Allot of things happening today, but it's all over the news so permit me to not post any news links. Here are some of my thoughts on some of the things today....
1. Michael Jackson has passed: Good God he will be missed. I am awaiting the news on the issues surrounding his death just like everyone else. I don't think it was foul play, but rather an unfortunate circumstance with him and his private doctor. We will have to wait and see. My condolences to his family and especially his children.
2. Madoff is in the hoosegow: THANK GOD! Bernie Madoff, has been sentenced to 150 years in prison- yikes- for investor fraud. His victims are overjoyed and so am I. Madoff had embezzled, among other victims, a 90 year + couple out of their life savings and their home. Sad. But, glorious day that he is gone for the rest of his life.....enjoy the prison showers, Uncle Bernie.
3. Plane crash in the Comoros: Another Airbus plane crashed in the Comoros, from Yemen. As you would remember, there was another Airbus plane that crashed earlier on in the month, from Brazil on the way back to France. I don't know if it's terrorism or is it just inferior design. A full investigation by European authorities should be underway.
4. Coup in Honduras: What? Yes, a coup in Honduras. The president is out, the equivalent of the speaker of the house in the U.S. is in. Apparently, corruption and the sort---blah blah blah! Apparently the ousted president, Manuel Zelaya, was a left leaning socialist who wanted a constitutional reform in the manner of Chavez in Venezuela. All power to have unlimited presidential terms. I see nothing wrong with it aside from the fact that these guys think that they will live forever. But, it does raise democratic and corruption issues with a leader who wishes to have the ability to stay in power for as long as he wishes....too much power, over too much time, is dangerous. I know!
That's it from this side of the world.
Youri
Tuesday, June 30, 2009
Monday, June 29, 2009
The Nationalisation to Privatisation quagmire!
With high premium on free markets and the virtue of privatisation, more countries are finding themselves controling private organisations than one would want to believe. Venezuela comes to mind. Belarus and in the Ukraine- both having severe economic challenges for differing reasons- have nationalised industries. The Saudi government as well as the other state owned oil companies in the United Emirates are also examples of nationalised industry that apparently will remain nationalised for quite some time.
This is not endemic to Eastern Europe, Latin America, The Middle East or other emerging or developing regions and countries. For example, the recent exercises in the U.S. and the U.K., leaves some gleeful in the notion that the great purveyors of private enterprise, have fallen victim to the trappings of easy pickings from the private market.
Currently, Citigroup and, more publicised, General Motors (GM), took U.S. Federal funding to stay afloat. GM is currently 60% owned by the U.S. government. In the U.K., Northern Rock, a mortgage lender, has been under public control since 2007 as well as the Royal Bank of Scotland (RBS), being partly controlled by the U.K. government, both due to their exposure to subprime debt. In fact, nationalisation fever has gotten so out of hand in the U.K., until they nationalised an entire country, The Turks and Caicos Islands, for all intents and purposes. I digress!
France, in contrast, has partial and predominantly state run corporations. The most observable of these are its transportation company, Regie Autonome des Transports Parisiens (RATP), the partially state owned France Telecom, where the state has 27% ownership and, in addition, the 85% share owned state energy company, Électricité de France (EDF).
The questions of why said companies- particularly with U.S. and the U.K.- were nationalised in the first place, is of little importance. But the issue that they will have to be privatised in the medium to near future is.
This presents the problem for the newly acquired public companies; how should government privatise, again?
This isn’t easy. For example, if GM were to be privatised too early, there is a chance that the U.S. may end up losing GM all together, because the company simply isn’t ready to compete against other car companies on its own; especially now after filing for bankruptcy.
In the U.K, re-distributing the government shares in Northern Rock would violate a tremendous property rights standing of the former majority share holders in Northern Rock, if it were not to be handed back to them, first and foremost.
To go even further, there may be a case where prolonged nationalisation can lead to a “French-style” government ownership of industry economy, with no exit plan, with the profitability of these enterprises in future dispute.
The best and most relevant examples of state owned to privatisation, to nationalisation to again privatisation, can be seen in Latin America during the late 1940’s to the 1990’s, especially in the latter years where there were sweeping changes in attitudes with regard to the virtue of private enterprise opposed to government monopoly.
A fantastic comparative study is within the telecommunications sectors' of Argentina and Chile. While these are by no means the only sectors' that were privatised in either country, the comparison bear fruit to the issue of the process.
Chile, on average, had a more successful privatisation experience, particularly with their telecommunications (Compania de Telefonos de Chile- CTC) liberalisation.
The process was marked by a very strong desire to not only privatise, but to also re-distribute resources to a greater share of the population- through various stock packages to employee's (labour capitalism), to further stock packages to indigenous investors and then to competitive bidding- through what ever capital market structure Chile had. The experience of the investor did not matter as much, over the actual sale through competition did.
More importantly, Chile focused on the actual regulations that promoted competitiveness, before concentrating on securing the profitability of CTC. In addition, the actual cost of running the organization, proved more valuable to the future profit of CTC than its price adjustments during.
With the latter, this is, primarily, due to the lower rates CTC had as a result of lowering them prior to private investment, which ended up with the buyer having the option to raise rates and at the same time presenting the consumer, with the opportunity to take advantage of lower rates, which resulted in less outrage from consumers upon privatisation, who would, possibly, be outraged with higher rates if the rate ceiling was left at the status quo during privatisation- this, coupled with the concept of labour capitalism, softened public outrage.
Argentina, on the other hand, had a much different privatisation process. While the Argentinean government ended up appropriating the consumer surpluses due to the privatisation, the end result was not optimal.
Similar to CTC, Empressa Nacional de Telecomunicaciones (ENTEL), was first private, then nationalised and then privatised again. However, the impact from the round of privatisation that occurred in the years1989 to 1991 made the process problematic, due to the emergency of their debt crisis in the 1990's and their consistently unstable macro-economic condition, which did result with the Argentinean economy crashing as an effect of their debt crisis in 1999-2002.
The privatisation of ENTEL did alleviate, temporarily, the national debt in Argentina through its actual sale and the government’s insistence on external debt papers. However, the sale was overshadowed by the more important need to regulate the industry pre-privatisation, in order to solve the issue of, now, private monopoly.
In comparison to CTC in Chile, Argentina did not use the capital markets to drive the sale. The bidding was closed to particular investors who fit certain criteria for running a telecommunications company. This limited the amount of bidding activity in the purchase of ENTEL and, subsequently, kept the actual sale price for ENTEL relatively low as compared to the pre-sale price. Also, laws enacted before the privatisation of CTC as different from ENTEL, made constant reimbursable contributions to the services under regulation and more importantly, allowed for domestic and foreign competition, as well as set rate ceilings to discourage private monopoly concentration.
To this date, there are six main providers in Chile, providing service to over 16 million inhabitants. While there are only two, from the privatisation and break up of the original ENTEL into two parts- Telecom Argentina covering the north and Telefónica de Argentina covering the south- providing service to well over 40 million inhabitants, albeit Argentina has several niche service providers.
Whatever the issues are currently for all that fit this crisis, the re-sale of entities after state intervention, to whom and for what purpose, presents a considerable challenge as it does with Northern Rock. In addition, the issue with regard to new regulations for the current financial system, should factor into the re-privatisation of Northern Rock and RBS, for the purpose of them being more efficiently ran companies, operating within a stable environment, where, at least from this aspect, systemic risk, or the fear of risk, doesn't envelope the sector.
On the other hand, direct and indirect industry partners in the supply and value chains would suffer greatly from the consistent attempt by the US government to be a player in the car manufacturing business. Prolonging state management can- in the long term by crowding out private investment- damage and penalise competitors, like Ford Motors, who had their challenges in the recent past and have pre-crisis, adjusted their business model to become profitable today.
It also shouldn’t be a question of whether or not the U.S. will be forced to sell nationalised companies, to pay off debt (over 82% of current GDP) where they clearly have the institutional ability to monetise that debt.
The issue of crawling back out of debt, particularly in the U.S., is an issue all to itself. The issue of re-privatisation, without question, is clearly with its own set of unique issues and challenges.
This is not endemic to Eastern Europe, Latin America, The Middle East or other emerging or developing regions and countries. For example, the recent exercises in the U.S. and the U.K., leaves some gleeful in the notion that the great purveyors of private enterprise, have fallen victim to the trappings of easy pickings from the private market.
Currently, Citigroup and, more publicised, General Motors (GM), took U.S. Federal funding to stay afloat. GM is currently 60% owned by the U.S. government. In the U.K., Northern Rock, a mortgage lender, has been under public control since 2007 as well as the Royal Bank of Scotland (RBS), being partly controlled by the U.K. government, both due to their exposure to subprime debt. In fact, nationalisation fever has gotten so out of hand in the U.K., until they nationalised an entire country, The Turks and Caicos Islands, for all intents and purposes. I digress!
France, in contrast, has partial and predominantly state run corporations. The most observable of these are its transportation company, Regie Autonome des Transports Parisiens (RATP), the partially state owned France Telecom, where the state has 27% ownership and, in addition, the 85% share owned state energy company, Électricité de France (EDF).
The questions of why said companies- particularly with U.S. and the U.K.- were nationalised in the first place, is of little importance. But the issue that they will have to be privatised in the medium to near future is.
This presents the problem for the newly acquired public companies; how should government privatise, again?
This isn’t easy. For example, if GM were to be privatised too early, there is a chance that the U.S. may end up losing GM all together, because the company simply isn’t ready to compete against other car companies on its own; especially now after filing for bankruptcy.
In the U.K, re-distributing the government shares in Northern Rock would violate a tremendous property rights standing of the former majority share holders in Northern Rock, if it were not to be handed back to them, first and foremost.
To go even further, there may be a case where prolonged nationalisation can lead to a “French-style” government ownership of industry economy, with no exit plan, with the profitability of these enterprises in future dispute.
The best and most relevant examples of state owned to privatisation, to nationalisation to again privatisation, can be seen in Latin America during the late 1940’s to the 1990’s, especially in the latter years where there were sweeping changes in attitudes with regard to the virtue of private enterprise opposed to government monopoly.
A fantastic comparative study is within the telecommunications sectors' of Argentina and Chile. While these are by no means the only sectors' that were privatised in either country, the comparison bear fruit to the issue of the process.
Chile, on average, had a more successful privatisation experience, particularly with their telecommunications (Compania de Telefonos de Chile- CTC) liberalisation.
The process was marked by a very strong desire to not only privatise, but to also re-distribute resources to a greater share of the population- through various stock packages to employee's (labour capitalism), to further stock packages to indigenous investors and then to competitive bidding- through what ever capital market structure Chile had. The experience of the investor did not matter as much, over the actual sale through competition did.
More importantly, Chile focused on the actual regulations that promoted competitiveness, before concentrating on securing the profitability of CTC. In addition, the actual cost of running the organization, proved more valuable to the future profit of CTC than its price adjustments during.
With the latter, this is, primarily, due to the lower rates CTC had as a result of lowering them prior to private investment, which ended up with the buyer having the option to raise rates and at the same time presenting the consumer, with the opportunity to take advantage of lower rates, which resulted in less outrage from consumers upon privatisation, who would, possibly, be outraged with higher rates if the rate ceiling was left at the status quo during privatisation- this, coupled with the concept of labour capitalism, softened public outrage.
Argentina, on the other hand, had a much different privatisation process. While the Argentinean government ended up appropriating the consumer surpluses due to the privatisation, the end result was not optimal.
Similar to CTC, Empressa Nacional de Telecomunicaciones (ENTEL), was first private, then nationalised and then privatised again. However, the impact from the round of privatisation that occurred in the years1989 to 1991 made the process problematic, due to the emergency of their debt crisis in the 1990's and their consistently unstable macro-economic condition, which did result with the Argentinean economy crashing as an effect of their debt crisis in 1999-2002.
The privatisation of ENTEL did alleviate, temporarily, the national debt in Argentina through its actual sale and the government’s insistence on external debt papers. However, the sale was overshadowed by the more important need to regulate the industry pre-privatisation, in order to solve the issue of, now, private monopoly.
In comparison to CTC in Chile, Argentina did not use the capital markets to drive the sale. The bidding was closed to particular investors who fit certain criteria for running a telecommunications company. This limited the amount of bidding activity in the purchase of ENTEL and, subsequently, kept the actual sale price for ENTEL relatively low as compared to the pre-sale price. Also, laws enacted before the privatisation of CTC as different from ENTEL, made constant reimbursable contributions to the services under regulation and more importantly, allowed for domestic and foreign competition, as well as set rate ceilings to discourage private monopoly concentration.
To this date, there are six main providers in Chile, providing service to over 16 million inhabitants. While there are only two, from the privatisation and break up of the original ENTEL into two parts- Telecom Argentina covering the north and Telefónica de Argentina covering the south- providing service to well over 40 million inhabitants, albeit Argentina has several niche service providers.
Whatever the issues are currently for all that fit this crisis, the re-sale of entities after state intervention, to whom and for what purpose, presents a considerable challenge as it does with Northern Rock. In addition, the issue with regard to new regulations for the current financial system, should factor into the re-privatisation of Northern Rock and RBS, for the purpose of them being more efficiently ran companies, operating within a stable environment, where, at least from this aspect, systemic risk, or the fear of risk, doesn't envelope the sector.
On the other hand, direct and indirect industry partners in the supply and value chains would suffer greatly from the consistent attempt by the US government to be a player in the car manufacturing business. Prolonging state management can- in the long term by crowding out private investment- damage and penalise competitors, like Ford Motors, who had their challenges in the recent past and have pre-crisis, adjusted their business model to become profitable today.
It also shouldn’t be a question of whether or not the U.S. will be forced to sell nationalised companies, to pay off debt (over 82% of current GDP) where they clearly have the institutional ability to monetise that debt.
The issue of crawling back out of debt, particularly in the U.S., is an issue all to itself. The issue of re-privatisation, without question, is clearly with its own set of unique issues and challenges.
Friday, June 26, 2009
US economy contracts by -5.5%!
According to the Bureau of Economic Analysis at the Department of Commerce.
Nothing to say here, aside from the green shoots are taking a while to sprout to full fledged trees!
A better synopsis was done by the FT.
I had up the output figures from last month which there was a larger decline from the month before. So, I have no idea as to why people can be suggesting that the economy is sliding at a slower pace? And, how can that reflect as good news for the American economy over all?
To top it all off, job numbers are still dwindling--even though I have taken into account the amount of jobs created as well.
I think the issue is in the "new economy"...away from industry and mechanical engineering jobs. Green tech and a bit of the old economy, construction and transport and, now, efficiency in transport, is what are possible drivers.
Will have a look at those numbers in a few. It's hard just to isolate green tech, but construction should not be so hard to find as it is already in the Industrial output figures and they are leading the push back to normalcy in the US economy!
Housing and Commercial property developments would help.
Nothing to say here, aside from the green shoots are taking a while to sprout to full fledged trees!
A better synopsis was done by the FT.
I had up the output figures from last month which there was a larger decline from the month before. So, I have no idea as to why people can be suggesting that the economy is sliding at a slower pace? And, how can that reflect as good news for the American economy over all?
To top it all off, job numbers are still dwindling--even though I have taken into account the amount of jobs created as well.
I think the issue is in the "new economy"...away from industry and mechanical engineering jobs. Green tech and a bit of the old economy, construction and transport and, now, efficiency in transport, is what are possible drivers.
Will have a look at those numbers in a few. It's hard just to isolate green tech, but construction should not be so hard to find as it is already in the Industrial output figures and they are leading the push back to normalcy in the US economy!
Housing and Commercial property developments would help.
Wednesday, June 24, 2009
Is Japan's problem China?
FT article.
I think the biggest issue with regard to Japan's economic woes are China. Everyone has been making hay over the issue of the US losing out on employment and being in debt to China, but the bigger issue may be Japan losing out on export- regional and international- to an increasingly powerful China.
At least the US had debt driven growth. Japan does not have the credit driven growth as well as their regional exports are taking a hit, as expected, due to China's increase in dominance over the region as well as marine fare.
I will have a glimpse of the statistics and give a comparison as soon as I get to it....a hunch, is what it is.
I think the biggest issue with regard to Japan's economic woes are China. Everyone has been making hay over the issue of the US losing out on employment and being in debt to China, but the bigger issue may be Japan losing out on export- regional and international- to an increasingly powerful China.
At least the US had debt driven growth. Japan does not have the credit driven growth as well as their regional exports are taking a hit, as expected, due to China's increase in dominance over the region as well as marine fare.
I will have a glimpse of the statistics and give a comparison as soon as I get to it....a hunch, is what it is.
Fed worried about inflation?
I think so. The latest Fed statement that they will keep rates where they are.
Well, the market did bounce a few months back. Oil shot up to over $70 per barrel. So, they may be trying to contain oil prices as they have said in the statement.
I hope this does not hamper strong and solid recovery!
Well, the market did bounce a few months back. Oil shot up to over $70 per barrel. So, they may be trying to contain oil prices as they have said in the statement.
I hope this does not hamper strong and solid recovery!
Tuesday, June 23, 2009
New UK House Speaker- Bercow!
I'm not clear on who the new speaker is, but the FT tries to give a few ideas.
Apparently, he is a 17 year career conservative--yes, tory-- who has been leaning left for the last few years. So much so, some on the tory side have called him a labour party member.
I don't know what it all means for Britain, but there certainly is an inside political shift that change will happen in the UK in 2010.
Brown and labour has, perhaps, given it up already!
Apparently, he is a 17 year career conservative--yes, tory-- who has been leaning left for the last few years. So much so, some on the tory side have called him a labour party member.
I don't know what it all means for Britain, but there certainly is an inside political shift that change will happen in the UK in 2010.
Brown and labour has, perhaps, given it up already!
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