Mugabe "fighting extradition to the Hague"

I presume that in the wake of his arrest and ongoing extradition battle, the case of a certain Serbian alleged war criminal is sub judice, so I have edited down and altered names, facts, numbers and places in the following Press Association article, using alternatives plucked at random.

Mugabe fights crimes extradition

1 day ago

Former Zimbabwean leader Robert Mugabe is battling extradition from Zimbabwe to the Netherlands, where he faces trial for genocide.

Mugabe's lawyers have been given three days to appeal against the extradition ruling by a Zimbabwean judge.

If the extradition goes ahead he will stand trial at the International Criminal Tribunal in The Hague on war crimes charges - including masterminding the massacre of thousands of Ndebele in Matabeleland during the liberation war of the 1980s.

Meanwhile, the arrest of the former Zimbabwean leader could help pave the way for Zimbabwe finally to join the European Union, Foreign Secretary David Miliband signalled.

Attending a meeting of the EU foreign ministers in Brussels, Mr Miliband said that the actions of the Zimbabwean government "bodes very well for long-term relations".

Mugabe was arrested while travelling on a bus in Harare, Zimbabwe. The one-time education lecturer had been practising as a tutor in legal studies during his period as a fugitive from international justice.

The Financial Times reports British and US intelligence helped trap Mugabe. The newspaper says they co-operated with Zimbabwean intelligence services, using both signals and human intelligence to track him down.

Mugabe's lawyer said his client was in good spirits but was not co-operating with police.

The hunt for Mugabe's right-hand man, Emmerson Mnangagwa, continues.

Now aged 61, his whereabouts are not known, but is believed that he could be hiding in Zimbabwe with the help of hardliners in the police and military and Mashona loyalists.

Mish: "The entire US banking system is insolvent."

Mish gives us a long list of bad news; the last item is, arguably, the worst:

Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

Big rewards for corporate failure

Wikipedia reports that chief executive Angelo Mozilo cashed in over $400 million (about a third of it in 2006/7) in Countrywide Financial stock before the failing lender's purchase by Bank of America this month. Karl Denninger's latest dramatic video presentation says, in effect, that bankers looted the system for personal gain and are now trying to get the taxpayer to foot the bill.

Investment wise owl Christopher Fildes has long advocated that, if they expect a bonus when things go well, directors should pay a "malus" when the company suffers. The French already use a bonus/malus system as a stick-and-carrot for car drivers.

Maybe then I'd be more reconciled to gross inequalities of wealth.

New: UK private schools fully-funded by the State

A friend has just sent me this article, originally from The Economist (14 June 2008). It's about the private-school revolution in Sweden, which is now coming here (starting in Richmond).

I've often wondered what the education system does with all the money - £6,000 a head times 30 children (if you're an English or maths teacher) = £180,000, but the classroom teacher's standard pay and pension might only use £30k-£40k a year.

Here's the website for the Swedish outfit trying their luck with a couple of academies in Greater London.

In praise of Patrick O'Flynn

This wide-ranging article by the Daily Express' chief political commentator covers many aspects of the broad crisis that led me to start blogging. My interest is not money per se, but about the fate of our country, and here Patrick O'Flynn unrolls a map of our problems, including:

• The rise of the East
• The growing power of foreign authoritarian regimes
• The purchase of British enterprises by foreign sovereign wealth funds, and the consequent export of our future dividend income
• Increasing foreign-held UK public debt (again, more income exported)
• Our vulnerability to energy repricing, and inadequate energy security
• Inflation in food and fuel
• Our unbalanced national budget, what with the cost of unemployment, and rising costs in other social benefits such as the NHS
• Inefficiency in the public sector
• The UK's squandering of its North Sea oil opportunity (cf. Norway's £300 billion investment fund)
• British economic decline, and our deterioriating manufacturing base

He concludes: "...the decade ahead will be full of challenges. Britain will have to aggressively earn its living in the world once more and those with nothing to offer will be offered nothing in return."

Spot on. But it's still tucked away on page 12 in yesterday's paper edition, well after Madeleine McCann and Amy Winehouse. This stuff should be hitting the front page all the time, because long after we've forgotten the celeb victims of today, we'll be counting the cost of our government's political and economic negligence and incompetence.

Gold fever may return

Gold has been in the doldrums for a while, but we're now getting messages about inflation and if Fannie Mae and Freddie Mac are added to the liabilities of the US Government, we could be back in the paper-money world of pre-Revolutionary France as advised by the Scottish gambler, John Law.

The Mogambo Guru gives value, not just in comic entertainment, but also in his useful references. One of them is to Adrian Ash, who points out that gold is now worth less than 2% of world financial assets, whereas at times of "investor stress" (and as late as 1982) it has risen to 20-25%. It may be time to consider the argument for precious metals, not so much as investments as insurance against the severe loss of value of other assets.

The EU and Radavan Karadzic

ITV's News at Ten last night covered the arrest of Karadzic, making the point that his identity and whereabouts have been known to the Serbs for years.

(The archive footage included an infamously misleading shot of Bosnian Muslims behind barbed wire, hauntingly reminiscent of the Nazi concentration camps; both at the time and again now, it was not explained that it was the camera crew that was penned in. Still, dramatic truth and all that.)

Whatever the terrible crimes of this man, the decision by Serbia's new, pro-EU government to "lighten the troika" looks primarily motivated by the desire to re-establish trade and diplomatic links with "Europe." So to me, the real story is the continuing expansion of the new European Empire.

The Balkans are being knocked into shape, or so the empire-builders think. Kosova declared independence in February 2008 (in the teeth of an attempted legal challenge by Serbia) and has been recognised by the USA and many other countries. The 100,000 Serbs in Kosova make up only 5% of the new nation's population, and compared to the 10 million in Serbia itself they are, presumably, of little account politically there, also. Besides, of course, Kosovans are not wolves.

But the question remains, how much more of Europe's former battlegrounds does the EU have the wealth and power to suborn, absorb and control? What will happen when its money runs low? Can its Babel-army sustain the territorial integrity of a hastily-constructed, ramshackle and heterogeneous empire? Will its gourmet diplomats and bibbed lawyers maintain law and reason under its young, yet complex and fuzzy legal and constitutional codes?

Whose country?

"Citizenship in this nation is is not a spectator sport," says Karl Denninger, as he tries to get more people to sign his petition to stop Fannie Mae and Freddie Mac being made vast burdens of the State.

I hope that is true for the USA, and I wish it were true here. Are we deluding ourselves when we talk of "our" Government?

Worrying signs

Knowing that debt creates extra money and so boosts inflation, The Mogambo Guru notes that the Chinese now have 1.58 billion credit cards! For some reason, TMG thinks we should look at gold and silver.

Karl Denninger points out that short-selling actually acts as a kind of price support in the market, since ultimately the short seller has to buy the shares he's sold to someone else; and so the new ban on short-selling selected financials has removed the floor beneath them. Jim in San Marcos found he couldn't do any short-selling in that sector for three hours yesterday, and doesn't know whether that means we're looking at free-fall or a sudden rally. Either way, it seems to prove the point that banning short-selling increases volatility, the sensible investor's enemy and the gambler's fatal siren.

If two views make a market, does silencing one leave the other free to become a whimsical dictator?

Inequality revisited

"...both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs," says Russell Roberts at Cafe Hayek, quoting the Tax Foundation.

As we've seen recently, there's more than one way to interpret the facts. At what point do the rich cease to inspire those beneath them, and begin to squeeze them? Doesn't it take money to make money? If so, shouldn't the lower orders be left with some after paying their bills? Is there an optimum level for the Gini Index?

UPDATE

Trevor Phillips on inequality on Britain: "People can see the economic slowdown coming. Everyone is happy to take some of the pain as long as that pain is shared fairly and what we want to do is to make sure that the burden doesn't fall unfairly on some groups rather than others."

Inequality

An anonymous spam-rant comment on one of my recent posts claimed that 1% of Americans owned 50% of the wealth, and this was destroying the system. Is it really a problem? I've had a quick trawl for information on inequality.

• Gini Index/Coefficient of inequality explained here
• Wikipedia lists countries by inequality here
• The CIA Factbook gives the Gini Index of the USA as 45 (in 2007), the UK as 34 (in 2005)
• Increase of USA's Gini coefficient since 1967 here

Here's some relevant articles and posts:

Richest 2% Own Half World Wealth; Bottom 50% Own 1% - UN Report (5 December 2006)
"the richest 1% of adults alone owned 40% of global assets in the year 2000"

The wealth gap is widening again (Daily Mail, 26 June 2008)

Why is the 'wealth gap' a bad thing? (MSNBC says it's not, what matters is opportunity)

Wealth gap widens (CNN, 29 August 2006)
"In the early 1960s, the top 1 percent of households in terms of net worth held 125 times the median wealth in the United States. Today, that gap has grown to 190 times..."

Wealth Gap Is Increasing, Study Shows (ScienceDaily, 9 August 2007)
"The poorest ten percent of families actually had a negative net worth---more liabilities than assets..."

*** Sackerson's Prophet Prize for this: ***
Globalization Has Increased the Wealth Gap (interview with Nobel prize-winning economist Joseph Stiglitz , author of "Globalization and Its Discontents", posted 15 January 2007)
"I think we are in a precarious position. We might be lucky and wander our way through this mess. There is a significant probability, however, that global interest rates could rise. If that happened, households with a large amount of debt would find it very difficult to meet their mortgage payments, and home prices would go down, which would lead to a reduction in consumption. Last year Americans consumed more than their income, something that is obviously not sustainable. The only way they could get away with it was by taking out money from their houses. But if home prices go down, they won't be able to do that any more. So there is a significant risk of a large economic slowdown. And government, by piling on so much debt and having such a large deficit, does not have much room to maneuver."

Why the wealth gap keeps growing (essay by Paul van Eeden, 17 November 2006)
"The fact is that people all over the world are getting poorer -- not because of free enterprise, open markets or globalization but because government created monetary inflation robs them of their living standards. The only ones who can immunize themselves are those with sufficient capital and that is why the rich get richer and the poor get poorer."

Market manipulation in financials?

Mish refers us to a piece in Minyanville. It suggests a recently introduced selective ban on short-selling is intended to support share prices in financials, so that more money can be drawn in by splitting shares and selling new tranches to the public.

To me, it feels like touting for sucker money. What happens later, when the short-selling ban is lifted? When the government (via regulators) begins to manipulate the market in this way, it looks like a sign that we are in trouble.

Should sterling now decline against the US dollar?

Mish thinks so, now we've decided to borrow our way out of a recession.

Also interesting to hear the discussion on Radio 4's Any Questions, where the assertion that Gordon had stuck to the EU's "40% of GDP" borrowing guideline wasn't challenged by anyone, despite the massive off-book PFI financing.

Conspiracy Corner

Secret Bilderberg Agenda to Microchip Americans Leaked

Thought you ought to know.

Break free

To cut down the rainforest, you need logging roads and rivers, so that you can empty the land. And to extract the wealth and freedom of a nation, you need a money system, banking, credit and debt.

Thanks to iTulip, I'm working my way through a series of YouTube postings of an Argentinian documentary. It describes how banks and multinational companies raided Argentina from the nineteenth century onwards, and how successive betrayals by popular politicians and union leaders have perpetuated the crisis.

Some years ago, I watched a documentary about an old American farmer, trying to make ends meet while crop prices fell and the bank continued sucking up interest from his debts. Finally, he did a brave, bold, heroic thing: he sold. He took the farming equipment he had acquired with a life's work, and auctioned it to his farming neighbours, who were rooting for him. Then he cleared his bank debt entirely, gave the home farm unencumbered to his son, left the big sky and went with his wife to live in a little flat in town.

I don't think I shall ever forget the dignity and restraint he showed when the bank telephoned him with hypocritical words of goodwill.

Pay off your debts, save cash (or whatever will keep its value), and don't put it all in the bank.

M4 up

FXstreet.com reports (htp: Alice) on significant increase in UK M4 money supply and lending (someone please help me with the distinction). Conclusion: inflation.

To put it in context, click here for BoE long run stats on M4.

Saturday smile

Comments, please

I had the last comment here come through tonight, but although it's long and features words in capital letters (usually a bad sign), I read it. Shame it's anonymous, and maybe it could do with editing, but aren't there elements in it with which you could agree? Is he (I assume he, for some reason) right about wealth distribution in the USA?

UPDATE

That rant has indeed been copied and pasted as the author suggests, with slight variations. I've done a little digging via Google (there's about 1,600 instances) and the earliest date-stamped version I can find so far is 26th February 2008 here, though quite likely there's earlier ones.

I don't know what he's got against Oprah.

The "1% own 50%" claim startled me - looks like England in the 19th century. Anybody able to confirm the inequality data? And will the sucking-up of wealth by the rich destroy the economy, as the ranter claims?

Should we let Africa starve?

Wofie's post on the futility of charity in Africa, a rider to Kevin Myers' article in the Irish Independent, gave me pause for thought. Are we wasting our money keeping poor children alive, so that they can grow up to be gangster-soldiers? If abortion is the answer to the criminal classes (not actually advocated as such by the authors of "Freakonomics"), is starvation the solution to civil war in Africa?

"Africa’s peoples are outstripping their resources, and causing catastrophic ecological degradation," says Myers. Perhaps, if they do things as they have done before. But on that basis, one would never have predicted the growth of Europe's population to its current size.

One of my relations by marriage went to Kenya to try his fortune some years ago, and having married a local girl from the Kikuyu tribe, bought a farm. His new wife is clever and sent off for pamphlets on farming, from which she learned that you can multiply the productivity of your land by companion-planting several crops. I wonder how much more food Africa could produce if agricultural skills there were better developed and disseminated.

Even in Europe, there are disparities in efficiency. Up to the end of World War 2, my grandfather had a farm in East Prussia. His 600 acres produced at least as much as the 2,000-acre farms of his neighbours. He compounded this advantage by diddling the taxman, telling the latter that as a simple farmer, he didn't understand finance and would the taxman please assess him on what his land could be judged to yield. You may be sure that he paid his tax bill without argument.

And what about modernising energy supplies, too? As a child, I saw a map of the Congo Basin and fantasised about damming the encircling ring of mountain ranges to make the world's greatest hydro-electric project, supplying the electricity needs for the whole of Africa. Of course, I hadn't considered ecological consequences; but in the Sixties, all I ever (over)heard of "ecology" was an brief, excited discussion between two of my teachers. This doesn't vitiate the argument for looking for efficient energy production that doesn't require chopping down all the forests to cook on wood fires like traditional tribespeople, or middle-class hippies.

Yes, some African countries are spectacularly badly governed; but I don't think we should rush to a money-saving despair for their peoples.

Bubble economy is beyond satire

My brother sends me a link to this article in the internet satire mag The Onion:

Recession-Plagued Nation Demands New Bubble To Invest In

... The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent....

Has the author read iTulip's Eric Janszen on the "bubble economy"? If he has, he'll know Janszen expects the next craze to be alternative energy - full Harper's article here.