Oil, Falklands, Malvinas

European Pressphoto Agency - Argentine President Cristina Kirchner, right, is trying to get Latin American leaders to sign a statement backing Argentina's claim to the islands

A British oil rig started drilling in disputed waters off the Falkland Islands on Monday, as Argentina tried to rally support from Latin American nations for a diplomatic statement backing Argentina's claim to the islands and criticizing the U.K. for violating Argentine sovereignty.

The move by British oil companies to initiate exploration off the Falklands has stirred passions over the remote South Atlantic islands to perhaps their highest point since 1982, when Argentina lost a brief war to Britain over control of the islands. No one predicts armed hostilities this time, but nationalist rhetoric has been flying on both sides of the Atlantic. If Britain finds large amounts of oil, relations could get stickier.

Can't see Gordon Brown doing a Thatcher.


Argentina's leftist President Cristina Kirchner was in Cancún, Mexico, on Monday working on a diplomatic response during a previously scheduled summit of Latin American leaders. Mrs. Kirchner was trying to get regional leaders to sign a statement condemning the U.K. and backing Argentina's claim to the islands, known in Spanish as the Malvinas.

Argentina was getting support from some quarters, such as Venezuela's leftist President Hugo Chávez. "In case of aggression against Argentina, rest assured that the Argentine nation will not be alone" as it was in the 1982 war, Mr. Chávez said Sunday.

On Univision's broadcast last night a clip was shown of Hugo telling the Queen of England that the era of empires has ended. Wonder if Elizabeth was watching.

Bill Rammell, the U.K.'s minister of state for the armed forces, said the Falklands had a "legitimate right" to develop an oil industry within its waters and that Britain had made Argentina aware of its determination to protect that right.

"We do, we have, and we will take whatever steps are necessary to protect the Falkland Islands—and our counterparts in Argentina are aware of that," he told the House of Commons.

The government has to stand strong; Brown can not afford to look weak. Surely the Tories are holding his feet to the fire.

Mrs. Kirchner had ratcheted up pressure over the islands last week, issuing a decree that ships traveling to the Falklands must first seek permission from Buenos Aires before entering Argentine waters.

This is manna from heaven for Presidenta Kirchner, an external crisis.

Argentina emphasized that it was intent on pursuing its objectives by peaceful means. No one in Argentina seemed eager for a repeat of the shooting war that started in April 1982, when Argentina's dictatorship, facing deepening discontent at home, seized the islands in a surprise attack. The U.K. government of Prime Minister Margaret Thatcher sent a naval task force across the Atlantic and retook the Falklands, at the cost of 649 Argentine and 255 British servicemen killed.

In the nearly three decades since the war, Argentina has gone from a military dictatorship to a democracy. Argentine political scientist Rosendo Fraga wrote on Monday that Argentina has cut military spending by a greater amount than any other South American country since Mrs. Kirchner's husband and predecessor, Nestor Kirchner, took office in 2003. Nevertheless, analysts say that putting forth a vigorous diplomatic defense of Argentina's historic claims to the Falklands could help Mrs. Kirchner politically at a time when she has sunk far in the polls because of the flagging economy.

Exactly.


For some Argentines, the oil dispute has reopened an old wound. On Sunday, computer hackers launched a cyber attack on the Web site of the Falklands newspaper Penguin News, posting an Argentine flag, a patriotic march and a manifesto affirming Argentina's claim to the islands. In the U.K., Argentina has been on the receiving end of potshots in the press. The Sunday Telegraph has dubbed Mrs. Kirchner the "Botox Evita."

YOUR fault, not ours

Pencil in this one -- hell, ink it -- in the stupidity column. This story appeared in today's Wall Street Journal, in the Money & Investing section.

U.K. Bank Group Lashes Out at 'Irresponsible' Reforms


LONDON -- The U.K.'s leading banking association ended 2009 with a bang on Wednesday, accusing authorities of impulsive reforms that could undermine the U.K. as a top financial center and crimp future economic growth.

In an outspoken end-of-year statement on Wednesday, Angela Knight, Chief Executive of the British Bankers' Association, lashed out at the sector's critics, saying U.K. banks were being unfairly blamed for causing most of the country's economic woes.

Now, let's see: the financial calamity and economic crisis arose from the actions of banks and investment banks, the taking of extreme risks for the potential large rewards, and only the rescue of the government saved the banks and the financial system from disaster -- so, what isn't fair?


U.K. banks know "they have few - if any - friends. They understand they are held responsible for the whole problem - even when this is manifestly not the case," she said.

Friends? Manifestly? What universe are these people living in?

Ms. Knight offered blunt criticism of U.K. authorities, which include the treasury, the Bank of England and the Financial Services Authority, saying they had rushed ahead with "irresponsible" reforms on remuneration and capital requirements that go beyond what others have done.

She criticized everyone, except herself and her industry, for, it must be assumed she thinks, they are wholly blameless.

"There are literally tens, if not thousands of British jobs directly and indirectly related to banking - bringing billions of pounds in tax income," she said. "Some of this is now at risk and, although many are well aware of it, decision makers increasingly either wish to ignore it or - even more dangerously - choose not to believe it."

Depends what one wants to believe.

The U.K. banking system has recovered some of its strength this year, with several leading institutions reporting large profits in recent months. However, there is still broad public anger over the financial crisis, which saw the U.K. government inject tens of billions of pounds worth of taxpayer money into major banks, like Royal Bank of Scotland and Lloyds Banking Group and offer hundreds of billions of pounds worth of debt guarantees, loss insurance and liquidity support.

And the government is to blame for everything bad, even for the weather.

The banks have faced a particular outcry over bonus payments, with Chancellor of the Exchequer Alistair Darling imposing a 50% tax on bankers' bonuses above £25,000 earlier this month and other U.K. officials accusing bankers of having "tin ears" to significant reform. Nor have the opposition Conservatives offered much support for the sector with a general election due over the next six months.

Even the Tories realize that to defend bankers is a sure way to lose votes, and Tories need and want votes.


Meanwhile, FSA Chief Adair Turner has said U.K. authorities should consider whether some financial activities are socially useless and should be banned and questioned whether the banking system has simply grown too big.

Socially useless. Has quite a ring to it.

However in Wednesday's statement, Ms. Knight said authorities' demands that banks increase capital and liquidity reserves "have the potential to drastically reduce economic growth and restrict lending." Meanwhile she attacked as "stupid" the calls by some, including Bank of England Governor Mervyn King, for larger, more complex banks to be split up.

Have the potential to reduce lending? Is there enough lending being done? Stupid? It was stupid and irresponsible to allow such behemoths to come into being in the first place.


Ms. Knight said financial centers overseas "are waiting ready to pick up the business from the wreckage we will leave if we are stupid enough to discard a banking model which has served us well."


And she argued that many of the reforms needed in the U.K. banking system have already taken places, with new measures to prevent irresponsible lending, new regulations to clamp down on derivatives trading and a more aggressive approach from bank boards.


Enough change. Now, leave us alone (until the next time we need to be rescued).

Belgian Haiku Master

Georges Gobet/AFP/Getty Images - Belgian Prime Minsiter Herman Van Rompuy.




BRUSSELS -- When it chooses its first permanent president this week, the European Union is expected to pass over former British Prime Minister Tony Blair and other heavy hitters in favor of a balding, bespectacled Belgian named Herman Van Rompuy.

The charismatic Mr. Blair walked the international stage long enough to wear grooves in it. Mr. Van Rompuy, Belgium's prime minister for the past 11 months, is a modest functionary known inside his country for writing haikus in his native Flemish. His lack of ostentation is reflected in his poem "Hair":

“Hair blows in the wind
After years there is still wind
Sadly no more hair.”

I know whereof he speaks.

Mr. Van Rompuy is the clear favorite of oddsmakers like Ladbrokes to be chosen president by the leaders of the EU's 27 member nations Thursday. Though the vote could still hold surprises, Mr. Van Rompuy's likely ascendance speaks to the baroque nature of EU politics -- where permanent presidents need not be permanent or presidential, and where the race tends to go not to the strong, but to the Belgians, Danes and Luxembourgers.


From left, Luxemburg Prime Minister Jean-Claude Juncker, Belgian Prime Minister Herman Van Rompuy, former British Prime Minister Tony Blair, Dutch Prime Minister Jan Peter Balkenende and former Latvian President Vaira Vike-Freiberga[mdash ]hopefuls for the coming job of EU President.




Mr. Van Rompuy is known as a master of procedural minutiae who can run committee meetings in several languages. But as Belgium's budget director in the 1990s, he also helped the massively indebted country meet the criteria for joining the euro.

After becoming Belgium's prime minister in December, Mr. Van Rompuy has repaired fissures with the country's French-speaking minority and managed a bureaucracy of six parliaments and more than 50 cabinet-level ministers. "If you know how to run Belgium, you can deal with the EU," says Piotr Maciej Kaczynski, an analyst with the Brussels-based Center for European Policy Studies.

Mr. Van Rompuy's particular knack was evident in the haiku he read at a recent news conference with the prime ministers of Spain and Hungary:

“Three waves together,
Rolling into the harbor --
The trio is here.”

Again, Silvio

Italian Prime Minister Silvio Berlusconi said Thursday that he had used a state plane to ferry personal guests to his private villa -- but that there was nothing improper as he and other government officials were flying on the jet.

That's splitting hairs, or fudging it, which is Silvio's style. And it works, or has worked, for him.

An investigation has been started into whether the premier allegedly abused his powers by arranging for partygoers -- including a dancer and singer -- to use government aircraft and for official security escorts to travel to his villa on the island of Sardinia.

The man has so much money, but he chose a government craft because, well, because he wanted to.

Mr. Berlusconi said "all of these people were hosted at Certosa without a euro of cost to the state." He was speaking on a morning talk show on Italy's Canale 5 channel, which is part of the Berlusconi family's media company Mediaset SpA.

Rather incestuous, to be interviewed on a channel he owns.

Silvio has always maintained his innocence. This week, polls show Mr. Berlusconi's right-wing political coalition with a strong lead in the weeks leading up to elections for the European Parliament, which end Sunday.

They love Silvio, and he knows it.

In the U.K. a scandal involving widespread abuse of parliamentary expenses is expected to help send the ruling Labour Party to defeat in the European elections.

The British are different than Italians, and Gordon Brown is different than Silvio.

Last year, Mr. Berlusconi pushed a new law through Parliament that grants immunity from criminal prosecutions to Italy's top officials -- himself included.

Gordon could never do that. The press would skewer him, and he doesn't own any media.

Robin Cook

Robin Cook said the Iraq war was against British interests.

On the same page as the obit below of Ibrahim Ferrer.

Who was right? Blair, or Cook? Too soon to tell.

Robin Cook, a former British foreign secretary who quit the government to protest the invasion of Iraq, died on Saturday after collapsing in the Scottish Highlands on a mountain called Ben Stack, the police said, without explaining the cause of death. He was 59.

Mr. Cook was close to tears in March 2003 when, as leader of the House of Commons, he rose on the very eve of battle to tell legislators that he did not believe an Iraq campaign had either international or domestic support and therefore, "with a heavy heart," he was quitting the government.

In a letter to Mr. Blair at the time he said: "In principle, I believe it is wrong to embark on military action without broad international support. In practice, I believe it is against Britain's interest to create a precedent for unilateral military action."

By resigning, Mr. Cook brought himself into line with a broad swath of the British population that was opposed to a war without a United Nations mandate and in alliance with a disliked American administration.

But he also set himself against Mr. Blair at one of the most critical moments of the prime minister's career. In British politics, Mr. Cook's action - defying his party at a time of national crisis - was seen as a rare display of principle at personal and political cost.

Robin Finlayson Cook was born near Glasgow and studied English at Edinburgh University. He had planned further studies in divinity but suffered doubts about his religious belief. He was known thereafter for twin passions - politics and horse racing. He wrote newspaper columns on both.

Quite a change in direction.

Say formaggio

Silvio likes to clown around, and Dmitri called Barack "my new comrade."

In Russian, сыр (cheese) C

Humble? Silvio?

The best political leader in Europe and the world

Silvio Berlusconi, on himself

First he complimented Barack Obama's "tan", then he played hide and seek with the German leader. He has even annoyed the Queen by being too loud.

Now Italian Prime Minister Silvio Berlusconi has held up the start of a key Nato summit - by talking for too long on his mobile phone.

In his defence, Mr Berlusconi was talking to Turkey's prime minister in a bid to resolve a row at the summit.

But Germany's leader was kept waiting on the red carpet for several minutes.

Angela Merkel had just led Nato leaders from Germany across a bridge straddling the River Rhine to meet President Nicolas Sarkozy coming from Strasbourg on the French side.

Mr Berlusconi joined the group shortly afterwards.

Mrs Merkel looked bemused as the Italian's call dragged on and finally opted to start the event's opening ceremony without the Italian.

It emerged later that Mr Berlusconi had been speaking to his Turkish counterpart in Istanbul, Recep Tayyip Erdogan, in an attempt to persuade Turkey to drop its opposition to Danish Prime Minister Anders Fogh Rasmussen as Nato's new chief.

In the event, Turkey did concede, with Mr Erdogan saying it had been swayed by US President Barack Obama's assurances.


What can possibly be added? SIlvio takes care of it all.

Mr Berlusconi's previous practical jokes at formal gatherings include making the Italian horned cuckold gesture behind a Spanish minister during a group photo of EU leaders in 2002.

The billionaire media mogul then sparked a minor diplomatic incident in 2005 by suggesting he had used "playboy tactics" to woo Finnish President Tarja Halonen in order to ensure her backing for Italy to host the European Food Safety Authority.

Protocol is abandoned as Michelle Obama cosies up to Queen

From the London Times, this story:

Protocol seems to be dispensed with when the Obamas come to town.

When the President and his wife, Michelle, attended a reception at Buckingham Palace, the First Lady and the Queen slipped their arms around each other towards the end of the evening.

It is usually a breach of protocol to touch the Queen. But as the two women stood side by side, chatting about their height difference, she put her hand on the back of Mrs Obama, who did the same for a few moments. Before she departed, Mrs Obama told the Queen: “I really enjoyed our meeting.”

Breaching Royal protocol has left visiting digintaries and statesmen in hot water in the past. When the former Australian Prime Minister Paul Keating put his arm around the Queen in 1992, he was branded the “Lizard of Oz”. When his successor, John Howard, was accused of doing the same, a spokesman insisted: “We firmly deny that there was any contact whatsoever.”

The warm conclusion to the Obamas' Royal meeting was matched by the rest of the US President's engagement, which was both informal and affectionate.

Mr Obama had earlier disclosed that the Queen was top of the list of things he likes about Britain, praising her “decency and civility” as important matters to people in the United States.

When they met last night, Mr Obama was heard to say to her: “Thank you so much for having us.”

Addressing the Duke of Edinburgh, he added: “It’s a wonderful honour,” and then described his day. “I had breakfast with the Prime Minister, I had meetings with the Chinese, the Russians and David Cameron,” he said.

Appearing to refer to his jetlag, he won laughter from his hosts as he added: “I’m proud to say I did not nod off in any of the meetings.”

The Duke laughed and asked: “Can you tell the difference between them?” The President waved a hand and joked: “It’s all a blur.”

The 20-minute meeting was held before the reception for world leaders in the Palace’s picture gallery.

The long room, with its arched roof, buzzed with conversation as the politicians, their aides and other members of their entourage chatted.

The Queen held court in the middle of the event, which despite the formality of the setting was designed to be informal. A large number of the Royal Family had joined them, including the Prince of Wales, Duchess of Cornwall, Duke of York and Princess Beatrice.

At one point, the Queen chatted for a few moments with Silvio Berlusconi, the Italian leader, as a few inches away the French President Nicolas Sarkozy held an animated discussion, through an interpreter, with Hillary Clinton, the US Secretary of State.

The world leaders sipped white and red wine and champagne in front of Old Master paintings worth millions.

For those who wanted something to eat, minuscule canapes were served by catering staff. The selection included chicken with courgette on skewers, mini Cornish pasties, smoked quails’ eggs, foie gras and tiny rolls of duck filled with melon.

As the drinks reception drew to a close, the politicians were ushered into the Palace’s ornate Throne Room for a group photograph with the Queen to mark the occasion.

A Palace official told the dignitaries to pose for four frames. The Queen then made a quip that made the whole group laugh: “It has to be a happy photo,” she said.

Presents were exchanged between the Queen and Mr and Mrs Obama. The US President gave the Queen an iPod containing a video of her visit to Virginia, Washington, in 2007. In return, he received a silver-framed, signed photograph of the royal couple.

Kennedy, Knight of the British Empire

Not Sir Ted, but Knight of the British Empire: EMK, KBE,

Kennedy, Knight of the British Empire
by Sarah Wheaton


The Kennedy dynasty has been called Camelot. But today, Senator Edward M. Kennedy will actually become a knight.

British Prime Minister Gordon Brown bestowed the distinction from the Queen on the ailing Mr. Kennedy during his address to a joint session of Congress this morning.

The British government released Mr. Brown’s prepared remarks:

And I hope that you will allow me to single out for special mention today one of your most distinguished Senators, known in every continent and a great friend. Northern Ireland is today at peace, more Americans have health care, more children around the world are going to school, and for all those things we owe a great debt to the life and courage of, Senator Edward Kennedy.

And so today, having talked to him last night, I want to announce that Her Majesty The Queen, has awarded an honorary Knighthood for Sir Edward Kennedy.

The Times of London explains that Mr. Kennedy cannot actually go by “Sir Ted,” because he is not a British subject, but rather he will have “K.B.E.,” for “Knight of the British Empire,” after his name.

How bad is it?

January 21, 2009, 4:00 pm - Should Obama Seize Citigroup?
By Eric Etheridge (New York Times, 21 January 2009)

This is probably not a news story that a new president wants to read on his first full day in office. Bloomberg.com reports: U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis."

Roubini got it right; back in 2005 he rained on Greenspan's parade, and even Summers criticized his conclusions. He can not be dismissed.

Last week’s bad news from Citigroup and Bank of America had already prompted a round-robin discussion in the blogosphere on the wisdom of nationalization. With tongue somewhat in cheek, John Quiggin blogged at Crooked Timber on Monday:

All reasonable commentators now agree that nationalisation of big banks like Citigroup, Bank of America and Royal Bank of Scotland must take place soon, explicitly or otherwise. As I said at just before the second (failed) Citigroup bailout, banks like Citi are not only too big to fail, they’re too big to rescue with any of the half-measures that have been tried so far.

Why didn't TARP get used to buy troubled assets? Thank goodness Hank Paulson is gone from Treasury.

Others were wary of this solution: At his New Yorker blog, The Balance Sheet, James Surowiecki wrote the same day, “I think that as the ‘nationalize now’ meme has taken hold in the blogosphere, people are talking about nationalization ‘awfully casually.’ . . . [T]he idea that most of Barack Obama’s Presidency will be spent presiding over a government-run banking system is a daunting thought.”

Nationalizing banks would be a bear (pun intended).

And at Marginal Revolution, Tyler Cowen listed his concerns about how a nationalization strategy would play out:

How many years of profits are needed to create the cushion of capital which is required for re-privatization? And how many years of government ownership will be needed to generate that many years of profits? Will banks owned by the government be allowed to pursue profits, rather than lending to troubled industries in the districts of influential Congressmen? Or will government just stick money in the bank and hope they have thereby created a sound enterprise?

The idea of nationalized banks is enough to make one shudder. The idea of banks not being nationalized makes one shudder.

Quiggin’s argument is that current rescue efforts — especially including leaving current bank managers in place — simply won’t work. Blogging today in response to Surowiecki and others, Quiggin writes:

Financial restructuring is going to be a huge challenge, involving both a radical redesign of national regulations and the construction of an almost completely new global financial architecture. To attempt this task while leaving the banks under the control of discredited managers nominally responsible to shareholders whose equity has, in the absence of massive transfers from taxpayers, been wiped out by bad debts, seems like doing live electrical work while wearing a blindfold and standing in a pool of water.

He has no doubts, does he?

In Britain, where the banks and the pound are collapsing, and the government announced its new, just-short-of-nationalization rescue plan on Monday, Financial Times blogger Willem Buiter is leading the charge for going all the way.

Yesterday he laid out his thinking in a long post, which began with a comparison of the recent banking excesses in Iceland and the U.K.:

Both countries allowed the unbridled growth of banks that became too large to fail. In the case of Iceland, the banks also became too large to rescue. In the UK, the jury is still out on the ‘too large to rescue’ issue, but I have serious and growing concerns. Incrementally, the British authorities have guaranteed or insured ever-growing shares of the balance sheets of the UK banks. And these balance sheets are massive. RBS, at the end of June 2008 had a balance sheet of just under two trillion pounds. The pro forma figure ws £1,730 bn, the statutory figure £1,948 (don’t ask). For reference, UK GDP is around £1,500 bn. Equity was £67 bn pro forma and £ 104bn statutory, respectively, giving leverage ratios of 25.8 (pro forma) and 18.7 (statutory), respectively.

With a 25 percent leverage ratio, a four percent decline in the value of your assets wipes out your equity. What were they thinking? The fact that Deutsche Bank used to have a leverage ratio of 40 and is now proud to have brought it down to just below 34 is really not a good excuse.

Look at this figures:

RBS, at the end of June 2008 had a balance sheet of just under two trillion pounds. The pro forma figure ws £1,730 bn, the statutory figure £1,948 (don’t ask). For reference, UK GDP is around £1,500 bn. Equity was £67 bn pro forma and £ 104bn statutory, respectively, giving leverage ratios of 25.8 (pro forma) and 18.7 (statutory), respectively.

With a 25 percent leverage ratio, a four percent decline in the value of your assets wipes out your equity. What were they thinking? The fact that Deutsche Bank used to have a leverage ratio of 40 and is now proud to have brought it down to just below 34 is really not a good excuse.

RBS has a bigger balance sheet than the UK's GDP? With a 25 percent leverage ratio, a four percent decline in the value of your assets wipes out your equity. Amazing.

Buiter goes on to argue that the near-nationalization rescue plans will only make things worse:

In the name of preventing a collapse of the UK banking system, we are witnessing the socialisation — at first gradual, but now quite rapid — of all balance sheet risk of the UK banks by the UK government. This is risky and, in my view, unwise. The manner in which it is done also seems designed to maximise moral hazard. The good news is that it is unnecessary for restoring and maintaining the flow of new credit in the the British economy. . .

Socialization, er, socialisation of bank balance sheet risk.

My belief that the UK government should take over all UK high street banks (on a temporary basis) is based on the simplification this would provide as regards the governance of these institutions under extreme circumstances, when private ownership and governance have clearly failed, and on its positive effect on incentives for future bank behaviour (’moral hazard). When the public interest and the interests of the existing private shareholders and the incumbent managers and boards of directors diverge as manifestly as they do in this crisis, the sensible thing to do is to buy out the existing shareholders (as cheaply as possible). That way the failed and failing management and boards can be restructured (fired without golden parachutes) and the new owner can insist on and enforce an open, verifiable valuation of toxic and dodgy assets, on and off the balance sheet of the bank.

That makes sense.

He then lays out his four-point plan:

(1) Take into complete state ownership all UK high street banks. This has to be mandatory, even for the banks that still like to think of themselves as solvent.

(2) Fire the existing top management and boards, without golden or even leaden parachutes, except those hired/appointed since September 2007.

(3) Don’t issue any more guarantees on or insurance for existing assets - regardless of whether they are toxic, dodgy or merely doubtful. Issue guarantees/insurance only on new lending, new securities issues etc. A simple rule: guarantee the new flows, not the old stocks. This will reduce the exposure of the government to credit risk without affecting the incentives for new lending.

(4) Transfer all toxic assets and dodgy assets from the balance sheets of the now state-owned banks (or from wherever they may have been parked by these banks) to a new ‘bad bank’. If possible, pay nothing for these toxic and dodgy assets. Since the state owns both the high-street banks (I won’t call them ‘good’ banks) and the bad bank, the valuation does not matter.

Back in the States, watching Tim Geithner’s confirmation hearing today, Kevin Drum seizes on this remark by the soon-to-be Treasury Secretary:

The tragic history of financial crises is a history of failures by governments to act with the speed and force commensurate with the severity of the crisis. If our policy response is tentative and incrementalist … then we risk greater damage to living standards, to the economy’s productive potential, and to the fabric of our financial system … In a crisis of this magnitude, the most prudent course is the most forceful course.

Well, I barely understand some of what the professor is saying, but how can we go ahead ignoring existing assets whether they are toxic, dodgy or merely doubtful? What happens to them? Creating a bank to assume bad assets is a good idea, indeed. What are "high-street banks", I wonder?

Drum’s conclusion?

Nationalization fans should rejoice at hearing this. More and more, that includes me, by the way. The news out of Britain is beyond grim right now, and [throughout] this financial crisis the U.S. has never been more than a couple of months behind the UK. If that stays the case, nationalization of at least a couple of big banks will hardly even be a debatable option a few weeks from now.

After U.S. Breakthrough, Europe Looks in Mirror

From afar, Europeans and others are hailing Obama's election.

In the general European euphoria over the election of Barack Obama, there is the beginning of self-reflection about Europe’s own troubles with racial integration. Many are asking if there could be a French, British, German or Italian Obama, and everyone knows the answer is no, not anytime soon.

Europeans will no longer be able to lecture America on its failings with its own blacks. No one will be able to do it any longer.

“They always said, ‘You think race relations are bad here in France, check out the U.S.,’ ” said Mohamed Hamidi, former editor of the Bondy Blog, founded after the 2005 riots in the heavily immigrant suburbs of Paris.

No more. “But that argument can no longer stand,” he said.

For many immigrants to Europe, Mr. Obama’s victory is “a small revolution” toward better overall treatment of minorities, said Nadia Azieze, 31, an Algerian-born nurse who grew up here. “It will never be the same,” she said, over a meal of rice and lamb in the racially mixed Paris neighborhood of Barbès-Rochechouart. Her sister, Cherine, 29, is a computer engineer. Mr. Obama “really represents the dream of America — if you work, you can make it,” she said. “It’s a hope for the entire world.”

In a suburb of Paris, people watched election returns from the United States last week



In Rome, a poster from the Italian Democratic Party said, “The World Changes.” The only black member of the Italian Parliament saw the Obama victory as a “provocation” to Europeans

I wanna go to Washington, too

Story headline in London Times online: Europe’s leaders are divided in scramble for seat with Obama.

Bickering over which countries will attend this month’s Washington financial summit – and a chance to meet Barack Obama – sidetracked Europe’s leaders at their emergency meeting on the economic crisis.

The main concern of José Luis RodrÍguez Zapatero, the Spanish Prime Minister, was whether he could get a seat at the gathering of G20 countries on November 15 despite one of his ministers being told by Condoleezza Rice, the US Secretary of State, that they would not be invited.

Mr Zapatero is desperate to rehabilitate Spain’s relations with the US after falling out with the Bush Administration over the Iraq war.

There was more evidence of Obama one-upmanship when it emerged that Gordon Brown had a ten-minute telephone call with the President-elect while President Sarkozy was then reported by the French media to have had a more impressive 30 minutes.

Not all European leaders were falling over themselves to cosy up to Mr Obama. Silvio Berlusconi, the Italian Prime Minister, was unrepentant in the face of criticism for calling the President-elect “young, handsome and even tanned”. Mr Berlusconi described as “imbeciles” those who questioned his remark and said that it would not damage relations. “Did you see how I was welcomed by President Bush? The same thing will happen with the new Administration,” he said.

Yesterday’s meeting of the 27 EU leaders in Brussels ended with a diluted agreement to reform the International Monetary Fund and similarly weakened proposals for improved oversight of financial markets.

What's up, Sarko?

Economic weakness is leading to a recession, even in Europe.

The signs of economic caution are everywhere here, including even a sudden drop in the sale of bottled water.

Now, that's serious.

Trying to counteract fears of higher unemployment as the economy slows, Mr. Sarkozy announced a new program of subsidized work contracts, warned companies not to make unjustified layoffs and promised to loosen restrictions on short-term job contracts and Sunday work.

Warned companies to not lay people off unjustifiably? What a novel idea. As Sarko presses to make inroads, to prevent the recession from deepening, others remain skeptical.

The Socialist he beat for the presidency, Ségolène Royal, said Tuesday that “with a new plan practically every two days,” Mr. Sarkozy had “a credibility problem.” At the very least, she said, “we must pay attention that each plan announced should start before announcing the next.”

And other major states, especially Germany, are skeptical about his intentions. They believe that Mr. Sarkozy, who has often excoriated the Central Bank for its focus on limiting inflation, wants to sharply increase the size of France’s budget deficit — despite European Union restrictions — to stimulate an economy considered to be in recession and to create jobs.

Imagine him wanting to stimulate an economy; what a radical idea. Still, Sarko is something of a loose cannon.

Recent pronouncements by Mr. Sarkozy have rubbed the Germans and the British the wrong way, in part because he has reverted to an old habit of acting without consulting his allies. Quite unusually for Europe, Mr. Sarkozy has also called other leaders to summit meetings on extremely short notice, sometimes just a day, a senior European diplomat said, causing consternation and confusion. Mr. Sarkozy’s relations with the German chancellor, Angela Merkel, have deteriorated again, diplomats and French officials say, over both his lack of consultation and his efforts to pressure the European Central Bank.

Then again, he is bold. That can cut two ways, but action is certainly needed, and it would be better to act sooner rather than later.

In particular, Mr. Sarkozy has called for two European initiatives that have been widely criticized. The first is a European Union sovereign fund to protect the ownership of important business with suddenly low stock prices. The other is a “unified economic government” of the European Union that would bring the heads of state together on economic issues, and not just the finance ministers.Mr. Sarkozy argues that leaders must lead, and that with the Czech Republic and then Sweden, neither of which uses the euro, taking over the European Union presidency in 2009, Europe’s ability to deal with the global financial crisis will be reduced.

There's one of those European anomalies: countries that are in the EU but do not use the euro. And why not sovereign funds?


President Nicolas Sarkozy of France passed a mirror after delivering a speech on employment measures on Tuesday.

The crisis is redefining our leaders

This from the Financial Times of London: a month and a half ago Gordon Brown looked as if would go up in flames, now he is the rock that not only steadid Britain's economy, but prodded, and gave a role model to, Europe; while McCain flails and Bush drowns, Obama remians calm and presidential.

If Monday’s market rally really does signal a turning point in the global financial crisis, the world will hail an improbable saviour. Step forward Gordon Brown, Britain’s gloomy prime minister. Until the crisis struck, the conventional wisdom was that Mr Brown was a tragic-comic figure: a man who had desperately wanted to be prime minister, but had proved hopelessly unfitted to the task.

Europeans bourses (stock markets for the bitter, uninformed ones) rallied strongly; the Dow Jones average is up 707 points as of 3.30pm. So, yes, thus far the markets are voting with a sigh of relief and a dash of optimism that the authorities have finally braked the nosedive and righted the ship's course (to mix metaphors).

The emergency European summit in Paris over the weekend saw the 15 members of the European single currency area adopt bank rescue plans that look strikingly like the British initiative. British officials, who have often been told that in a big economic crisis they would be tugged along hopelessly in the wake of the eurozone, are enjoying their moment of vindication.

And the US is about to act as well. It seems that the Brown model might well be the American plan as well.

Crises define politicians. The contrasting fortunes of Mr Brown and President George W. Bush illustrate the point. In normal times, Mr Brown often seems indecisive, gloomy and robotic. In normal times, Mr Bush seems chipper, decisive and a regular guy. But, in a crisis, both men’s manners are transformed – one for the better and one for the worse. Mr Brown suddenly looks calm, determined and in control. Mr Bush has an unfortunate tendency to look panicky and out of his depth.

W looks as if he'd rather be at the ranch. His pronouncements are laughable and irrelevant. When it came to posturing, W was ready; but in crises, he stumbles: witness Katrina, and now the financial panic.

The current financial crisis seems to have actually cheered Mr Brown up. When a mobile phone rang during a speech he was giving late last week, the prime minister made a rare spontaneous joke, speculating about whether this was news of yet another collapsing bank. This kind of joke sounds like the height of bad taste. But somehow it worked. Gallows humour becomes Mr Brown. And besides, his audience had some confidence that he had a handle on the situation.

That's a good one. Brown was Chancellor of the Exchequer. In contrast, W was a governor and part owner of a baseball team, neither of which roles did anything to prepare him for the presidency, clearly.

Mr Bush’s presidency may also be defined by his reaction to crises – but in a bad way. In the immediate aftermath of the terrorist attacks on New York and Washington, he disappeared, albeit on secret service advice. He later recovered and gave some fine speeches. But Mr Bush’s hopelessly out-of-touch performance during hurricane Katrina cemented his reputation for incompetence. “Brownie, you’re doing a heck of a job” – the remark he directed to the hapless head of the federal government’s disaster relief effort – looked like it might be the defining remark of his time in office.

What a putz.

But it now has a close competitor. The president’s reported comment that “this sucker could go down” was the only memorable thing he has said throughout the entire financial crisis. Unfortunately, it made him sound like a Texan on the bridge of the Titanic. Compare and contrast with Roosevelt’s: “The only thing we have to fear is fear itself.”

He looks as if he doesn't know what he's doing, and, worse, doesn't much care. Same snide look, same stupid grin. And: what are the preliminary verdicts on the other political actors?

Peer Steinbrück, the German finance minister, wins a special booby prize for premature triumphalism. Suggesting last month that “the crisis originated in the US and is mainly hitting the US” was tempting fate. Angela Merkel, the German chancellor, has also not covered herself in glory. Appealing for a European response and then announcing unilateral German measures made her look inconsistent – to put it politely. By contrast, Nicolas Sarkozy has done well. “Reassuring” is not a word that generally applies to the hyperactive French president. But Mr Sarkozy has looked energetic and determined.

The Germans, particularly Steinbrück, have come off as selfish. Sarko has acquitted himself very well: he has looked decisive, determined, in control.

Commons

I just find it fascinating. The guy with the wig, the books, the scepter, and that box, all symbols of Parliament.

And in Britain

U.S. and British Diplomats Held by Zimbabwe Police

This seems to push things quite far, attacking diplomatic personnel.

Zimbabwean police detained U.S. and British diplomats on Thursday, slashing the tires of their cars after they visited victims of political violence ahead of a presidential election run-off, the U.S. embassy said. "Police put up a roadblock, stopped the vehicles, slashed the tires, reached in and grabbed telephones from my personnel, and the war veterans (Mugabe's supporters) threatened to burn the vehicles with my people inside unless they got out and accompanied police to a station nearby," U.S. Ambassador James McGee said in an interview on CNN.

Pure intimidation; but of diplomats?

In an indicator of Zimbabwe's rapid economic decline, its dollar currency plunged to a new low of between 995 million and 1.45 billion to the greenback on Thursday from an average 700 million at the beginning of the week.

Incredible.

Dream? Nightmare?

From the Telegraph, London.

Editorial cartoons from UK's Telegraph

These are good.
from March 27, 2008









April 5






March 20

God and Gold

A book a patron asked for: God and Gold, by Walter Russell Mead (a Council on Foreign Relations scholar).

From Kirkus Reviews: A Council on Foreign Relations scholar examines the biggest geopolitical story of modern times: the birth, rise and continuing growth of Anglo-American power.For the past 400 years, notwithstanding the continually renewed opposition from the rest of the world, the Anglo-Americans, with the British handing the baton to the United States, have emerged from every conflict more powerful. Finally, he explains why they have been so consistently wrong in believing that their mix of commerce, Christianity, the English language and democratic institutions would convert all opponents and put an end to all strife.

At the CFR website, I found an excerpt from the book.