Technorati Tags: Customer Service , economics
Saturday, October 13
Cross border banking and financial stability in the EU
Seems like banking stability is the theme this Saturday!. Here's another research report on this issue written by Robert A. Eisenbeis
and George G. Kaufman, two luminaries of the banking world. Eisenbeis was Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta and Kaufman is the John Smith Professor of Banking at Loyola University Chicago and a consultant to the Federal Reserve Bank of Chicago.
If you see their paper, their constant emphasis on the word "prompt" is so vital. Customer and consumer confidence is fickle, and can ebb/flow very very quickly. So there is simply no time for navel gazing or finger pointing. If you need to do something, do it very quickly and fast. That means that decision making has to be quick. Which in turn means that roles/responsibilities are clear. My personal problem is that the last is very unclear in the European Financial Landscape.
And my biggest worry is that this will show up when a big bank goes under. Look at the performance of the various European regulators and ECB during the recent credit crunch. A variety of European and American banks based in the UK suffered liquidity problems, credit issues and reputational problems, and you had a variety of responses, mostly uncoordinated. This is a word of warning to our political leaders and economic leaders to get their act together.
If you want to write a case study, see how the various leaders in Europe reacted to the situation when BNP Paribas reported issues with its funds. Headless chickens! But this paper is a great start to that analysis, it gives very detailed tables relating to who or what is responsible for a failed institution. Deposit insurance across Europe. Funding mechanisms of this deposit insurance. Cross border banking demographics. And And. If somebody wants a copy, more than happy to share this. I quote their last but one closing paragraph.
The focus of this study has been on potential problems in the structure of supervisory and deposit insurance systems in cross-border banking and the related aspects of failure resolution and coordination when financial problems arise, with particular emphasis on the EU. The issue is of substantial current importance and deserves attention because the costs of any resulting crisis may more than offset the well analyzed efficiency benefits of cross-border banking. We have identified a number of issues and concerns about the present system design that are likely to result in higher than necessary costs of insolvencies in cross-border banking in the EU. To date, little progress appears to have been made in the EU in dealing with them. Indeed, as cross border branches and subsidiaries increase in importance in host EU countries, the resulting potential dangers of the current structure.are likely to become large and may not only reduce aggregate welfare in the affected countries substantially when foreign banks with domestic branches or subsidiaries approach insolvency, but also threaten financial stability.
Eisenbeis, R.A., Kaufman, G.G., Cross border banking and financial stability in the EU, Journal of Financial Stability (2007), doi:10.1016/j.jfs.2007.09.004
Abstract:
This paper examines the implications that alternative regulatory structures may have for resolving failed banking institutions. Emphasis on the European Union (EU), which is both economically and financially large and has several features relating to cross-border banking in the form of direct investment that may heighten the problems we consider. To ensure the efficient resolution of bank failures with minimum, if any, credit and liquidity losses four
policies should be followed. These include prompt legal closure of institutions before they become economically insolvent, prompt identification of claims and assignment of losses, prompt reopening of failed institutions, and prompt re-capitalizing and re-privatization of failed institutions. These policies together with a prompt corrective action system and structured early
intervention and resolution regime could be voluntarily adopted through the use of deposit insurance premium discounts as an incentive.
India outsources outsourcing
A very good and thought provoking article on Indian outsourcing. Some quotes:
The ability of an industry in a developing country such as India to export "managerial and entrepreneurial capital" to wealthier nations is unprecedented, say economists. Arvind Subramanian, of Johns Hopkins University in Baltimore, says that India exports 12% of its GDP ($120bn) in foreign direct investment. Professor Subramanian says this is part of India's "anomalous pattern of development". Countries typically specialise in industries such as IT only when their income per head passes $15,000 and they do not export investment until per capita GDP touches $45,000. The comparable figure for India is only $900. "India finds comparative advantage in skills and managerial capital ... how precocious is that?" he wrote this year.
The other strange feature is that the Indian economy, booming at 9% a year, is not driving the growth of India's software firms. Barely 2% of Infosys's income comes from India. Instead Wall Street banks asking for "Spanish language support" or China's booming economy sway investment decisions. Mr Gopalakrishnan says Infosys's "non-English-speaking revenues contribute about a fifth of the total. It is growing fast and we have to build up expertise in languages."
Technorati Tags: India , Outsourcing
When do you become an adult?
When do you become an adult? When you can join the army? when you can vote? when you can drink? or smoke? when you can make love without being accused of underage sex?
See this drinking map. The amount of inconsistencies in our laws is amazing and many times, very amusing.
Technorati Tags: legal system
The collapse of the Bank of Glasgow in 1878
How ironically prescient that I get hold of this research report on how the Bank of Glasgow collapsed in 1878. Just few days ago, we had a bank run in the UK when we saw long queue's in front of Northern Rock. The wonderful economic managers (Gordon Brown, Alistair Darling, FSA and the Bank of England) all managed to turn the reputation of our country into one of a banana republic. What does this tell us? it tells us that we do not learn. Sad, or what?
The Death Blow to Unlimited Liability in Victorian Britain:
The City of Glasgow Failure, Graeme G. Acheson & John D. Turner, Explorations in Economic History
Abstract
In 1878, one of Britain’s largest banks, the City of Glasgow Bank, collapsed, leaving a huge deficit between its assets and liabilities. As this bank, similar to many other contemporary British banks, had unlimited liability, its failure was accompanied by the bankruptcy of the vast majority of its stockholders. It is generally believed that
the collapse of this depository institution revealed the extent to which ownership in large joint-stock banks had been diffused to investors of very modest means. It is also believed that the failure resulted in bank shareholders dumping their shares unto the
market. Our evidence, garnered from ownership records, trading data, and stock prices, offers no support for these widely-held beliefs.
“It [City of Glasgow failure] was a calamity so unlooked for, so huge and disastrous, that it riveted men’s gaze and made their hearts stand still, and we shall all remember it to our dying day as a landmark in the history of our generation.”
A. J. Wilson (1879, p.46)
SWIFT moves most of its data outside American control
SWIFT announced that they will setup a data centre in Switzerland to make sure that European and Asian messages stay outside the control of USA.
If you recall, there was a huge argument some time back when the US Government requested SWIFT to present huge amounts of data to check terrorism related financial transactions. This made the European leaders go up in smoke such as here and here. Poor SWIFT was caught in the middle.
I am not sure that this will be sufficient as the Americans have shown very clearly that if they wish to have data related to terrorism, they will get it. Even if SWIFT move the data to Switzerland, they will have to release it if asked for it. Will just take a bit longer as it will have to go through the Swiss authorities. But the Swiss move very fast as well when criminal evidence is presented. They do not want the squeaky clean privacy / secrecy oriented banking image sullied either.
Technorati Tags: anti Money Laundering , counter-terrorism , terrorism , financial institutions , Switzerland
Friday, October 12
More confusion over the Darfur peacekeeping force
Jean Marie Guehenno, UN Under Secretary General for Peace Keeping Operations said that a strengthened UN Darfur peacekeeping force will not really be on the ground till well into next year. There are currently almost 20000 peacekeepers on the ground, 16000 from the AU, and about 4000 from Thailand, Bangladesh and Nepal. Sudan is furiously pushing against the inclusion of non-African peacekeepers into the peacekeeping force. For obvious reasons. Keep out the non Africans, and the pathetic under powered and equipped African forces cannot stop the genocide carried out by the Arab Sudanese regime!
Darfur is huge and you need logistics to keep the peace. If you don't have trucks, helicopters, fuel, a supply chain, heavy equipment, armoured personnel carriers, ammunition, etc. etc. what will these extra bodies do?
wave flags and sing "she will be coming down the mountain"? But guess what?
while simple equipment such as trucks and fuel can be arranged by even countries such as Nepal and Bangladesh, to deploy attack and transport helicopters requires a serious commitment from a serious army. And that means one of the western powers. Helicopters are one of the most maintenance intensive pieces of equipment. Closely followed by tracked vehicles. Very finicky and needs loads of maintenance. Look at where Darfur is based. Where is the equipment going to come from? Who will pay for it? If a Mogadishu like situation happens like it did when 10 African peacekeepers were killed recently , who will go in for rescue of these peacekeepers? and how? and from where?
See my previous posts on this half baked abortion of a mission here
Another new angle against Iran
The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of policies, both at the national and international levels, to combat money laundering and terrorist financing.
The thirty-four members of the FATF are: Argentina; Australia; Austria; Belgium; Brazil; Canada; China; Denmark; the European Commission; Finland; France; Germany; Greece; the Gulf Cooperation Council; Hong Kong, China; Iceland; Ireland; Italy; Japan; Luxembourg; Mexico; the Kingdom of the Netherlands; New Zealand; Norway; Portugal; the Russian Federation; Singapore; South Africa; Spain; Sweden; Switzerland; Turkey; the United Kingdom; and the United States.
The FATF has teeth, this body can and does ask all the financial institutions under its ambit and coverage to follow its requirements.
So now see what the chairman is saying:
The Financial Action Task Force (FATF) is concerned that the Islamic Republic of Iran’s lack of a comprehensive anti-money laundering / combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability within the international financial system. FATF calls upon Iran to address on an urgent basis its AML/CFT deficiencies, including those identified in the 2006 International Monetary Fund Article IV Consultation Report for Iran. FATF members are advising their financial institutions to take the risk arising from the deficiencies in Iran’s AML/CFT regime into account for enhanced due diligence. FATF looks forward to engaging with Iran to address these deficiencies.
You know what this means? this means that most risk and compliance managers within any FATF country will now pull down the shutters on almost every transaction to do with any kind of exposure to any Iranian financial institution. And if you are frozen out of these 34 countries (and the observer countries along with the associate countries), you can effectively wave goodbye to any kind of international transactions.
Barter system, anybody? Who is going to hump the big barrels of oil?
Technorati Tags: Anti Money Laundering , Central Banks , Regulation , Iran , terrorism , counter-terrorism , financial Institutions
Rich men and their toys
The Financial Times of today has a magazine which is called as “How to spend it”. I am not joking. Well, that kind of magazine usually goes straight to the bin, but due to the fact that I found the timing extremely amusing, I flipped through it.
The timing sucks because the financial markets are currently full of great nervousness because of the absolutely horribly Q3 results of the investment banks. There are job losses galore and nobody is being spared. So if you do have a hope of getting a bonus that is great news. Keeping a job itself would be good. So the idea of pitching a magazine which is talking about how to spend your bonus in October 2007 is spectacularly bad timing.
I mean, yes, you can see a series of Swiss chronographs which range from a minimum of £20,000 up to £60,000 but those are for funny money people. I mean, for a chap who grew up on Casio watches, these instruments are at the same level as that of the Apollo modules in the Smithsonian or the Rosetta Stone in the British Museum.
But I wanted to talk about two items which caught my eye, the first was the fact that men’s fragrances are getting so popular and great that power women are actually purchasing men’s perfumes!, just to appear more masculine!, that made me scratch my head for some time before the logic dimly penetrated into the cranium.
The second was an amazing idea. As the story goes, there are no men, there are only boys, there are little boys and big boys. And when you are a really big boy, you buy a jet (as one does). And instead of purchasing a Cessna or a Lear Jet, why don’t you buy a stripped down military jet? Makes perfect sense. The www.avtechgroup.com produces jets which are actually made for the military as training jets. But take away the weapons system, remove the hardened avionics and plastic nylon stuff, junk the ejection seat, flight helmet, life jacket, flight suit, ejector seat, etc. etc. put in some leather upholstery, some nice Multi function displays, and you can sit there wearing your Armani suit and not get creased. And just a snip at £1.5 million before tax. Pretty neat, eh?
When I grow up, I want one (the jet, not the perfume!)
All this to be taken with a grain of piquant salt!!!
Technorati Tags: Economy , Financial Institutions
Christian Terrorism in India, Uganda and Indonesia
We have heard quite a lot about Islamist Terrorism and there has been a pretty fair comment which has been floating about asking why other religions have not been similarly classified. Judaism is well represented with its Zionist angle, but the issue is confused because now we have a Jewish State and as I have frequently said, states cannot commit terrorism, they can sponsor it but they cannot commit it. Hindu terrorism is getting there, some of the activities of some of the groups such as Bajrang Dal and others are perilously getting close to where I would explicitly call them as terrorist organisations. Buddhist terrorism is already present in Sri Lanka although one can argue this is more Singhala (linguistic based ethno terrorism) terrorism rather than religion based terrorism.
Well, the main reason in the Christian matter, in my opinion, is because the number of terrorist campaigns being driven by ideology based upon Christianity is few and far between and secondly, they have not been as brutal or visible as the Islamist ones. That said Christian terrorism does exist. I have recently seen this paper which does a good job in covering the three main instances of Christian terrorism, namely in North East India, Northern Uganda and the island of Ambon in Indonesia.
Well, my first objection is why ask why call it militantism? Never heard of that word, but perhaps a better word would be terrorism. Each of these groups are non governmental, they are waging a low intensity war against a state, have secessionist or insurrectionist or at least a political objective and draw heavily on elements of Christian theology for their ideology. So call them as terrorists, stop faffing around. The authors draw 4 lessons from their study of these 3 campaigns and I quote their full conclusion as it is important to read their own words:
All this to be taken with a grain of piquant salt!!!
Well, the main reason in the Christian matter, in my opinion, is because the number of terrorist campaigns being driven by ideology based upon Christianity is few and far between and secondly, they have not been as brutal or visible as the Islamist ones. That said Christian terrorism does exist. I have recently seen this paper which does a good job in covering the three main instances of Christian terrorism, namely in North East India, Northern Uganda and the island of Ambon in Indonesia.
In the Name of the Father? Christian Militantism in Tripura, Northern Uganda, and Ambon; Jeroen Adam; Bruno De Cordier; Kristof Titeca; Koen Vlassenroot, Conflict Research Group, Department of Third World Studies, Ghent University, Ghent, Belgium, Studies in Conflict & Terrorism, 30:963–983, 2007
Although armed groups and political violence referring to Islam have attracted increasing attention since the start of the global war against terror, one particular religion can hardly be described as the main source of inspiration of what is commonly referred to as “terrorist acts of
violence.” Faith-based violence occurs in different parts of the world and its perpetrators adhere to all major world faiths including Christianity. As such, this article treats three cases of non-state armed actors that explain their actions as being motivated by Christian beliefs and aimed at the creation of a new local society that is guided by religion: the National Liberation Front of Tripura, the Lord’s Resistance Army, and the Ambonese Christian militias. It
analyzes the way by which they instrumentalized religion against respective backgrounds of conflict rooted in social change, the erosion of traditional identities, imbalances of power, and widening communautarian faultlines.
Well, my first objection is why ask why call it militantism? Never heard of that word, but perhaps a better word would be terrorism. Each of these groups are non governmental, they are waging a low intensity war against a state, have secessionist or insurrectionist or at least a political objective and draw heavily on elements of Christian theology for their ideology. So call them as terrorists, stop faffing around. The authors draw 4 lessons from their study of these 3 campaigns and I quote their full conclusion as it is important to read their own words:
What the authors did not consider and that’s a gaping hole, is the role played by external monies and funding (such as from evangelical bodies in the west) or from governmental support such as the reported links between the Pentagon and Evangelical groups. But all this is definitely fuelling the clash of civilisations, I am afraid. Another reason why I do not like proselytisation and religious evangelism aimed at conversions at all. It is such a bizarre concept anyway but that’s my personal opinion. What I hate about it is the propensity of such conversions (or even dawa in some bad examples!) to lead to violence, misunderstandings and overall bad atmosphere in this charged religious times.First, various forms of Christianity prove instrumental in filling the sociocultural vacuum left by the thorough social changes of local societies. They offer an alternative reading of the changing environment in the absence of structures that can offer prospects for development and security. In the case of Tripura, Christianity has become a true “exit-strategy,” as it is often associated with access to the “progress” that is associated with “the West.” In this sense, religion can give meaning to the context of deeper processes of socioeconomic crisis and marginalization and can therefore offer new tools to understand this context. In the three cases, the said processes of social change were caused by different factors, such as migration and land seizures (most obvious in Tripura, also Ambon), the loss of social-economic
status inherited from colonial times (the Acholi, the Ambonese Christians), and subsequent marginalization and exclusion to the advantage of dominant out-groups.
Even though the process of “christianization” and references to religion do not necessarily lead to religious radicalization, the different case-studies reveal that the potential for this radicalization is higher in situations where socioeconomic differences are also translated into
religious terms. In this context, social or economic shocks are often explained as being caused by other religious groups, which are considered as threats to the position of one’s own group. This explains why in Ambon and Tripura, Christian communities feel increasingly threatened by competing or numerically superior non-Christian groups.
Second, the cases also prove how Christianity also serves other strategic functions, apart from coping with processes of marginalization and change: it is a central mechanism in processes
of self-definition, informing both the in-group cohesion and the relationship with the “out-group.” Important in these processes are the use of collective symbols, rules, and rituals that in turn lead to a further polarization of the relation with the out-groups, that is, the Muslim population for the Ambonese Christian militias, the non-Acholi for the LRA, and the Bengali Hindus for the NLFT. The more the internal religious identity is being strenghtened, the more
the rift with the out-group deepens.
Third, in the cases discussed in this article, processes of religious radicalization have been hastened by so-called trigger events that have widened already existing communitarian rifts:
theAgartala riots in Tripura in 1979 and 1980; the failed “Acholi coup” and subsequent crackdown in Uganda in mid-1985; and the Christian–Muslim riots in Ambon and other Moluccan islands in 1999 and 2000. In all the case-studies, religion has become the main mobilization force, even though the content of the religious message differs. The same can be said about the impact of religious mobilization of local society. In the case of Ambon, processes of religious mobilization and violence have widened and almost physically institutionalised
religious-communitarian divisions, for example in the form of formerly mixed neighborhoods in Ambon city that are now either “purely” Christian or Muslim.
A similar situation exists in the town of Agartala in Tripura. However, in Tripura and Northern Uganda, Christian radicalism and unpopular methods such as forced conversions and kidnapping young recruits has also created internal splits in the in-group, for example between non-LRA Acholi and LRA members and between Christian and non-Christian tribals and NLFT members in Tripura.
And fourth, the question remains to what extent outside influence and manipulation have, ideologically as well as logistically, facilitated the rise of religious radicalism. If one talks of safe havens and arms supplies, then it is clear that the LRA could, at least temporarily,
benefit from facilities in and supply routes from southern Sudan; the same goes for the NLFT in Bangladesh and the neighboring state of Mizoram.Ideologically, native Christian groups from Mizoram played a key role in the rise of Christianity among the tribals in Tripura. In Ambon, the arrival of the Islamist Lashkar Jihad group, the perceived Western support for Ambon’s Christians as references by some of them to their fight being “a crusade against Islamic terrorism”—and similar sloganeering by the Muslim side about “fighting stooges of the depraved and immoral West”—have strengthened
perceptions of a global civilizational frontline on the island. Because of the strong mobilizing capacity of religion, the increasing use of and reference to religious symbols and the integration of a local conflict as part of what is perceived to be a global struggle, the situation in Ambon is certainly more typical and instrumental for the new global context as it is since 2001 than that in Tripura and Northern Uganda.
All this to be taken with a grain of piquant salt!!!
A Korean Nationalist Speaks on Education
This column is worth reading in its entirety and therefore I am posting it here. Education is highly emotive but it becomes even more dangerous when it starts to traverse the chasm which divides globalists/nationalists; right and left; liberals and conservatives, you name it. As you can see, even South Korea is facing the same issue. One thing which I noticed in my travels in South Korea (something that they share with Iran and Turkey, along with some other nations) is how nationalistic they are and how little others realise this sheer amount of nationalism. But read and weep!
All this to be taken with a grain of piquant salt!!!Our Forefathers' Lessons Fell on Deaf Ears, by Kang Chun-suk
I have a couple of questions I'd like to put to the people of the Roh Moo-hyun
administration. I'd be more than pleased if the president, prime minister and
deputy premier would answer them, too. Only then will the arrogant 386
generation of former student activists now in office get serious.
The first question calls for identifying common features. Name two things these
figures from contemporary Korean history have in common: Lee Sang-jae, Syngman Rhee, Kim Jwa-jin, Lee Shi-young, Shin Chae-ho. Did you say they are all independence fighters? Then you're correct. But that's an answer any schoolchild who has read a Korean history book could give. Yes, these people do come from a list independence fighters, but you say you can't think of another quality they share? You, who boasted would rewrite our history, in which, you said, justice had been defeated and injustice prevailed, don't know it? Study your history books again. The correct answer is that they all aspired for the rebirth of
their fatherland and nation by establishing schools or becoming teachers.
Lee Sang-jae in 1894 established a foreign language school and served as
its principal. Syngman Rhee in 1895 taught English at Paichai Hakdang. Kim
Jwa-jin in 1907 set up Homyeong School in his hometown. Lee Shi-young in 1912
inaugurated Shin Heung Military Officer School in Bukgando (North Gando). And
Shin Chae-ho in 1905 taught at Mundong Hakwon in Cheongwon, North Chungcheong Province and established Sandong Hakwon.
Now let's identify one common feature that the following share: Kim Koo, Ahn Jung-geun, Lee Dong-hwi, Park Eun-sik, Ahn Chang-ho and Yi Sung-hun.
These too are all independence fighters. But is there more? The correct answer to this question, again, is that they all established schools or taught youngsters. Kim Koo established Bongyang School in Jangyeon, Hwanghae Province in 1900, Gwangjin School in 1904 and Yangsan School in 1906, and taught at each of them. Ahn Jung-geun established Samhung School in Jinnampo in 1906 and then Donui School. Park Eun-sik played the leading role in establishing Seobuk Cooperative School in 1906 and later became its principal. Lee Dong-hwi set up Hapil School in Gangwon Province in 1905, after which he opened schools in Kaesong, Pyongyang and Wonsan. Ahn Chang-ho set up Jeomjin School in 1899, the first modern school in the northwest, and started Daeseong School in 1907. And Yi Sung-hun established Osan School in Jeongju, North Pyongan Province, in 1907.
Although I don't know what scores the president, prime minister and deputy premier might have gotten, the Cheong Wa Dae 386ers would evidently have scored zero. For had they known these historical facts, they wouldn't have bungled the nation's education system so much.
Between 1905 when Korea was deprived of its diplomatic rights under the Eulsa Treaty and 1910 when the nation was colonized by Japan, thousands of schools were established in every nook and corner of the country.The phenomenon was spurred by idea that the only way for the country to rebuild
and regain its independence was to train talented students with awareness and
savvy of world affairs. It's lamentable that the awakening didn't come 50 years
or at least 30 years earlier. That gap of 50 or 30 years resulted in the
nation's ruin. Observing the fruits of good education and the harm from bad
education requires the passage of time. People may regret their misfortunes
after years of bad education has ruined their country, but by then it's too
late.
What is our situation like today, 100 years after we had to suffer such grievances? In the past five years this administration has failed to develop a single elementary school, middle school, high school or university that can compete with their counterparts overseas. Instead it has crushed our budding talents. It has exhausted the national coffers by swelling the number of civil servants by 60,000 and building dozens of administrative offices in empty fields. It has been obsessed by a mistaken belief that shortening the tall and lengthening the small means equality, and that that is the objective of education.
Ethnic or Racial Genome Mapping
China has now announced that it has successfully completed the first sequence map of the diploid genome of a Han Chinese man. While I don’t know much about this field but some comments made me a bit curious and faintly worried
We need to be careful that we don’t ascribe differences such as this to racial or ethnic dimensions. Our world can do without rot like this.
All this to be taken with a grain of piquant salt!!!
Wang Jun, the leader of the project and vice-director of BIG's Shenzhen branch, said that all people share the vast majority of genetic information that
makes us human beings.
However, small differences, corresponding to just a fraction of the whole genome, determine traits such as skin colour, height, susceptibility to diseases and responses to therapies and environments.
"We can never change our genes, but we can understand our genetic structure better by creating a fine map of our genome sequence. This is very helpful in preventing or controlling diseases, such as cancers," Wang said.
We need to be careful that we don’t ascribe differences such as this to racial or ethnic dimensions. Our world can do without rot like this.
All this to be taken with a grain of piquant salt!!!
Managing VaR at a time of liquidity and volatility problems
Value at Risk – the dangers within
The Bank of England warned earlier this year about the propensity of banks to rely on Value at Risk (VaR) models to manage and guide them on risks. We have been here before, for example during the 1990’s Russian Crisis. Almost exactly the same thing happened, at least on the market side. The was a liquidity crunch as everybody rushed to the exit at the same time.
When everybody rushes to the exit at the same time, one side of the bargain (the buy bit) disappears, and therefore the price formation process is seriously out of whack. When that happens, even small movements in price can and do influence volatility and correlations disproportionately.
Now usually, you are ok to measure your VaR at daily intervals and you don’t update your correlation matrices more than weekly (if you are extremely particular, generally, you can go for 3 months without needing to change, market micro-structures do not change that fast). But as we know, markets have fat tails. Extreme events happen at a far greater frequency than what your normal distribution will suggest.
Consequently, what your VaR numbers will be telling you will not be an accurate reflection of the actual situation. In other words, these numbers tell you the risk that you are carrying. But if you decide to act on that risk number, you will find that the market does not support the consequent decision because there is simply nobody out there to offload your risk to. If nobody wants to purchase your debt or paper, then what are you going to do? You simply suck it up. Or you pray to the great gods of the central banks to provide you with some liquidity.
There is another problem and I quote from the FT article:
In the current environment, no bank chief executive who hopes to hang on to that job can afford to give regulators or shareholders the impression that they are being cavalier about risk. And since VAR is often used to define what level of margins – or financial buffers – are set against trades, some banks are doubly keen to cut VAR, to reduce pressure on their own balance sheets.
But as the banks embark on this task, some are finding themselves caught in an unpleasant trap. The easiest way to reduce a risk exposure is to sell risky assets, such as risky loans. In recent weeks, many banks have been trying to do precisely that.
But these sales have been occurring on such a large scale that they have pushed up market volatility. Thus, measured VAR has risen, exactly as the Bank warned all those months ago.
One big investment bank has recently analysed the impact of its own recent asset sales. These suggest that while these sales should have cut VAR by half in recent weeks on constant volatility levels, in practice this gain was more than wiped out by ensuring market price swings.
By scurrying to reduce risk, in other words, the banks may end up simply running to stand still.
The only way to resolve this is by having stringent stress testing or scenario analysis running. But very few banks that I know of have management trip wires or even have management who take action based upon these stress scenario’s. But all I can predict at this moment is that we will again have this issue. See my previous post on Carnegie as an example.
All this to be taken with a grain of piquant salt!!!
The Bank of England warned earlier this year about the propensity of banks to rely on Value at Risk (VaR) models to manage and guide them on risks. We have been here before, for example during the 1990’s Russian Crisis. Almost exactly the same thing happened, at least on the market side. The was a liquidity crunch as everybody rushed to the exit at the same time.
When everybody rushes to the exit at the same time, one side of the bargain (the buy bit) disappears, and therefore the price formation process is seriously out of whack. When that happens, even small movements in price can and do influence volatility and correlations disproportionately.
Now usually, you are ok to measure your VaR at daily intervals and you don’t update your correlation matrices more than weekly (if you are extremely particular, generally, you can go for 3 months without needing to change, market micro-structures do not change that fast). But as we know, markets have fat tails. Extreme events happen at a far greater frequency than what your normal distribution will suggest.
Consequently, what your VaR numbers will be telling you will not be an accurate reflection of the actual situation. In other words, these numbers tell you the risk that you are carrying. But if you decide to act on that risk number, you will find that the market does not support the consequent decision because there is simply nobody out there to offload your risk to. If nobody wants to purchase your debt or paper, then what are you going to do? You simply suck it up. Or you pray to the great gods of the central banks to provide you with some liquidity.
There is another problem and I quote from the FT article:
In the current environment, no bank chief executive who hopes to hang on to that job can afford to give regulators or shareholders the impression that they are being cavalier about risk. And since VAR is often used to define what level of margins – or financial buffers – are set against trades, some banks are doubly keen to cut VAR, to reduce pressure on their own balance sheets.
But as the banks embark on this task, some are finding themselves caught in an unpleasant trap. The easiest way to reduce a risk exposure is to sell risky assets, such as risky loans. In recent weeks, many banks have been trying to do precisely that.
But these sales have been occurring on such a large scale that they have pushed up market volatility. Thus, measured VAR has risen, exactly as the Bank warned all those months ago.
One big investment bank has recently analysed the impact of its own recent asset sales. These suggest that while these sales should have cut VAR by half in recent weeks on constant volatility levels, in practice this gain was more than wiped out by ensuring market price swings.
By scurrying to reduce risk, in other words, the banks may end up simply running to stand still.
The only way to resolve this is by having stringent stress testing or scenario analysis running. But very few banks that I know of have management trip wires or even have management who take action based upon these stress scenario’s. But all I can predict at this moment is that we will again have this issue. See my previous post on Carnegie as an example.
All this to be taken with a grain of piquant salt!!!
Thursday, October 11
Do not expect your IT outsourced vendor to provide innovation for your business
Now here is a very interesting article. If you read the entire article, and I would suggest that you do, you will find that CIO after CIO is moaning about the fact that their outsourced vendor is not providing innovative services. The technology stack layer (whatever bit, whether application down to data centre) is stuck at the time when the contract was signed and the SLA was written.
I am not surprised and nor should you be. Why on earth would you actually expect your outsourced vendor to provide innovation? Let me be blunt. Do you expect your sewer facility provider to provide innovation? Or how about your postal provider? How about asking if your electricity provider is providing innovation? No? What about the provider of your cleaning services? If they are not providing innovative services, why are you expecting your data centre or application support services vendor to provide innovation?
The fact that you are expecting innovation to come from your vendors means that you have lost your people. This is far too common, I am afraid. You outsource on the basis of a big fat contract, an SLA which defines service levels down to the number of breaths that the service personnel can draw in 1 minute, the costs and and and. That inexorably leads to a concept of keep quality at the level defined and try to do whatever possible to reduce the costs. Which means labour arbitrage, service arbitrage or technology arbitrage. But YOU do not get the benefit, the provider is getting the benefit. So instead of having ceramic pipes for your sewer, they have put in plastic pipes. Who gains? Not you. But you do not care, you care about your business.
And if you were taken in by the salesmen from the outsourced vendors who said that they will be strategic partners and innovators, then perhaps you might want to get some reality checks. Sales people will say anything to get you to sign on the dotted line.
So how do you get the benefit? Well, think clearly about why you are outsourcing. Are you outsourcing because you can only provide those services at a higher cost than outsiders? Then what you are looking at is a cost innovation driver. So build in falling cost targets or increased bonus levels at increased quality levels per period into the contract. That way you capture the benefits of better technology by the outsourced vendor. Incentivise them to come up with better ways to do your business.
Secondly, get the best relationship managers you can afford and then some more. These relationship managers are a rare breed but they are the people who can talk to your business and then translate that into what you want the outsourced vendor to do. When you outsource, you remove the feedstock of your best relationship managers, the boys and girls with 2-3 years of experience. Do not lose them, tie them into your firm.
Third, have a strategic innovation team. Not a big one, 4-5 people. Explicitly incentivise them to come up with 10 ideas per year and also get them on an exponential bonus scale if they manage to operationalise 1-2 ideas per year. So that way, they do dream but some of the dreams are grounded in reality. And it wont cost that much either.
Fourth, make sure that you are able to flip your outsourced vendor. Competition is a great way to pull in innovation. Make sure that your vendors know that they have to pitch for the business every 3 years, and that way, they will be on their toes.
All this to be taken with a grain of piquant salt!!!
I am not surprised and nor should you be. Why on earth would you actually expect your outsourced vendor to provide innovation? Let me be blunt. Do you expect your sewer facility provider to provide innovation? Or how about your postal provider? How about asking if your electricity provider is providing innovation? No? What about the provider of your cleaning services? If they are not providing innovative services, why are you expecting your data centre or application support services vendor to provide innovation?
The fact that you are expecting innovation to come from your vendors means that you have lost your people. This is far too common, I am afraid. You outsource on the basis of a big fat contract, an SLA which defines service levels down to the number of breaths that the service personnel can draw in 1 minute, the costs and and and. That inexorably leads to a concept of keep quality at the level defined and try to do whatever possible to reduce the costs. Which means labour arbitrage, service arbitrage or technology arbitrage. But YOU do not get the benefit, the provider is getting the benefit. So instead of having ceramic pipes for your sewer, they have put in plastic pipes. Who gains? Not you. But you do not care, you care about your business.
And if you were taken in by the salesmen from the outsourced vendors who said that they will be strategic partners and innovators, then perhaps you might want to get some reality checks. Sales people will say anything to get you to sign on the dotted line.
So how do you get the benefit? Well, think clearly about why you are outsourcing. Are you outsourcing because you can only provide those services at a higher cost than outsiders? Then what you are looking at is a cost innovation driver. So build in falling cost targets or increased bonus levels at increased quality levels per period into the contract. That way you capture the benefits of better technology by the outsourced vendor. Incentivise them to come up with better ways to do your business.
Secondly, get the best relationship managers you can afford and then some more. These relationship managers are a rare breed but they are the people who can talk to your business and then translate that into what you want the outsourced vendor to do. When you outsource, you remove the feedstock of your best relationship managers, the boys and girls with 2-3 years of experience. Do not lose them, tie them into your firm.
Third, have a strategic innovation team. Not a big one, 4-5 people. Explicitly incentivise them to come up with 10 ideas per year and also get them on an exponential bonus scale if they manage to operationalise 1-2 ideas per year. So that way, they do dream but some of the dreams are grounded in reality. And it wont cost that much either.
Fourth, make sure that you are able to flip your outsourced vendor. Competition is a great way to pull in innovation. Make sure that your vendors know that they have to pitch for the business every 3 years, and that way, they will be on their toes.
All this to be taken with a grain of piquant salt!!!
Corruption cost China $86 Billion in 2003
The Carnegie Endowment for International Peace reported that based upon estimates, China has lost $86 Billion to corruption. We have discussed this issue before.
I quote:
I agree with Mr. Pei. Given the fact that the legal system and public officials are all part of the party, it is simply impossible for them to reform this issue. And given the huge amount of demonstrations against forcible expropriations of land, and other abuses of law, it soon will reach a point that corruption will cause the dead hand of the communist state to shiver.
All this to be taken with a grain of piquant salt!!!
I quote:
The report by Minxin Pei, the director of the China programme at the
Washington-based policy study group, says the sums of money expropriated by
corrupt officials have risen “exponentially” since the 1980s and cost more than
last year’s entire education budget.
“The odds of an average corrupt official going to jail are at most
three out of 100, making corruption a high-return, low-risk activity,” the
report says Mr Pei, however, sees corruption not just as a stage of development
but as a failure of political reform.
“The Chinese government has consistently resisted steps to further
reduce the role of the state in the economy, increase judicial independence and
mobilise the power of the media and civil society, even though international
experience shows that only such full-fledged efforts can root out systemic
corruption,” he said.
I agree with Mr. Pei. Given the fact that the legal system and public officials are all part of the party, it is simply impossible for them to reform this issue. And given the huge amount of demonstrations against forcible expropriations of land, and other abuses of law, it soon will reach a point that corruption will cause the dead hand of the communist state to shiver.
All this to be taken with a grain of piquant salt!!!
Computer Science PhD's vital for a country's computing base and future
The Head of Microsoft India has pointed to something that is vital for any economy, forget India. He talks about the fact that India is producing only 35 computer science PhD's in an year, compared to 1000 PhD's in the USA. I quote:
But this is true in almost every country. I attended a presentation by my son's potential High School Principal yesterday. There were some students there as well. And while it is quite far away from a PhD level, I was quite pleased to hear that a majority of students at the High School are going to go for science, mathematics, physics or ICT. But let this be a lesson for all of us, if you do not produce sufficient PhD's, you are choking off the ability to train your students in the future.
All this to be taken with a grain of piquant salt!!!
“It’s an incredibly urgent and important issue,” Ravi Venkatesan told the
Financial Times. “It affects the pipeline of future talent because the teaching
institutions aren’t getting enough qualified faculty and, of course, if you
really want to do cutting edge innovation in computer science, you’re restricted
by the pool of talent out there.”
The World Bank estimates that the country produces a total of 7,000 PhDs a
year across the entire spectrum of science, engineering and technology. “India’s
higher education system needs to produce more scientists, engineers and other
masters and PhD graduates with skills matched to the needs of the innovation
economy,” the bank said in a recent report.
But this is true in almost every country. I attended a presentation by my son's potential High School Principal yesterday. There were some students there as well. And while it is quite far away from a PhD level, I was quite pleased to hear that a majority of students at the High School are going to go for science, mathematics, physics or ICT. But let this be a lesson for all of us, if you do not produce sufficient PhD's, you are choking off the ability to train your students in the future.
All this to be taken with a grain of piquant salt!!!
Islam and European Secularism go head to head in a courtroom
The news was buried in a corner of the Financial Times of yesterday, a tiny news story from Strasbourg in France where the European Court of Human Rights is based. I did not recognise the significance at first of the headline, “Ruling against Islamic lessons” and went on. And then came back to read about the fact that the court ruled on October 9, 2007 that compulsory religion classes for Muslim pupils in Turkey violate individual freedoms because they present only Sunni Islam views.
Then my poxy laptop died and was taken away for open heart surgery. Hence I was reduced to staring at the wall and ruminating. Its then that I realised that this could be far more important and sensitive than anybody has realised for many reasons.
For those who are legal minded, can refer to the judgement here. I am going to quote heavily from the judgment so bear with me.
Now as you read this, you will immediately know that this is as far away from traditional Islam as possible. So this sect is definitely Haram, forbidden and it is not surprising that this sect’s religious learning is not passed on in schools. The Sunni Ulema (the mullahs, priests and theologians) will spontaneously combust if this happens!
But you see, universal principles of human rights, secularism and liberal traditions of democracy, humanism and universalism demand that the state does not take sides, each religion is equal, and as long as they do not commit any crimes against anybody else, you can worship who you please. But that’s the theory, and the practise is something else. Unfortunately for the Turkish State and Sunni Islam, the European Court of Human Rights is forced to look at theory to judge this case. Read on!
So the plaintiff took his complaint to the ECHR. Now the Government lawyer said that Jewish and Christian pupils were exempted from this compulsory teaching. Both sides submitted school textbooks on Islam to bolster their respective cases.
The learned judges then referred to the Article 18 of the International Covenant on Civil and Political Rights; Recommendations 1396 (1999) and 1720 (2005) of the Parliamentary Assembly of the Council of Europe and the European Commission against Racism and Intolerance (ECRI) General policy recommendation no. 5.
As an aside, the court did a fascinating review of what’s happening in other countries and again it is worthwhile to quote it in full.
To cut a long story short, the court found that the Government of Turkey had violated Article 2 of Protocol 1 of the European Convention of Human Rights. Too bad the court did not rule on the Article 9 but still.
So here we go, we have a situation that will force Sunni Majority Turkey, bastion of Militant Secularism, ruled by a mildly Islamist party to decide what to do. It is now forced into an unpalatable decision. You see, it is impossible for a theological position to emerge where different interpretations of Islam can co-exist. The continuing debates, protests, riots and demonstrations (both state and religiously sponsored) over apostasy and blasphemy show that tolerance at worst and theological supports at best are simply not there.
If the Turkish government decide to follow the court’s judgement and actually allow heretical sects such as Shia, Alevism, etc. to propagate their own theology in schools that will mean that the majority Sunni ulema and faithful will go up in flames. They cannot allow people to call themselves as Muslims and still exclude themselves from Sunni teaching as that gives a governmental recognition to these sects. The government cannot remove the compulsory teaching either as that will also make the majority Sunni ulema and faithful will go up in flames. It cannot remove secularism and say Sunni Islam is majority religion and you have to learn it or lump it because it has signed up to the European treaties (such as Council of Europe and the European Human Rights Convention). This is assuming the Turkish Military, the militant protector of Ataturk’s secularism, would be silent. Very interesting days ahead, folks.
All this to be taken with a grain of piquant salt!!!
Then my poxy laptop died and was taken away for open heart surgery. Hence I was reduced to staring at the wall and ruminating. Its then that I realised that this could be far more important and sensitive than anybody has realised for many reasons.
For those who are legal minded, can refer to the judgement here. I am going to quote heavily from the judgment so bear with me.
The background to Alevism:
7. Hasan Zengin stated that his family
were adherents of Alevism.
8. Alevism originated in central Asia but
developed largely in Turkey. Two important Sufis had a considerable impact on
the emergence of this religious movement: Hoca Ahmet Yesevi (12th century) and
Haci Bektaşi Veli (14th century). This belief system, which has deep roots in
Turkish society and history, is generally considered as one of the branches of
Islam, influenced in particular by Sufism and by certain pre-Islamic beliefs.
Its religious practices differ from those of the Sunni1 schools of law in
certain aspects such as prayer, fasting and pilgrimage.
9. According to
the applicant, Alevism is a belief or philosophy influenced by other cultures,
religions and philosophies. It represents one of the most widespread faiths in
Turkey after the Hanafite2 branch of Islam. It advocates close contact with
nature, tolerance, modesty and love for one's neighbour, within the Islamic
faith. Alevis reject the sharia (code of laws in orthodox Islam) and the sunna
(forms of behaviour and formal rules of orthodox Islam) and defend freedom of
religion, human rights, women's rights, humanism, democracy, rationalism,
modernism, universalism, tolerance and secularism. Alevis do not pray by the
Sunni rite (in particular, they do not comply with the obligation to pray five
times daily) but express their devotion through religious songs and dances
(semah); they do not attend mosques, but meet regularly in cemevi (meeting and
worship rooms) for ritual ceremonies. Equally, Alevis do not consider the
pilgrimage to Mecca as a religious obligation. They believe that Allah is
present in each person. According to Alevism, Allah created Adam in his image
and all his manifestations in this world are in human form. Allah is neither in
the sky nor in paradise, but in the centre of the human heart.
Now as you read this, you will immediately know that this is as far away from traditional Islam as possible. So this sect is definitely Haram, forbidden and it is not surprising that this sect’s religious learning is not passed on in schools. The Sunni Ulema (the mullahs, priests and theologians) will spontaneously combust if this happens!
But you see, universal principles of human rights, secularism and liberal traditions of democracy, humanism and universalism demand that the state does not take sides, each religion is equal, and as long as they do not commit any crimes against anybody else, you can worship who you please. But that’s the theory, and the practise is something else. Unfortunately for the Turkish State and Sunni Islam, the European Court of Human Rights is forced to look at theory to judge this case. Read on!
10. On 23 February 2001 the applicant submitted a request to the Provincial
Directorate of National Education (“the Directorate”) at the Istanbul Governor's
Office, seeking to have his daughter exempted from religious culture and ethics
classes. Pointing out that his family were followers of Alevism, he stressed
that, under international treaties such as, for example, the Universal
Declaration of Human Rights, parents had the right to choose the type of
education their children were to receive. In addition, he alleged that the
compulsory course in religious culture and ethics was incompatible with the
principle of secularism.
11. On 2 April 2001 the Directorate replied
that it was impossible to grant the exemption request. In particular, it stated:
“... Article 24 of the Constitution states that 'Education and
instruction in religion and ethics shall be conducted under State supervision
and control. Instruction in religious culture and moral education shall be
compulsory in the curricula of primary and secondary schools. Other religious
education and instruction shall be subject to the individual's own desire, and
in the case of minors, to the request of their legal representatives.'
Article 12 of the State Education Act (Law no. 1739) ... provides that
'secularism shall be the basis of Turkish national education. Religious culture
and ethics shall be among the compulsory subjects taught in primary and upper
secondary schools, and in schools of these levels.'”
For these reasons,
your request cannot be granted.”
So the plaintiff took his complaint to the ECHR. Now the Government lawyer said that Jewish and Christian pupils were exempted from this compulsory teaching. Both sides submitted school textbooks on Islam to bolster their respective cases.
The learned judges then referred to the Article 18 of the International Covenant on Civil and Political Rights; Recommendations 1396 (1999) and 1720 (2005) of the Parliamentary Assembly of the Council of Europe and the European Commission against Racism and Intolerance (ECRI) General policy recommendation no. 5.
As an aside, the court did a fascinating review of what’s happening in other countries and again it is worthwhile to quote it in full.
30. In Europe, religious education is closely tied in with secular
education. Of the 46 Council of Europe member States which were examined, 43
provide religious education classes in state schools. Only Albania, France (with
the exception of the Alsace and Moselle regions) and the former Yugoslav
Republic of Macedonia are the exceptions to this rule. In Slovenia,
non-confessional teaching is offered in the last years of state education.
31. In 25 of the 46 member States (including Turkey), religious
education is a compulsory subject. However, the scope of this obligation varies
depending on the State. In five countries, namely Finland, Greece, Norway,
Sweden and Turkey, the obligation to attend classes in religious education is
absolute. All pupils who belong to the religious faith taught in the classes are
obliged to follow them, partially or fully. However, ten States allow for
exemptions under certain conditions. This is the case in Austria, Cyprus,
Denmark, Ireland, Iceland, Liechtenstein, Malta, Monaco, San Marino and the
United Kingdom. In the majority of these countries, religious education is
denominational.
32. Ten other countries give pupils the opportunity to
choose a substitute lesson in place of compulsory religious education. This is
the case in Germany, Belgium, Bosnia and Herzegovina, Lithuania, Luxembourg, the
Netherlands, Serbia, Slovakia and Switzerland. In those countries,
denominational education is included in the curriculum drawn up by the relevant
ministries and pupils are obliged to attend unless they have opted for the
substitute lesson proposed.
33. In contrast, 21 member States do not
oblige pupils to follow classes in religious education. Religious education is
generally authorised in the school system but pupils only attend if they have
made a request to that effect. This is what happens in the largest group of
States: Andorra, Armenia, Azerbaijan, Bulgaria, Croatia, Spain, Estonia,
Georgia, Hungary, Italy, Latvia, Moldova, Poland, Portugal, the Czech Republic,
Romania, Russia and Ukraine. Finally, in a third group of States, pupils are
obliged to attend a religious education or substitute class, but always have the
option of attending a secular lesson.
34. This general overview of
religious education in Europe shows that, in spite of the variety of teaching
methods, almost all of the member States offer at least one route by which
pupils can opt out of religious education classes (by providing an exemption
mechanism or the option of attending a lesson in a substitute subject, or by
giving pupils the choice of whether or not to sign up to a religious studies
class).
To cut a long story short, the court found that the Government of Turkey had violated Article 2 of Protocol 1 of the European Convention of Human Rights. Too bad the court did not rule on the Article 9 but still.
So here we go, we have a situation that will force Sunni Majority Turkey, bastion of Militant Secularism, ruled by a mildly Islamist party to decide what to do. It is now forced into an unpalatable decision. You see, it is impossible for a theological position to emerge where different interpretations of Islam can co-exist. The continuing debates, protests, riots and demonstrations (both state and religiously sponsored) over apostasy and blasphemy show that tolerance at worst and theological supports at best are simply not there.
If the Turkish government decide to follow the court’s judgement and actually allow heretical sects such as Shia, Alevism, etc. to propagate their own theology in schools that will mean that the majority Sunni ulema and faithful will go up in flames. They cannot allow people to call themselves as Muslims and still exclude themselves from Sunni teaching as that gives a governmental recognition to these sects. The government cannot remove the compulsory teaching either as that will also make the majority Sunni ulema and faithful will go up in flames. It cannot remove secularism and say Sunni Islam is majority religion and you have to learn it or lump it because it has signed up to the European treaties (such as Council of Europe and the European Human Rights Convention). This is assuming the Turkish Military, the militant protector of Ataturk’s secularism, would be silent. Very interesting days ahead, folks.
All this to be taken with a grain of piquant salt!!!
Wednesday, October 10
The contradictions are just too delicious not to be shared!
So if a gay man protests against Israeli occupation in Palestine and the bad treatment of women by Iran, how do you take it?
Well, not well, as it turns out! See here.
All this to be taken with a grain of piquant salt!!!
Well, not well, as it turns out! See here.
All this to be taken with a grain of piquant salt!!!
Stop whining, please, its getting boring!
I got this column today in the mail but do not have a url. But seriously, there is a limit to the number of times you can blame the past for the current situation.
Reminds me of the joke. An outgoing CEO hands 3 envelopes to the incoming CEO and says, open in order when you have problems. First year, the loss is big, so he opens first envelope which says, "blame previous CEO". Second year, same problem, second envelope says "blame the market" and the third year, when the same problem occurs, the third envelope says "prepare 3 envelopes".
It is a joke, and you cant really have another political system as easily, but too many times I have seen this blaming the past, others, religion, feudals, India, USA, zionists, everybody and his dog coming out of Pakistan. Sorry but it doesnt stick any more. This moaning and "blame somebody else" excuse has been used for 60 years and its wearing very thin, I am afraid. You want a proper democratic system, then you need to work on it. What do you think the Indians or Americans do? wave a magic wand? or do you think they didnt have the same or equivalent problems?
> Trauma of being a Pakistani
> By M.B. Naqvi
> 10 October 2007
>
> Pakistanis are actually in a state of trauma over their own failures
> to run a decent democracy. They tend to compare themselves with
> Indians and think that they are in no way different or inferior to
> them; if they can run a democracy why can't they?
>
> Their failure is a legacy of pre-partition Indian politics,
> particularly of the state of Muslim communalism's political awareness
> and their inability to adjust to the Twentieth Century. The Muslim
> League leadership was essentially in the hands of landlords of
> northern India from UP to Bengal. Their interests were limited to
> preserving the memories of past glories and advantages that went with
> them. Preservations of their lands was understandable, though not
> justifiable, at a time when calls for abolition of landlordism had
> begun to be raised by some Congressmen.
>
> They were pre-moderns, ensconced in the values of landowning classes
> ancestors. They actually had imposed social and international
> isolation on themselves by not intermixing more frequently and freely
> with relatively more modern educated Hindus.
>
> Pakistan inherited the imperatives of Muslim communalism of
> pre-independence India that degenerated into simple notions of doing
> everything that the Indians do not do and opposing them wherever
> possible was the right attitude. It was the Kashmir dispute in 1947
> that put Pakistan on an anti-Indian orientation virtually permanently.
> The policies that resulted from this orientation were to build up an
> army, confront India and if possible wrest Kashmir or force India to
> hold a plebiscite which, they thought, would necessarily result in
> Kashmiris automatically falling like a ripe fruit in their lap. That
> this was unrealistic has not been realized fully by all sections of
> Pakistanis even today, though many do, including importantly the
> leaders of Pakistan Army itself. Gone are the days when they thought
> they can take Kashmir by force and the message to India that General
> Musharraf has given was that Pakistan was now ready to normalize
> relations with India and act like a friendly state, accepting the
> international boundaries as India claims to be today inside the old
> Jammu and Kashmir State.
>
> But Indians, for their own reasons, have not jumped with joy on that.
> They have their own good or bad reasons for not responding quickly,
> although this occasion should have called for a different attitude:
> After all, Pakistan has withdrawn an irredentist claim on territory
> that India claims to be its integral part. However that is where
> things stand today.
>
> But the subject we are on is the trauma that Pakistanis have suffered
> as a result of their political experiences. They have not been able to
> develop the economy the way, for instance, India has; and comparisons
> with India come naturally to them. Second, Pakistan was unable to run
> an ordered democratic life. Chief reason is that discussion on its own
> raison d'etre has not ended. There are still people who doubt whether
> Pakistan would last for ever because it is after all a man-made state,
> and not very well thought out, too.
>
> It is also afflicted with basic ideological differences. The country
> experienced its saddest day in 1971 when the entire Eastern Command of
> Pakistan Army had to surrender before the Indians and their eastern
> province became Bangladesh. Moreover, they have really been worsted in
> all the wars, including the latest actual one in the Kargil heights
> and the virtual one in 2002.
>
> One includes this last non-war as a conceptually decisive war in which
> Pakistan had to threaten the use of its nuclear weapons over a dozen
> times. That it did not take place was because Pakistan gave the
> demanded assurances to India, probably through international
> guarantors (though there is no proof of that). That satisfied India.
> Indian interest was confined to Kashmir and it got what it wanted.
> Pakistan did deliver on its new promise – after a fashion. The Indians
> were not satisfied 100 per cent but knew that Pakistan was trying to
> implement what it has promised. That Pakistan could not have
> completely implemented the promises was due to many internal factors,
> including probably some dissension within the security establishment.
>
> No one should forget the innate desire of ordinary Pakistanis for a
> peaceful and productive life in a satisfyingly democratic
> dispensation. Their record of popular agitations against military
> control is a proof of that. The latest was this year's against
> Musharraf, the fourth military dictator who is still ruling the
> country and is likely to go on ruling Pakistan until 2012 if no
> extraneous factor intervenes.
>
> While political parties are hopelessly divided and have shown to be
> incapable of mobilising the people to achieve the much-repeated goal
> of restoration of democracy. Partly these differences result from the
> various concepts of what Pakistan was to be. Then Pakistan has never
> been able to overcome a contradiction: it believes in heavy
> centralization of governance and decision-making in seeming consonance
> with the notions of Islamic brotherhood. That called forth its
> nemesis: Ethnic nationalisms in ethnically distinct provinces of NWFP,
> Balochistan and Sindh.
>
> These provinces have developed nationalisms: Pushtoon nationalism used
> to be a secular and democratic concept. It now comes in two versions:
> heavily tinged with Islam (Taliban) and the old secular entity first
> set up by the famed Frontier Gandhi. There is hardly any nationalism
> that is quite secular. Third there is Sindhi nationalism that is based
> on Sindh, Sindhi language and its historical memories, again wholly
> secular. But the central challenge has, somehow, come to be an Islamic
> State, evolved painfully as a continuation and reorientation of Indian
> Muslim communalism, though it comes in various hues and colours.
> Fuller treatment of this genre is not possible here.
>
> Islam sits heavily on Pakistanis. One Islamic scholar, Maulana Abul
> Ala Maudoodi, founder of Jamaate Islami, has produced a uniquely
> integrated concept of Islamic State that would have its own Islamic
> economy and Islamic culture (whatever that means). The purpose of
> heart of Islamic idea, accumulated and evolved in eight or nine
> centuries in India, lay in individual piety but no concept of any
> uniquely Islamic state. But that is now all the rage – and not only in
> Pakistan.
>
> The Muslim Brotherhood of Egypt spread this notion all over Middle
> East and Meghreb and it believes in the same kind of Islamic system
> with occasional differences. The latest arrival in this genre is the
> influence of Saudi beliefs of Wahabi and Salafiisms. These are, in
> today's terms, intensely anti-American because Americans are perceived
> to be fighting Islam and Muslims everywhere. All these schools have
> their counterparts in Pakistan.
>
> A regular insurgency is going on in NWFP and it is no longer confined
> to its tribal areas alone; it is now spreading into throughout the
> settled parts of the province. Pakistan Army is fighting it but is not
> winning. Indeed it might be in for another defeat. Most of the
> religious leaders and the Pakistan government are convinced that is
> better to do a deal with Islamists that gives them giving them as much
> internal autonomy to establish whatever Islamic State they can than to
> go on fighting an unwinnable war.
>
> This is a huge and growing challenge for Pakistan. It has still to
> find a way of countering secular nationalisms in Balochistan and
> Sindh. The centre remains committed to a vague but raucous rhetoric of
> Islam without any content. This makes for utter confusion and
> divisions within the public life. The outlook is not bright.
>
> The military has, however, grown as a corporate entity that has become
> a strong vested interest demanding ever greater share of the national
> resources. That is resented by ethnic nationalists and real democrats
> everywhere. The military however has been clever. It has collected a
> coalition of interests that are socially important today, the main
> constituents of the regime are: Big landowners, big business, some
> medium sized industrialists, bankers and successful professionals like
> Syed Sharifuddin Pirzada. This is a strong coalition of controlling
> social elites. On present showing, there is no alternative coalition
> of interests that can replace it. The next government too will be a
> reflection of what the governments have been under the military
> leadership before. We are looking into a future where Pakistan Army
> would continue to rule indefinitely until there is a big explosion,
> caused by no matter what.
>
> MB Naqvi is a well-known columnist of Pakistan. He writes regular
> columns in many Pakistani newspapers and magazines
All this to be taken with a grain of piquant salt!!!
Reminds me of the joke. An outgoing CEO hands 3 envelopes to the incoming CEO and says, open in order when you have problems. First year, the loss is big, so he opens first envelope which says, "blame previous CEO". Second year, same problem, second envelope says "blame the market" and the third year, when the same problem occurs, the third envelope says "prepare 3 envelopes".
It is a joke, and you cant really have another political system as easily, but too many times I have seen this blaming the past, others, religion, feudals, India, USA, zionists, everybody and his dog coming out of Pakistan. Sorry but it doesnt stick any more. This moaning and "blame somebody else" excuse has been used for 60 years and its wearing very thin, I am afraid. You want a proper democratic system, then you need to work on it. What do you think the Indians or Americans do? wave a magic wand? or do you think they didnt have the same or equivalent problems?
> Trauma of being a Pakistani
> By M.B. Naqvi
> 10 October 2007
>
> Pakistanis are actually in a state of trauma over their own failures
> to run a decent democracy. They tend to compare themselves with
> Indians and think that they are in no way different or inferior to
> them; if they can run a democracy why can't they?
>
> Their failure is a legacy of pre-partition Indian politics,
> particularly of the state of Muslim communalism's political awareness
> and their inability to adjust to the Twentieth Century. The Muslim
> League leadership was essentially in the hands of landlords of
> northern India from UP to Bengal. Their interests were limited to
> preserving the memories of past glories and advantages that went with
> them. Preservations of their lands was understandable, though not
> justifiable, at a time when calls for abolition of landlordism had
> begun to be raised by some Congressmen.
>
> They were pre-moderns, ensconced in the values of landowning classes
> ancestors. They actually had imposed social and international
> isolation on themselves by not intermixing more frequently and freely
> with relatively more modern educated Hindus.
>
> Pakistan inherited the imperatives of Muslim communalism of
> pre-independence India that degenerated into simple notions of doing
> everything that the Indians do not do and opposing them wherever
> possible was the right attitude. It was the Kashmir dispute in 1947
> that put Pakistan on an anti-Indian orientation virtually permanently.
> The policies that resulted from this orientation were to build up an
> army, confront India and if possible wrest Kashmir or force India to
> hold a plebiscite which, they thought, would necessarily result in
> Kashmiris automatically falling like a ripe fruit in their lap. That
> this was unrealistic has not been realized fully by all sections of
> Pakistanis even today, though many do, including importantly the
> leaders of Pakistan Army itself. Gone are the days when they thought
> they can take Kashmir by force and the message to India that General
> Musharraf has given was that Pakistan was now ready to normalize
> relations with India and act like a friendly state, accepting the
> international boundaries as India claims to be today inside the old
> Jammu and Kashmir State.
>
> But Indians, for their own reasons, have not jumped with joy on that.
> They have their own good or bad reasons for not responding quickly,
> although this occasion should have called for a different attitude:
> After all, Pakistan has withdrawn an irredentist claim on territory
> that India claims to be its integral part. However that is where
> things stand today.
>
> But the subject we are on is the trauma that Pakistanis have suffered
> as a result of their political experiences. They have not been able to
> develop the economy the way, for instance, India has; and comparisons
> with India come naturally to them. Second, Pakistan was unable to run
> an ordered democratic life. Chief reason is that discussion on its own
> raison d'etre has not ended. There are still people who doubt whether
> Pakistan would last for ever because it is after all a man-made state,
> and not very well thought out, too.
>
> It is also afflicted with basic ideological differences. The country
> experienced its saddest day in 1971 when the entire Eastern Command of
> Pakistan Army had to surrender before the Indians and their eastern
> province became Bangladesh. Moreover, they have really been worsted in
> all the wars, including the latest actual one in the Kargil heights
> and the virtual one in 2002.
>
> One includes this last non-war as a conceptually decisive war in which
> Pakistan had to threaten the use of its nuclear weapons over a dozen
> times. That it did not take place was because Pakistan gave the
> demanded assurances to India, probably through international
> guarantors (though there is no proof of that). That satisfied India.
> Indian interest was confined to Kashmir and it got what it wanted.
> Pakistan did deliver on its new promise – after a fashion. The Indians
> were not satisfied 100 per cent but knew that Pakistan was trying to
> implement what it has promised. That Pakistan could not have
> completely implemented the promises was due to many internal factors,
> including probably some dissension within the security establishment.
>
> No one should forget the innate desire of ordinary Pakistanis for a
> peaceful and productive life in a satisfyingly democratic
> dispensation. Their record of popular agitations against military
> control is a proof of that. The latest was this year's against
> Musharraf, the fourth military dictator who is still ruling the
> country and is likely to go on ruling Pakistan until 2012 if no
> extraneous factor intervenes.
>
> While political parties are hopelessly divided and have shown to be
> incapable of mobilising the people to achieve the much-repeated goal
> of restoration of democracy. Partly these differences result from the
> various concepts of what Pakistan was to be. Then Pakistan has never
> been able to overcome a contradiction: it believes in heavy
> centralization of governance and decision-making in seeming consonance
> with the notions of Islamic brotherhood. That called forth its
> nemesis: Ethnic nationalisms in ethnically distinct provinces of NWFP,
> Balochistan and Sindh.
>
> These provinces have developed nationalisms: Pushtoon nationalism used
> to be a secular and democratic concept. It now comes in two versions:
> heavily tinged with Islam (Taliban) and the old secular entity first
> set up by the famed Frontier Gandhi. There is hardly any nationalism
> that is quite secular. Third there is Sindhi nationalism that is based
> on Sindh, Sindhi language and its historical memories, again wholly
> secular. But the central challenge has, somehow, come to be an Islamic
> State, evolved painfully as a continuation and reorientation of Indian
> Muslim communalism, though it comes in various hues and colours.
> Fuller treatment of this genre is not possible here.
>
> Islam sits heavily on Pakistanis. One Islamic scholar, Maulana Abul
> Ala Maudoodi, founder of Jamaate Islami, has produced a uniquely
> integrated concept of Islamic State that would have its own Islamic
> economy and Islamic culture (whatever that means). The purpose of
> heart of Islamic idea, accumulated and evolved in eight or nine
> centuries in India, lay in individual piety but no concept of any
> uniquely Islamic state. But that is now all the rage – and not only in
> Pakistan.
>
> The Muslim Brotherhood of Egypt spread this notion all over Middle
> East and Meghreb and it believes in the same kind of Islamic system
> with occasional differences. The latest arrival in this genre is the
> influence of Saudi beliefs of Wahabi and Salafiisms. These are, in
> today's terms, intensely anti-American because Americans are perceived
> to be fighting Islam and Muslims everywhere. All these schools have
> their counterparts in Pakistan.
>
> A regular insurgency is going on in NWFP and it is no longer confined
> to its tribal areas alone; it is now spreading into throughout the
> settled parts of the province. Pakistan Army is fighting it but is not
> winning. Indeed it might be in for another defeat. Most of the
> religious leaders and the Pakistan government are convinced that is
> better to do a deal with Islamists that gives them giving them as much
> internal autonomy to establish whatever Islamic State they can than to
> go on fighting an unwinnable war.
>
> This is a huge and growing challenge for Pakistan. It has still to
> find a way of countering secular nationalisms in Balochistan and
> Sindh. The centre remains committed to a vague but raucous rhetoric of
> Islam without any content. This makes for utter confusion and
> divisions within the public life. The outlook is not bright.
>
> The military has, however, grown as a corporate entity that has become
> a strong vested interest demanding ever greater share of the national
> resources. That is resented by ethnic nationalists and real democrats
> everywhere. The military however has been clever. It has collected a
> coalition of interests that are socially important today, the main
> constituents of the regime are: Big landowners, big business, some
> medium sized industrialists, bankers and successful professionals like
> Syed Sharifuddin Pirzada. This is a strong coalition of controlling
> social elites. On present showing, there is no alternative coalition
> of interests that can replace it. The next government too will be a
> reflection of what the governments have been under the military
> leadership before. We are looking into a future where Pakistan Army
> would continue to rule indefinitely until there is a big explosion,
> caused by no matter what.
>
> MB Naqvi is a well-known columnist of Pakistan. He writes regular
> columns in many Pakistani newspapers and magazines
All this to be taken with a grain of piquant salt!!!
Chi-X - the sneaky exchange
It is a well held truism in the banking and broking market that retail banking and exchange trading is generally very sticky. People tend not to move their current/savings account from the bank that they joined at university and will live with it for their lives. Despite it, many times, being a bad financial choice.
Similarly, exchanges are also pretty much sticky, moving trading away from an exchange to another exchange is very difficult and while it has happened before (Bund Futures taken away from LIFFE to Eurex), the history of exchanges is littered with failed attempts by exchanges to capture business from other exchanges. Eurex USA, Virt-X, Nasdaq Europe and a whole host of other examples lay testament to that fact.
But we now have this tiny exchange, called as Chi-X, run by Instinet. It has been very sneaky, and has managed to attract trading away from the big boys. For example, it has managed to have 44% and 29 %market share on Philips and ING in the end of August. It has also grabbed 10% of many very highly liquid German stocks, etc.
With MiFID barrelling down Europe's throat, Chi-X is positioned brilliantly. It promised a 10 times cheaper service and a 10 times faster trading opportunity compared to the big guys like LSE and NYSE Euronext. At end of the day, what market participants want is the best price formation process in the public eye at the lowest cost and at the fastest possible speed. In other words, you don't want the traffic policeman to become the bottleneck. So if he does become the bottleneck, the traffic is going to move away from your road to the road where the traffic policeman is the most efficient.
Life as the exchanges know it is going to (ex)change!
All this to be taken with a grain of piquant salt!!!
Similarly, exchanges are also pretty much sticky, moving trading away from an exchange to another exchange is very difficult and while it has happened before (Bund Futures taken away from LIFFE to Eurex), the history of exchanges is littered with failed attempts by exchanges to capture business from other exchanges. Eurex USA, Virt-X, Nasdaq Europe and a whole host of other examples lay testament to that fact.
But we now have this tiny exchange, called as Chi-X, run by Instinet. It has been very sneaky, and has managed to attract trading away from the big boys. For example, it has managed to have 44% and 29 %market share on Philips and ING in the end of August. It has also grabbed 10% of many very highly liquid German stocks, etc.
With MiFID barrelling down Europe's throat, Chi-X is positioned brilliantly. It promised a 10 times cheaper service and a 10 times faster trading opportunity compared to the big guys like LSE and NYSE Euronext. At end of the day, what market participants want is the best price formation process in the public eye at the lowest cost and at the fastest possible speed. In other words, you don't want the traffic policeman to become the bottleneck. So if he does become the bottleneck, the traffic is going to move away from your road to the road where the traffic policeman is the most efficient.
Life as the exchanges know it is going to (ex)change!
All this to be taken with a grain of piquant salt!!!
Monday, October 8
A further comment on English language imperialism and hegemony
On my previous posting, I got a comment
Abdou Diouf is right. The Hegemony of English is a threat to European languages and cultures. 1 billion dollars for multilingualism is nothing compare to the benefits accruing to the UK and to the USA as a consequence of the hegemonic role of THEIR language
I agree. But why am I as a British citizen being forced to pay for this? Why dont the people who demand protection of their languages pay for their own translations?
Also, I dont really see how USA and UK is actually forcing people to use their language. Do you see that? I dont. It just means that people find English easier to use and operate. So I am failing to understand how one blames the UK and USA. Do we also blame India? or Australia?
How about Italy for putting in the hegemony of Latin? Or Greece for the Greek bits? Or how about Saudi Arabia for Arabic? How about Hindi in India? How about the French for the French hegemony in Francophone Africa?
Languages and Religions grow because people are drawn to it and believe in it and use it. If they arent impressed, the language or religion will die out. And no amount of subsidy will save it. It will end up like Sanskrit and Latin !
All this to be taken with a grain of piquant salt!!!
Abdou Diouf is right. The Hegemony of English is a threat to European languages and cultures. 1 billion dollars for multilingualism is nothing compare to the benefits accruing to the UK and to the USA as a consequence of the hegemonic role of THEIR language
I agree. But why am I as a British citizen being forced to pay for this? Why dont the people who demand protection of their languages pay for their own translations?
Also, I dont really see how USA and UK is actually forcing people to use their language. Do you see that? I dont. It just means that people find English easier to use and operate. So I am failing to understand how one blames the UK and USA. Do we also blame India? or Australia?
How about Italy for putting in the hegemony of Latin? Or Greece for the Greek bits? Or how about Saudi Arabia for Arabic? How about Hindi in India? How about the French for the French hegemony in Francophone Africa?
Languages and Religions grow because people are drawn to it and believe in it and use it. If they arent impressed, the language or religion will die out. And no amount of subsidy will save it. It will end up like Sanskrit and Latin !
All this to be taken with a grain of piquant salt!!!
Turkey and the Armenian Genocide
When I first wrote about the Armenian Genocide, i had a huge number of foaming emails from Turks who furiously complained about my article. And now you have the US Congress voting on the measure. I quote:
The bill, which will be put to the House of Representatives foreign affairs committee on Wednesday, enjoys majority support and comes at a time when ties between Washington and Ankara are under severe strain.
The bill has 226 co-sponsors. It calls on Mr Bush “to accurately characterise the systematic and deliberate annihilation of 1.5m Armenians as genocide”. The massacres were carried out by Ottoman troops beginning in 1915, before the creation of the republic of Turkey. Turkey rejects characterisation of the deaths as genocide and takes diplomatic and other measures against countries that adopt such a stance.
See here for some potential repurcussions on USA, but hey, great news indeed! Just see my previous post on genocide! I also found it very damning that EIGHT ex-Secretary of State's thought that protesting against the Congressional attempt to identify and recognise this genocide was correct. This is the US Government for you, my friends, this is the US government for you. A government who is willing to oversee genocide for short term benefits. So what happened to the moral compass, the strong protestations of the advantages of western culture and morals? Esphoks!
Eight former US secretaries of state – including Colin Powell, Henry Kissinger and Madeleine Albright – have written to Nancy Pelosi, the speaker of the House of Representatives, to ask her to prevent a vote on the issue.
All this to be taken with a grain of piquant salt!!!
The bill, which will be put to the House of Representatives foreign affairs committee on Wednesday, enjoys majority support and comes at a time when ties between Washington and Ankara are under severe strain.
The bill has 226 co-sponsors. It calls on Mr Bush “to accurately characterise the systematic and deliberate annihilation of 1.5m Armenians as genocide”. The massacres were carried out by Ottoman troops beginning in 1915, before the creation of the republic of Turkey. Turkey rejects characterisation of the deaths as genocide and takes diplomatic and other measures against countries that adopt such a stance.
See here for some potential repurcussions on USA, but hey, great news indeed! Just see my previous post on genocide! I also found it very damning that EIGHT ex-Secretary of State's thought that protesting against the Congressional attempt to identify and recognise this genocide was correct. This is the US Government for you, my friends, this is the US government for you. A government who is willing to oversee genocide for short term benefits. So what happened to the moral compass, the strong protestations of the advantages of western culture and morals? Esphoks!
Eight former US secretaries of state – including Colin Powell, Henry Kissinger and Madeleine Albright – have written to Nancy Pelosi, the speaker of the House of Representatives, to ask her to prevent a vote on the issue.
All this to be taken with a grain of piquant salt!!!
How old does a crime need to be before you skip punishment?
The Germans killed 65,000 Hereros in Namibia in 1904, and very many more were cleansed from their lands. See here.
Generally, the colonial powers have escaped paying any kind of compensation to their imperial victims. Because Italy, Germany and Japan were on the receiving end, they were called as bad boys and forced to pony up. But the other colonial powers such as USSR, USA, France, UK, etc. escaped paying compensation or being really held to account. Or even now.
Pretty tragic, no? But here's a prediction, the noose is becoming tighter and tighter around the necks of interventionist powers. Over the next decade or so, it will become progressively more difficult for them to reach out and intervene without legal cover. Otherwise one can really tie up a country in legal difficulties. And do not think it is just USA and UK, you can add China, Saudi Arabia, Russia, Iran and a host of other countries to that list.
Interesting days ahead.
All this to be taken with a grain of piquant salt!!!
Generally, the colonial powers have escaped paying any kind of compensation to their imperial victims. Because Italy, Germany and Japan were on the receiving end, they were called as bad boys and forced to pony up. But the other colonial powers such as USSR, USA, France, UK, etc. escaped paying compensation or being really held to account. Or even now.
Pretty tragic, no? But here's a prediction, the noose is becoming tighter and tighter around the necks of interventionist powers. Over the next decade or so, it will become progressively more difficult for them to reach out and intervene without legal cover. Otherwise one can really tie up a country in legal difficulties. And do not think it is just USA and UK, you can add China, Saudi Arabia, Russia, Iran and a host of other countries to that list.
Interesting days ahead.
All this to be taken with a grain of piquant salt!!!
Rejection of the 1 Share - 1 Vote principle will hurt European Markets
The Financial News has a nice editorial on this issue today. Remember I talked about this over the weekend and said that personally speaking, I dont like it. I quote:
But the decision is a setback for the development of European capital markets and European prosperity. It follows publication of a study this summer that found the proportionality principle was widely ignored in several European markets. Of 464 European companies surveyed, 44% deviated from the principle by using devices such as multiple voting rights, priority shares with special voting rights, pyramid structures, voting ceilings and golden shares. Institutional investors surveyed expressed an aversion to these practices, stating the increased risk led them to expect a substantial discount when buying the affected shares.
This raises the cost of capital, fragments the European capital market and impedes a properly functioning market for corporate control.The lack of common understanding on proportionality bedevilled discussions around the European Union’s takeover directive and made the result ineffective.
The European Corporate Governance Forum, which advises the EC, identified reasons why proportionality matters. Without it, boards and management can become entrenched, companies can be harder to take over and minority shareholders can lose out because controlling shareholders are in a stronger position to take benefits for themselves. Also, the principle of comply-or-explain, which is a valuable tool of corporate governance, works less well when companies entrench their ownership structure in this way.
The forum therefore suggested an enhanced transparency regime whereby companies that deviate from the proportionality principle should explain their reasoning and the value their structure brings. This would promote debate and enable the market to decide. The extra information would also inspire further academic debate, which has been narrow and sometimes based on unreal premises.
Shareholders would go further and suggest there could be a vote on the explanations provided by companies. This would boost the pressure for change when companies are unable to provide a satisfactory explanation for their capital structure.
All this to be taken with a grain of piquant salt!!!
But the decision is a setback for the development of European capital markets and European prosperity. It follows publication of a study this summer that found the proportionality principle was widely ignored in several European markets. Of 464 European companies surveyed, 44% deviated from the principle by using devices such as multiple voting rights, priority shares with special voting rights, pyramid structures, voting ceilings and golden shares. Institutional investors surveyed expressed an aversion to these practices, stating the increased risk led them to expect a substantial discount when buying the affected shares.
This raises the cost of capital, fragments the European capital market and impedes a properly functioning market for corporate control.The lack of common understanding on proportionality bedevilled discussions around the European Union’s takeover directive and made the result ineffective.
The European Corporate Governance Forum, which advises the EC, identified reasons why proportionality matters. Without it, boards and management can become entrenched, companies can be harder to take over and minority shareholders can lose out because controlling shareholders are in a stronger position to take benefits for themselves. Also, the principle of comply-or-explain, which is a valuable tool of corporate governance, works less well when companies entrench their ownership structure in this way.
The forum therefore suggested an enhanced transparency regime whereby companies that deviate from the proportionality principle should explain their reasoning and the value their structure brings. This would promote debate and enable the market to decide. The extra information would also inspire further academic debate, which has been narrow and sometimes based on unreal premises.
Shareholders would go further and suggest there could be a vote on the explanations provided by companies. This would boost the pressure for change when companies are unable to provide a satisfactory explanation for their capital structure.
All this to be taken with a grain of piquant salt!!!
Spain's attack on freedom of speech
So why is making fun of the Spanish Royal's a crime? If drawing cartoons of Prophet Mohammad is all perfectly legal, having a statue of a saint killing a Moor revered as a nation icon is perfectly all right, then having cartoons of the heir to the throne having sex with his wife should be perfectly legal under the freedom of speech element.
All this to be taken with a grain of piquant salt!!!
All this to be taken with a grain of piquant salt!!!
Should the tax-payer pay for mickey mouse courses in University?
I dont think so, but dont take my word for it, see what Sir Richard Sykes, the rector of Imperial College in London has to say on this:
Sir Richard Sykes, the rector of Imperial College in London, said that pushing loans closer to high street bank rates would deter students from taking "damn silly courses". His opinions echo those of many senior university figures, who view the growth of degree courses such as golf management and surfing with growing alarm.
If my son wanted to do a golf management or surfing course, he knows what my answer would be! :)
All this to be taken with a grain of piquant salt!!!
Sir Richard Sykes, the rector of Imperial College in London, said that pushing loans closer to high street bank rates would deter students from taking "damn silly courses". His opinions echo those of many senior university figures, who view the growth of degree courses such as golf management and surfing with growing alarm.
If my son wanted to do a golf management or surfing course, he knows what my answer would be! :)
All this to be taken with a grain of piquant salt!!!
Parents of primary school student's are increasingly aiming for segregated schooling
This is absolutely gobsmacking. Instead of aiming for a colour blind, race blind society, because of the government's policies, now we have a situation that parents are pushing their kids to join same ethnic / race schools. I already talked about how funding for schools whcih are based on faith is completely wrong, education should be strictly secular. You want to learn about religion, go to the temple, mosque or church, not in the secular state temples.
I quote:
The study shows that the over-concentration of some ethnic groups in state schools cannot be explained by the social make-up of catchment areas alone. Instead, parents are actively choosing to segregate their children from other groups of pupils, sending them to predominately "black" or "Asian" schools.
It will make uncomfortable reading for the Government whose response to the spectre of monocultural playgrounds has been little more than to direct schools to teach about diversity and provide opportunities for children to visit other schools with a different racial and religious make-up.
All this to be taken with a grain of piquant salt!!!
I quote:
The study shows that the over-concentration of some ethnic groups in state schools cannot be explained by the social make-up of catchment areas alone. Instead, parents are actively choosing to segregate their children from other groups of pupils, sending them to predominately "black" or "Asian" schools.
It will make uncomfortable reading for the Government whose response to the spectre of monocultural playgrounds has been little more than to direct schools to teach about diversity and provide opportunities for children to visit other schools with a different racial and religious make-up.
All this to be taken with a grain of piquant salt!!!
The Swiss are now climbing on the racism, islamophobic bandwagon!
The NYTimes has a full article on how the Swiss are working themselves up on foreigner hatred, racism and Islamophobia. Again, I am very worried indeed. This is not good. I quote:
“Our political enemies think the poster is racist, but it just gives a simple message,” Bruno Walliser, a local chimney sweep running for Parliament on the party ticket, said at the rally, held on a Schwerzenbach farm outside Zurich. “The black sheep is not any black sheep that doesn’t fit into the family. It’s the foreign criminal who doesn’t belong here, the one that doesn’t obey Swiss law. We don’t want him.”
More than 20 percent of Swiss inhabitants are foreign nationals, and the SVP argues that a disproportionate number are lawbreakers. Many drug dealers are foreign, and according to federal statistics, about 70 percent of the prison population is non-Swiss.
Human rights advocates warn that the initiative is reminiscent of the Nazi practice of Sippenhaft, or kin liability, under which relatives of criminals were held responsible and punished for their crimes.
For Nelly Schneider, a 49-year-old secretary, the party’s approach is “a little bit crass,” but appealing nevertheless. “These foreigners abuse the system,” she said after Mr. Walliser’s presentation. “They don’t speak any German. They go to prostitution and do drugs and drive fancy cars and work on the black market. They don’t want to work.”
While going on welfare, asking to be treated differently, refusing to treat women when you are a doctor, or refusing to sell contraceptive pills is disgusting. That's not what you signed up for when you became a citizen or continue to be a citizen. See here for my comments to Tariq Ramadan, the author of what it means to be an European Muslim.
But that's on the citizen's side. On the other side, we have seen so many times as to how Europeans lead inexorably towards genocide and killings. This is simply another step towards it. Perhaps the Council of Europe can take up this matter? I think that's the only body in Europe who can conceivably make a difference in this frankly extremely dangerous matter. I know Muslims think the worst of the Jews for complaining about the Genocide and Holocaust, but remember this, what happened to them can and will happen to the Muslims as well.
All this to be taken with a grain of piquant salt!!!
“Our political enemies think the poster is racist, but it just gives a simple message,” Bruno Walliser, a local chimney sweep running for Parliament on the party ticket, said at the rally, held on a Schwerzenbach farm outside Zurich. “The black sheep is not any black sheep that doesn’t fit into the family. It’s the foreign criminal who doesn’t belong here, the one that doesn’t obey Swiss law. We don’t want him.”
More than 20 percent of Swiss inhabitants are foreign nationals, and the SVP argues that a disproportionate number are lawbreakers. Many drug dealers are foreign, and according to federal statistics, about 70 percent of the prison population is non-Swiss.
Human rights advocates warn that the initiative is reminiscent of the Nazi practice of Sippenhaft, or kin liability, under which relatives of criminals were held responsible and punished for their crimes.
For Nelly Schneider, a 49-year-old secretary, the party’s approach is “a little bit crass,” but appealing nevertheless. “These foreigners abuse the system,” she said after Mr. Walliser’s presentation. “They don’t speak any German. They go to prostitution and do drugs and drive fancy cars and work on the black market. They don’t want to work.”
While going on welfare, asking to be treated differently, refusing to treat women when you are a doctor, or refusing to sell contraceptive pills is disgusting. That's not what you signed up for when you became a citizen or continue to be a citizen. See here for my comments to Tariq Ramadan, the author of what it means to be an European Muslim.
But that's on the citizen's side. On the other side, we have seen so many times as to how Europeans lead inexorably towards genocide and killings. This is simply another step towards it. Perhaps the Council of Europe can take up this matter? I think that's the only body in Europe who can conceivably make a difference in this frankly extremely dangerous matter. I know Muslims think the worst of the Jews for complaining about the Genocide and Holocaust, but remember this, what happened to them can and will happen to the Muslims as well.
All this to be taken with a grain of piquant salt!!!
Ignore Risk Management at your peril, your entire bank might be at risk
Here we go again, now Carnegie, the Swedish investment bank, is being pummelled by the markets and country, for having completely mucked up its risk management, allowed traders to run amok and ended up with huge losses. 200 years of pristine reputation, clean and transparent firm, all firmly driven into the toilet.
How many times have we seen this? Risk management underinvestment and then traders take wrong posititions or mis vale or mark to model or something like that and then it blows up, usually bringing down the very management who did not pay money or attention to their risk management systems.
After thinking about it for 2 seconds, I came up with some questions arise which I would ask to the CEO
1. Who does the chief risk officer report to? If the CEO with NO dotted lines, then fine. If there are any dotted lines or matrix management, then there is a disaster waiting to happen. This is applicable to market, credit, ops, liquidity risk
2. Are each division's capital allocated based upon risk?
3. Do you match the divisional RoE with their P &L? On a monthly basis?
4. How do you base your bonus pool allocations? On revenue or adjusted risk levels?
5. Who develops your risk scenario's? How often do you do war gaming? Do your head of trading attend? What is your definition of comfort values?
6. Why are you not making your divisional risk and RoE transparent?
7. What is your investment in IT? What is the ratio of risk investments to trading investments? If less than 20 percent, why?
8. When was the last time you had an independent risk and trading systems audit? And seen the results? And acted upon them? And reviewed them? And fired somebody for not following them?
9. Where does product control fit it? Do they report to trading or risk heads?
10. Who is looking after your model risk? Do you know the stress scenario results? Under what circumstances do they fail? Negative interest rates? Liquidity risk? Spreads very wide? Exchange stops trading? A dr death scenario?
But I am afraid this will happen again and again and again, people just do not listen and short term profits will again overwhelm the risk manager's warnings. And then the bank will again drop into the muck!
All this to be taken with a grain of piquant salt!!!
How many times have we seen this? Risk management underinvestment and then traders take wrong posititions or mis vale or mark to model or something like that and then it blows up, usually bringing down the very management who did not pay money or attention to their risk management systems.
After thinking about it for 2 seconds, I came up with some questions arise which I would ask to the CEO
1. Who does the chief risk officer report to? If the CEO with NO dotted lines, then fine. If there are any dotted lines or matrix management, then there is a disaster waiting to happen. This is applicable to market, credit, ops, liquidity risk
2. Are each division's capital allocated based upon risk?
3. Do you match the divisional RoE with their P &L? On a monthly basis?
4. How do you base your bonus pool allocations? On revenue or adjusted risk levels?
5. Who develops your risk scenario's? How often do you do war gaming? Do your head of trading attend? What is your definition of comfort values?
6. Why are you not making your divisional risk and RoE transparent?
7. What is your investment in IT? What is the ratio of risk investments to trading investments? If less than 20 percent, why?
8. When was the last time you had an independent risk and trading systems audit? And seen the results? And acted upon them? And reviewed them? And fired somebody for not following them?
9. Where does product control fit it? Do they report to trading or risk heads?
10. Who is looking after your model risk? Do you know the stress scenario results? Under what circumstances do they fail? Negative interest rates? Liquidity risk? Spreads very wide? Exchange stops trading? A dr death scenario?
But I am afraid this will happen again and again and again, people just do not listen and short term profits will again overwhelm the risk manager's warnings. And then the bank will again drop into the muck!
All this to be taken with a grain of piquant salt!!!
Better management of foodstocks will lead to less famine!
Ethiopia is a country which is in the news for all the wrong reasons. If it is not war then its famine. But now the country is embarking on a remarkable exercise, to implement a commodities exchange which will allow for better price formation, manage the wild swings of prices, better hedging, better knowledge of inventories, better foodgrain production and management of buffer stocks. Some quotes:
I know, I know, delivery and execution risks are huge, corruption is always present, but given the fact that these chaps are starting from negative territory, even this government driven initiative is welcome news for me!
Perhaps sometime in the next century, they will actually take the step which will remove famines permanently, and that's the Amartya Sen's prescription: DEMOCRACY. Its not the lack of food which causes famine, its the lack of governance which does it.
All this to be taken with a grain of piquant salt!!!
The government of Ethiopia, which has one of Africa’s most state-dominated economies, is stepping into uncharted territory by launching a commodity exchange to help alleviate food shortages and encourage the commercialisation of agriculture.
The exchange will create a pool of liquidity and reference prices that reflect the amalgamation of demand from across the country, thereby reducing the price volatility caused by the existence of multiple fragmented markets.
Price tickers at 200 rural sites will give farmers independent access to price information from Addis Ababa, enabling them to negotiate a fairer deal with middle-men and giving them incentives to produce.
Traders, meanwhile, will be able to profit from arbitrage opportunities by buying cheap grain in areas of surplus and selling it at higher prices closer to areas where
there are shortages, which will itself facilitate food distribution.
I know, I know, delivery and execution risks are huge, corruption is always present, but given the fact that these chaps are starting from negative territory, even this government driven initiative is welcome news for me!
Perhaps sometime in the next century, they will actually take the step which will remove famines permanently, and that's the Amartya Sen's prescription: DEMOCRACY. Its not the lack of food which causes famine, its the lack of governance which does it.
All this to be taken with a grain of piquant salt!!!
A good review of the German recovery and reform!
A good review from Wolfgang Münchau of the FT. The last two paragraphs were very telling:
Bad indictment, no? And then the forthcoming Lisbon meeting will be taken up with that exceedingly stupid Reform Treaty. When will these politicians learn that their citizens are stupid?
All this to be taken with a grain of piquant salt!!!
In all these years, I have yet to meet a single politician in a large
continental country with a plausible economic reform strategy. I suspect most
European voters have not met one either. The electorates have regrettably, but
logically, concluded that parties advocating economic reforms cannot be trusted.
Do not blame the voters. The idea that voters are incapable of grasping what is
good for them is plainly absurd.
The small countries have fared better, but their successes hold few lessons as their political economy is so different from that of large countries. It is now time for a new approach, something strategic, and something that does not call itself “agenda” or “reform”. Both words, and the politicians who use them, are associated with failure.
Bad indictment, no? And then the forthcoming Lisbon meeting will be taken up with that exceedingly stupid Reform Treaty. When will these politicians learn that their citizens are stupid?
All this to be taken with a grain of piquant salt!!!
Freedom of Speech under threat, this time at the United Nations
You have heard about the Swedish issue with the cartoon of the Prophet Mohammad? But now something more troubling is underway. And that's the attempts by several governments to clamp down on free speech on an inter-governmental basis. This has to be fought back as much as possible. Just read the hypocritical statements and puke:
Each and every of these governments do things which are much more against Islam and the Prophet than any kind of cartoon can ever do. So besides being hypocritical and party to repression internally, now they are trying to wrap themselves in a pious flag and complaining about freedom of speech and defamation of religion/prophet. But I do hope that the governments in the United Nations reject these calls firmly. Bloody cheek!
Look at this half-baked abortion of a bill in the UK which has now gone into law. In other words, a cartoon like the Swedish one couldnt have been published in the UK. See here for a good argument against this stupid bill. Bizarre, i tell you.
All this to be taken with a grain of piquant salt!!!
The Iranian foreign ministry protested to Sweden, while Iranian President
Mahmoud Ahmadinejad asserted that "Zionists," "an organized minority who have
infiltrated the world," were behind the affair.
Pakistan complained and said that "the right to freedom of expression" is inconsistent with "defamation of religions and prophets."
The Turkish Ministry of Religious Affairs called for rules specifying new
limits of press freedom.
Speaking for the OIC, Pakistani diplomat Marghoob Saleem Butt then
criticized "unrestricted and disrespectful enjoyment of freedom of
expression."
Each and every of these governments do things which are much more against Islam and the Prophet than any kind of cartoon can ever do. So besides being hypocritical and party to repression internally, now they are trying to wrap themselves in a pious flag and complaining about freedom of speech and defamation of religion/prophet. But I do hope that the governments in the United Nations reject these calls firmly. Bloody cheek!
Look at this half-baked abortion of a bill in the UK which has now gone into law. In other words, a cartoon like the Swedish one couldnt have been published in the UK. See here for a good argument against this stupid bill. Bizarre, i tell you.
All this to be taken with a grain of piquant salt!!!
Two British Muslims in the dock for another bombing attempt
Here we go again, we now have the sad situation that two young British Muslims are now charged with the crime of trying to blow up few BNP members. While the BBC does not identify the chaps as Muslims, they seem to have dual nationality with Pakistan. So what are the chances that a Pakistani Christian or Hindu would want to blow up a BNP Member in Yorkshire, UK?
I dont like BNP, I think they are a bunch of clowns, mainly because their policies seem to be strained through a cloth of melanin and is frankly intellectually incoherent not to mention racist. So as soon as anybody says that I like the BNP or support them immediately gets filed under the "idiot" label. But that still does not allow people to blow them up.
This is seriously worrying that now the illness of militant islam and jihadism is now deep inside the youth of today. When you combine it with the fact that British Muslim Doctors are now reportedly refusing to treat non muslims, or alcohol related diseases or females, I am deeply concerned about this. I quote:
All this to be taken with a grain of piquant salt!!!
I dont like BNP, I think they are a bunch of clowns, mainly because their policies seem to be strained through a cloth of melanin and is frankly intellectually incoherent not to mention racist. So as soon as anybody says that I like the BNP or support them immediately gets filed under the "idiot" label. But that still does not allow people to blow them up.
This is seriously worrying that now the illness of militant islam and jihadism is now deep inside the youth of today. When you combine it with the fact that British Muslim Doctors are now reportedly refusing to treat non muslims, or alcohol related diseases or females, I am deeply concerned about this. I quote:
Shazia Ovaisi, a GP in north London, said one of her male Muslim
contemporaries at medical school failed to complete his training because he
refused to examine a woman patient as part of his final
exams.
This weekend, however, it emerged that Sainsbury's is
also allowing
its Muslim pharmacists to refuse to sell the morning-after
pill to customers. At
a Sainsbury's store in Nottingham, a pharmacist named
Ahmed declined to provide
the pill to a female reporter posing as a customer.
A colleague explained to her
that Ahmed did not sell the pill for "ethical
reasons".Boots also permits pharmacists to refuse to sell the pill on ethical
grounds.
The BMA said it had received reports of Muslim students who did not
want to learn anything about lcohol or the effects of overconsumption. "They are
so opposed to the consumption of it they don't want to learn anything about it,"
said a spokesman.
This is playing into the fascists, islamofascists and racist hands. This is very worrying and frankly I am very upset with Sainsbury's for indulging in this behaviour. It is none of the pharmacist's business about what pills I take. It is none of the NHS's doctor's business what disease I have. What's this? Next you will refuse to treat me for lung cancer because I stay in London and am exposed to pollution?
Disgusting.
All this to be taken with a grain of piquant salt!!!
Making London the centre for Islamic Finance
Now the attempts to make London the centre for Islamic Finance is good. I like the attempt because it shows a proactive measure of regulation, some drive to keep on top of financial instruments, and a desire to experiment in finance. That's how London and the UK will keep on succeeding.
The Government wanted to raise some funds using Islamic Bonds (sukuk's, etc.) but as the FT reports, there is going to be a bit of a challenge because our laws are simply not capable of handling such kind of structures. And it would take much longer, and will be a bit tough to get subscribers as the coupon payments will be low.
We always knew that we will need to modify our laws, but I did not realise it will be this complex. You see, Islamic Bonds do not work on the basis of interest but on the basis of profit and loss of an underlying asset.
Nothing strange in this, we have quite a lot of such kind of structures already. Think about the PFI initiatives, or large infrastructure projects, etc. who get funded on this basis. So you raise 100 quid via a bond to make a bridge and promise to pay the bond holders out of the tolls you get. You securitise the toll payments and pay off the bond holders. The only difference that you will see is that instead of a fixed amount, you get (theoretically!!!) a cut of the profit or loss. But that's only in theory because people arent stupid, they can compare cashflows.
Personally speaking, I see no difference between Islamic Finance and ordinary finance, the only difference is that you pay a bit more for the "faith" discount. There is a big problem with the operationalisation part of Islamic finance but that's confidential, I am afraid! :)
But given the huge amounts of money sloshing around in the oil rich muslim world, its a shame that we cant get our legislation in gear to satisfy this. I do hope the government picks this up again and soon. All the London banks are already working hard on satisfying pent up demand and if we dont do it, then Malaysia, UAE, Bahrain etc. will walk away from this.
All this to be taken with a grain of piquant salt!!!
The Government wanted to raise some funds using Islamic Bonds (sukuk's, etc.) but as the FT reports, there is going to be a bit of a challenge because our laws are simply not capable of handling such kind of structures. And it would take much longer, and will be a bit tough to get subscribers as the coupon payments will be low.
We always knew that we will need to modify our laws, but I did not realise it will be this complex. You see, Islamic Bonds do not work on the basis of interest but on the basis of profit and loss of an underlying asset.
Nothing strange in this, we have quite a lot of such kind of structures already. Think about the PFI initiatives, or large infrastructure projects, etc. who get funded on this basis. So you raise 100 quid via a bond to make a bridge and promise to pay the bond holders out of the tolls you get. You securitise the toll payments and pay off the bond holders. The only difference that you will see is that instead of a fixed amount, you get (theoretically!!!) a cut of the profit or loss. But that's only in theory because people arent stupid, they can compare cashflows.
Personally speaking, I see no difference between Islamic Finance and ordinary finance, the only difference is that you pay a bit more for the "faith" discount. There is a big problem with the operationalisation part of Islamic finance but that's confidential, I am afraid! :)
But given the huge amounts of money sloshing around in the oil rich muslim world, its a shame that we cant get our legislation in gear to satisfy this. I do hope the government picks this up again and soon. All the London banks are already working hard on satisfying pent up demand and if we dont do it, then Malaysia, UAE, Bahrain etc. will walk away from this.
All this to be taken with a grain of piquant salt!!!
Ig-Nobels - very amusing take on the Nobel Prizes
One of the reasons why my sister and I sign off our posts with "with a grain of salt" is to make sure that we do not descend into pretentiousness and self-righteousness. Keeps us from making a fool of ourselves and not to take us too seriously. People have a tendency of doing that, lol, because I firmly believe that there is nothing in the world that you cannot laugh at!
But here's an announcement about Ig Nobels, the alternative Nobel prize given to people whose research is basically so amazing that you just listena and go, eh? why the hell would you research anything like that? See this year's candidates:
All this to be taken with a grain of piquant salt!!!
But here's an announcement about Ig Nobels, the alternative Nobel prize given to people whose research is basically so amazing that you just listena and go, eh? why the hell would you research anything like that? See this year's candidates:
Medicine Brian Witcombe of Gloucester and Dan Meyer of Antioch, Tennessee,
for their report in the British Medical Journal, Sword Swallowing and its
Side-Effects
Physics L Mahadevan of Harvard and Enrique Cerda Villablanca of
Santiago University, Chile, for studying how sheets become wrinkled
Biology Johanna van Bronswijk of Eindhoven University of Technology, Netherlands, for a census of the mites, insects, spiders, pseudoscorpions, crustaceans, bacteria, algae, ferns and fungi with whom we share our beds
Chemistry Mayu Yamamoto of the International Medical Centre of Japan, for developing a way to extract vanilla essence from cow dung
Linguistics Juant Manuel Toro, Josep Trobalon and Núria Sebastián-Gallés, of Barcelona University, for showing that rats cannot tell the difference between a person speaking Japanese backwards and a person speaking Dutch backwards
Literature Glenda Browne of Australia, for her study of the word "the" and the problems it causes when indexingPeace The Air Force Wright Laboratory, Dayton, Ohio, for instigating research on a chemical weapon to make enemy soldiers sexually irresistible to each other
Nutrition Brian Wansink of Cornell University, for exploring the
seemingly boundless appetites of human beings by feeding them with a
self-refilling, bottomless bowl of soup
Economics Kuo Cheng Hsieh, of Taiwan, for patenting a device that catches bank robbers by dropping a net over them
Aviation Patricia V Agostino, Santiago A Plano and Diego A Golombek of
Argentina, for the discovery that Viagra aids jetlag recovery in hamsters
All this to be taken with a grain of piquant salt!!!
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