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Tuesday's Top 10 with NZ Mint:US presidential fundraising as speed-dating; Economists, madmen and unending economic growth; BoE to bankers: 'Gentleman you could all be out of business by Xmas'; Dilbert
Here's my Top 10 links from around the Internet at 12.30 pm today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email firstname.lastname@example.org.
My must read today is #1. Read it and weep.
1. How America really works - This New Yorker piece on the business of political fundraising dinners in America is fascinating.
It gives a lot of the detail and colour about how they work and what Presidents are expected to do for their money.
It also shows what happens when the dinner buyers don't feel like they get value for money.
Is this how to run the world's longest running and greatest democracy?
Anyone thinking we should sign up to a free trade deal with America sight unseen (which is how it's going at the moment given the details are not being released) should read this snippet first (and the last paragraph in particular).
By the time that Obama ran for President, in 2008, his relations with the financial industry had grown warmer, and he attracted more donations from Wall Street leaders than John McCain, his Republican opponent, did. Yet this good feeling did not last, despite the government’s bailout of the banking sector. Many financial titans felt that the President’s attitude toward the “one per cent” was insufficiently admiring, even hostile.
The planning for the fund-raisers seemed to underline this estrangement. Obama’s first event was a 6 P.M. dinner at the Four Seasons. About forty contributors, many of them from Wall Street, had paid thirty thousand dollars each to dine with him. Some of the invitees were disgruntled supporters who felt unfairly blamed for the country’s economic problems, and they wanted to vent about what they considered Obama’s anti-business tone. But the President did not have enough time to hear them out—or even share a meal—because after only an hour he was scheduled to leave for the second fund-raiser, at the downtown home of Anna Wintour, the editor of Vogue. At the Four Seasons, the President could spend about seven minutes per table, each of which accommodated eight donors. This was fund-raising as speed-dating.
Anita McBride, the chief of staff to Laura Bush, says, “It’s always a very delicate balance at the White House. Do donors think they are buying favors or access? You have to be very conscious of how you use the trappings of the White House. But you can go too far in the other direction, too. Donors are called on to do a lot. It doesn’t take a lot to say thank you.” One of the simplest ways, she notes, is to provide donors with “grip-and-grin” photographs with the President. “It doesn’t require a lot of effort on anyone’s part, but there’s been a reluctance to do it” in the Obama White House. “That can produce some hurt feelings.”
In the past, a President’s ability to charm the super-rich might not have mattered much. A decade ago, however, wealthy Democrats and Republicans began circumventing limits on direct campaign contributions by making enormous donations to political groups that were technically separate from campaigns but effectively served as their proxies, often by funding negative ads. In 2004, the outspoken liberal financier George Soros gave $27.5 million—then a record amount—to groups opposing President George W. Bush. The strategy provoked widespread censure. (The Republican National Committee accused Soros of having “purchased the Democratic Party.”) Richard Hasen, an election-law expert at the University of California at Irvine, says that “a legal cloud hung over” such efforts to sway elections. But in 2010 the Supreme Court, in the landmark case Citizens United v. Federal Election Commission, ruled that groups could make “independent expenditures” without limits, because such spending amounted to “political speech.” Subsequently, a lower court ruled, in Speechnow.org v. Federal Election Commission, that individuals could pool unlimited resources in order to support or criticize candidates, as long as these efforts were not explicitly coördinated with official campaigns. Since then, the number of indirect gifts has soared, giving rise to the “Super PAC,” and very wealthy Americans have begun wielding increasingly disproportionate power in U.S. politics.
2. Now it's Deutsche Bank - First there was HSBC. Then there was Standard Chartered. Now the New York Times reports New York State prosecutors are investigating Germany's Deutsche Bank over money transferred for governments Iran and Sudan.
3. The problem with Greece - Der Spiegel reports on the returning fears about a Grexit.
Athens has not been having an easy time coming up with the €11.5 billion in cost cutting measures over the next two years it has promised Europe. Indeed, Greek Prime Minister Antonis Samaras is reportedly set to request an additional two years to make those cuts during meetings later this week with German Chancellor Angela Merkel on Friday and French President François Hollande on Saturday.
But according to information obtained by SPIEGEL, the financing gap his country faces could be even greater. During its recent fact-finding trip to Athens, the so-called troika -- made up of representatives from the European Central Bank, the European Commission and the International Monetary Fund -- found that Greece will have to come up with as much as €14 billion to meet the terms for international aid. According to a preliminary troika report, the additional shortfalls are the result of lower than expected tax revenues due to the country's ongoing recession as well as a privatization program which has not lived up to expectations.
4. Why the Germans might like FIXIT - Ambrose Evans Pritchard does a nice job at The Telegraph explaining why the Germans quite like the Finnish chatter about leaving the Euro-zone
“We can’t start this off, but the Finns can,” said Hans-Olaf Henkel, former head of Germany’s industry federation.
Berlin’s policy elites are constrained by their honourable - if misdirected - feelings of moral duty towards the euro. They cannot bring themselves to plunge the dagger.
Or as ex-Bundesbanker Thilo Sarrazin puts it, they are driven by “the very German reflex that the Holocaust and Second World War will only be atoned for finally when all our interests, including our money, are in Europe's hands".
Finnish exit - or FIXIT, as they say in Helsinki - is certainly a plausible hypothesis. The Finns have no ensnaring duty to a mystical “Europe“. They did not join the EU until 1995, and only then with widespread dissent.
5. Yikes - The Telegraph reported The Bank of England was so worried about the Euro-zone financial crisis late last year it warned of a potential systemic collapse 'before Christmas'.
Paul Tucker, the deputy governor of the Bank of England, told an October meeting of the chief executives of Britain’s largest banks that there was a serious chance none of their businesses would survive to the end of the year.
“Gentlemen, you could all be out of business by Christmas,” Mr Tucker said in a stark warning to the bank chiefs, according to three sources present at the meeting.
The revelation of Mr Tucker’s remarkable warning shows the depth of fear among senior officials over the havoc the collapse of the eurozone would wreak on the British financial system.
6. Euro-zone beneficiaries - FTAlphaville reports on research showing most people in Portugal and Spain have actually done best out of the Euro-zone since 2000. Austria not so much.
7. Keep an eye on China - Bloomberg reports banks are actually getting tougher with property developers there, which might put a spanner in the works of the grand recovery everyone in the Western world is banking on.
The China Banking Regulatory Commission told lenders they should also demand more collateral, or tell developers to sell projects or stakes, if the banks predict they’ll have difficulty repaying loans due within 12 months, the person said, asking not to be identified because the instructions aren’t public.
Mortgages and developer loans classified as “special- mention,” or those at risk of souring, started to rise recently, the person said. Lack of funding, high leverage and a peak of loans maturing have increased the risk that some developers’ financing chains may collapse, the CBRC told lenders, according to the person.
I particularly like his quote to start it. PDK will be cock-a-hoop.
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” —Kenneth Boulding, Economist
We are five years into a severe global food crisis that is very unlikely to go away. It will threaten poor countries with increased malnutrition and starvation and even collapse. Resource squabbles and waves of food-induced migration will threaten global stability and global growth. This threat is badly underestimated by almost everybody and all institutions with the possible exception of some military establishments.
1. Last year we reported the data that showed that we are 10 years into a paradigm shift or phase change from falling resource prices into quite rapidly rising real prices.
2. It now appears that we are also about five years into a chronic global food crisis that is unlikely to fade for many decades, at least until the global population has considerably declined from its likely peak of over nine billion in 2050.
3. The general assumption is that we need to increase food production by 60% to 100% by 2050 to feed at least a modest sufficiency of calories to all 9 billion+ people plus to deliver much more meat to the rapidly increasing middle classes of the developing world.
It is also widely assumed that at least the lower end of this target will be achieved. I believe that this is substantially optimistic. At very best, if we reach that level we will not be able to hold it. Much more likely, we will not come close because there are too many factors that will make growth in food output increasingly difficult where it used to be easy:
9. 'The right level of punishment' - Reuters reports Swiss banks are very worried.
Swiss banks hoping to atone for decades of complicity in tax evasion may be left to sweat it out for months as the United States and Germany ponder the right level of punishment.
Switzerland has long dodged U.S. accusations of hiding money for wealthy Americans. But now eleven Swiss banks are under investigation in the United States and there is pressure too from Europe where burdened taxpayers want scalps after numerous banking scandals. The Swiss need a deal to remove the taint from their financial industry.
However, Washington must factor forthcoming elections into its thinking, and Germany is delaying ratification of a tax deal key to Switzerland's efforts to strike similar agreements elsewhere in Europe. So the Swiss may be in limbo for a while.