- Was Marx Right?



In case you've been on Mars (or even just on vacation), here's a surprising idea that's been making the rounds lately: there might have been something to Marx's critiques of capitalism after all.
Now, before you leap into the intertubes, seize me by the arm, perform a citizens' arrest, and frog-march me into the nearest FBI office, exclaiming "See this suspicious looking brown guy? He's a card-carrying communist!!" please note: I'm, well, not. I'm a staunch believer in capitalism (hence, the title of my book.)
Yet, I do think — and after reading the dismal, dreary headlines every day, not to mention checking the value of your 401K, house, job, economy, society, and future lately, I'd bet you do too — that prosperity as we know it might be lazily circling the glowing inner rim of the burbling event horizon of a massive supergalactic black hole. And when it comes to doing much about it (wave hello to your new friend, "double-dip"), well, the status quo's pretty much out of options, out of ideas, and running out of time (hey, is that a Congressional "super-committee" being stalked by lobbyists I see? Who came up with this brain-melter of an idea?).
Hence, indulge me for a paragraph or two. Now, please note: This is a hugely divisive topic, and by "was Marx right?" I don't mean "Communism is the glorious future of humankind, my brothers in arms!! (And I am your leader — bow!!)". For, of course, I think we've had plenty of compelling demonstrations that it wasn't. Rather, I mean: "Was there maybe a tiny mote of insight or two hidden in Marx's diagnoses of the maladies of industrial age capitalism?"
Let's take Marx's big critiques of industrial age capitalism, one by one (and with a grain of salt: since I'm far from a Marxist economist, it's entirely possible my quick, partial descriptions leave much to be desired).
Immiseration. Marx claimed that capitalism would immiserate workers: he meant that labor would be "exploited" — not just in a purely ethical sense, but in a narrower economic one: that real wages would fall, and working conditions would deteriorate. How was Marx doing on this score? I'd say middlingly: wages in many advanced economies — notably, the most purely capitalist in a financialized sense — have failed to keep pace with productivity; not for years, but for decades. (America's median wage has been stagnant for roughly 40 years.) In macro terms, labor's share of income has plummeted, while the lion's share of growth has accrued to those at the very top.
Crisis. As workers were paid less and less, capitalism would be prone to chronic, perpetual crises of overproduction — for they wouldn't have the means to purchase or invest in enough goods to keep the economy humming. As Marx put it, there was likely to be "poverty in the midst of plenty." How's Marx doing on this score? Not bad, I'd say: the last three decades have in fact been characterized by global crises of what you might crudely call overproduction (think: too little demand chasing too many disposable widgets, resulting in a massive global debt crisis, as vanishing middle classes took on more and more debt to compensate for stagnant real wages).
Stagnation. Here's Marx's most controversial — and most curious — prediction. That as economies stagnated, real rates of profit would fall. How does this one hold up? On first glance, it seems to have been totally discredited: corporate profits have broken through the roof and into the stratosphere. But think about it again, in economic terms: Marx's prediction concerned "real profit," not just the mystery-meat numbers served up by beancounters, and chewed over with gusto by "analysts." When seen in those terms, Marx might be said to have been onto something: though corporations book nominal profits, I'd suggest a significant component of that "profit" is artificial, earned by transferring value, rather than creating it (just ask mega-banks, Big Energy, or Big Food). I've termed this "thin value" and Michael Porter has described it as a failure to create "shared value." Replace "declining real profit" with "shrinking real value" and it's analogous to what Tyler Cowen and I have called a Great Stagnation (though our casus belli for it differs significantly from Marx's).
Alienation. As workers were divorced from the output of their labor, Marx claimed, their sense of self-determination dwindled, alienating them from a sense of meaning, purpose, and fulfillment. How's Marx doing on this score? I'd say quite well: even the most self-proclaimed humane modern workplaces, for all their creature comforts, are bastions of bone-crushing tedium and soul-sucking mediocrity, filled with dreary meetings, dismal tasks, and pointless objectives that are well, just a little bit alienating. If sweating over the font in a PowerPoint deck for the mega-leveraged buyout of a line of designer diapers is the portrait of modern "work," then call me — and I'd bet most of you — alienated: disengaged, demoralized, unmotivated, uninspired, and about as fulfilled as a stoic Zen Master forced to watch an endless loop of Cowboys and Aliens.
False consciousness. According to Marx, one of the most pernicious aspects of industrial age capitalism was that the proles wouldn't even know they were being exploited — and might even celebrate the very factors behind their exploitation, in a kind of ideological Stockholm Syndrome that concealed and misrepresented the relations of power between classes. How's Marx doing on this score? You tell me. I'll merely point out: America's largest private employer is Walmart. America's second largest employer is McDonald's.
Commodity fetishism. A fetishized object is one which is more than a symbol: it's believed to have actually the power the symbol represents (like an idol, or a totem with magical properties). Marx claimed that under industrial age capitalism's rules, commodities became revered talismans, worshipped through transactional exchanges, imbued with mystical powers that give them inherent value — and obscuring the value of and in the very people who've worked labored over them in the first place. It's one of Marx's most subtle and nuanced concepts. Does it hold water? Again, I'll merely pointing to societies in furious pursuit of more, bigger, faster, cheaper, nastier, now, whether it's the retail temples of America's mega-malls, or London rioters stealing, not bread, but video games.
Marx's critiques seem, today, more resonant than we might have guessed. Now, here's what I'm not suggesting: that Marx's prescriptions (you know the score: overthrow, communalize, high-five, live happily ever after) for what to do about the maladies above were desirable, good, or just. History, I'd argue, suggests they were anything but. Yet nothing's black or white — and while Marx's prescriptions were poor, perhaps, if we're prepared to think subtly, it's worthwhile separating his diagnoses from them.
Because the truth might just be that the global economy is in historic, generational trouble, plagued by problems the orthodoxy didn't expect, didn't see coming, and doesn't quite know what to do with. Hence, it might just be that if we're going to turn this crisis upside down, we're going to have to think outside the big-box store, the McMansion, the dead-end McJob, the bailout, the super-bonus, and the share price.
The future of plenitude probably won't be Marxian — but it won't look like the present. And if we're going to trace the beginnings of better, more enduring, more authentic, more meaningful, fundamentally more humane paradigm for prosperity, perhaps it's worthwhile exploring — even when we don't agree with them — the critiques and prophecies of those who already challenged yesterday's.
NB: This is a divisive topic. Let's stay civilized, enlightened, and keep a sense of humor. Let's discuss the issues and ideas in the comments — not just defend ideologies by pointing fingers and calling one another names.



- Real Estate Bubble And Pricey Commodities Mean Trouble Ahead For Canada's Economy


Andrew Hepburn is a business commentator living in Toronto.
Recent Posts
If adulation comes before a fall, the Canadian economy is in serious trouble.
Both at home and abroad, people are in love with Canada as an investment destination.
Yet largely ignored amidst the hoopla are clear and growing threats to the country’s economic well-being.
The common theme of these dangers is overvaluation: pricey real estate, inflated commodities and a currency too strong for the nation’s manufacturing exporters.
The most obvious issue facing the Canadian economy is its housing bubble.
Using data from the Canadian Real Estate Association, Alexandre Pestov of Three Bears Research estimated in September 2010 that average nominal national house prices increased 121% in the prior decade.
By his calculations, this equated to 76% in inflation-adjusted terms. And of course Canadian house prices have continued to rise since Pestov’s research was published.
Granted, talk about a Canadian housing bubble is everywhere. But what should be on everyone’s mind are the consequences of its inevitable bursting. The real danger exists because the bubble has been financed with credit, leaving Canadian households in record levels of debt. According to data from Statistics Canada, personal mortgage debt at the end of 2010 totaled $956 billion, more than double the level of 2000.
Financial bubbles without debt are bad (think internet stocks), but they are minor compared to those financed with credit. This was a key implication of economist Irving Fisher’s work, whose famous 1933 paper explained the toxic combination of debt and deflation. Indeed, the major economic downturns of the last hundred years, the Great Depression, the Japanese malaise, and the recent Great Recession, were all rooted in excessive private sector debt.
Because asset bubbles ultimately crash but debts don’t magically disappear, a collapsing bubble makes the debt more onerous. Bank of Canada Governor Mark Carney alluded to this predicament in recent testimony to the Senate when he reminded Canadians that, “while asset prices can rise and fall, debt endures.”
In the housing context, people can end up owning homes worth less than their mortgage. Selling the asset to raise funds simply causes everyone else’s property to decline further in value.
The risks to the Canadian economy are not confined to real estate. Many of the investors bullish on the country and its currency justify their optimism on the grounds that commodity prices will continue to increase due to growth in developing economies. This is wishful thinking.
The real impetus behind the raw material spikes of recent years is not developing world demand, but rather a previously unimaginable degree of speculation in commodity markets. This was plain to see when oil plummeted from $147 a barrel in July 2008 to just over $30 in early 2009 as speculators unloaded their futures positions.
Like housing, the commodity bubble has received attention. Once again, though, the depth of the problem isn’t often recognized.
Pre-financial crisis, speculation in commodities overwhelmingly occurred via derivatives. What may not be widely understood, though, is that in addition to a few exchange traded commodity funds, some speculators also took physical delivery of raw materials. This activity has increased post-financial crisis, perhaps due to pending U.S. regulations to limit bets in futures markets.
To use one striking example, according to a report from the Federal Reserve, JP Morgan Chase owned physical commodities as of June 31, 2011 worth just over $21 billion. To this we can add the holdings of other investment banks, commodity merchants, ETFs and hedge funds. It is not difficult to see how financial players have distorted what are primarily intended to be markets for consumption, not investment.
The final major issue facing Canada is its currency’s strength. With oil until recently above $100 and metal and grain prices very high as well, you would think that a major commodity exporter like Canada would be running significant trade surpluses. You would be mistaken. Despite historically high commodity prices, trade surpluses have morphed into deficits.
Forget its French and English heritage; Canada would seem to suffer from a serious case of “Dutch Disease”, an economic affliction whereby an appreciating currency prices a commodity country out of other export markets. The gains of Bay Street and the oil sands thus parallel the decline of export-oriented manufacturers across the country.
Nothing could have made this more evident than a Bloomberg article from December 2010, which reported that factories now employ only 10% of the Canadian workforce, the lowest level since 1976. In addition, the story noted that Canada’s exports to the U.S. as a percentage of total exports account for their smallest share since 1982. Canada’s trade surplus with its southern neighbour has plunged from $11.7 billion in October 2005 to $3.6 billion this June. This can’t be blamed solely on China, because as TD Economics pointed out in April, “Canada has fared worse than most other countries from the changing composition of the U.S. trade deficit”. This suggests our dollar also bears responsibility.
In the aftermath of the financial crisis a peculiar Canadian hubris has emerged. Its neighbour chastened, once humble Canada is seen as a rock in a turbulent economic world. The Conservatives boasted during the election campaign of the nation’s economic prowess in television commercials, and foreigners take good notes about steady, fiscally responsible (allegedly) Canada. To top it off, Toronto Councillor Doug Ford recently presented Jim Flaherty with a mock “World Finance Minister Championship” belt. If there ever was bad economic karma, this was it.
It may be tempting to believe that Canada is, in the words of more than one economist, “a bastion of stability”. But a realistic look at the Canadian economy suggests a castle at least partly built on sand, and of course financed with debt. Unless house and commodity prices continue to defy gravity, Canada’s current good fortunes will likely come to a very painful end.
Unfortunately, there is little stock market diversification to save the day: as of September 1, the energy, materials and financial sectors accounted for a staggering 78.83% of the S&P TSX Composite Index.

- Les dissensions au sein de la BCE font chuter le CAC


Le secteur bancaire subit les foudres des investisseurs alors que Jürgen Stark, membre du directoire de la BCE, a annoncé sa démission en raison d'un conflit portant sur le plan de rachat d'obligations de l'institution.
Après deux séances de hausse, la Bourse de Paris est repartie en territoire négatif ce vendredi et continue de creuser ses pertes. vers 16 heures, le CAC40 perdait plus de 3% et revenait sous les 3000 points à 2989,52 points. Londres et Francfort suivent avec des pertes respectives de 1,03% et 1,87%.
Le secteur bancaire suscite à nouveau les inquiétudes des investisseurs. Il accentue ses pertes depuis que Jürgen Stark, membre du directoire de la BCE, a annoncé sa démission pour des «raisons personnelles» selon le communiqué de la BCE mais Jürgen Stark, dont le poste est l'un des plus importants de l'institution, a exprimé à plusieurs reprises ces dernières semaines son opposition au programme de rachat d'obligations publiques mené par la BCE pour soulager les pays les plus fragiles de la zone euro.
Par ailleurs, les déclarations de Christine Lagarde, selon lesquelles une crise de liquidités n'était pas à écarter alors que certaines banques avaient besoin de fonds propres supplémentaires, on également pesé sur la tendance. «C'est l'effet Lagarde. Ces déclarations touchent surtout les banques qui sont jugées les moins bien placées en termes de ratio de fonds propres», commente un trader.
Résultat : à mi-parcours, Société Générale chute de 6,66 % à 18,21 euros et signe la plus forte baisse du CAC. Derrière elle, Crédit Agricole lâche 4,34 % à 5,60 euros, Natixis 4,65 % à 2,48 euros, BNP Paribas 3,77 % à 31,01 euros et Axa 3,82 % à 9,78 euros.
Le plan d'Obama ne rassure pas
Les investisseurs accueillent par ailleurs sans enthousiasme les détails du plan pour l'emploi dévoilé par le président américain Barack Obama dans la nuit. Il a présenté un projet de loi portant sur le déblocage de 447 milliards de dollars pour sortir les Américains du chômage. « Ce plan donnera un choc électrique à une économie qui a calé, donnera confiance aux entreprises sur le fait que si elles investissent et embauchent, il y aura des clients pour leurs produits et leurs services », a assuré le président américain aux membres du Congrès.
Comme en Asie ce matin, les opérateurs semblent douter de la mise en œuvre de ce plan. Son financement suscite déjà des interrogations de la part des adversaires républicains qui pourraient bloquer son vote. Barack Obama les a exhorté à l'adopter « immédiatement ». Le président américain a par ailleurs annoncé qu'il dévoilerait le 19 septembre « un plan de réduction de déficit plus ambitieux ».
Comme à Wall Street hier, les investisseurs n'ont également pas apprécié les propos du président de la Réserve fédérale américaine sur la croissance et l'emploi hier soir. La FED « fera tout ce qu'elle peut pour participer au retour de taux de croissance et d'emploi élevés », a déclaré son président Ben Bernanke, minimisant les craintes inflationnistes. Ce discours nourrit toutefois l'hypothèse d'un nouvel effort d'assouplissement quantitatif qui pourrait être annoncé lors de la prochaine réunion du Comité de politique monétaire de la Fed, prévue les 20 et 21 septembre.
L'inflation en Chine ralentit
Toujours du côté macroéconomique, le Japon a fait état ce matin d'un recul de 2,1 % de son PIB au deuxième trimestre 2011 en rythme annualisé. C'est plus que la baisse de 1,3 % estimée au départ. Le principal facteur pesant sur le PIB a été le net recul des exportations (-4,9 % par rapport janvier-mars).
En Chine, la hausse des prix à la consommation, principale baromètre de l'inflation, qui s'était accélérée au cours des derniers mois, a légèrement ralenti à 6,2 % en août. La production industrielle est elle en hausse de 13,5 % en août.
En France, la production industrielle a rebondi de 1,5 % en juillet après un recul de même ampleur en juin, montrent les statistiques publiées vendredi par l'Insee. Le déficit du budget de l'État français a reculé fin juillet à 86,6 milliards d'euros, contre 93,1 milliards d'euros un an plus tôt, grâce notamment à une baisse des dépenses, a annoncé vendredi le ministère du Budget.
À l'agenda figurent aussi ce vendredi les stocks de grossistes aux États-Unis. Sont également attendues, dans l'après-midi, les premières estimations de la confiance des consommateurs américains de l'Université du Michigan.
Du côté des devises, l'euro oscille autour de 1,38 dollar, après être repassé sous le ce seuil pour la première fois depuis six mois (1,3789 vers 12H10 à Paris). Le pétrole monte pour sa part, soutenu par une baisse surprise des stocks américains. Dans les premiers échanges électroniques, le baril de « light sweet crude » pour livraison en octobre gagnait 23 cents à 89,28 dollars et le baril de Brent de la Mer du Nord pour livraison en octobre 21 cents à 114,76 dollars.


- Les banques françaises attaquées sur les marchés


Les Bourses européennes semblaient prises d'un mouvement de panique, vendredi 9 septembre, plombées par la crise dans la zone euro, les pertes de Wall Street et la démission de l'économiste en chef de la BCE, Jurgen Stark.

Le secteur bancaire a été particulièrement touché. La Société générale était, une nouvelle fois, la plus attaquée de toutes les banques françaises : elle perdait plus de 10 %, à 17,49 euros, suivi par le Crédit agricole (- 8,48 %, à 5,63 euros), BNP Paribas (- 7,014 %, à 29,93 euros) Natixis (- 7,49 %, à 2,41 euros). Autre valeur financière à dégringoler Axa (- 8,15 %, à 9,33 euros).
Le 10 août, la Société générale avait déjà été attaquée par les investisseurs alors que les rumeurs les plus folles circulaient selon lesquelles le groupe était proche d'une faillite. Après avoir perdu jusqu'à 22,5 % en séance, le titre de la banque avait fini en recul de 14,74 % à 22,18 euros.
La suspicion à l'égard des banques atteint un paroxysme, indique-t-on dans les salles de marché. Les propos de Christine Lagarde, directrice générale du FMI, sur les besoins de recapitalisation des banques européennes ont provoqué un mouvement de panique dans ce secteur, ajoute-t-on.
"Face à la montée des risques et des incertitudes, et à la nécessité de convaincreles marchés, certaines banques ont besoin de renforcer leur capital", a-t-elle assuré vendredi avant l'ouverture d'une réunion du G7 à Marseille (sud-est de la France).
Le 30 août, l'ancienne ministre de l'économie de Nicolas Sarkozy avait déjà demandé une "recapitalisation urgente" des banques européennes, ce qui lui avait valu une volée de critiques de la part de nombreux responsables politiques et patronaux européens.


- BCE : le chef économiste démissionne

Jürgen Stark, membre du directoire et chef économiste de la Banque centrale européenne, a démissionné «pour des raisons personnelles», a officiellement annoncé la BCE dans un communiqué. Cette démission fait suite à un conflit à propos de la politique de rachat d'obligations publiques de l'institution, selon plusieurs sources. Depuis plusieurs semaines, Jürgen Stark exprimait son opposition à cette stratégie, qui a soutenu l'Italie et l'Espagne pendant la crise de l'été. L'information de sa démission a fait de nouveau basculer les Bourses en Europe.
Le départ du chef économiste est un coup dur pour la BCE, dont le président, Jean-Claude Trichet, doit quitter ses fonctions à la fin du mois d'octobre. Ce dernier sera remplacé par Mario Draghi. «Jürgen Stark partageait le point de vue d'Axel Weber et du président actuel de la Bundesbank concernant ce programme de rachat des obligations d'État. C'est une position que partagent tous les Allemands. Cela montre les gros problèmes que la Banque centrale européenne doit affronter en interne», commente Manfred Neumann, professeur d'économie à l'Université de Bonn.
«Les gouvernements n'ont pas agi comme il fallait»
«Si nous nous sommes embarqués dans ce programme de rachat d'obligations publiques, c'est parce que les gouvernements concernés n'ont pas agi comme il fallait», a déclaré Jean-Claude Trichet lors de son dernier point de presse mensuel.
Agé de 63 ans, Jürgen Stark était membre de la direction de la BCE depuis juin 2006. Son mandat devait s'achever le 31 mai 2014. Selon des sources proches du dossier, Jörg Asmussen, secrétaire d'Etat allemand aux Finances, va remplacer Jürgen Stark au directoire de la BCE.


- L'Irlande peut-être plombée par la Grèce

Les difficultés de la Grèce pourraient affecter la capacité de l'Irlande a retourner sur les marchés de la dette à long terme, a déclaré vendredi le directeur de l'agence irlandaise de la dette.
"Il y a certains facteurs exogènes, comme par exemple ce qui se passe en Grèce, qui pourraient nous écarter de nos objectifs", a dit John Corrigan devant une commission du Parlement.
Il a ajouté que la NTMA (l'agence nationale chargée de la gestion du Trésor) envisage de commencer à étendre l'échéance de son programme de dette à court terme de trois à six mois, vers le milieu de l'année 2012.
"Le premier signe crédible de notre capacité à retourner sur les marchés sera donné lorsque nous serons en mesure d'étendre substantiellement ce programme."
"Quant à notre retour sur le marché obligataire de long terme(...), le plus tôt sera le mieux."

- Le FMI victime de son prisme anglo-saxon

Le Fonds monétaire international est il anti-européen ? A la lumière des récents échanges verbaux entre sa directrice générale, Christine Lagarde, et les leaders économiques du Vieux Continent à propos de la fragilité des banques européennes et de la nécessité de renforcer leurs fonds propres, certains observateurs auraient tôt fait de conclure positivement. D'autant plus que les remarques, réitérées ce week-end, de la nouvelle patronne de l'institution multilatérale ont trouvé un écho favorable du côté de Washington et de Londres. Doit-on pour autant en conclure que Christine Lagarde, auparavant ministre des Finances française, a trahi ses « anciens amis » ? Historiquement, la même mésaventure était arrivée à son prédécesseur, Dominique Strauss-Kahn. En avril 2008 exactement.
A l'époque, le ton est également monté entre l'Europe et le FMI. Le sujet de discorde : l'estimation, par le Fonds, des pertes potentielles des banques européennes à la suite de la crise des « subprimes ». Dans son « Rapport sur la stabilité financière globale » publié au printemps de cette année, les analystes du FMI évaluaient alors à plus de 4.000 milliards de dollars le coût qu'avaient dû et qu'allaient devoir supporter l'ensemble des institutions financières. Rien que pour les banques européennes, le montant estimé était de près de 1.200 milliards de dollars. Et le Fonds d'appeler les établissements bancaires à rassembler entre 375 et 725 milliards de capitaux propres supplémentaires avant la fin 2010. Hurlements des Européens, pour qui les chiffres étaient exagérés. « L'influence des ‘‘boys'' de Goldman Sachs s'est encore manifestée »,lâchait même un haut fonctionnaire du Trésor français. Mieux, la ministre des Finances française, Christine Lagarde, indiquait alors : « Lorsque nous prenons les chiffres publiés par le FMI par une extrapolation des méthodes comptables américaines aux banques mondiales, et que nous les comparons aux nôtres, nous n'avons pas les mêmes chiffres. »
Aujourd'hui qu'elle a traversé l'Atlantique, l'ex-ministre aurait donc tourné casaque. En fait, comme il y a trois ans, la polémique entre l'Europe et le Fonds est d'abord une affaire de méthodologie comptable.« La méthodologie est fondée sur l'idée que le reste du monde encourt le même problème que celui du marché américain. C'est osé », avançait en 2008 un haut responsable français.
Les deux affaires témoignent en réalité de l'influence anglo-saxonne au sein de l'institution multilatérale. Une influence prédominante, même si les Etats-Unis n'ont qu'un peu plus de 17 % des droits de vote de l'institution contre près d'un tiers pour les Européens.
A ce propos, le rapport annuel 2010 sur la diversité du FMI est riche d'enseignements. Si les ressortissants des pays en développement représentent 46,5 % du total des équipes de l'institution - un chiffre en hausse de plus de 5 points par rapport à 1990 -, ce pourcentage tombe à... 29,1 % pour les équipes dirigeantes. Pour les seuls économistes du Fonds, les pourcentages sont similaires. Autre enseignement : être ressortissant d'un pays en développement ou d'un pays industrialisé du G7 ne veut pas pour autant dire que l'on échappe à l'influence américaine. Le même rapport du Fonds relève en effet que dans 48 % des cas, le personnel du FMI a effectué ses études aux Etats-Unis. Suivent le Royaume-Uni (9 %), la France (4,4 %) et le Canada (3,7 %). « Pas moins de 63 % de tous les PhD (doctorat), la moitié des masters ont été obtenus aux Etats-Unis », précise le rapport.
L'exemple le plus emblématique est le chef économiste du FMI, Olivier Blanchard. « Ce dernier n'a de français que sa nationalité », ironise un grand économiste de l'Hexagone lui reprochant son prisme américain. En effet, Olivier Blanchard a obtenu un PhD en économie au célèbre Massachusetts Institute of Technology (MIT) en 1977. Il est, entre autres, membre de l'Académie des sciences américaine. L'équipe de recherche du Fonds qui l'entoure est, elle aussi, issue des grandes universités américaines, que ce soit Princeton, Harvard, New York Columbia University, Yale, Berkeley, ou encore Chicago. Même Dominique Strauss-Kahn, qui se vantait pourtant d'avoir fait venir au FMI des Européens, ne peut se dédouaner de l'aura exercée par les universités américaines. Le nouveau directeur du département européen du FMI est de nationalité portugaise. Reste qu'il est titulaire d'un PhD en économie de l'université de Stanford et qu'il a passé huit années chez Goldman Sachs (2000-2008) en tant que vice-président et directeur général.
L'influence anglo-saxonne est-elle pour autant un gage de qualité et de pertinence en ce qui concerne les analyses du FMI ? Le rapport 2011 de l'office d'évaluation indépendant du Fonds, un organisme interne chargé d'évaluer ses performances, répond plutôt négativement. « L'utilité pratique de la recherche est souvent limitée faute de consultation préalable des autorités des pays sur les thèmes qu'elles couvrent et d'une connaissance suffisante des contextes nationaux et institutionnels. » Plus loin, ce rapport précise que « la qualité technique des études du FMI est très inégale ». Enfin, « les autorités de nombreux pays ont signalé que les études du FMI servaient à faire passer un message et de nombreux fonctionnaires de l'institution ont indiqué qu'ils se sentaient souvent obligés d'aligner leurs conclusions sur les opinions du FMI ». Depuis quelques années, des efforts sont pourtant faits pour amoindrir cette influence américaine. En 1995, le FMI a mis en place un conseil de la diversité, chargé, entre autres, de réduire les inégalités trop criantes au sein des équipes de l'institution, comme la faible représentation des ressortissants des pays en développement et en transition au niveau du management. Des objectifs chiffrés devant être atteints avant 2014 avaient même été fixés en 2009. Selon le dernier rapport annuel publié l'an passé, on est encore loin du compte. Au sein du FMI, l'influence anglo-saxonne continuera donc de s'exercer. Et sa directrice générale ne pourra guère s'écarter de la ligne directrice.
Richard Hiault est chef du service International des « Echos »



- Pressé d'agir, le G7 peine à apporter une réponse convaincante à la crise

Jean-Claude Juncker, président de l'Eurogroupe (G), le gouverneur de la Banque de France Christian Noyer (C) et le ministre Français de l'Economie et des Finances François Baroin lors d'une réunion du G7 à Marseille, le 9 septembre 2011


Les pays riches du G7, réunis vendredi àMarseille, dans le sud de la France, s'efforçaient de dépasser leurs divergences en vue de formuler une réponse convaincante à la crise, sur fond de nouvelle dégringolade des marchés financiers.
Au moment même où les grands argentiers des pays les plus industrialisés entamaient cette réunion, Wall Street et les Bourses européennes plongeaient toutes dans le rouge.
Le ministre français des Finances François Baroin, dont le pays préside actuellement le G7, a promis "une discussion de fond sur le ralentissement observé cet été dans le monde", aussi libre que possible.
Mais, alors que ce n'était pas initialement prévu, il n'était plus exclu que les Etats-Unis, le Japon, l'Allemagne, la France, le Canada, le Royaume-Uni et l'Italie publient un communiqué commun à l'issue de la réunion, selon des sources concordantes.
Les grandes puissances sont pressées de faire quelque chose pour éviter une rechute de la croissance après la grande récession de 2008-2009.
"Les Etats doivent agir maintenant, et agir avec audace", car l'économie mondiale "traverse une phase pleine de dangers", a ainsi lancé vendredi matin à Londres la directrice générale du Fonds monétaire international FMI) Christine Lagarde, avant de gagner Marseille.
Agir donc. Mais qui, et comment ?
Au lendemain de l'annonce du plan pour l'emploi de 447 milliards de dollars par le président Barack Obama, les Etats-Unis sont arrivés àMarseille avec le sentiment du devoir accompli. Et en attendent autant de l'Europe.
Le secrétaire américain au Trésor Timothy Geithner a de nouveau exhorté vendredi les Européens à prendre de nouvelles mesures susceptibles de rassurer sur leur capacité à passer la crise. Et il a quelque peu douché les espoirs d'une action concertée et forte des banques centrales du G7.
"On va voir les gouvernements et les banques centrales, partout, refaire leurs comptes et décider où ils ont de la latitude pour chercher ce qu'ils peuvent faire pour aider à renforcer la croissance", a-t-il expliqué.
"Cela va venir progressivement, avec le temps. Mais je ne pense pas qu'il faille attendre de cette réunion un changement spectaculaire dans les signaux envoyés", a-t-il précisé.
D'autant que la double crise, économique et de la dette, appelle des réponses difficilement conciliables: soutien coûteux à l'activité d'une part, réduction du déficit de l'autre.
Sur ce chapitre, les Européens ont réitéré vendredi leur engagement à assainir leurs finances publiques, insistant sur leur absence de marges de manoeuvre pour une relance. Les pays du G7 doivent prendre des mesures "coordonnées" pour soutenir la reprise, mais les Européens doivent en priorité continuer à réduire leur déficit, a confirmé à Marseille le commissaire européen aux Affaires économiques, Olli Rehn.
Pourtant, des voix de plus en plus nombreuses, à l'instar de Christine Lagarde, commencent à suggérer que les bons élèves de la discipline budgétaire utilisent les marges de manoeuvre qui leur restent pour relancer l'activité.
"Combattre la crise avec un endettement encore plus prononcé, cela serait exactement le mauvais chemin à prendre", a rétorqué vendredi le ministre allemand des Finances Wolfgang Schäuble, "cela aggraverait les problèmes au lieu de les résoudre".
Son collègue britannique George Osborne n'a pas dit autre chose en réaffirmant la détermination de son pays à poursuivre son plan d'austérité, en dépit des avertissements à Londres de Mme Lagarde contre des politiques d'assainissement budgétaires trop brutales.
Samedi, les ministres du G7 retrouveront leur homologue russe pour


- Les banques s'enfoncent à des profondeurs jamais vues


Après deux jours de répit, les valeurs bancaires européennes, les françaises tout particulièrement, ont été de nouveau pilonnées en Bourse vendredi, plusieurs d'entre elles flirtant avec leur plus bas niveau historique, sans espoir de rebond à court terme.
Déjà en baisse à l'ouverture de la séance, les cours des grands établissements européens ont plongé en milieu d'après-midi, avant de se reprendre quelque peu par la suite.
Régulièrement en première ligne depuis un mois, la Société Générale a encore fait office de cible privilégiée, même si ses concurrentes ont été aussi malmenées.

La banque de La Défense a vu son cours perdre 10,5% à 17,44 euros et approcher de son plancher de 17,28 euros, atteint en séance le 10 mars 2009.
Le groupe a encore fait l'objet de rumeurs vendredi, dans la lignée de celles, plus folles les unes que les autres, entendues depuis début août et systématiquement démenties.
Une enquête de l'Autorité des marchés financiers AMF) est en cours sur le sujet et le président du gendarme des marchés, Jean-Pierre Jouyet, a mentionné jeudi comme origine possible les pays anglo-saxons, l'Asiemais aussi la France.
Quant au Crédit Agricole, déjà au plus bas, il a établi vendredi un nouveau plancher en séance depuis son entrée en Bourse (à 5,35 euros), abandonnant finalement 7,7% à 5,40 euros. BNP Paribas a perdu jusqu'à 7,5% à 29,80 euros.
Contrairement au début de la semaine, le marché a eu la main nettement plus lourde sur les banques françaises que sur leurs consoeurs européennes.
Avant l'ouverture d'une réunion du G7 à Marseille, la directrice du Fonds monétaire international (FMI), Christine Lagarde, a appelé vendredi, pour la troisième fois en quelques jours, à une recapitalisation des banques européennes.
Le fait de préciser qu'elle ne visait que "certaines" banques et non les établissements européens dans leur ensemble, comme ses propos initiaux avaient pu le laisser penser, n'a pas modifié l'humeur des marchés, qui n'ont retenu que la tonalité d'ensemble du discours.
"Les explications (à la baisse des cours) sont les mêmes que les jours précédents", a commenté un analyste sous couvert d'anonymat: la possible contagion de la crise grecque et le fort ralentissement de la conjoncture économique.
"Il y a une inquiétude générale concernant l'accès à la liquidité", a expliqué Jon Peace, analyste de Nomura, malgré les propos du président de la Banque centrale européenne (BCE), Jean-Claude Trichet, qui a redit jeudi que l'institution continuerait d'alimenter les banques autant que nécessaire.
Principal indicateur de tension sur le marché interbancaire, l'écart entre le principal taux du marché, l'Euribor à échéance 3 mois, et le taux de l'argent au jour le jour (overnight indexed swap ou OIS), a renoué vendredi avec son niveau d'avril 2009, au lendemain de la crise financière.
Dans le cas des banques dont la capitalisation dégringole à des niveaux jamais vus, "plus on descend, plus la dilution sera forte en cas d'augmentation de capital, ce qui renforce encore l'inquiétude" et peut créer un effet de spirale, observe M. Peace.
L'interdiction des Ventes à découvert sur dix valeurs financières, décrétée par l'AMF le 11 août et prolongée le 25, peut toutefois contribuer à éviter un scénario de ce type.
L'analyste précise que la Société Générale n'a, selon lui, pas besoin de lever des fonds, notamment parce que son exposition à la dette des Etats les plus attaqués de la zone euro est modeste.
"Je ne m'attends pas à une annonce d'augmentation de capital d'ici la fin de ce trimestre" de la part d'une grande banque européenne, livre un analyste, sous couvert d'anonymat.



- [CRISE DE LA ZONE EURO
Le Premier ministre néerlandais veut sortir les mauvais élèves->http://www.presseurop.eu/fr/content/news-brief-cover/931501-le-premier-ministre-neerlandais-veut-sortir-les-mauvais-eleves]


De Volkskrant, 9 septembre 2011
Un tabou a peut être été brisé. "Rutte [le Premier ministre néerlandais] est le premier à parler d'expulsion de la zone euro",titre De Volkskrant. Si certains pays échouent de façon systématique à respecter les lois budgétaires de l'UE, ils devraient choisir de quitter la zone euro, a-t-il écrit dans une lettre adressée au parlement néerlandais. Et dans une tribune écrite dans le Financial Times, le 8 septembre, Rutte et son ministre des Finances Jan Kees De Jager ont parlé sans détour : "A l'avenir, la sanction ultime pourrait être d'obliger les pays à quitter l'euro". "La punition ultime d'une sortie forcée est, selon le gouvernement, quelque chose qui pourrait s'appliquer sur le long terme. Car une modification du traité européen prendrait des années (…)", précise le quotidien.
Le gouvernement néerlandais, réputé, selon NRC Handelsblad, pour être le "donneur de leçon" de l'Europe sur les questions de la discipline budgétaire, a également suggéré la création d'un poste de commissaire indépendant du budget européen. Une idée soutenue selon de Jager par la Finlande et l'Allemagne et qui pourrait s'appliquer sur le court terme, selon De Volkskrant.



- Suisse : “Bienvenue dans la zone euro”

Après des mois de polémiques sur la flambée du franc suisse, la Banque nationale suisse a décidé de fixer un taux de change plancher entre la monnaie helvétique et l’euro. En Europe, les réactions oscillent entre étonnement et curiosité pour une décision qui tombe en pleine tourmente de la monnaie unique.
"L’option nucléaire", consistant à fixer le taux de change minimum entre le franc suisse et l'euro (1,20 franc pour un euro) constitue un "grand pari", comme le titre Le Temps. Pour le quotidien genêvois, ce choix
défie frontalement la logique de marchés financiers qui cherchent refuge [dans le Franc suisse] pour se protéger d’une zone euro proche de l’implosion et d’un dollar plombé par des montagnes de dettes et déficits. […] La Banque nationale suisse (BNS) a jugé, à raison, que la zone euro et l’économie américaine n’offrent, à moyen terme, plus aucune assurance de retrouver un semblant de stabilité. Pour les entreprises d’exportation, l’appréciation du franc [depuis le début de l'année, la devise helvétique s'est appréciée de 11% face à l'euro et de plus de 15% face au dollar] devenait insupportable et mortelle, tant elle est rapide et brutale.
“Bienvenue dans l’euro-club”, lance le Handelsblatt, qui illustre son propos par photomontage montrant le drapeau de l’UE au pied du Cervin, la montagne emblématique de la Suisse. Pour le journal économique de Düsseldorf, la décision de la BNS marque “la fin d’une époque. La Suisse, qui a depuis toujours tenu énormément à son indépendance, lie sa monnaie à l’euro. L’industrie liée à l’export a trop souffert du franc fort”. Son confrère Die Welt constate quant à elle qu’“Il n’y a plus d‘îles” en Europe :
Pendant des années la Suisse a eu un statut d’exception: une faible taxation du capital, un secret bancaire inébranlable, l’économie était stable. [Mais] une monnaie nationale trop forte constitue une menace existentielle pour les exportations et le tourisme. Cette décision révèle deux choses : la soit-disant île est en vérité étroitement liée à la zone euro, et la Suisse va forcement devenir de plus en plus européenne.
"Le franc se raidit”, titre Gazeta Wyborcza, notant que “le gouvernement suisse a pris tout le mond de court, en fixant un plancher pour le taux de change de sa monnaie et en affirmant qu’il allait le défendre jusqu’au bout”. Pour le quotidien de Varsovie,
cette intervention est un acte de désespoir de la BNS, qui a tenté pendant des mois de dévaluer le franc. Une monnaie forte signifie en effet que le made in Switzerland est cher à l’export, que les sociétés suisses licencient, que les Suisses vont faire leurs achats dans les pays voisins, devenus meilleur marché. De quelles armes dispose la BNS ? D’abord, d’énormes réserves financières ; ensuite, elle peut faire tourner la planche à billets. C’est ce que les banques centrales européenne et américaine font lorsqu’elles ont besoin de davantage de liquidités pour acheter des bons du trésor des pays menacés de banqueroute.


- [What no one else will tell you about 9/11 -
Commentary: The astonishing investment fact everyone has ignored->http://www.marketwatch.com/story/what-no-one-else-will-tell-you-about-911-2011-09-09]

By Brett Arends, MarketWatch
BOSTON (MarketWatch) — What kind of person rushed out after 9/11 and invested their money in the stock markets of Muslim countries?
Turns out: A shrewd one.
As you may have noticed, it’s the 10-year anniversary of “the day that changed everything.” I thought I’d scan the performances of different investments and asset classes over the intervening years to see how they’d done.
You know about gold, and Apple stock.
But one thing stood out immediately.

Defying the conventional wisdom, let alone the gloomiest predictions: Someone who invested in the Muslim world following 9/11 has done just fine.
Indeed: Better than fine.
These markets have for the most part left Wall Street, and other Western markets, in the shade.
MSCI, the stock market performance company, has been tracking the markets of six mainly Muslim countries for all of that time. Their annual gross returns range from about 8% a year, in the case of Jordan, all the way up to a stunning 30% a year for the biggest, that of Indonesia.
Let’s put that in terms of results.
If you’d invested $1,000 in the stock markets of the developed Western world 10 years ago, and just left it there, today you’d have about $1,500. (That includes dividends, but ignores taxes).
The figure for Jordan: $2,100.
In the case of Turkey and Morocco, you’d have around $4,500 each. Pakistan would have left you with more than $6,000, and Egypt around $7,600.
As for the stock market of the world’s biggest Muslim country, Indonesia?
You’d have about $14,200, says MSCI. No kidding.





- Party Celebrating Capitalism Has Ended: Fund Manager

By: Patrick Allen
CNBC EMEA Head of News
America’s strained relationship between democracy and capitalism is at an inflection point that is likely to favor the politicians over the bankers, according to Richard Maraviglia, a hedge fund manager at Carson Capital in London.

“The United States could be thought of as a strained marriage of democracy and capitalism,” said Maraviglia in a research note obtained by CNBC.
“The party celebrating capitalism was a great one, but all parties come to an end and so did that one. Whenever one sector of a mixed economy has been 'in power' too long, it tends to suffer from hubris,” he said.
Governments in the 1970s acted like the capitalists at the turn of the new millennium. when Wall Street convinced itself that “the more capitalist laissez-fair free-market an economy was, the gentler (non-volatile) a business cycle would be”, according to Maraviglia.
“Capitalism offers the opportunity to get rich, but it also requires the occasional duty of going broke,” he said.
“While socialism offers a relatively calm existence, capitalism presents us with a state of continuous revolution. Creative destruction and capital expenditure booms. Except few were ever allowed to go broke in this cycle. Big government stepped in and took away the business cycle through a series of stimuli or truly unprecedented proportion,” Maraviglia said.
We are now at a point in the battle between democracy and capitalism where the politicians and the business leaders are set for conflict, according to Maraviglia.
“Let’s face it, Washington is a disaster. Political brinkmanship is quite clearly exacerbating what is an already Herculean task. When we look at Merkel, Sarkozy, Obama, and Chavez we see a slow wave of socialism building in the absence of a better solution,” he said.
This had led the likes of Warren Buffett and Howard Schultz, the CEO ofStarbucks [SBUX 37.49 -0.70 (-1.83%) ] to call for an end to political donations to Washington until it gets its act together as the market deals with huge uncertainty over the debt crisis.
The policy response from the Federal Reserve to the current crisis is likely to be operation twist followed by a repeat of QE2, the second round of quantitative easing , if we enter a full-on crisis, according to Maraviglia.
“Economies will be cocooned in massive ineffectual, dam-plugging QE,” he said.




Germany's EU Commissioner Oettinger
- 'Deficit Sinners' Flags Should Fly at Half-Mast'


Greece should be forced to fly its EU flags at half-mast in shame, Oettinger said.
With the debt crisis in Greece spiralling out of control, German EU Energy Commissioner Günther Oettinger suggested some radical solutions on Friday. Not only should EU officials take over tax collection for the 'obviously ineffective' Greeks, but 'deficit sinner' countries should be made to fly their flags at half mast.
Greece clearly needs help escaping from its financial quagmire, according to German European Union Energy Commissioner Günther Oettinger. In fact, the EU should consider using some "unconventional" methods to increase motivation among Greek officials for solving the country's problems, he told daily Bild on Friday.
"There has been the suggestion too of flying the flags of deficit sinners at half mast in front of EU buildings," the member of Chancellor Angela Merkel'sconservative Christian Democrats told the paper. "It would just be a symbol, but would still be a big deterrent."
Another tactic for pulling the debt-stricken country out of crisis could be replacing "the obviously ineffective administrators" there, he added. Because Greek officials have failed at collecting outstanding taxes and selling state-owned assets as planned, Oettinger alleged, experts from other EU nations should be sent in to do their jobs instead. "They could operate without concern for resistance and end the inefficiency," he told Bild.
After all: "Those who demand solidarity from the other countries must also be prepared to give up partial responsibility for a certain time."
Talk of EU Exclusion
As pressure from other euro-zone nations to avoid debt default grows, Greece's efforts at achieving promised reforms and fiscal goals have faltered . The country received its first €110-billion bailout a year and a half ago after pledging new austerity measures and other changes, but improvements have been hindered by deep-seated corruption, structural problems and public resistance.
Last week the "troika" of inspectors from the EU, the International Monetary Fund and the European Central Bank left Greece early after putting a stop to talks on paying the next aid tranche because the country had failed to achieve reforms.
Meanwhile a growing chorus of politicians in other EU countries, including senior-level German lawmakers, are now openly discussing the taboo of excluding Greece from the euro zone.
But Oettinger warned against such a move. "That would divide Europe and would be a disastrous signal," he told Bild. "Then investors and markets wouldn't trust us at all anymore for the future."
--kla, with wires


- Strong words from a weak president


By ROGER SIMON | Another day, another speech. A speech that promised more speeches. And so Barack Obama, who once soared on the wings of hope, now plods on the leaden feet of reality.
“We can stop the political circus and actually do something to help the economy,” the president said in a speech to a joint session of Congress Thursday evening.
Continue Reading
Were it only so. Obama delivered a strong speech at a time when he has never been weaker. Gallup says only 44 percent of the nation approves of how he is doing his job, while 50 percent disapprove. He is, in other words, “upside down” by 6 percentage points.
A president can demand that Congress pass a bold jobs plan when his numbers are high. But when a president’s numbers are low, he can only beseech.
And make promises. Including one for another speech. “A week from Monday, I’ll be releasing a more ambitious deficit plan,” the president said.
He did not place a price tag on that ambition, but the Washington Post says it will cost $447 billion.
The president’s first stimulus plan cost $787 billion, and it has not worked well enough to fix the economy. Will $447 billion more do the job? Or will it be good money after bad?
And even if he can get the Republicans and Democrats to agree to such a plan - - a huge if - - where will America get the money? There is only one way: We must borrow it. We must plunge deeper in debt in order to climb out of the hole. Or so the president says.
Obama succinctly described the difference between his party and the Republicans: “Some of you sincerely believe that the only solution to our economic challenges is to simply cut most government spending and eliminate most government regulations.”
Obama didn’t actually sneer while saying that, but the sneer was implied.
We cannot cut and dismantle, the president said, we must build. Roads! Bridges! Schools! Dams! Airports!
And then he reached the “nut graph,” that part of a speech that gets to the heart of the matter.
“I know there’s been a lot of skepticism about whether the politics of the moment will allow us to pass this jobs plan - - or any jobs plan,” Obama said, after telling Congress “pass this jobs bill” or “pass this bill” more than a dozen times.
“Already the media has proclaimed that it’s impossible to bridge our differences,” he went on. “And maybe some of you have decided that those differences are so great that we can only resolve them at the ballot box.”
Well, yes, there is that. In November of next year a new president may be elected along with a new Congress, and power may shift more decisively to the Republicans. Which would mean new speeches and different plans.


- Black Tuesday as US markets revalue to global banking crisis part two

US markets open today after a holiday on Monday and face a mounting global banking crisis centred on Europe that yesterday pulled equities down by more than five per cent in Germany. It is going to be a Black Tuesday with US futures down two per cent.
As they return to work US brokers still have the US jobs disaster of last week’s unemployment figures in their heads but the real crisis is emerging far away in the eurozone, and few have yet to digest its real implications.
European banking crisis
When the the head of Deutsche Bank warns that many smaller European banks will not survive the sovereign debt implosion that is about to happen, and says that this situation looks very much like the autumn of 2008, it is time to head for the hills.
He could also cite the parallel with 1931 and the credit crisis that originated in Europe from the collapse of the Credit Anstaldt Bank in Austria. That brought on the worst years of the Great Depression.
But such remarks are not made lightly and indeed you have to wonder what the head of a major bank is doing in making them at all. It is certainly far from being a positive indicator, and you could say what would be worse?
In the eurozone the sovereign debt crisis lurches from worse to worse. US observers assume that the EU will get its act together but there is no sign of this happening. Rather the EU officials almost seem to want a crisis to extend their central powers in an emergency. Perhaps they realise that they will not get such power without it.
That is surely coming. However, the collateral damage is going to be enormous. Small banks will fail and so will small countries like Greece and possibly others. Have US banks insulated themselves entirely from this? Hardly, there will be a massive contagion as nobody is stress testing on this scale or has recapitalized to face this storm.
US subprime mess
Meantime, the US banks are still dealing with their own subprime lending crisis, and as the economy stagnates rather than grows the mortgage deliquencies can only go up and the write-offs rise.
A financial system full of bad debts has to purge itself one way or another. Only then can the pieces be picked up much more cheaply and a recovery follow.
What we are paying now is the price for not allowing some kind of systemic collapse in the global financial crisis three years ago, welcome to part two, the real Day of Reckoning.
In the absence of any turnaround in the US or European economies, Maraviglia saidglobal growth is likely to be dependent on an economy that is far from democratic: China.
“China has engaged in a phenomenal fixed asset investment boom and now it wants to morph its economy into a domestic consumption model. As China daily fixes its yuan higher, it is making millions of Chinese people middle class,” he said.




- High Noon Approaching for Greece?

By: Edward Hugh
Independent Economist
The Greek tragedy in several acts would appear to be approaching a climactic moment. The warnings coming out of Berlin all week have been hard to ignore: "Greece either puts up or shoves off" would seem to be the blunt message being offered.

Only yesterday, German Finance Minsister Wolfgang Schaeuble informed members of the parliamentary budget committee that Greece is now perched on a "knife's edge". This follows hints from other leading German politicians (including Angela Merkel herself) that a Greek euro [EUR=X 1.3808 -0.0073 (-0.53%) ] exit is no longer the unthinkable taboo topic which it had been to date.
As if all of this wasn't clear enough, the Dutch Prime Minister Mark Rutte suggested yesterday in an FT article that expulsion from the Euro Area should be available as a disciplinary measure of last resort.
The backdrop to all this heavy language is, of course, the sudden suspension of the quarterly program review by Troika representatives at the end of last week. The message that is being put across to the Greek administration is that they need to come up with the goods by next Monday when discussions on their review are set to resume—or else.
Naturally, the easiest thing to assume is that all of this is simply a bout of strong rhetoric to try and force the Greek government to fall into line. But there is another issue looming which could also threaten to upset the apple cart if the ball bounces the wrong way, and that it the proposed bond swap that constitutes the core of the private sector involvement (PSI) included in Greece's second bailout program at Angela Merkel's insistence.
One of the little-discussed features of this swap, which involves some 135 billion euros in Greek debt, is the effect it will have on the legal framework governing Greek bonds. At the present time, some 90 percent of those bonds are governed by Greek law, a state of affairs which would evidently give the Greek authorities a certain advantage were there ever to be a hard default.
As veteran debt lawyer (and current adviser to the Greek government) Lee Buchheit put it in a 2010 paper on Greek debt restructuring: “No other debtor country in modern history has been in a position significantly to affect outcome of a sovereign debt restructuring by changing some feature of the law by which the vast majority of the instruments are governed.”
Given this, it's hard to understand why anyone in such a uniquely favorable position would wish to voluntarily surrender it.

All of this explains why I personally was not that surprised by today's statement from OECD Chief Economist Pier Carlo Padoan that the plan wasn't working out as planned, since there had only been a 75 percent take-up. The Greek government itself raised more than an eyebrow or two when it laid down a minimum 90 percent participation as its condition for proceeding, in a letter the government sent to global finance ministers at the end of August.
If the PSI falls, then so does the second bailout plan, and judging by the prevailing mood in Northern Europe at the moment, it seems unlikely that all parties are in the frame of mind to go all the way back to the drawing board. So when the Troika inspectors are on their flights back to Athens, it isn't hard to imagine that they will have more than the fiscal slippage implied by Greece's second-quarter 7.3 percent drop in GDP on their minds.



- Gloomy HSBC reports highlights UAE and KSA economic slowdown


The widely followed Purchasing Managers Index compiled by HSBC shows the UAE economy is close to stalling, ending the recovery evident in the first half of the year.
August was a particularly bad month, even after seasonal adjustments for the summer and Ramadan, and the PMI score fell to 50.9, its lowest level in 14 months. Regional chief economist Simon Williams commented: You can’t help feeling the slowdown across developed and emerging markets is evident here’.
For Saudi Arabia its PMI score slipped by two points to 58, the lowest reading in 18 months, reflecting a slowdown in output and new orders.
Global slowdown
ArabianMoney has previously reported on the sudden slowdown in global trade flows (click here), an ominous repetition of the backdrop to the slump in global trade during and immediately after the global financial crisis of late 2008. Most trade is dependent on credit and when that stops so does trade.
For the UAE a number close to 50 means stagnation, a drop below that number is a contraction or negative GDP. The UAE saw its economy nose-dive into 2009 although official statistics do not show the true extent of the contraction. The real estate market crashed from boom conditions and trade contracted violently in the first half.
Will it be any different this time? Well the real estate market is still relatively subdued so cannot crash to the same extent again and local banks have recapitalized since then, so the UAE will not get such a rough ride.
Oil price fall
However, oil prices have come down from recent peaks and will undoubtedly fall a lot further if the world goes back into recession.
That hits oil export earnings hard, and they have been running at record levels during the Arab Spring this year, mostly explaining the UAE economic recovery in the first half of this year, alongside a rise in trade and tourism. The Kingdom has been earning an extra $1 billion-a-week from higher oil revenues and the UAE around a quarter of that amount.
The HSBC survey showed that UAE output dropped four points in August, and new orders extended falls noted in July and employment growth also slowed up. With the KSA also trending lower this is not a great start to the final business season of the year.


- Spain | Teachers in Madrid this week protested against proposed budget cuts in public education.
By STEVEN ERLANGER

PARIS — With markets still volatile, and politicians only marginally closer to a solution of the euro’s troubles than they were two years ago, the future for the euro zone remains uncertain at best.
Economists and financial analysts point to a series of land mines that lie ahead.
Growth is slowing, even in Germany, where exports are down and imports are stagnant. A team of experts stalked out of Greece last week to force Athens to live up to its debt-cutting promises as its bills continue to mount. The Italian government is applying fiscal Band-Aids to its deficit instead of surgery, while there is new budgetary pressure on Rome and Madrid, considered too big to bail out.
On Thursday, the Organization for Economic Cooperation and Development provided only the latest gloomy assessment of the prospects for a new recession and a European banking crisis. “The sovereign debt crisis in the euro area could intensify again,” the group said, urging the recapitalization of some European banks and better financial management in the 17-nation euro zone.
And the German finance minister, Wolfgang Schäuble, scolded Athens, warning that European aid would be provided only “if Greece actually does what it agreed to do.”
“The situation is extremely grave,” said Julian Callow, chief European economist for Barclays Capital. “Despite a sharp slowdown in economic activity, especially on the export side, you still have to push governments with large deficits to cut them to levels that are sustainable. That’s the key challenge, and the economic environment is much less favorable now for fiscal consolidation in the euro zone. And the Greek situation is like a ticking bomb.”
But Europe works in incremental steps, driven by crisis and the domestic politics of its nations. Any sweeping solution to the problems of the euro — like an “economic government,” or a pan-European Treasury or Finance Ministry, or collective “euro bonds” — is many months, if not years, away.
Still, most experts agree that Europe’s crisis will persist until it adopts a far tighter fiscal and monetary union, expels weaker economies or divides into two, with different currencies.
“You either go forward to more European economic governance or backward,” said Edwin M. Truman of the Peterson Institute for International Economics. “And if you go backward, you go backward pretty far, to the fragmentation of Europe.”
Mr. Callow said that the mood among European central bankers and German officials, too, was “centralize or die.”
For now, Europe is working on ratifying the changes made to its economic system at a meeting on July 21. To go into effect, even those limited changes must be approved by all euro-zone countries and their parliaments, which may take until mid-October, further unnerving markets.
The hope among experts and economists is that the changes, if carried out with skill, may allow Europe to further isolate Greece and its unsustainable debts from other countries, reducing the risk of contagion and buying time for other countries to fix their budgets and work on how to better centralize control of fiscal policy. Though abstract on the surface, the changes will provide more flexibility to bail out or further restructure Greek debt, to aid Italy and Spain with their bond sales and even to recapitalize some European banks, weakened by their exposure to sovereign debt in the form of Greek, Portuguese, Spanish and Italian bonds.
Changes in the European Financial Stability Facility, which will be expanded to $610 billion of collective financing from the 17 euro-zone states, should also allow it to act as a kind of bank. That would help relieve the European Central Bank from its current role as the buyer of last resort for Italian and Spanish bonds, a decision it reluctantly made to keep down the borrowing costs of those governments and prevent Greece’s problems from infecting the rest of Europe.
The facility itself is already a form of stealth euro bond, in that its obligations are shared by all euro-zone members.



- French Energy Giant Total Makes Huge Gas Discovery In The Caspian Sea

Mamta Badkar |
French multinational oil and gas company Total S.A. has announced a major gas discovery in the Caspian Sea. First results confirmed "a potential of several trillion cubic feet of gas and associated condensates".
The discovery has been in the Absheron block off the coast of Azerbaijan. The Absheron X-2 well is at a depth of 6,550 meters and the company will continue drilling to explore and tested again to better confirm the reservoir potential.
Total also announced a hydrocarbon discovery in French Guiana's offshore Guyane Maritime license today.






- [Bush's Tragic Legacy
How 9/11 Triggered America's Decline->http://www.spiegel.de/international/world/0,1518,785405,00.html]

A Commentary by Gregor Peter Schmitz in Washington

The events of Sept. 11, 2001 led to a wave of solidarity with the US. But the superpower has lost that goodwill over the course of the wars it subsequently waged. Now America is mainly seen not as the victim of terrorism, but as a perpetrator of violence itself.
Info
The smoke was still rising from the rubble of the World Trade Center when Richard Armitage, at the time the US deputy secretary of state, spoke in the aftermath of the 9/11 attacks. "History begins today," he said.
In the coming decade, Armitage would turn out to be right -- except the politician could not have foreseen how tragic the history would be following the epochal event.
It is the history of the decline of the USA as a superpower.
Immediately before the attacks, this country was in full bloom -- like Rome at its peak, as TV host Joe Scarborough recalls today.
The Republican President George W. Bush had inherited a fat budget surplus from the Democrat Bill Clinton. In Kosovo, the US, which Madeleine Albright dubbed "the indispensable nation," had just shown the Europeans how it could resolve conflicts, even in their own backyard. Bill Gates and Microsoft were still cool.
Then came the planes, piloted by the followers of Osama bin Laden -- and for a brief moment, the superpower seemed even more powerful than ever. Palestinian leader Yasser Arafat had himself photographed donating blood for the victims. Even the French all suddenly wanted to be Americans. German Chancellor Gerhard Schröder promised "unlimited solidarity."
What followed was an unlimited mistake. Bin Laden had hoped to entangle the Americans in bloody wars. How well he would succeed in doing this, he probably could not have imagined himself.
Bush's Tragic Legacy
America was trapped in Iraq for years, where a victory was a long time coming and was never a real one. It is currently trapped in Afghanistan, where victory no longer even seems possible. And it is trapped in an embrace with his its ally Pakistan, which it does not trust and yet cannot release.
These are costly defeats for America and the rest of the world. According to a conservative estimate of Brown University, there have been almost 140,000 civilian casualties in Afghanistan and Iraq. The massive retaliation cost more than $3 trillion (€2.2 trillion) -- dollars that would have been better used in America's schools or in the wallets of US citizens.
For a short time after the attacks, the country seemed united. Americans embraced each other. Even the cold city of New York suddenly seemed warm. But instead of cultivating public spirit, President Bush sought to find a pretext -- any pretext -- to invade Afghanistan and Iraq. This is his most tragic legacy, the fact that America can no longer even mourn its victims properly -- because Americans have long been not just victims, but also perpetrators.
But the decade of terror did in fact traumatize Americans and turn them into victims -- even those who only experienced the attacks on television.
A Country at War with Itself
Today, following all the Bush-era tax cuts, the US is a deeply divided country in social terms. The gap between rich and poor is almost as great as it was in the days of oil barons and steel magnates in the last century. Five percent of Americans buy almost 40 percent of all consumer goods sold in the country.
The country is at war with itself. It has a Congress where there is perpetual conflict between the right and the left -- and where they don't even want to talk to each other when the threat of a national bankruptcy looms.
Like no other country, the US became great because of its openness. Now, it has become distrustful, fearful and defensive -- against Muslims, against foreigners, against anyone who is different. Citizen militias hunt down illegal immigrants, and many people can still not accept having a black president in the White House.
"American exceptionalism" was always the US's trump card. The new candidates for the White House still refer to it in the election campaign, but it sounds like a hollow mantra -- one of those election promises that shouldn't be examined too closely.
Because if it was, then people might realize that many things in America are only exceptional because they are exceptionally bad. The country has lousy health statistics despite having one of the most expensive health care systems in the world. Then there are the billions wasted in the education system, not to mention the armaments madness -- the US spends almost as much on defense as the rest of the world put together.
And then there is the fixation on a financial system that rewards gamblers, where the country's most talented young people no longer work on developing new patents, but on financial wizardry. Meanwhile, China and other emerging economies can happily concentrate on their own ascent.
Estranged from the Rest of the World
Where has that one-of-a-kind America gone? New York Magazine sums it up: "Ten years later, America now looks a bit more like other countries do -- our embrace of capitalism has grown more complicated, our class mobility less certain, our immigrants and our diversity less unique..."
Even in foreign policy, the world power is no longer seen as the world's role model. "Leading from behind" is the maxim of the current president, Barack Obama, who says it is out of necessity. Because stateside, a strange alliance has formed, between those on the fringes of mainstream politics both on the left and on the right.
They want to turn America into a tight-fisted world power. They only want one thing: US troops should come home, and then other countries should see how they fare. After all, the isolationists argue, these other countries don't understand America anyway.
The US has become estranged from the rest of the world. It is partly its own fault, but the rest of the world also shares some of the blame -- because many only see America as a perpetrator, and no longer regard it as a victim.
This was most evident on the day that bin Laden was killed. Americans cheered spontaneously on the streets when they heard the news. But many people in other parts of the world did not want to celebrate with them. They reacted with agitation to the openly flaunted joy over the terrorist's death. The alienation of the others often sounded patronizing and self-satisfied.
But it underlined that the victims of the attacks were no longer in the foreground. Instead, the sins of the first victims were brought into focus -- America's sins. The superpower, to a large extent, only has itself to blame. But it is still sad nonetheless.


- Germany Said to Ready Plan to Help Banks If Greece Defaults

By Alan Crawford - Sep 9, 2011
Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.
The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.
The existence of a “Plan B” underscores German concerns thatGreece’s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.
Greece is “on a knife’s edge,” German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.
Schaeuble travelled to a meeting of central bankers and finance ministers from the Group of Seven nations in Marseille, France, today as they face calls to boost growth amid increasing threats fromEurope’s debt crisis and a slowing global recovery.
Progress Report
The German government is awaiting the results of the Greek progress report and will decide what course of action then, a government spokesman said, speaking on customary condition of anonymity.
European bank credit risk surged to an all-time high today and stocks fell worldwide on concern that the debt crisis is escalating. German two-year yields declined to a record as investors sought a haven and Greek two-year note yields added as much as 86 basis points to 55.91 percent, a euro-era record.
Credit-default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238, according to CMA. The five- year contracts signal there’s a 92 percent probability the country won’t meet its debt commitments.
“Countries must act now and act boldly to steer their economies through this dangerous new phase of the recovery,” International Monetary Fund Managing Director Christine Lagarde said in a speech in London today. “We must not underestimate the risks of a further spread of economic weakness or even a debilitating liquidity crisis,” she said. “That is why action is needed urgently so banks can return to the business of financing economic activity.”
Barroso Meeting
Merkel, who is due to discuss the crisis with European Commission President Jose Barroso in Berlin on Sept. 12, is battling to secure a majority among her coalition bloc to push an overhaul of the European Financial Stability Facility through the lower house of parliament on Sept. 29. The changes would give the EFSF the power to buy bonds in the secondary market, raising German guarantees to 211 billion euros ($290 billion) from 123 billion euros.
Longer term, euro countries will “only preserve the common currency if there is more integration” in the European Union, Merkel said in a speech in Berlin today. The EU “won’t be able to avoid treaty change.” While intensive discussions lie ahead and the path won’t be easy, policy makers “shouldn’t be afraid” of tackling the challenge, she said.
Policy makers in Europe “are moving,” U.S. Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview from the G-7 in Marseille. “But I think they’re going to have to demonstrate to the world they have enough political will.”


- Behind the Selloff: US Is Struggling, Europe Is Worse

By: Jeff Cox
CNBC.com Senior Writer
The latest turmoil in Europe is overshadowing efforts to revive the US economy, indicating that markets will continue to struggle until the debt crisis in Greece and other EU nations is finally resolved.
Despite an oft-stated belief from economists that the problems in Europe’s peripheral nations won’t spread through the world’s economy, investors are acting as if a tipping point is near.
“There’s the sense that there is this denouement coming, that we’re coming to some important event in Europe,” said Quincy Krosby, market strategist at Prudential Financial in Newark, N.J. “We’ve circled back to Greece.”
Stocks sold off sharply Friday, driven primarily by worries that the European Union is unraveling.
Rumors that Greece was about to default on its debt—fiercely denied by the nation’s government—overwhelmed efforts the day before by US policy makers to assure that help was on the way for the domestic economy.
President Obama on Thursday evening unveiled a nearly half-trillion dollar jobs-creation program, while Federal Reserve Chairman Ben Bernanke earliertried to assure investors that the central bank would not let the economy sink.

The market took no solace from either presentation, selling off after the Bernanke speech and opening lower the morning after seeing the president’s plan.
“With the president’s speech, yes, it was important for the market. But right now it’s more about Europe,” Krosby said. “Overall there was nothing really new in that speech that had not already been telegraphed.”
Much the same could be said for Bernanke’s presentation in Minnesota.
“Anyone looking for confirmation that the Fed is preparing to act further…would have been a little disappointed by (Bernanke’s) speech,” Paul Ashworth, chief US economist at Capital Economics in Toronto, wrote in an analysis. “He noted that the Fed has a range of tools available to provide additional stimulus, but he didn’t expand on what those tools were or drop any hints that additional stimulus was definitely on the way.”
With the inability of US policymakers to change the narrative, investors were left to revisit the troublesome nemesis of euro zone debt.
Despite repeated bailout efforts and attempts to devise creative strategies to forestall the problem, the idea has not gone away that widespread defaults are in the offing that will threaten not just the region’s health but elsewhere as well.
“The Eurozone authorities have always avoided the next crisis around the corner by strengthening their firepower despite initial political constraints,” wrote Athanasios Vamvakidis, forex strategist at Bank of America Merrill Lynch. “However, with markets now concerned about Italy and Spain, the euro zone crisis could become systemic.”
What scares investors most is that even if Congress passes portions of Obama’s jobs plan and Bernanke’s Fed can stimulate growth with another round of easing, their efforts could be for naught should the euro debt crisis explode.
“Economic and financial headwinds facing the economy are so strong that they have rendered monetary policy ineffective,” Daniel Aaronson and Lee Markowitz, principals at Continental Capital Advisors in New York, said in an analysis. “Therefore, the global debt problem, weak economic backdrop and corporate earnings will be the primary drivers of the stock market going forward.”
Still, lawmakers in Washington pledged Friday to give Obama’s plan a fair hearing.
Economists greeted the ideas with a broad level of skepticism, though, stating that the proposals to extend unemployment compensation, provide tax cuts for working-class families and give credits for small business job creation have been largely aired already.
The more ambitious plans, meanwhile, are considered unlikely to pass.
“Forecasters should thus see much of last night’s speech in a political light,” Citigroup economist Steven C. Wieting wrote. “However, to the extent that the president can generate popular support for added measures and to any extent that immediate fiscal tightening can be put off, it does offer the potential for incremental improvement in the US growth outlook, at least for 2012.”
With little help for big leaps on the home front, investors then are pushed to look overseas at the ominous European debt overhang.
“It’s an issue that we’ve been ignoring. We have a possible Greek default and there obviously still are issues in Europe and it could spill over to the US,” said Andre Julian, senior market strategist at OpVest Wealth Management in Irvine, Calif. “If they don’t come up with a real solution that’s more than rhetoric it’s going to continue to weigh down the global economy.”



- It's 'Time to Finally Let Greece Go': Strategist

By: JeeYeon Park
CNBC.com Writer
In addition to Germany preparing to shield its banks in the event of a Greek default, “every other European country” will be doing the same thing, according to Peter Boockvar, equity strategist of Miller Tabak.
“The fear feeds on itself,” Peter Boockvar of Miller Tabak told CNBC. “The end point will come next week or the week after the at the latest, where Greece is hoping that they get the next tranche [of international aid], because if they don’t, they realize they’ll run out of money.”
“All the money the [EU] is allocating to the EFSF (European Financial Stability Facility) and these bailouts can be better spent by recapitalizing these banks and finally letting Greece go,” said Boockvar. “The only way to cut debt is to cut debt, not pile on more debt.”
Earlier, Greece’s finance ministry dismissed rumors that the debt-ridden nation is planning on defaulting over the weekend. The news came after Germany announced it is making plans to protect their banks if Greece ends up defaulting on its debt, according to a Bloomberg report.
Adding to the euro zone woes, markets were earlier rattled by news that ECB Executive Board Member Juergen Stark will resign from his post due to conflict over the central bank's controversial bond-buying program.
“Europe is an enormous economy and their economy and banking systems are freezing up—so [this] is a warranted [market response],” Boockvar said, pointing to the sharp sell-off on Wall Street. “It does mean that global growth will continue to slow and earnings will need to be ratcheted down and is the unfortunate rational reaction to the downside”



- Surmising an End Game for the Euro

By: Dr Moorad Choudhry
Head of Business Treasury, Royal Bank of Scotland
Last week Jacek Rostowski, finance minister of Poland (a country that is not in the eurozone), noted that the choice facing EU leaders was “much deeper macroeconomic integration in the eurozone or its collapse. There is no third way.”
How refreshing to hear a politician speaking in such clear, unambiguous and factually accurate terms.
Mr. Rostowski is, of course, correct.
Every other step taken to shore up the eurozone only buys time, and an increasingly shorter amount of time at that, and does not present a real solution. This isn’t me being particularly clever, it simply reflects the reality of a currency union.
Consider the US dollar currency zone. Budget deficits in individual states are alleviated by cash transfers from the Federal center (which is assisted by the fact that some states operate a budget surplus). There is no political issue associated with these cash transfers, they simply happen – although clearly we can see that the size of the Federal deficit itself is a cause for concern for certain US politicians. But the basic principle is that, in a currency union with monetary policy set at the center and no way for individual countries (or states, in the USA) to devalue their way out of a budget deficit, fiscal policy needs either to be controlled at the center or otherwise the deficit states need cash transfers from surplus states.
That is the inescapable reality of a currency union, articulated most eloquently by Professor Milton Friedman just prior to the inception of the euro in 1999. The euro’s current problems were foreseen by him, when he noted that monetary union without fiscal union was not tenable. The EU’s Stability Pact was designed to deal with the tensions that arise from trying to balance 17 different country budgets all sharing a common currency, but that was shown to be ineffective even before the crash, when member countries routinely ignored it.
This is the end-game for the euro. The EFSF, whether it is EUR440 billion in size or increased to EUR1 trillion, will not solve the problem. Nor will any proposed Eurobond (wecommented recently in this column why that will not work). Governments will have to realize that either budget deficits need to be covered from the center, because if they do not then investors will stop lending them money, or fiscal policy will have to be centralized, thereby introducing the required discipline into country governments’ budget setting.
The first solution is a non-starter with EU taxpayers in the northern eurozone, but may still be forced through given that no vote at the national level is required – it can simply be enforced. EU decision-making is not necessarily what one might call democratic. The second solution is difficult politically and would take time to implement.
But if neither track is pursued and the EU simply tries to fudge through, it is difficult to see how certain southern eurozone countries do not eventually move to default. The alternative is even more horrendous to contemplate when one reviews the past history of multinational currency unions: in most cases, it has always been the economically strongest countries that withdrew first.
Dr Moorad Choudhry is Head of Business Treasury, Global Banking & Markets, Royal Bank of Scotland, and Visiting Professor at London Metropolitan University.



- Here's Why Everyone's Thinking That Greece Might Default This Weekend
Simone Foxman | Sep. 9, 2011 - Tons of people are chattering about the possibility of a Greek default today, with Germany ready to bail out its banks if that happens.
There are two reasons that people are speculating on a Greek default this weekend.
First, private sector participation in the bailout—in which bondholders would have to accept about a 21 percent haircut voluntarily—is not going to be very popular.
Greece bank managers have said they expect private sector participation in the bond swap to reach about 80%. This is well short of the 90% Greece demanded last month. If Greece were actually to take a hard line on this, it would compromise an $185 billion piece of the bailout agreement.
This swap technically signals default anyway, so the failure to go through with it means we'd see a hard default rather than the managed, "selective" default outlined in the July 21 agreement.
The deadline for bondholders to declare interest in the plan is today.
Second, Greece could learn that it will not receive further aid funding from the ECB/EU/IMF "troika."
Superficially, this doesn't seem like a huge deal. The aid funding at stake is $11 billion, small really in comparison to the size of Greek debt ($644 billion in 2010).
However, failure to receive this funding would signal that Greece is not meeting its debt and privatization goals, and jeopardize support for the bailout agreement announced on July 21. Parliaments and governments across the eurozone are deciding whether to move forward with that this month.
Policymakers aren't supposed to meet again until September 14. In the meantime, Greece is examining its books. If it finds that its numbers will not pass muster, it could go ahead with default at any time.