras.

Andreas Lubitz, the suicidal Germanwings co-pilot who crashed an Airbus A320 into the French Alps, has understandably gone down in infamy for his actions. Suicide is bad enough from the perspective of any number of major world religions, but taking another 149 lives with you is much, much worse. I was reminded of the Lubitz episode when Greece's amateur-grade pinko of a "leader," Alexis Tsipras, engaged in financial suicide that took the entire Greek nation to an unknown, likely morbid, fate.

You see, like Lubitz practicing how to plunge a jetliner to its grave, Tsipras had premeditated financial suicide, taking 11 million people along for the ride to oblivion. Readers of my generation should be familiar with the Charles Bronson action franchise Death Wish that ran from the 1970s to the 1990s. Let's just say the latter sequels were not any good...but Death Wish 6: Tsipras, Greek Financial Suicide Co-Pilot would be the worst of the lot. In this 2015 remake, Tsipras plunges the Eurozone into turmoil out of his Narcissist-Leninist convictions to speed the demise of capitalism.

What evidence do I offer that Tsipras' suicide act--pretending a referendum was a "democratic" choice even it was to be held after financial lifelines are cut--was premeditated? I offer you two things. First, Greek negotiators thought they were talking in good faith with the nation's creditors when Tsipras pulled a "gotcha" on everyone--including them:

No one was more surprised by Greek Prime Minister Alexis Tsipras’s call for a referendum than his team of negotiators in Brussels. Shortly before midnight on Friday in the Belgian capital, the Greeks and representatives of the European Union and International Monetary Fund, tucked away in the EU Commission’s Charlemagne building, learned via Twitter that their efforts were in vain, according to an EU official. It was the first they’d heard about it. They soon left the room, their attempts to thrash out a compromise in tatters.

Second, Tsipras ignored his so-called "finance minister," self-styled erratic Marxist Yanis Varoufakis, over imposing capital controls on the Greek people. Said Varoufakis:

Capital controls within a monetary union are a contradiction in terms. The Greek government opposes the very concept.

Yeah, whatever. The upshot is that Tsipras had no intention of concluding an agreement with Greece's creditors anyway--the Greek negotiators were props. Even the leftist agitator Varoufakis was only there for show. While we don't know when Tsipras became convinced of his death wish any more than Lubitz did, that he had one is certain.

Reading the concluding text of the Communist Manifesto, Tsipras' methods are perfectly understandable in hindsight as he attempts to make the ruling classes tremble. He may not singlehandedly destroy the Eurozone, but he certainly will try his darndest to do so even if he damns the whole Greek nation to oblivion:

The Communists turn their attention chiefly to Germany, because that country is on the eve of a bourgeois revolution that is bound to be carried out under more advanced conditions of European civilisation, and with a much more developed proletariat, than that of England was in the seventeenth, and of France in the eighteenth century, and because the bourgeois revolution in Germany will be but the prelude to an immediately following proletarian revolution.

In short, the Communists [e.g., Syriza--ed.] everywhere support every revolutionary movement against the existing social and political order of things. In all these movements they bring to the front, as the leading question in each, the property question, no matter what its degree of development at the time. Finally, they labour everywhere for the union and agreement of the democratic parties of all countries.

The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win [my emphasis].

Proletariat of all countries, unite, and all that.

UPDATE 1: I obviously agree with Chris Giles of the FT that Tsipras is getting what he deserves.

UPDATE 2: Here is a more sympathetic view of Tsipras despite costing Greece billions with his antics.

Investment Roadshow: 'Fight ISIS, Buy Kurdistan Bonds'

♠ Posted by Emmanuel in Middle East,Security at 6/29/2015 01:30:00 AM

Invest in the peshmerga, the brave fighters of ISIS--buy Kurdistan bonds.

Among more adventurous "investments" I've covered in the recent past, Ukraine bonds are among the choice picks insofar as literally fighting anti-Western forces are concerned. With yields north of, oh, 50%, they are factoring in a substantial reduction in the value of these bonds as Ukraine's "government" is literally fighting for its life. But, here's some good news if you're having doubts about investing in Ukraine: Try some Kurdistan bonds.

I have portrayed the Kurds as the only real good guys in Iraq as they fend off ISIS, a rapacious central government in Baghdad, Saddam's Baathist loyalists, and a Turkey fearful of a nation of Kurdistan at the same time. Instead of investing in those opposing a new Russian Empire or a reborn Soviet Union, you can put your money to work funding those at the frontlines of a war against a hyper-retrograde "caliphate." Last week, the Kurds were in London flogging Kurdistan bonds. In a world of low interest rates, some of these fringe issues are becoming increasingly attractive:

As the fight against Islamic State rages in Iraq, the semiautonomous Kurdistan region is wading into a battle of different sorts. Its government is in London to woo international investors for a new bond issue, the latest among fringe emerging markets. The Kurdistan Regional Government [KRG] is planning to raise cash through a bond sale, its first ever, as it seeks to plug a gaping hole in its finances thanks to weaker oil-sale revenues amid an increasingly costly battle with the radical militants.

The KRG is holding fixed-income investor meetings this week through Friday in London, organized by Deutsche Bank and Goldman Sachs International, to gauge appetite for the energy-rich region’s debt, and may issue a bond after that. They are meeting big institutions and frontier-market investors, and will complete the size of the bond depending on demand.

The bond issue seeks to fulfill the government’s budget deficit, which is expected to reach $5 billion this year for the second year in a row, said Ezat Sabir, head of the investment and economy committee in the KRG’s regional parliament. KRG’s bond plan comes at a time when global investors anticipate a rise in U.S. interest rates, which could trigger a selloff in riskier emerging-market debt. Some of the riskiest sovereigns in the world—such as Armenia, Bulgaria and Ecuador—have sold debt in recent months, finding takers for the high yields they offered amid record low global interest rates.

Actually, Kurdish officials explain, their bonds are not a dubious investment since some of the richest oil reserves in Iraq lie in Kurdistan. In other words, revenue streams should be fairly steady going forward:

The KRG doesn’t have a credit rating, which usually helps investors make a decision, and Kurdish fighters are fighting Islamic State just outside the borders of the Kurdish region. But some bankers and government officials are still optimistic.

They point to the Iraq 2028 bond that trades at around 8%—more favorable than the yields on debt issued by countries such as Venezuela, Greece and Ukraine. And the country’s economy is underpinned by oil. Islamic State, despite its advances, is still far away from the heart of oil production in southern Iraq. The Iraqi central government, meanwhile, is also looking to raise debt through its own bond sale.

“We are optimistic about the future of our future economy because we have huge reserves of gas and oil,” the KRG’s Mr. Sabir said.

Given how menacing ISIS has become, there may be an additional normative component to investing in Kurdistan.

Corporate America Buys Fast Track Authority

♠ Posted by Emmanuel in Trade at 6/27/2015 01:30:00 AM

Fast-track's passage was more or less bought.

We have come full circle on trade at the end of Barack Obama's second term as the American president. Campaign Mode Obama circa 2008 adopted some pretty nasty anti-trade rhetoric. As I noted so many years ago, this tactic is standard fare for Democratic candidates for president to gain the support of or at least silence staunchly isolationist elements in their party like labor unionists. Once they enter office, however, they ditch these patsies and reveal...their true pro-trade agenda.

And so it's happened with the passage of fast-track authority. With no further votes to win--he is in his second and last term as US president, Obama has pushed for this authority enabling him to conclude trade deals abroad--the Trans-Pacific Partnership (TPP) in Asia and the Transatlantic Trade and Investment Partnership (TTIP) in Europe--and have them voted on an up-or-down basis in the US congress without modification.

What accounts for the relatively easy passage of fast-track authority--after a few temporary hiccups? Simple: pro-trade contributions to politicians far outstrip anti-trade ones:

The political maneuvering and opinions on the trade partnership remain complex. But the money flowing to senators from interested groups has been much more one-sided. Industries, such as banks, insurance companies, utilities and many more, that back the bill in its current form have donated $218.4 million to current senators since October 2008, according to money in politics researcher MapLight. That's about nine times more than the $23.2 million contributed by groups that oppose it.

"As far as business, this is the most important vote that will be taken this year," said Anthony Corrado, a professor of government at Colby College in Waterville, Maine, who studies campaign finance. "The business community for the most part has been united on TPA, so you might expect a large disparity."

Seen from the perspective of campaign finance contributions, we should have known that the anti-trade set never really stood a chance. Money talks, that's all.

Will the Party 'Save' China's Imploding Stock Markets?

♠ Posted by Emmanuel in Casino Capitalism,China at 6/26/2015 01:13:00 PM

Fried chicken...or fried rat? That's the real question about what's in Chinese stocks.

There's been a silly controversy about a customer who found a rat-shaped piece in a KFC order. As it turned out, the piece was only rat-shaped but was wholly chicken meat. For some reason, this episode reminded me about the debate about corporate governance issues among PRC-listed firms: How much disclosure is being provided by these firms? Moreover, is Chinese-style accounting to be trusted? Explaining why he didn't invest in PRC-listed assets, famed investor Bill Gross called them the "mystery meat" of the financial world for this very reason. Are the Chinese serving up fried chicken...or fried rat? Unfortunately, it remains hard to tell.

If you enjoy financial adventure, then there is no finer place to invest than in China. In 2015, its stock markets have been both the best-performing and worst-performing in the world due to wild gyrations. Daily moves of ±5% are the norm and not the exception. During the last few sessions, for instance, the Shanghai Composite Index has fallen an astounding 19% in 9 trading days:

Friday was another black day in recent times for Chinese stock markets. The stocks, as suggested by Shanghai Composite index, nosedived 7.40 per cent for the day to mark their biggest daily point-wise fall in more than seven years. Regional indices too were hit badly, with Shenzhen Composite ending 7.9 per cent lower. Selling was seen across the board, with nearly 2,000 of 2,800 listed companies on Shanghai and Shenzhen exchanges hitting their 10 per cent-daily limits. limits.

That was harsh, but nothing new for Chinese stocks given the recent trend. The stocks have been bleeding over the last 9 trading sessions. In fact, the Shanghai market — which is nearly three times bigger than India's stock market in terms of market capitalisation — has lost a fifth its weight during the period.

Also:

China’s $8.8 trillion stock market has plunged from first to worst on global performance rankings, threatening to bring an end to the longest bull market since the ruling Communist Party introduced equity trading to the world’s largest population in 1990. Morgan Stanley advised clients to refrain from purchasing mainland shares in a report on Friday, saying the Shanghai Composite’s June 12 high likely marked the top of the rally.

Market observers generally agree that the Chinese Communist Party has goaded retail investors through a relentless state media blitz about the benefits of investing in equities. To sweeten the pot, it has enabled these neophyte mom-and-pop investors to borrow considerable amounts to buy stocks. The end result has been fascinating to watch: Amidst a visibly slowing Chinese economy, stock markets kept rising as debt-fueled retail investors tried to cash in on a supposedly "government guaranteed" bull run. Once in a while, though, the reality becomes evident that (a) the Chinese economy is slowing, (b) unsophisticated mom-and-pop investors gorged on debt are driving this run, and (c) everyone expects the government to goose the market when it slows.

But here's the thing: what if the PRC cheerleaders shut the hell up and the government simply says "Well, that's just the way it is with stocks?" Recent movements have left the propagandists speechless:

Only months ago, encouraging words from Xinhua sent stocks soaring. Now, with markets sinking, that official line has gone quiet, leaving many wondering how -- or whether -- Beijing might respond. Just how much China’s state media are used to telegraph government views on the markets is the subject of debate. Xinhua, founded in 1931 as the Red China News Agency, didn’t answer calls to its news hotline seeking comment.

But analysts agree that Xinhua, a ministry-level government department, is too powerful to ignore. If nothing else, reports and commentary by state media sway investor psychology and can turn a rout into a rally -- or vice versa. “Investing in China stocks means you have to follow state media,” said Nelson Yan, the chief investment officer at the Hong Kong unit of Changjiang Securities Co. Government policy, after all, has been largely behind the world-beating 124 percent market gain of the past 12 months.

What to do? Call me crazy, but I prefer to invest in companies that observe good corporate governance: they have real and verifiable earnings, real and verifiable assets, and some semblance of an intelligible business model. Hoping that the Chinese government will keep talking up the market does not sound like a wise investment strategy to me. More often that not, Chinese listed companies have none of these things, leaving us to guess what Chinese apparatchiks are serving up: fried chicken...or fried rat?

Given recent headlines, it seems even gullible mom-and-pop investors in China believe the latter.

Caveat emptor!

UPDATE: Bang on schedule--call it the PBoC put--the People's Bank of China has reduced the benchmark lending rate for the fourth time since November 2014, while reducing reserve requirements as well. The timing suggests that the tanking stock market again drove monetary policy-making. Can the Party keep the stock market party going? I didn't even bet on it either way.

Will Obama Boycott (Now PRC-Owned) Waldorf-Astoria?

♠ Posted by Emmanuel in China,Security,Travel at 6/25/2015 01:30:00 AM

Reds' listening devices under the bed at the now Chinese-owned New York Waldorf-Astoria?

One of the best-known hotels in the world is the Waldorf-Astoria in New York. Its fame stems from world leaders, celebrities, and movers and shakers in the world of business patronizing this venerable institution for decades. A source of its renown has been American presidents staying there whenever in the Big Apple. Like, for instance, while delivering addresses at the United Nations. If only these rooms could speak, they could tell us about persons who have shaped our world. Consider the presidential suite:

The Waldorf Towers, which bills itself as a hotel atop a hotel and has its own drive-through entrance on East 50th Street, has 26 “presidential style” suites. The presidential suite itself isn’t even the biggest or the most expensive. (It is surpassed by the Cole Porter, with five bedrooms; the royal, where the Duke and Duchess of Windsor lived; and the penthouse.)

Still, it’s roomy, with a foyer, a living room with a decorative fireplace, a dining room that seats 10, a kitchen and a boudoir off the marble master bathroom. It is spacious enough, at 2,245 square feet, to accommodate 50 guests. (The suite can also be converted into a more economical one-bedroom.) Originally fitted with colonial-style furnishings, it was redecorated in a Georgian style in 1969, “to be evocative of the White House, without trying to copy it,” said Matt Zolbe, the hotel’s director of sales and marketing.

There’s no great original art to speak of, but the living room is graced by an upholstered rocking chair that belonged to John F. Kennedy; wall sconces donated by Richard M. Nixon; and books by Homer, Shakespeare, Lewis Carroll and J. K. Rowling (she stayed there). Facing the king-size bed and Serta Perfect Sleeper mattress (with 400-thread-count sheets from Anichini) is a desk owned by Gen. Douglas MacArthur, who had a suite at the hotel.

If you're rich enough, you too can stay at the presidential suite. However, it may not deserve its name for much longer if rumors are true that Barack Obama will not be staying there for the upcoming UN general assembly:

Every president since Franklin D. Roosevelt has stayed in the presidential suite on the 35th floor of the Waldorf Astoria New York in Manhattan. The accommodations run $4,000-$6,000 per night, hotel officials say, and feature souvenirs collected from past commanders in chief and security measures like bulletproof glass windows. Current and former White House officials have long considered the hotel and its staff as the best in the world at hosting the most powerful man in the world. That may all be about to change. President Barack Obama is on track to skip the Waldorf this fall when he heads to New York for the annual United Nations General Assembly, several officials told Yahoo News.

Is Obama boycotting this Hilton-managed property over the antics of heiress Paris Hilton? Hell no! Reportedly, the PRC-based Anbang insurance group buying the property has resulted in [my eyes are rolling here] "security" issues. What if the presidential suite is now riddled with listening devices? At least that's the argument of those steering Obama away from the Waldorf-Astoria:

While the officials would not say so explicitly, they strongly indicated that the decision to reevaluate the historic relationship with the Waldorf was tied to the hotel’s sale to China’s Anbang Insurance Group, approved by U.S. regulators earlier this year. While Hilton will continue to operate the property for 100 years, one U.S. official linked the American decision to relocate the president to worries about Chinese espionage and to the announcement of an upcoming “major renovation” at the hotel that could provide an opportunity to install surveillance gear. The recent theft of millions of federal workers’ personal information, pinned on China, has fed the sense of alarm in Washington. China denies responsibility for the breach.

What's this, hotel protectionism? Having passed Committee on Foreign Investment in the US (CFIUS) scrutiny, you would think that security-related concerns have been assuaged since the American president has always stayed at the Waldorf-Astoria. I guess not.

Trade Agreement-Signing Competition: US vs. China

♠ Posted by Emmanuel in China,Trade at 6/24/2015 01:30:00 AM

US, China race to sign preferential trade deals...which exclude the other.

With the WTO Doha Round safely written off--it's so stale that even the obituaries declaring it dead date to 2012--another "great game" has preoccupied the great (trading) powers. Aside from being the two largest economies in the world, the US and China are also its two largest traders in goods and services. Paying no heed to the notion of "trade diversion," both are racing to sign preferential trade agreements with any and all comers--except each other, that is. As it so happens, Laura He has an interesting description of this contest to ink PTAs at MarketWatch.

Let's start off with China. Its strategy involves linking together a series of bilateral arrangements for an eventual wider, regional deal known as the Regional Comprehensive Economic Partnership [RCEP]. After the RCEP, there will be an even broader deal in China's plans for APEC member nations known as the Free Trade Area of the Asia-Pacific [FTAAP]:

Last week, China signed a landmark free-trade agreement with Australia, the latest entry in Beijing’s recent parade of high-profile trade deals. [T]hese deals can also be seen in the context of a “free-trade race” with the U.S., in which each side racks up competing — and often overlapping — free-trade agreements, or FTAs. Specifically, the Australia deal follows closely a similar agreement with South Korea, inked June 1, and falls into China’s plan for a Regional Comprehensive Economic Partnership, which Beijing hopes will in turn serve a grander, more globe-straddling strategy for a Free Trade Area of the Asia-Pacific.

RCEP and FTAAP, as the latter schemes are known, are more than just another pair of Chinese government acronyms. Back in the 1990s, China was struggling to conform to the rules of the World Trade Organization, which it finally joined in 2001. But today, as an editorial by the state-run Xinhua News Agency put it last week, China wants to transition to “actively helping write international economics and trade rules” rather than following a system set up by other nations.

This month’s new trade deals are a step in that direction, Xinhua said, with China trying to “thread the beads of a China-South Korea FTA and China-Australia FTA onto the string” of its RCEP plan and eventually “create a plane” for the more ambitious FTAAP. In fact, Chinese President Xi Jinping went so far as to tell Australian Prime Minister Tony Abbott in a public letter that the FTA between their countries would “set an example” for similar agreements in the Asia-Pacific region.

Allegedly, China's reinvigorated mania in signing preferential details left and right has been spurred by fears of being frozen out by the Trans Pacific Partnership [TPP]*:

But perhaps the root of China’s proliferation of trade deals and multinational organizations is yet another set of initials, emanating from Washington: the TPP. The TPP is the U.S. government’s Trans-Pacific Partnership, currently under negotiation by the Obama administration, with 12 countries in the Asia-Pacific arena — but not China.While neither side has openly declared an FTA race — President Obama even said that China has shown interest in joining the TPP “at some point” — many observers see the TPP and China’s RCEP as rivals.

“It is indeed commonly perceived that the TPP is designed to exclude China,” said Francis Lui, director of Hong Kong University of Science & Technology’s Center for Economic Development.

Certainly, there’s a good deal of overlap between the two proposed trading spheres, with Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam and Brunei all marked for inclusion in both the TPP and RCEP. And in seeking to promote the TPP in the U.S., Obama warned in April that if the trade group isn’t set up, then China will write the trade rules for the region.

Lui said China’s rush to sign trade pacts and set up the RCEP is Beijing’s counterweight to the TPP, and “the emergence of this large number of FTAs shows that [the U.S.’s TPP] strategy can be mitigated easily. If China can sign individual FTAs with many members of TPP, then the American goal of using it to isolate China would no longer be of any significance,” Lui said. “The fact is that many members of the TPP indeed have the incentive to go into FTAs with China.”

While it's all very interesting to read about, you do have to wonder why they don't just conclude a simpler WTO agreement that China, the US and everyone else can agree to. Instead, we have multiple possibilities for trade diversion. Moreover, it gets hard for customs authorities to know just what tariff rate to administer with so many overlapping PTAs. It's going to be a nightmare to keep track of which is which if this keeps going on.

* - Also see a previous post on how FTAAP turned from an American into a Chinese advocacy.

Climate Clash of Titans: Pope Francis vs. ExxonMobil

♠ Posted by Emmanuel in Energy,Environment,Religion at 6/22/2015 01:30:00 AM

On climate change, oil and gas companies are pretty much in the same position nowadays that tobacco companies were in regard to smoking's adverse health effects during the Fifties. Just as cigarette makers denied any link between smoking and lung cancer, certain energy firms like to downplay that man-made climate change is occurring. Bloomberg has an interesting story regarding how Pope Francis' forthcoming visit to the United States is prompting Americans to sway them to their positions on social and, yes, environmental issues. Last week, Pope Francis of course released his long-awaited encyclical on mankind's responsibility regarding environmental stewardship. While it is of course required reading for Catholics, other readers are certainly encouraged to see how scientific knowledge can buttress theological argumentation.

Prior to its release, ExxonMobil sent emissaries to the Vatican in hopes that Pope Francis would tne down the man-made climate change aspect:

In the months leading up to the release of the encyclical, conservative American Catholics and even the oil and gas industry sent emissaries to the Vatican hoping to dissuade the Holy Father from weighing in on climate change, arguing that the science isn’t settled and that cutting back on fossil fuel use would hurt rather than help the world’s poor. Exxon Mobil sent several delegations to meet with Vatican officials, and a conservative Chicago-based think tank, the Heartland Institute, held a whole counter-conference on alternative climate science in Rome at the end of April. But the Pope was apparently unmoved, and the encyclical states “there is a very consistent scientific consensus that indicates that we are witnessing a worrying warming of the climatic system…Humanity is called to take conscience of the need to change life styles, ways of production and consumption to fight this warming, or at least the human causes that produce it or accentuate it.”

No arguments from me on Pope Francis' main points. However, Exxon is apparently hardening its climate change denial. In a recent shareholders meeting, its CEO pooh-poohed climate change in keeping with the anti-science stance prevalent in the United States:

The CEO of one of the world’s largest oil companies downplayed the effects of climate change at his company’s annual meeting Wednesday, telling shareholders his firm hadn’t invested in renewable energy because “We choose not to lose money on purpose.” “Mankind has this enormous capacity to deal with adversity,” ExxonMobil CEO Rex Tillerson told the meeting, pointing to technologies that can combat inclement weather “that may or may not be induced by climate change.”

Playing up the religious angle, ExxonMobil had also been petitioned by a Milwaukee-based Catholic group concerned about environmental matters. The company slammed the Catholic organization's efforts to place an expert on climate change on the board of directors:

At the meeting, shareholders sided with the company’s board and voted against a measure proposed by Father Michael Crosby and Sister Pat Daly, representatives of a Milwaukee-based Roman Catholic organization, to add a climate change expert to the company’s board. In a letter to shareholders, Tillerson and his colleagues wrote that “to set aside one seat for an environmental specialist or for any single attribute or area of expertise would, in our view, not be in the best interests of the company or its shareholders because it would dilute the breadth needed by all directors to make informed decisions for the company.”

As obstructionist and anti-scientific as mainstream American conservatives are on this issue, look at how Republican candidates for president stack up, you do have to wonder if the Catholics among them have anywhere left to hide after Pope Francis made clear where Church teaching stands on the subject matter.

Whether American leaders will keep backing sunset industries like oil and gas extraction is certainly interesting to watch as the world's wealthiest nation is decidedly backward-looking on this issue. When even Saudi Arabia--a nation almost entirely dependent on this single industry--admits that the days of fossil fuels are almost up, why the likes of ExxonMobil persist in denying the world has changed is puzzling and disturbing.

At any rate, a showdown looms when Pope Francis visits the US of A.

I [Heart] Comedy: Russia 'Rescuing' Greece; Other Idiocies

♠ Posted by Emmanuel in Credit Crisis,Europe,Russia at 6/19/2015 02:44:00 PM

"Psst...Tsipras! I've got you covered if you really want to finish off Greece."

I am utterly entertained by the idea that Russia can help bail out Greece. True, the so-called Greek "socialist" government full of Burberry scarf-wearing and Paris Match magazine-hogging amateurs threaten Western European powers by cottoning up to Vladimir Putin. Still, the idea of Greece becoming a Russian satellite is definitely among the more amusing Syriza rants including asking for WWII reparations from Germany and styling the IMF as a criminal organization. (Remind me to try that last one on people I borrow money from in the future.)

Let's start off with Foreign Policy and its usual sort of unsubstantiated sensationalism about Russia coming to the rescue of Greece:

So far, Russia has largely stayed out of the European financial crisis. But the Greek conundrum provides a tasty incentive to dive in. If Moscow does, it would transform a five-year economic crisis into a geopolitical one. “You don’t want Europe to have to deal with Greece, who is a member of NATO, all of the sudden cozying up to Russia,” Sebastian Mallaby, a senior fellow for international economics at the Council on Foreign Relations said Thursday.

Ahead of the Friday meeting, Russian Deputy Prime Minister Arkady Dvorkovich said he “cannot comment on specific decisions” when asked if Moscow would rescue Athens.

The reliably yellow Daily Telegraph loves reheating this sort of Cold War nonsense:

A communist Greek revolution today may seem a laughable idea. Just as with the Baltic, we like to imagine that the West’s ideological victory in the land of tavernas and so many British summer holidays is irreversible. But it is not. Earlier this year Russia signed an agreement with Cyprus to give Russian naval vessels access to Cypriot ports. On the beaches of Greece’s islands this year you will hear Russian everywhere. The West’s sphere of influence cannot be taken for granted, neither in Greece nor the Balkan peninsular which it caps. We must not be complacent.

But, back to the real world. Fantasy-loving hacks aside, let's take a look at some hard numbers. Even with upgraded forecasts, the one-trick Russian economy--dependent as it is on energy exports--will shrink a lot this year and barely grown next:

The World Bank has raised its GDP growth forecasts for Russia "to reflect a further stabilization of global oil prices". It lifted its forecast for 2015 to a contraction of 2.7 per cent, up from the contraction of 3.8 per cent it predicted in April. In addition, it has bumped up its growth forecast for 2016 to 0.7 per cent from the decline of 0.3 per cent it forecast a month ago.

Oil prices have stabilised and recovered slightly this year after plummeting in the second half of 2014. The rouble has followed a similar trajectory, falling hard in the second half of 2014 as oil prices dropped and the west imposed sanctions on the Russian economy for its role in the conflict in Ukraine, before the currency staged a recovery in the first half of this year.

Greece's total public debt amounts to some EUR 305 billion, of which it owes Europe's crisis fighters EUR 195 B in emergency funding incurred since 2010. If Greece were truly "going socialist," they would of course choose to repudiate all its debts to European lenders post-crisis or, at the very least, give them a major haircut. You must be joking if the Greeks are counting on the Russians to pay the hated Western Europeans back.

So, the real question then is whether Greece becoming a Russian satellite would compensate for it being subjected to the same sorts of economic sanctions that Russia now faces as a result of debt repudiation or unilaterally erasing between, say, half to two-thirds of its debts. Actually, trade with Russia is around 5% of Greece's total trade--most of which are energy and raw materials. Unless Greece can import a wide range of everyday products from Russia, alienating Western Europe won't solve matters. That Russia itself isn't importing a whole lot of useful things right now it can re-export to Greece doesn't bode well for Greece following the de-globalization route.

Bottom line: Sure Greece and Russia can get together to thumb their noses at the West, but it's an empty gesture. Nobody doubts that Russia is worse off now after going rogue, and Greece is more than welcome to follow its example. But, if it thinks Russia can "replace" the EU as a major sponsor, think again. Russia doesn't have a wide range of goods to sell to Greece. Nor would Russia spend any considerable amount of money bailing out Greece to benefit Western powers who are its ultimate foes.

As the saying goes, how can Russia help Greece when it can't even help itself?

Can Mrs. Clinton Fix US Via German-Style Apprenticeships?

♠ Posted by Emmanuel in Americana,Labor at 6/17/2015 03:57:00 PM

Apprenticeships for the jobless youth: after eight wasted years, it may at last be Clinton Part III.

After engaging in a fair bit of America-bashing now and then, you may be surprised that I have a rather positive view of Bill and Hillary Clinton. Efforts to tar Bill Clinton before his first term made me to believe that he was a draft-dodging womanizer--which, actually, he is. But, guess what? On more substantive things--generating economic growth and putting the United States on a more internationalist path--it's very hard for me to fault Bill Clinton. By the same token, I think of Missus Clinton as an accomplished person with great ideas as well for governing. So her foreign policy chops in Asia are, er, somewhat questionable. But, just as it was way back when in the roaring Nineties, it's still the economy, stupid, and I think the Clintons understand what must be done with America best--and the world will benefit as a result.

Being an admirer of the German apprenticeship system instead of the American university-jobless system as I have called it, you will not be surprised that I think much of Missus Clinton's pitch to give enterprises hiring young people for apprenticeships a $1,500 tax credit:

Hillary Clinton will on Wednesday call for a federal apprenticeship program as a path to reducing youth unemployment, aides said, her first new policy proposal since officially launching her campaign this week. Speaking at a technical college in Charleston, South Carolina, Clinton will propose rewarding businesses with a tax credit of $1,500 for every apprentice they hire. She will say that the program would encourage businesses to take on more young workers.

Apprenticeships are a major benefit for workers who see large annual earnings gains, Clinton will argue, as well as a boon for businesses that receive a tax credit.

Of course, there is also a vote-getting angle here appealing to younger people and minorities:

But on some business issues she has moved away from the liberal line. She has not condemned the Trans-Pacific Partnership as her competition for the Democratic nomination has and she has called for reducing regulations on small banks and businesses. Linking apprenticeships with tax credits has received bipartisan support in Congress, Clinton’s aides pointed out, with Democratic Sens. Cory Booker and Maria Cantwell as well as Republican Sens. Susan Collins and Tim Scott supporting similar programs.

Clinton aides cited an unemployment rate among 18- to 34-year-olds of 7.8%, a rate that was nearly double among African-Americans. In order to win in a general election, Clinton will need to mobilize the black voters who overwhelmingly supported Barack Obama in 2008 and 2012.

With America going down the tubes and enterprises not daring to invest in America, I don't see why its electorate should keep delaying round 2 of the Clinton years. There's a chance they won't be able to revive America's fortunes, but if anyone has a track record doing so, then there are really few choices out there.

Ukraine vs. Franklin Templeton Investments, Round 77

♠ Posted by Emmanuel in Europe,IMF,Security at 6/16/2015 01:30:00 AM

A lot off the top, a lot off the side: Ukraine seeks to give its creditors a sizable haircut.

The unprecedented example of IMF lending to a country in the midst of civil war demonstrates US influence even now at the institution. If you are on America's side, the IMF will find all sorts of loopholes for you...but even if it means screwing over US investment concerns? At the moment, Ukraine is in rather worse financial straits than Greece, which at least is not in any danger of dismemberment. Yet, there are two conflicting interests with regard to the American treatment of Ukraine. On one hand, it wishes to keep the (American-recognized) Ukrainian government in Kiev intact in fear that further chaos will erupt if matters deteriorate financially and another regime is installed. However, the interesting thing is that many of Ukraine's largest creditors are American fund managers who mistakenly thought that either (a) the country's situation would stabilize in the near future or (b) Western powers-that-be would not give them a "haircut" if push came to shove.

A haircut is, simply, writing off the value of obligations. For instance, a 50% haircut would mean that Franklin Templeton Investments would only be repaid 50 cents for every $1 of face value of Ukraine sovereign bonds it possesses. For Ukraine, it's literally a life-or-death, lose-lose situation: They can stop paying creditors and be declared in default, but that *may* help fund the war effort. Or, they can continue paying their creditors but have less funding to keep whatever remains of (Western) Ukraine intact. What's interesting with the former choice is that the Yankees may be willing to allow Ukraine to shaft US investment funds to help keep Ukraine afloat:

Ukraine's premier warned Friday that Kiev will freeze its debt repayments if no immediate deal is found with private lenders because it has to fund its escalating campaign against pro-Russian fighters. Prime Minister Arseniy Yatsenyuk said on his return from a visit to Washington that the International Monetary Fund had given his embattled government a few weeks' reprieve to enact laws needed for the release of new loans.

But the Western-backed cabinet leader said the IMF had signalled its willingness to let Ukraine restructure debts at its own pace -- and that interest payments to Western commercial lenders and Russia may stop as early as next week."Today, Ukraine spends as much on foreign and domestic debt servicing as it does on defence," Yatsenyuk told a government meeting.

"The budget can no longer afford it -- and not just the budget. The Ukrainian people can no longer live like this," he said. "We will not take money out of Ukrainians' pockets to pay foreign debts."

So there you are: the United States may effectively be condoning Ukraine's default. Insofar as the likes of Franklin Templeton and BlackRock do not have holdings in the tens of billions of these papers, these large fund management firms should be able to cope anyway. US/IMF indifference appears to be emboldening Ukraine in dealing with its creditors:

The creditor group negotiating with Ukraine over its $19 billion debt restructuring has no plans to revise a proposal that was rejected by the nation’s government, a person familiar with the talks said. The bondholders oppose writedowns to principal because they’re not necessary to reach the International Monetary Fund’s targets and would therefore lead to restricted capital-markets access for the sovereign and companies, said the person, who asked not to be identified because the talks are private. Even if it did agree to a writedown, other creditors wouldn’t accept it, they said.

Ukraine’s Eurobonds fell the most in almost three months this week as a verbal battle between the government and creditors escalated. Finance Minister Natalie Jaresko said Wednesday that the country will stop servicing its debt if no progress is made on talks. The bondholder committee, led by Franklin Templeton, said yesterday it’s “deeply concerned” by Jaresko’s stance.

A two-month impasse in negotiations is hardening as coupon payments come due this month and a $500 million note matures in September. Jaresko has repeatedly said that any restructuring agreement must include a so-called haircut to the face value of bonds while creditors have insisted that is not necessary to fulfill three IMF-mandated targets.

So it appear that, with Uncle Sam's approval, the electric shavers are being readied for some action on Ukraine's creditors.

Incarceration Nation: Invest in US Private Prisons?

♠ Posted by Emmanuel in CSR,Security at 6/15/2015 12:24:00 PM

Their "customers" are all outfitted in Guantanamo orange. Care to invest?

With interest rates set to rise in the United States, it is difficult for folks to figure out where to invest. Bonds tend to go down in price as interest rates rise. While stocks may be less averse to interest rate rises, making the cost of money dearer results in greater difficulty funding their purchase, and stocks also face headwinds as a result. Consider, then, a somewhat different investment that falls somewhere between bonds and stocks in real estate investment trusts (REITs). REITs provide their holders with income from real estate-related activities, especially renting out properties. Among the different REITs, the most adventurous of them all are prison REITs. That is, those which derive their income from running private prisons in the United States. With an astronomically high, world-leading incarceration rate, the United States certainly doesn't lack for, er, a huge captive market.

There are of course different arguments about the virtues and vices of corporations running prisons. From the right, some would say that for-profit businesses are more efficient in running jails Stateside. On the other hand, those from the left caution that private prisons encourage unnecessarily tough sentencing since these businesses profit from more people being thrown in jail for longer regardless of whether sentences meted out are just. Because of the political controversy surrounding prison REITs, they provide higher dividends than other kinds of REITs. But, there are caveats for would-be investors like Democrats running for the 2016 presidential elections seeking to reduce tough sentencing and hence the number of prisoner-customers for these REITs:

The small and controversial sector of for-profit prison companies, which operate as real estate investment trusts (REITs), have been under pressure this year, underperforming the broader REIT sector, which has itself lagged behind the general market. The two main prison operators have been dogged by the prospect of new government regulations, with presidential candidates Hillary Clinton and Senator Rand Paul among those calling for criminal justice reform, an issue seen as a threat to the group. While supporters argue that private prisons save taxpayer money, critics charge that the companies' for-profit model has led to excessive sentencing and poor conditions for inmates.

Take, for instance, some major prison REITs:

Corrections Corporation of America, which has a market capitalization of about $4.1 billion, is down 5.3 percent in 2015 while Geo Group is down 9.4 percent. The Vanguard REIT ETF, a popular way for investors to play the broader space, is down 4.9 percent. Analysts say the year-to-date declines in prison stocks mean potential headwinds have been priced in, positioning them for gains even as the appeal of the overall REIT sector wanes. In an indication the selloff has been overdone, Corrections trades almost 16 percent under StarMine's measurement of intrinsic value, which looks at anticipated growth over the next decade.

"There is a lot of uncertainty surrounding reforms, causing prison REITs to trade at a discount to the REITs that aren't tied to government spending, but you've already seen them pull back, meaning that from here there's more upside than downside potential," said Eric Marshall, portfolio manager at the Hodges Funds in Dallas.

Marshall, who has a stake in Geo, also praised the high dividend yields of prison REITs, which surpass those for the sector at large. Corrections' yield is 6.25 percent while Geo's is 6.74 percent. Three of the biggest REITs by market cap - Simon Property Group, Public Storage and Equity Residential - have yields below 4 percent. The S&P's yield is 2.38 percent.

Are you tough enough to invest in CXW and GEO? Like in life's other pursuits, it may be a case of fortune favoring the bold--especially if the ethical aspects do not elicit unease.

Can You Spare a Quadrillion? Zimbabwean $'s End

♠ Posted by Emmanuel in Africa,Currencies at 6/12/2015 11:03:00 AM

Legal tender not acceptable anywhere; this reality is simply being formalized.

It's the end of an era as Comrade Bob Mugabe's pipe dream of a currency, the Zimbabwean dollar, goes to the Great Printing Press in the Sky. For quite some time after its bout with hyperinflation, Zimbabwe has effectively been a [US] dollarized and [South African] rand-ized economy. With no faith left in the Zimbabwean dollar, most "real" transactions have been conducted with foreign exchange. To no one's real surprise, Zimbabwe's finance officials--surely a fun job, if there ever was one--have declared that they will soon discontinue the laughingstock local currency soon.

To be honest, it's no longer being used except as a party piece to show the foreigners what a mess Mugabe's made of the economy:

Zimbabwe is phasing out its local currency, the central bank says, formalising a multi-currency system introduced during hyper-inflation. Foreign currencies like the US dollar and South African rand have been used for most transactions since 2009.

Local dollars are not used except high-denomination notes sold as souvenirs. But from Monday, Zimbabweans can exchange bank accounts of up to 175 quadrillion (175,000,000,000,000,000) Zimbabwean dollars for five US dollars. Higher balances will be exchanged at a rate of Z$35 quadrillion to US$1.

The move has been "pending and long outstanding," central bank Governor John Mangudya said, quoted by Bloomberg. "We cannot have two legal currency systems. We need therefore to safeguard the integrity of the multiple-currency system or dollarization in Zimbabwe." Zimbabweans have until the end of September to exchange their local dollars.

And so ends the madness of inflation computation and folks using wheelbarrows to purchase everyday necessities:

Hyper-inflation saw prices in shops change several times a day, severe shortages of basic goods and Zimbabweans taking their money to market in wheelbarrows. Ahead of the abandonment of the Zimbabwean dollar in January 2009, officials gave up on reporting official inflation statistics. Towards the end of 2008, annual inflation had reached 231m%, pensions, wages and investments were worthless, most schools and hospitals were closed and at least eight in 10 people were out of work.

The highest denomination was a $100 trillion Zimbabwean dollar note. Zimbabwe's economy has struggled since a government programme seized mostly white-owned farms in 2000, causing exports to tumble. A four-year unity government, that ended in 2013 with President Robert Mugabe's re-election, helped stabilise the economy but it still faces huge challenges.

Isn't socialism grand when people have no faith in your money and have to use those of vile capitalists? Unless changes are made, Zimbabwe is Venezuela's future.

Why Greece Can't "Wawrinka" Its Creditors

♠ Posted by Emmanuel in Credit Crisis,Europe,Sports at 6/11/2015 01:30:00 AM

Greece has no equivalent to Wawrinka's "Shorts of Doom."

Over the weekend, I watched the 2015 men's final at the French Open pitting world #1 Novak Djokovic [Serbia] against world #8 Stan "The Man" Wawrinka [Suisse]. Like everyone else, I expected the Serbian great to trounce Wawrinka, but the latter had other things in mind. Looking ever-so-ridiculous in pink boxer shorts pictured above, Wawrinka's incredible serve and pinpoint backhand nevertheless gave the world's best player a lesson in grand slam tennis he will not soon forget. The prospect of losing a French Open for the third time--this time to some dork wearing pyjamas--seems to have had driven Djokovic beyond the edge of sanity. First he smashed his racket to smithereens. Next he cried like a baby during the awarding ceremony.

I am not sure whether the crazy shorts were intended, but they seem to have thrown Djokovic off his game. Since being elected, the Syriza faux-socialists have tried to "Wawrinka" their creditors not only by dressing funny but also acting funny. What kind of self-respecting commie pinko appears in a lifestyle spread in the tabloid Paris Match? More seriously, how can you expect to please your creditors by making no changes whatsoever to the patronage-heavy Greek institutional infrastructure? Increasingly, I am with those calling for Greece to finally enjoy the fruits of their seemingly desired bankruptcy. Grant them their death wish. From Francesco Giavazzi at Bocconi:

Europeans, too, have made mistakes. Since Athens joined the monetary union, we have lent Greece €400bn, 1.7 times the country’s gross domestic product in 2013. It is time for a reality check: they will never be repaid. And it is an illusion to imagine, as the Finns sometimes do, that we could receive compensation in kind by acquiring a few Greek islands. The age when the British empire would do that is, luckily, over. Bygones are bygones. The sooner we accept this and forget those loans the better.

If the Greeks do not want to modernise, we should accept it. By a large majority, they have voted for a government that, six months after the election, remains vastly popular. Its popularity with the electorate signals a wish to remain a nation with a per-capita income half that of Ireland, less than that of Slovenia. In a few years it will be overtaken by Chile. I only hope that no one in Athens dreams that debt forgiveness and Grexit offer an alternative path to growth.

Without economic and social reforms, Greece will remain a relatively poor country. But it is not for the rest of Europe to impose reforms on Greece. It should merely make crystal clear that without serious reforms, new official loans are over. The only way for Athens to borrow will be to convince the markets that it will pay its own bills. No more EU guarantees, explicit or otherwise.

The difference is that while Wawrinka was crazy like a fox--feigning lunacy to disguise a well-thought game plan to put one over a formidable opponent--Greece's leaders are plain crazy. Sure, Greece does the "crazy" bit real good with talk of German WWII reparations and other ideas from cloud cuckoo land. However, it certainly isn't "like a fox" with no plan other than to bite the hand that feeds. And therein lies the rub: to implement the "Wawrinka" strategy, you have got to have game. Greece's Syriza leaders have one trick, which is to keep saying how the EU will implode if Greece isn't accommodated, all the while backtracking on all sorts of commitments to reform a backward, dilapidated and uncompetitive country. Greece cannot put one over the troika; it has no game, nor any semblance of an overarching strategy. Unlike Wawrinka and his sartorial commentary, Greece's Stupid European Tricks increasingly throw no one off.

It's time to put Greece out of its misery already. Let it default and go back to the the drachma. The world has wasted enough time on these fools.

PS: You too can try to "Wawrinka" others by purchasing his Yonex shorts. Attention Greek leaders: isn't capitalism grand this way?

Hopeless America: Firms Spend On Buybacks, Not Capex

♠ Posted by Emmanuel in Americana at 6/09/2015 01:30:00 AM

American firms don't dare invest in America...so why should you?

There is no clearer sign that Americans don't believe in America than US corporations electing to give earnings back to shareholders or buy back stock than to invest those earnings. However, this pattern has been evident Stateside ever since the global financial crisis. Firms simply refuse to make outlays that may have once promised to increase output in the future. Why would firms decide to return money to shareholders or buy back stock instead of making productive investments? The only logical explanation is that the US economy has prospects poor enough to discourage any sort of investment. In other words, the future of America is shot, and its firms use their money accordingly:

Data show a broad array of companies have been plowing more cash into dividends and stock buybacks, while spending less on investments such as new factories and research and development...

Laurence Fink, chief executive of BlackRock Inc., the world’s largest money manager, argued as much in a March 31 letter to S&P 500 CEOs. “More and more corporate leaders have responded with actions that can deliver immediate returns to shareholders, such as buybacks or dividend increases, while underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth...”

An analysis conducted for The Wall Street Journal by Standard & Poors Capital IQ shows that companies in the S&P 500 index sharply increased their spending on dividends and buybacks to a median 36% of operating cash flow in 2013, from 18% in 2003. Over that same decade, those companies cut spending on plants and equipment to 29% of operating cash flow, from 33% in 2003.

So firms are using cash like it's game over for America. How will this play out in the future?

It is it too early to know how—or whether—the shift will affect the overall economy. Some economists predict an investment reduction will mean less growth and fewer jobs. “If investment falls, then you’re losing demand in the economy, you’re losing expenditures, you’re losing economic stimulus,” says Steven Fazzari, an economist at Washington University. “That’s hurting jobs.”

People in America used to dream about the future. I guess not anymore.

Space Geopolitics: Why ISS is Off-Limits to Chinese

♠ Posted by Emmanuel in Aerospace,Security at 6/08/2015 01:30:00 AM

Chinese, keep out! Aboard the (reds-free) "International" Space Station.

In an age of specialization, there's an academic journal for everything. Did you know there's one entitled Space Policy? I've written something for Transport Policy, but I haven't reached the final frontier (yet). At any rate, I may be inspired to do so after reading this fascinating article in TIME concerning why the International Space Station (ISS) remains off-limits to Chinese astronauts (or taikonauts to use the Chinese term for these folks). Is it because of the perceived "rivalry" between the US and China?

[T]he International Space Station (ISS) [is] the biggest, coolest, most excellent tree house there ever was. Principally built and operated by the U.S., the ISS has welcomed aboard astronauts from 15 different countries, including such space newbies as South Africa, Brazil, The Netherlands and Malaysia. But China? Nuh-uh. Never has happened, never gonna’ happen.

China has been barred from the ISS since 2011, when Congress passed a law prohibiting official American contact with the Chinese space program due to concerns about national security. “National security,” of course, is the lingua franca excuse for any country to do anything it jolly well wants to do even if it has nothing to do with, you know, the security of the nation. But never mind.

Few people in the U.S. paid much attention to the no-Chinese law, but it’s at last taking deserved heat, thanks to a CNN interview with the three Chinese astronauts—or taikonauts—who flew China’s Shenzhou 10 mission in 2013. The network’s visit to China’s usually closed Space City, which will air on May 30, is a reporting coup, especially because of the entirely familiar, entirely un-scary world it reveals: serious taikonauts doing serious work with serious mission planners—every bit what you see behind the scenes at NASA or Russia’s Roscosmos

Ah yes, "national security"--that all-purpose cover for anti-foreign acts. This position is supposedly bolstered by "findings" from studies by US agencies and academic institutions:

The 2011 law draws a sort of ex post facto justification from a study that was released in 2012 by the U.S.-China Economic and Security Review Commission, warning that China’s policymakers “view space power as one aspect of a broad international competition in comprehensive national strength and science and technology.” More darkly, there is the 2015 report prepared by the University of California, San Diego’s Institute on Global Conflict and Cooperation, ominously titled “China Dream, Space Dream“, which concludes: “China’s efforts to use its space program to transform itself into a military, economic, and technological power may come at the expense of U.S. leadership and has serious implications for U.S. interests.”

Why is it that Chinese taikonauts represent a "national security" threat to the United States while Russian cosmonauts do not? Does it have something to do with not being able to get to the ISS without Russian help ever since the Space Shuttle program was discontinued? Don't ask me. Space politics are weird, and probably provide endless fodder for writers contributing to Space Policy.

How Much Can the US Gain from Going Metric?

♠ Posted by Emmanuel in Americana at 6/05/2015 01:30:00 AM

Soak the rich? Eliminate ISIS? Hope? Change? Heck no...let's go metric!

As a lover of fringe candidates, I gleefully note that former Senator Lincoln Chafee (R-Rhode Island) is running for the Democratic nomination. So it's not quite Dick Cheney running for the Communist Party of the USA nomination, but hey, it'll have to do in 2015. Most international readers are probably asking themselves, "Who is Lincoln Chafee?" Which, of course, is a fair observation insofar as he was not exactly the most international public official during his days in office. But, that may changing. Can you imagine a more quixotic platform to run on than fully converting the United States to the metric system? Well, that's what he's running on for what it's worth:

Lincoln Chafee launched his presidential bid Wednesday on a platform of what he called "bold" ideas, but few are as bold as his proposal to switch to the metric system... "This is just one piece, as I said, of becoming internationalist as a country and getting away from that unilateralist approach, that muscular approach to the world, that I don't think is working in our best interests," he said. Chafee added that it would be "good for our economy, bottom line."

Take that, Dubya. And he keeps harping on the economic benefits of the metric system:

"Let's be bold -- let's join the rest of the world and go metric," he said during his launch. He clarified during a question-and-answer session after that it would be a "symbolic integration" meant to show goodwill to the world. He acknowledged that shifting to the metric system could cost the U.S., but that "the economic benefits that would come in would surpass those costs of putting up new signs and the like."

While the US has adapted some metric conventions, incredible peculiarities remain such as measuring distance in miles. But, do not doubt that there are real gains to be had by making this change:

Politics and economics have been the real incentives to go metric. The world’s most anti-metric nation—Great Britain—grudgingly began to ditch its Imperial system in the 1970s because it was the only way to gain access to the markets of continental Europe. Most of the rest of the world adopted the measures in order not to fall behind in the global economy.

There is no question that a uniform global system of measurement helps cross-border trade and investment. For this reason, labor unions were among the strongest opponents of 1970s-era metrication, fearing that the switch would make it easier to ship jobs off-shore. (Which it did.)

Is global uniformity a good thing? Not when it comes to cultural issues, and customary measures are certainly a part of our national culture. But to have brains trained in the thirds, quarters, sixths, eighths, and twelfths of our inches and ounces, as well as the relentless decimals of the metric system can only be beneficial, in the same way that learning a second language is better than knowing only one. That ours is a dual-measurement country is part of our great diversity.

Given how so few areas of academic research remain, I am surprised that pointy-headed American economist types haven't investigated how much the US stands to gain in economic term$ if this transition to international-standard measurements was made. The same gains from standardization should obtain.

Era's End: Japanese Stop Making 'Galapagos Phones'

♠ Posted by Emmanuel in Japan,Marketing at 6/04/2015 01:30:00 AM

Actually, the flip phone won't die in Japan, just the proprietary OS.

The "Galapagos Syndrome" is the term coined to describe standards and technologies that have emerged only in Japan, not to spread to the rest of the world. This, of course, draws from the Galapagos Islands in Ecuador that have hosted wildlife not found in the rest of the world. The "Galapagos Syndrome" is a negative term denoting how Japan has, in recent years, become quite insular in developing consumer products. Whereas Japan was once an exporting powerhouse, some believe that it has become increasingly inward-looking. It's a downscaling of expectations: Japan Inc. aimed to sell to the world before but now it mostly looks to sell at home.

I would doubt that statement, of course, since Japan has always had some peculiarly Japanese product categories like kei cars with a maximum displacement of 660cc sold nowhere else in the world. Still, homegrown Galapagos phones are supposedly endangered even in Japan itself: does anyone else still use flip phones? Apparently these remain popular among older Japanese, of whom there are many. But all things must come to an end, and so must these phones:

Japanese manufacturers from 2017 will end production of conventional mobile phones with custom operating systems, bringing an end to once-pioneering technology that led to the world's first Internet-able cellphones. The operating systems and other core technologies of conventional devices, used primarily for phone calls and texting, are developed jointly by handset makers and wireless carriers. With the rise of smartphones, development of those operating systems have become a drag on their earnings.

Manufacturers will continue producing handsets that look and function much like conventional phones, due to the enduring popularity of flip phones with keypads among older consumers, but these will be loaded with Google's Android operating system. NEC currently supplies conventional phones to Docomo. It will stop developing new models in March 2016 and end production in March 2017. This will mark a complete withdrawal from the mobile phone market, as it bowed out of the smartphone business in 2013. For now, the company will continue to service products it has already sold.

There remain any number of cell phone makers only for the domestic Japanese market, but they will be thinning over the next few years:

The spread of smartphones has left older-style devices almost entirely confined to Japan, where they have been dubbed "Galapagos phones," evoking an isolated environment housing unique species. Japanese electronics makers and mobile carriers have ramped up joint handset development since the late 1990s. In 1999, Docomo rolled out i-mode, the world's first service allowing mobile phones to connect to the Internet. Japanese telecommunications and electronics companies were pioneers in the field.

But the situation changed after Apple released the iPhone in 2007 and Google worked with phone manufacturers worldwide to launch Android devices from 2008 onward. Smartphones exploded in popularity. Conventional-phone specialist Nokia sold its handset business, while Japanese companies were forced to restructure. Japan's shift toward smartphone technology will mark another step in the field's division into Apple and Google camps.

It makes me kind of sad, but it's another episode of the iOS versus Android juggernaut steamrolling the previously more diverse Japanese telecoms ecosystem. The aging customer base aside which is not fond of apps and assorted frippery, Galapagos phones have other advantages, such as battery life and durability:

There are several ways to explain this rise. One could be the demographic changes Japan is undergoing. As is well-known, Japan has a low birth rate coupled with an aging society. And obviously old folks here would have more trouble navigating the touch screens and the various apps of a smart phone. Most only need to use two basic functions in a cell phone: calling and texting. Another reason explaining the comeback of flip phones is that it’s simply cheaper than a smart phone.

The other reason is durability. The phones are notoriously difficult to break and Delphia Putinsky, a bilingual tour guide in Japan, says she keeps her flip-phone precisely for that reason. “Drop you iPhone without a cover, and you get the spiderweb of death—the screen gets cracks which spread and spread. You can throw your garakei across the room, hit the wall, and it still functions like new.” Finally, there’s also undeniably one thing that flip phones surpasses the smart phone in: holding a charge for more than one day.

American Hegemony in Sports: Blatter's a Goner

♠ Posted by Emmanuel in Europe,Hegemony,Sports at 6/02/2015 07:16:00 PM

Making too many enemies in high places, Blatter was brought down.

After a lot of huffing and puffing, it's finally come down to this: After Sepp Blatter's trusted lieutenant Jerome Valcke was reportedly embroiled in a $10M slush fund scandal, it was probably only a matter of time before prosecutors pinned Blatter down. As slippery as he's been. Blatter likely recognizes that the game was up. With so many powerful enemies--the US, UK, and the rest of Europe for starters--he would be implicated sooner or later. Rather than try to put out fires raging all across FIFA as this and that official is charged in addition to running its day-to-day affairs, Blatter has decided to quit while he's ahead. If nothing else, he's a canny operator, and he perceives that deserting FIFA will do him better than staying on at this point in the game. So he's called for new elections right away while promising to step down once someone new is selected.

This done, there are three big questions going forward:

Who will be the next FIFA president? UEFA's Michel Platini is the supposedly the front-runner, but keep in mind that many Blatter allies will remain in place for now, complicating the selection process;
Will the 2018 Russian World Cup in Sochi still push through? With the (Western) Europeans seemingly ascendant, that won't be a particularly popular venue given Vladimir Putin's penchant for military adventurism at their expense;
Will the 2022 Qatar World Cup in Doha still push through? This literally murderous event has been mired in controversy for years after hundreds and hundreds of migrant workers constructing stadiums have died--and still it's seven years away.

The latter two events may be scotched if it is proven that bribery was behind their selection (which I honestly don't think will be all that difficult to uncover if you look hard enough). So is it three cheers for American imperialism in the US Department of Justice laying the seemingly untouchable Sepp Blatter low? The long arm of the American lawman reached out and swatted Blatter down more easily than I'd thought possible. Still, my belief is that Sepp Blatter was not so much the ringmaster as he was the enabler of massive corruption at FIFA. With so many dirty old men fronting football associations the world over, Blatter simply fit right in.

As a parting shot, "Reformer Sepp" is stepping up:

The Executive Committee includes representatives of confederations over whom we have no control, but for whose actions FIFA is held responsible. We need deep-rooted structural change. The size of the Executive Committee must be reduced and its members should be elected through the FIFA Congress. The integrity checks for all Executive Committee me mbers must be organised centrally through FIFA and not through the confederations . We need term limits not only for the president but for all members of the Executive Committee. I have fought for these changes before and, as everyone knows, my efforts hav e been blocked. This time, I will succeed.

Yeah, whatever. Cleaning up the murk that is FIFA will be a Herculean task, to say the least. As long as there is football and scumbags with a fetish for the sport, I suspect corruption there will not go away so easily.