There is a rather inspiring, video on the Internet on the challenges faced by Somali athletes training for the 2012 Olympic Summer Games in London. If you have ten minutes to spare, Google “Somalis Train on the Road of Death”. Quite a difference between them and the cosseted athletes in much of the rest of the world. 

GLEANINGS VERSION II

No. 409 - May 12^th,  2011 

ONE-THIRD OF WORLD’S FOOD WASTED (NYT, John Collins Rudolf) 

• A study done by the Swedish Institute for Food & Biotechnology for the FAO made public on May 12^th, says that, while the world may be on the brink of a food crisis, it isn’t for a lack of food. For one-third of all food produced globally is lost or wasted each year. While this is divided quantitatively fairly equally between the industrialized & the developing worlds, on a per capita basis it’s far greater in the former. And the reasons for these food losses are dramatically different : in the developed world it is largely due to retailers & consumers alike throwing away ‘perfectly edible food stuffs’, while in the latter it is a function of harvesting-, processing-, distribution- & infrastructure inadequacies. It concludes that, while there is lots of scope for improvement in the latter, little effort is being made to study, or develop solutions for, these problems. 

 

There isn’t enough money for the American agricultural-industrial complex to address these problems in the developing world’s systems & to willingness among decision makers in this area of human endeavour to give them any degree of priority & to think “outside the box” in dealing with them. 

DON’T BLAME YOUR ECONOMIC MESS ON THE MASSES (NYT, Paul Krugman) 

• More & more I hear from self-appointed wise men, officials & pundits that the recent economic disasters were the fault of voters wanting something for nothing & of weak-kneed politicians catering to the electorate’s foolishness. This blame-the-public view is self-serving & dead wrong. For it was a top-down disaster : the policies that caused them weren’t responses to public demands but to those by individuals with influence who now hector us on the need to address the resultant mess. The man in the street wasn’t responsible for ideology-driven Bush tax cuts, the military adventures in Iraq & Afghanistan, and the reckless deregulation-prompted Great Recession. Europe’s crisis too it was brought on by the elite’s bad judgment calls, not the greediness of the common man. While the official story there too is that governments catered unduly to the masses, promising too much & collecting too few taxes, that may have been true for Greece, but wasn’t for Ireland & Spain, both of whom had low debt & budget surpluses on eve of the crisis. And the real story behind Europe’s crisis was the creation of a single currency, an idea imposed by the elite on highly reluctant voters.
• As to the question why we should be concerned about the blame for bad policies being shifted onto the general public, one reason is accountability : those who advocated the budget-busting policies of the Bush era should not now be allowed to pass themselves off as deficit hawks & those who praised Ireland as a role model should not be permitted to lecture people on responsible government. The other is that if we allow those who caused the current mess to be absolved from blame, we risk having the power elites doing even more damage in the future.     

 

He is right, but only up to a point. As is so often the case in his writings, he is blinkered by traditional left-of-centre thinking. The power elites made the fateful decisions but it was the voters who put them, & kept them, in positions where they could do so. As to the hoi polloi’s greed, their reaction across much of the developed world to proposals to return to fiscal sanity by encroaching on their entitlements speaks for itself. 

BOEHNER : ‘TRILLIONS’ IN CUTS LOOM IN DEBT VOTE (AP, Andrew Taylor) 

• He told the Economic Club of New York on May 9^th that any increase in the debt limit must be accompanied by spending cuts larger than that, saying “It’s true that allowing America to default would be irresponsible ... But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process ... To increase the debt limit without simultaneously addressing the drivers of our debt - in defiance of the will of the people - would be monumentally arrogant and massively irresponsible”. Thus he implies a need to cut Medicare, food stamps & Medicaid only a few days after other prominent Republicans, incl. House Majority Leader Eric Cantor (R.-Va),  seemed to suggest that political realities ruled out doing so prior to the 2012 election. He also insisted “tax hikes should be off the table” & that “If we don’t act boldly now, the markets will act for us pretty soon ... We cannot let this moment pass.” (the latter likely intended as a sop to his audience).

 

His aim audience was suitably ‘underwhelmed’ & gave him only a “polite” applause. At last report Senate Minority Leader Mitch McConnell had gone on record saying that he wouldn’t vote for a debt ceiling hike in the absence of major spending cuts that would include Medicare & Medicaid & there are now said to be growing numbers of Republicans who are sceptical of the August 2^nd ‘drop dead’ date for increasing it. 

MORTGAGE RATE OVERHAUL MAY PUSH U.S. HOME LOAN RATES ABOVE 8% (Bloomberg) 

• Pursuant the Dodd-Frank Act of 2010, federal regulators are now proposing the introduction, effective January 1^st, 2012, Qualified Residential Mortgages (QRMs) that could be securitized without the sponsoring bank having to put 5% of the issue on its own books. They would require 20% downpayments & limit housing debt to 36% of the borrower’s income (the benchmark three decades ago). The Washington-based Mortgage Bankers’ Association claims this could raise mortgage rates for those unable to qualify by up to 300 bps (over & above the 100 bp rise in mortgage rates it is already forecasting for the next year). This, & the Administration’s plan to shrink Fannie & Freddie & to make it harder to get FHA-insured mortgages, could put paid to expectations that in 2012 house prices would start rising again, however modestly.   

 

Of the mortgages held by Fannie & Freddie 70% don’t meet QRM standards. And the  MBA says each 100 bp rise in rates excludes 4MM people from the housing market.

 

VETS OPPOSE BILL THAT RAISES HEALTH CARE FEES (AP, Donna Cassata) 

• Healthcare fees for working age military retirees haven’t changed in a over decade, with singles paying US$2.50/month & families US$5.00 for coverage that would cost civilian federal employees & other US citizens US$5,000/year (partly as a result of which the Pentagon’s out-of-pocket healthcare costs have almost tripled in nine years US$53BN. The Defence Bill unveiled on May 9^th would raise that to US$230/year for singles & twice that for families and, starting in 2013, would index them to rising healthcare costs. This has drawn fierce opposition from the 2.1MM-strong VFW (Veterans of Foreign Wars).

 

It’s hard to generate much sympathy for its position. 

THE MISSING FIFTH (NYT, David Brooks) 

• Americans have long been known for their manic dynamism. But they may be getting less so. For, while in 1954 96% of American men between the ages of 25 & 54 worked, today it’s more like 80%; i.e. one out of every five men in their prime working years isn’t getting up in the morning to go to work. According to the OECD the US now has the lowest share of working age men in its work force among the G-7 countries. And while a decade ago 5MM Americans collected federal disability benefits, today that number stands at 8.2MM.
• This is in part due to a lack of skills. According to the Bureau of Labor Statistics over one-third of those without a high school diploma are out of the work force, vs one in ten college graduates. And as some industries that traditionally employed the less well-educated, like agriculture, manufacturing & energy, become more productive they do so by employing more machinery or foreign workers, not by creating more jobs for Americans. And the longer people don’t work, the more they are corrupted by the corrosive culture of idleness.
• This problem cannot be solved by the Keynesian stimulus dream of the Left, nor by the public sector shrinking mantra of the Right. It will require a range of new policies, incl. the adoption of such German-style programs like apprenticeship programs & wage subsidies. Bringing them back into the work force will take money and, if we were smart, we would now be debating how to shift money from programs that provide comfort towards those that spark innovation. But that’s not what is happening. This leads to the question whether we should use our resources in the manner of a nation in decline or to stoke the energy of our people in a manner that would continue its rise.

 

These numbers may overstate the problem by not counting those beavering away in the underground economy, incl. the drug trade. But it does strike a potential death blow to the hopes of the optimists that the Americans somehow will get their s$%^ together. 

US MARCH OPENINGS HIGHEST IN 2 ½ YEARS (Reuters) 

• The Labor Department reported on May 11^th that job openings rose by 99,000 to 3½MM, it’s highest level since September 2008 & only the second time since November 2008 of back-to-back 3+MM monthly levels.

 

While a significant gauge of the demand for labour, their current number dwindles into significance compared to the number of those who are unemployed & looking for a job.   

US TRADE DEFICIT WIDENED MORE THAN EXPECTED (Reuters) 

• In March it rose to US$48.2BN, vs. February’s US$45.4BN & a US$47BN forecast, as exports grew 4.6% to US$172.7BN & imports 4.9% to US$220.8BN

 

The average price of imported oil hit US$93.76/bbl, a post-September 2008 high.  

NEW YORK CITY MUST FIX ITS PENSION MESS (NBCNews, Gabe Pressman) 

• Next year pensions & workers’ benefits will eat up US$16.4BN, 35% of its revenues. In ten years the cost of pensions has risen from US$1.2BN to US$8BN

 

Politicians have long been avoiding labour strife by making pension promises that someone else would have to deal with at a later date. But the buck has stopped now & this will be only one of the many unpleasantries facing Americans in the next decade.    

ALBERTA’S WATER IS NOT FOR SALE (EJ, Keith Gerein) 

• Following a May 11^th speech in Geneva Nestle Chairman Peter Brabeck told reporters that  water should be traded on an exchange, that “We are actively dealing with the government of Alberta to think about a water exchange” & that Alberta would be a good place to start due to the growing competition for water between agricultural & energy producers and that, if its price determined by supply & demand, it would encourage users to treat it with more respect & help curb a shrinking availability of fresh water in many parts of the world.  
• While an Alberta Environment spokesperson denied negotiations are taking place to create a water exchange, her Minister acknowledged there was an emerging debate around the idea as a means of encouraging water conservation & said that, while he didn’t recall speaking to any Nestle executives, he had heard from many people on the issue. And later in the Legislature, after opposition members levied all kinds of nonsensical charges, he told MLAs to put away “their conspiracy theories ... since Alberta’s water is not for sale.”
• This came in the wake of a report by a government-appointed economic panel that recommended, among others, that the province adopt a market system to allow water allocations to be sold or leased at prices determined by supply & demand. And there is already an informal market place of sorts whereby holders of water licenses can transfer, trade or sell any or all of their water allotments to others (such as happened when a major shopping centre being constructed outside Calgary, faced with a government freeze on the issuance of new water licenses, bought part of the water allotment of an irrigation district).

 

There are two separate issues. One is to achieve the most efficient distribution of Alberta water within Alberta among local users & the other the question of water exports. The former is a harbinger of things to come across the globe & a more transparent arrangement than the existing one would likely be beneficial, and the latter one that will become increasingly important in the years to come, given the growing demand for water South of the border in part due to its profligate use & a delusion down there Canada has an endless supply thereof. As such, anybody in his right mind should be in favour of the former, and oppose, or at least delay judgment on, the latter (having said that, it’s worth remembering that on both sides of the border North Americans’ per capita water consumption is two or three times that of most European countries, more than five times that in Israel, and twenty to thirty times that of the Palestinians).      

A FATAH-HAMAS DEAL (NYT, Editorial) 

• To succeed all Palestinians must work together. But the Fatah-Hamas deal is not the answer. For the latter has never renounced its legacy of violence nor agreed to recognize Israel. Replacing Salam Fayyad as Prime Minister ignores his role in building the West Bank’s  economy & institutions. Merging the two security forces will be problematic & put at risk the millions of dollars the US spent helping to build a credible Fatah security force.
• Israel has reason to mistrust the deal. So Netanyahu has suspended tax remittances & wants Washington to end all aid to the Abbas government.  While Obama has adopted a wait-and-see attitude, Congress talks tough. Abbas thinks the deal will boost the chances of UN recognition of Palestinian statehood & chose to deal with his enemies out of despair about the stalled peace process. No one knows Hamas’ motives although there are rumours of friction with Syria & a desire for better ties with the new Egyptian government.
• The Quartet must tell any new Palestinian government that its moves will be  scrutinized & that firing Fayyad would be a mistake, Hamas that it must quit firing rockets into Israel & recognize its right to exist, & Netanyahu to get himself back to the peace table since a negotiated peace is the only way to guarantee Israel’s security. And it’s up to Obama to put a deal on the table; for Israel & the Palestinians won’t break the stalemate on their own.

 

There is no doubt that Fayyad has done a stellar job in positioning the PA for statehood; but like everyone else he is not indispensable. And different circumstances call for different skills sets in Prime Ministers. Netanyahu, the US Jewish lobby & the New York Times may not like the deal, but the reality is that it’s the only one in town &, moreover, that it is an internal Palestinian issue. And the only reason for it having come to this has been Netanyahu’s his tendency to overplay its hand, counting on ‘divide & conquer’ to keep Fatah & Hamas at each other’s throats. And Hamas, years ago already offered Israel a multi-year cease-fire (which it turned down as ‘not being good enough’). 

FRANCE INCREASES AID TO PALESTINIANS (EJ, World Digest) 

• On May 9^th France announced it would donate 10MM Euros (US$13.8MM) to the Palestinian Authority after Prime Minister Salam Fayyad had told reporters, after Israel froze tax revenue transfers following the Palestinian unity agreement, that his government would be unable to pay its employees.

 

This came the day after Israel criticized the EU, accusing it of a “certain incoherence”, for boosting its aid to the Palestinians by 85MM Euros after Israel had announced it would withhold the transfer of 60MM Euros in tax revenues to the Palestinian Authority ‘until it could be sure that the money would not go to Hamas’, a move criticized across the world & in Israel itself by, among others, Netanyahu’s Defence Minister Ehud Barak). It is becoming clearer & clearer that Israel is becoming more & more isolated in its stance on the Palestinian issue & that the time is growing shorter & shorter for it being able to negotiate a deal that would enable it to achieve even a modicum of its objectives.       

THE QUEST OF A BILLIONAIRE MEDIATOR AND POSSIBLE LEADER

(G&M, Patrick Martin) 

• Munib Rashid Masri is a 75 year-old University of Texas-educated millionaire businessman & philanthropist who (aided by a rare VIP pass issued by Israel that enables him travel at will between the West Bank & Gaza with a minimum of fuss) was a key go-between in the reconciliation between Fatah & Hamas & who could be their choice to head the interim Palestinian government (in the past, when his business took more of his time, he was offered to post of Prime Minister three times only to turn it down each time).
• Interviewed at his home overlooking Nablus, he said “I want to see a state of Palestine before I die ... For the past four years I have worked 10 hours a day on this”, that when he first met Yasser Arafat in 1963 he “didn’t like him ... But came to love the man”, but that he never joined his Fatah movement since “my party was Palestine ... nothing more” & that, while as a secular Muslim he didn’t support Hamas’ religious agenda “once they were elected [in 2006] ... I accepted their place in the leadership ... Over the years ... I’ve warmed to them ... When they make a decision , they stick to it ... I respect that.”
• He believes Hamas made the big concessions : “Look at the three big points Meshaal made in his speech at the May 4^th reconciliation signing in Cairo ... He accepted the ‘67 borders, said he’d give negotiations a try and … would engage in any armed resistance only if the PA[ Palestinian Authority] agreed”  (Khaled Mashaal is Hamas’ Syria-based leader). Even so, he acknowledged “the biggest hurdles are still to come ... Building confidence between the people in the two factions is the most important thing ... there are so many doubters. I hate all this pessimism.” As to what would be hardest for Hamas to accept, he said “all the treaties from before , including the PLO’s agreements with Israel (one of which recognizes Israel) ... I’m sure they’ll recognize Israel when the time is right ... Why should they do it now?” The biggest obstacle, he said, is Israel : “They’re undermining the deal …This reconciliation is not ‘catastrophic” (as Netanyahu claims).

 

There you have it : pragmatism rather than dogmatism. And in life more often than not the former triumphs over the latter (Mr. Masri has extensive business interests all across North Africa & the Arab Middle East that are now being run on a day-to-day basis by some of his six children, with his flagship corporate entity being EDGO, a London-based drilling company. He is a member of the Palestinian Legislative Council and, many years ago briefly was a Jordanian Cabinet Minister).   

GREEK DISASTER RISKS EUROZONE ‘CONTAGION’ (AF-P) 

• On May 10^th experts from the EU, IMF & ECB began an audit of the finances & reforms in Greece to determine if it merits a critical new funding slice from last year’s 110BN Euro bailout package, a routine exercise that always creates nervousness in Greece because of the recommendations & conditionalities it produces for the next disbursement. Greece is struggling to meet its deficit reduction targets due to a deeper-than-expected recession and the next 12BN Euro instalment is critical to its finances. That same day Lorenzo Bini Smaghi, a member of the ECB Board (responsible for international & European relations) told the Italian Daily La Stampa a default or restructuring would hit the entire Eurozone & would bring the Greek banking system “on its knees”, and warned of “the contagion that a Greek disaster would inflict on the eurozone.”

 

Despite Prime Minister George Papandreou’s assurances that “we’ll take the necessary decisions ... to ensure we get out of this crisis” & that an overwhelming majority supports his government’s austerity measures, there continue to be periodic protest strikes, the latest of which was expected to paralyze travel on May 11th.