Archive for October 12th, 2008
Financial crisis: Countries at risk of bankruptcy from Pakistan to Baltics
Financial crisis: Countries at risk of bankruptcy from Pakistan to Baltics
A string of countries face the risk of “going bust” as financial panic sweeps Asia, Eastern Europe, and Latin America, raising the spectre of a strategic crisis in some of the world’s most dangerous spots.
By Ambrose Evans-Pritchard
Nuclear-armed Pakistan is bleeding foreign reserves at an alarming rate leading to fears that it could default on its loans.
There are mounting fears that Ukraine, Kazakhstan, and Argentina could all now slide into a downward spiral towards bankruptcy, while western banks exposed to property bubble across Eastern Europe have seen their share price crushed.
The markets are pricing an 80pc risk that Ukraine will default, based on five-year credit default swaps (CDS) – an insurance policy on a country being able to pay its debts.
The country’s banking system has begun to break down after years of torrid credit growth; its steel mills are shutting as demand collapses; and the political crisis is going from bad to worse.
President Viktor Yushchenko dissolved parliament this week in a dispute that risks bitter conflict with the country’s Russian bloc. Diplomats fear Moscow could be drawn into the crisis – or even use it as a pretext to occupy territory in a replay of the Georgia invasion this summer.
Ukraine’s government seized Prominvestbank this week, suspending payments to creditors. It closed the Kiev stock market, which has fallen 73pc this year.
Emerging market stocks have been tumbling since their peak in October, when investors were still betting that rising stars such as the BRICs (Brazil, Russia, India, China) were now strong enough to shake off a US crisis. That illusion has been shattered.
The International Monetary Fund said it is mobilising a “rapid-fire” fund worth several hundred billion dollars to stop a domino collapse across the developing world.
The trigger for the latest round of capital flight has been the lightning implosion of Iceland. BNP Paribas warned clients yesterday that the island is heading for “sovereign default” with contagion risks for other economies that have been living beyond their means on foreign credit.
Hungary had to intervene yesterday to prop up its markets following a run on country’s biggest lender OTP. The Budapest bourse fell 13pc. The treasury had to scrap a bond auction.
The most new mortgages in Hungary are in Swiss francs, leaving the homeowners facing a vicious squeeze as the forint plunges against the franc.
In Pakistan, the rupee has fallen to an all-time low. Standard & Poor’s downgraded the country’s sovereign debt to near write-off levels of CCC-plus. The central bank’s foreign reserves have fallen to $4.7bn (£2.73billion).
“The danger of default is hovering,” said Professor Kaisar Bengali from Karachi University.
“Pakistan may not be able to re-pay its debt or import anything,” he said, adding that the country cannot assume that it will be bailed out for strategic reasons.
Default risk on Kazakhstan’s top banks has risen to 70pc as property bubble bursts in the former Soviet republic and reliance in foreign credit comes back to haunt.
The country has mortgaged its future to oil prices, which crashed below $80 a barrel yesterday as the whole nexus of commodities (except gold) buckled in a wave of forced selling.
Analysts warn that it is leading indicator for what could happen if Russia if crude falls much further.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3174217/Financial-crisis-Countries-at-risk-of-bankruptcy-from-Pakistan-to-Baltics.html
The Road to Serfdom
The Road to Serfdom
Cailean Bochanan
11th October, 2008
The confusion that reigns concerning the nature of the British government’s intervention last Wednesday has reached staggering proportions. The study of Alisdair Darling’s statement leaves no doubt that there is a vast gulf between the proposal’s themselves and the way in which they have been presented. Last Sunday David Cameron had invoked the Swedish intervention in 1992 and set the ball rolling for the partial nationalisation thesis. This was very obliging coming from the so-called opposition and set in train an awesome “perception management” operation from the masters of these black arts ever since Walsingham’s Elizabethan police state had the bright idea of using the players, the stage itself, as a vehicle for official ideology. “For there is nothing either good or bad, but thinking makes it so” and if people can be made to think that giving away £500 bullion plus to private interests is part nationalisation then all the better. This propaganda onslaught saw many seemingly unlikely figures chiming in at suitable moments to confirm the story-line, and doing so all the more effectively under the guise of attacking it.
Yet to sell a lie of such magnitude,”the big lie” requires more than just the activation of key assets at key moments. It requires deep preparation. It requires a predisposition to see things in a distorted way. It requires that people see the world through ideology.
The ideology in question is neo-liberalism or free-market ideology. This is seemingly generally understood as a policy programme which involves ‘the economy’ to be left to “market forces” without state intervention. It is true that it is a anti-statist ideology and ,as such, a variant of the state of nature ideologies which have dominated European thought since the collapse of the city state, most particularly the Athenian city state. To understand state of nature ideology it is most instructive to go to the ancients and see its opposite:
“The polis, or political association, is the crown: it completes and fulfills the nature of man: it is thus natural to him, and he is himself “naturally a police-animal; it is also prior to him, in the that it is the presupposition of his true and full life.”(Aristotle. Politics)
This statement is astounding to us for its expression of a sense of belonging which is quite alien to modern man, notwithstanding the emergence of the modern nation state. Perhaps after almost three thousand years we may start to recover this sense of belonging in the world and at that moment we will have left behind the state of nature ideology and all its off-shoots such as neo-liberalism and the whole ideological paraphernalia of the anglo-enlightenment.
At that same moment we will have settled accounts with oligarchy and imperialism which have dominated the whole of this period since the death of the great Athenian Demosthenes.
So we recognise that oligarchical nature of “free-market ideology’, its prejudice against the very notion of a body politic, its hatred of government and the nation state. However, the state of nature viewpoint is essentially utopian: there can be no human life without the body politic, the polis or the nation state or whatever new forms may evolve. As a utopia it provides no coherent basis for political policy. But it serves very nicely as a narrative, a story line.
When modern free market ideology came to the fore with the rise of the British empire and the “enlightenment” of Locke, Hume and Smith we can see that this was the case. The role of the new Great British state was hardly hands-off. From slave trading to opium, from gun running to financial fraud the state was the facilitator. The new Great British entity subordinated the state as far as possible to the new oligarchy, an alliance between treasonous British oligarchs and Dutch finance. This was described constitutionally as “the separation of powers’, as the exact opposite of what it actually was. In the same way the plunder of India was the exact opposite of free market economics. The core of Smith’s worldview was an international division of labour presided over by the British Empire, constructing on a world scale what the Romans had done around the Mediterranean. His genius was to describe it as free trade. How free this trade was became clear when the American colonists showed that they hadn’t understood their designated role in this system.
The free trade ideology was a brilliant device, a narrative which made the handiwork of the British imperialists, look like “stuff that was just happening” rather than a programme of imperial plunder.
Moving to our own times we saw a new variant of free market ideology in neo-liberalism. This variant corresponded to the end of the epoch of national wars and the discarding of the social-democratic type models which corresponded to it and which ran counter to the basic principle of individual aggrandissement, to oligarchy. The essence of this process was the dismantling of the state by the state, since there was no other way to do it. It therefore involved an augmentation of the state’s role, and state expenditure, in order to make possible the transfer of state or public assets or private interests. The state was to go too extraordinary lengths in destroying itself in a final episode of the utopian, state of nature project, expressed in its crudest form by Madame Thatcher in her famous claim that “there is no such thing as society”. This programme of pure destruction involved privatising industries, selling off public housing, so-called public private partnerships, fraudulent financial wheeling and dealing. Its culmination came last week with the conversion of the national budget into a kitty for the bankers.
That was not perhaps so extraordinary, being as it was perfectly consistent with what has been happening for the last thirty years. What is extraordinary is to see people who for too long have been following the narrative, the theatrical representation, rather than reality itself, applaud an initiative which has brought us to the very edge of the abyss, consolidated the power of our enemies and brought us a huge step forward on the road to serfdom.
Relations in deep freeze as Iceland denounces UK’s ‘unfriendly’ action
Relations in deep freeze as Iceland denounces UK’s ‘unfriendly’ action
.Roger Boyes in Reykjavik
Britain and Iceland engaged in a full-scale diplomatic spat yesterday as leaders of the two countries traded angry words about the handling of the financial meltdown.
Gordon Brown denounced the “unacceptable” behaviour of the Icelandic authorities, who froze the accounts of hundreds of thousands of British savers, accusing them of taking illegal action.
“What happened in Iceland is completely unacceptable,” the Prime Minister told the BBC. “I’ve been in touch with the Icelandic Prime Minister, and I’ve said that this is effectively illegal action that they’ve taken. They have failed not only the people of Iceland, they have failed people in Britain.”
For his part, an angry Geir Haarde, his Icelandic counterpart, accused Britain of performing an “unfriendly act” against his country by using antiterrorist legislation to seize Icelandic accounts. This was no way, he said, to treat a Nato ally.
Times Archive, 1973: Cod war lull ends with charge of British ramming
The commander turned and grinned, telling us: “We smell Englishmen”
No warships have been dispatched to the North Atlantic but there is no longer any doubt that the financial collapse in Iceland is becoming the worst crisis in relations between London and Reykjavik since the Cod War of the 1970s.
“I certainly thought so this morning when I woke up to find that counter-terrorist laws were being used against us,” said Mr Haarde in response to a question from The Times. “This was very unpleasant, and I told the British Chancellor of the Exchequer that we are not pleased with this at all.”
Mr Haarde called Alistair Darling just before lunch yesterday and let off steam, officials said. “I told him that I considered this to be an unfriendly act,” he said.
Mr Darling first enraged the Icelandic Government by threatening legal action in an attempt to secure full compensation for British savers trapped by the collapse of the Landsbanki bank. More than 300,000 British savers have deposits in the bank’s internet operation, Icesave.
Then came the British seizure of assets. Yesterday the Icelandic leader suggested that this was what had nudged his government into nationalising Kaupthing, the largest bank in the country, on Thursday morning.
The scorecard in Iceland’s financial catastrophe so far: one major bank nationalised (Kaupthing); two in receivership (Landsbanki and Glitnir); and the stock exchange suspended until Monday. The value of the Icelandic króna plummeted briefly to 340 for €1. Just two days ago the over-the-counter exchange rate was 155 króna.
The heated conversation with Mr Darling appears to have concentrated on the need to keep some of Landsbanki’s operations going in Britain. “It’s very important that normal business continues as usual for Icelandic companies in Britain,” the Prime Minister said. “After all, it affects the jobs of 100,000 people, many of them UK citizens.”
Mr Haarde and Mr Darling agreed that Britain would send a small team of financial experts to the island to clarify matters further. Mr Darling is also due to meet his Icelandic counterpart at the International Monetary Fund meeting in Washington this weekend.
The Icelandic Government, though profoundly irritated, has enough on its hands without launching into a diplomatic confrontation with Britain. Certainly the Icelandic foreign ministry seemed to be doing what it could to sugar the lives of visiting British journalists. A trip to the thermal waters of the Blue Lagoon was on offer yesterday, perhaps in an attempt to get correspondents out of the capital; reporters, too, were encouraged to attend the opening of the Imagine Peace Tower, Yoko Ono’s memorial to John Lennon.
The conflict is, however, rapidly becoming as ill-tempered as the hot days of the last Cod War when Icelandic coastguards cut the nets of British trawlers fishing in Iceland’s self-proclaimed economic exclusion zone. This time around ordinary Icelanders are more preoccupied with the problems of managing everyday life without a properly functioning banking system. Property deals are on hold, and companies relying on imports are in trouble because of the plunging currency. So, too, are Icelanders who bought houses and cars on loans denominated in foreign currencies. A financial crisis centre is being set up to help those worst affected.
“Many people will lose their jobs in the banking sector,” Mr Haarde said yesterday. “Many shareholders will lose fortunes, and we will have to do our best to ease the pain.”
Although the Prime Minister tried to crack a few strained jokes while talking to the press yesterday, it is clear that the mood in Reykjavik is growing darker. Yesterday, for the first time, Mr Haarde was accompanied by a phalanx of security guards. This is almost unprecedented on this island where everybody appears to be a cousin of somebody else.
The President of Iceland, Olafur Ragnar Grimsson, had heart surgery this week, thus removing a popular figurehead who could have helped to calm the nation. Instead it appeared that the entire financial and political system of Iceland was suffering from a form of cardiac arrest.
http://www.timesonline.co.uk/tol/news/politics/article4916933.ece
