As a former Executive Director of the World Bank I know that the columnists of the Financial Times have more voice than what I ever had, and therefore they might need some checks-and-balances. For more see "A Blog is Born" at the very bottom.
Would a child shouting out “the Emperor is naked” have his observation published in FT? Would he now need a PhD for that to happen?
June 29, 2007
100% organic pure corporate vanilla bonds.
I can’t stand the suspense.
This memory came to my mind when reading Richard Beales’ and Gillian Tett’s “Real risks emerge when Pandora’s investment box is opened” June 29. If what I recounted above could happen with open and transparent audited statements (albeit in a developing country) then what limits could there be to what you could hide in black-box algorithmic proprietary trading models. I pity those judges that tomorrow will have to try to understand the issues, as I pity those that though perhaps totally innocent will be sentenced to jail just because they can’t get anyone to understand their models.
Having said that it is clear that we must face the real possibility that all of our economic numbers could be fictitious since we could already have incurred in real big losses but that are mercifully covered by a lot of untested hot air. When those boxes are opened up who will appear? A beautiful girl or someone with a machine-gun… I can’t stand the suspense, though I must admit that the bliss of ignorance has also its attractions.
June 28, 2007
But the Venezuelans will not get their gasoline.
For your information, according to projections based on the current sales of vehicles, Venezuela a country with only 26 million inhabitants and a GNI per capita of less than US$ 5.0000, will in the years of 2006 and 2007 have placed a total of 750.000 new gas guzzlers on its roads, partly thanks to the craziness of a domestic gasoline price of under 3 US cents per liter. Can you imagine what will happen when you have to start to adjust gasoline prices? One of the first symptoms of the existence of a purely populist government is that all planning gets thrown out the window and you live day by day.
Whistling in the dark
Second, are these gaps not what used to be registered as losses? With all the derivatives and hedge funds flying around is not really our problem that the financial crises, while already been happening have not been noticed as they have gone underground or informal.
If it could be said that Italy based only on its formal growth rate would have long since disappeared but that they are alive and well thanks to the informal sector, could not the opposite be held; that the formal sector that looks to be doing well could in fact have disappeared because of what is going on underground? Thinks are indeed quite scary, and so we better keep on whistling in the dark!
June 27, 2007
It is we that have to learn the lesson from the rating agencies handling of Enron.
Consumers...hedge your energy bets
There’s just been a change of shackles.
We have shackled much of the market to the opinions of some few credit rating agencies; we have shackled the market into the belief that risks can actually be derivated away and will not reappear elsewhere; and we have shackled the financial reward structure to something more akin to the time-share industry, rewarding those that are in fact restructuring the long term realities of our portfolios with success fees paid out immediately, based on the vendors own valuation models, and which most certainly do not bear much relation to our true long term results; and finally, the mother of all the shackles, the mind-boggling financial positions that have been built up around the world without really knowing how to get out of them, in an orderly way.
The champions of gluttony
He is also exquisitely politically incorrect when he argues the defence of his industry in such terms as motivating you to drink more in order to save you from the risk of not knowing the fun of being drunk although in this as a “desire for more” inspirer he has a clear point, since we should ask ourselves what would happen to our economies if our regulators convinced us all that we have had enough, of everything.
Cutting out short term data will not fix it, more important is sending out the right long term signals.
June 26, 2007
One for the short list
Laziness and arrogance
That is something they should have discovered long time ago had they not been so busy taking credits for the counter inflation benefits brought about by globalization; and driving banking risks out of banking to such an extent that so many of the risks were forced to hideout in the more informal world of the hedge-funds and in the algorithms of some derivatives. In order for them to be able to monitor the world’s financial flows, from their desks, they reduced the relations between borrowers and creditors to digital data, and they chained much of the world’s financial flows to the opinion of some hired credit rating agencies.
Now, when crisis is breeding around the corner, the most important thing to ascertain is that when the fire breaks out we do not send out the firemen who installed the sprinkler system and that are more interested in covering their shoddy piece of work.
Boy, were they arrogant. Even a World Bank was ordered to shut up and harmonize with the International Monetary Fund, one of the most famous clubhouses of the central bank’s bankers.
FT, keep cool!
June 25, 2007
The growth of global finance is not that free or muscular.
June 22, 2007
About the low cost of equity and the need of Chinese “sovereign” walls
June 21, 2007
Whistling in the dark
Second, are these gaps not what used to be registered as losses? With all the derivatives and hedge funds flying around is not really our problem that the financial crises, while already been happening have not been noticed as they have gone underground or informal.
If it could be said that Italy based only on its formal growth rate would have long since disappeared but that they are alive and well thanks to the informal sector, could not the opposite be held; that the formal sector that looks to be doing well could in fact have disappeared because of what is going on underground? Thinks are indeed quite scary, and so we better keep on whistling in the dark!
June 18, 2007
Caveat emptor rules in derivatives too
Do you know of any reputable Judiciary Independence Index?
Sir, you publish June 18 a long letter that signed by the Director of the Department of Information, Press Division, Ministry of Foreign Affairs, Bangkok, Thailand, purports that “Thai judiciary is independent” and I must confess I have no idea of how much credibility I should assign to it. Would you know about any reputable Judiciary Independence Index that I could use? I mean if I where able to get a grasp on where Thailand stands on this issue when compared for instance to my homeland Venezuela it would indeed be quite helpful.
June 15, 2007
Aren’t we always in the intersection of autonomous and accommodating flows?
Please let us learn instead and not believe more in the pure blessings of using credit rating agencies
June 14, 2007
But what about a bachelor degree in being happily unemployed?
What is at risk is our freedom to do what needs to be done.
In immigration, more than barriers new riverbeds are needed
June 13, 2007
In search of answers on search engines
Clearly a search engine should mostly be valued in terms of the services it offers to the searchers but in this case it is actually the searchers that become the searched and this leads to some very strange signalling effects. In fact I would not mind if Google was allotted, by the system, to perform a maximum of free searches, let us say 20 per cent of all the searches on the web during the last 24 hours, and thereafter, in order for a Google search to be allowed, a searcher would have to demonstrate Google’s search worth, by being willing to pay a substantial amount to Google for their service.
Also, with respect to privacy issues, we suddenly read about a possible compromise that would have Google cookies expire after only 18 months instead of 30 years, as if privacy had anything to do with time. On the contrary, if privacy was indeed the case, then one would perhaps be able argue that it is only after 30 years that Google could be allowed to use any personal data.
June 12, 2007
Why do you not sit down and talk instead?
Immigration policies should not be a Noah’s Ark.
The explanation lies also in the absence of the normal “shavings”
June 11, 2007
Spanish sayings and subprime woes
June 09, 2007
Odious debt revisited
Honestly, the more I see what we are up to, the more certain I become that sooner or later our whole generation of baby-boomers could be kindly invited to take a field trip to an “ättestupa”, meaning those steep cliffs where supposedly elderly Scandinavians ages ago threw themselves from when they became useless to society.
I repeat again my argument for an urgent revision of our governmental system so as to align them with the true shareholder’s interest. If the average life is eighty years a new born should have 80 votes (exercised by his mother or older brother) someone like me would have 23 votes left, and someone over eighty should count his blessings and be glad if he is allowed to keep one as a memento. I do not want to owe the world too my children, I want to assure their rights as stakeholders and make it all a joint venture.
June 08, 2007
Sir Samuel Brittan’s blackout
He must be suffering from memory loss. In late 1998 early 1999 when oil was around $11 per barrel and according to some pundits (The Economist) heading for $5, then the distribution at the pump was 85 per cent for the UK taxman, 5 per cent for distribution and only 10 per cent for the producer who gave up for ever the non renewable resource that we should remember oil is. And sure did Opec produce noise, among others oil at $70 and Chavez.
If only at that time, Sir Brittan would have suggested fair long term take up contracts at $30 dollars per barrel, I can almost swear we would not be living the current extreme market tightness, and so reading him now suggest that the “proper reply to threats from Opec against the development of biofuels is to tell them to take a running jump” is just sad.
By the way, on biofuels, for the sake of our children, please let us not take a running jump, just to run our cars a couple of miles more.
June 07, 2007
Let us keep it as much as possible above the board
It might very well be that Echarri is right, but since the reason for taking companies private sometimes sound so similar to why some big chunks of our economies in many countries go underground into informality, should we not at least mention that it surely reflects badly on our society as a whole if we make darkness more valuable than sunlight.
By the way, one thing confuses me with respect to all those investments by pension funds in private equity funds that Echarri mention. As I have understood it pension funds are frequently restricted to the use of investment graded instruments, and so in this case that would signify that private equity companies can be investment grade, for public purposes. Is that not something of an oxymoron? Or do the credit rating agencies have access to some internal information we don’t?
A hidden tax is neither acceptable nor efficient
Sir, Clive Crook in his “Bush may be on to something…” June 7, presents the alternative of another labyrinth, in this case a national one, that would make it possible to “simulate a carbon tax . . . avoiding the word tax”. Forget it! If we are to find our way out of the very difficult environmental hardships transparency is a must and we have to be able to call a spade a spade. If what we need is a direct carbon tax let us work on that and shame governments into action.
Crook also mentions that the sale of “perpetual permits” would create a constituency with a vested interest in enforcement of carbon caps as that would make the value of the permissions go up. Forget it! If we are to find our way out of our global and public predicaments we cannot afford having the income to ex ante deviate into private rents when so much investment is needed, just as we also must be extremely wary of any signalling risk. Place these “perpetual permits” investors in front of a forest and ask yourselves whether their profit motives would induce them to reach for water to put out a fire… or for the matches.
June 06, 2007
Why not deregulate the banks instead?
Having said that when reading Morley’s spirited defence of voluntary regulations and of the fact that regulators should instead help to enforce these instead of coming up with their own I just want to ask where was he when the banking regulators decided for instance to force down the throat of the market, the opinions of a couple of few credit rating agencies. As one could argue that it is the excessive regulation of the banks that has been the main driving force for the hedge fund industry and that banks should in fact be more important than hedge-funds, perhaps what Morley should ask for is some deregulation of banks, but of course that is not what the alternative association is paying him to do.
For a starter defend the right to be unhappy
Where is everyone?
What is new though, perhaps only because it is so shocking we did not even want to think about it, is that this diversify-your-risk driven market and that I prefer to call the hide-the-risk market has now developed some financial products, formally traded among formal participants, that create a vested interest (which means they profit) in the default of mortgages. What is this? A financial coliseum? Although I do no profess to understand it all (who can) I am no stranger to the fact that this type of derivatives could help people to get easier access to mortgages but now try to explain to someone being evicted that you cannot help him because someone has a legitimate profit motive that stops you from doing so. Where are our leaders when we need them?
June 05, 2007
The Venezuelan TV station’s closure is an infringement on your human rights too
In this respect I need to ask whether you could ever be satisfied with a rainforest with only eucalyptuses and red parrots. Of course not! Therefore we need your help to conserve the info-diversity in Venezuela. As the indigenous to this small planet earth that you all are, this is your problem too. You do not need Venezuela to join the list of countries with absence of information, such as North Korea.
Investing in people losing their homes?
June 04, 2007
The sale of healthcare should follow stricter standards than the sale of timeshares
I am a foreigner and no expert in the area of health assistance in the US (probably thankfully) but, from the little I have seen the number of uninsured is large, but so are also the costs they are charged.
Whatever you do there should be no place for timeshare selling procedures in healthcare and there should be a rule that clearly states that you are not allowed to charge someone without coverage, more for medicine or any health service than what you would charge a covered patient.
By the way, and before you lose all sense of social solidarity, please develop an insurance that covers any additional costs because of what could be discovered in your DNA when gene tested.
De-regulation Italian style
June 02, 2007
Forget the biofuels and go for a real oil price floor instead
Days ago, May 23, you suggested (for the US) “A price floor for oil” but, since you proposed achieving that by imposing green taxes on gasoline, you were there actually suggesting a price floor for anything but oil. May I instead take you on the word and suggest you try a real price floor for oil, whereby Europe guarantees a take up of oil based on a minimum negotiated price? That would help to bring some real new oil production to the market and, if you then would want to impose some other green taxes on gasoline to finance the cost of that real price floor guarantee or just to further reduce its consumption, well be my guest.
Sir, why does Europe willingly to enter into long term take-up agreements for gas but not for oil?