It is not all relative. It is all relatives.

Did you realise that the UN Declaration of Human rights, includes the following: "The family is the natural and fundamental group unit of society and
is entitled to protection by society and the State"?

However, in the decades since that declaration was signed by every civilised country, those very countries have turned around and, so far from protecting the family, actually undermined the family by means of taxation, welfare, changes in the financial and debt systems, housing and land issues, employment and work (usually under the guise of "equal opportunities"), education (which means maass brainwashing in many things), and of course the criminal justice system.

You may not believe me in all the details of the above statement. But you only have to look around you, or look at the statistics in almost any country, to realise that, whatever the causes, the result is a decline in the occurence of the family, and the richness of family life.

You may not like my views, you may still be open to a sober analysis of the situation, such as you find in "The Penumbra Effect: Family-centred Public policy", which has just been published by The Relationships Foundation, based in Cambridge, UK (www.relationshipsfoundation.org)

That publication includes the following passage, which I thought might interest you too:
"The family has been, is, and will continue to be the most important single source of wellbeing for the majority of people. ‘It’s all relative’ has been a central tenet of post modernity – in a world without absolutes, everything is relative. This report seeks to subvert that basic proposition. In a world of change, family remains. In times of transition, we turn to our extended families and relatives. Relative means dependent on or interconnected with something else. It also refers to a person connected with another by blood or affinity. The extended family brings these meanings together to conclude this report. The centrality of family to all aspects of society enables us to proclaim, ‘It’s all relatives’." Sphere: Related Content

A Tepid Compromise: The EU proposed three bodies to regulate and supervise finance

According to the latest proposals from the EU, three new pan-European supervisory agencies (one each for banks, insurers and securities markets) are to be created for the purpose for drawing up and helping enforce a common rulebook for each activity throughout the EU.

The bodies will have more powers and resources than the three existing EU committees, which play only a co-ordinating role.

What will weaken the ability of the proposed three bodies will be recognition of the principle of “fiscal responsibility”, meaning that the new supervisory structure must not intrude on states’ finances.

Why will it weaken these bodies? Because fiscal IRresponsibility by states is one key reason for irresponsibilty by individual companies as well as by the system as a whole.

In the event of a dispute with or between member states, there an appeal would be possible, ultimately to the European Council, where the final decision would be by qualified majority voting. This makes the whole elaborate creation of these bodies subject to political rather than rational criteria.

Possibly, these proposals from the European Commission may be the best that can be managed at present, but it falls far short of what is needed.

What is needed? Two things: a single regulator and a (separate) single supervisor for the EU.

Why a single regulator for 3 different kinds of activities (banking, insurance and securities markets)? Because these three are converging - or one should say have increasingly converged, and will continue converging ever more, into a single seamless set of financial transactions. This is already largely the case, with the three activities being kept artificially separate for regulatory purposes in areas where these are kept separate (the UK and Switzerland, for example, already have one regulator supervising all three activities).

So why two separate bodies (one for rule-setting and one for rule-enforcement)?

Because rule-setting is and should be a different activity from rule-enforcement.

Naturally, learning from rule-enforcement should feed into the rule-setting process.

But that is better and more transparently done by two separate bodies than by a single one.

So much for the matter of the three bodies that are proposed.

Separtely, there is a proposal for a new “European Systemic Risk Board”, made up of representatives of central banks and financial supervisory groups from the 27 countries which constitute the EU.

I am glad that such a Risk Board is proposed. However, having the same people in the Risk Board as ultimately control the 3 bodies will do nothing to provide confidence in the risk assessments of the Board.

Morevoer, systemic risk in Europe cannot be separated from systemic risk in the USA or in Asia - the current challenges arise from systemic problems in the USA, and the next crisis will arise from challenges in Asia.

While a European Systemic Risk Board is better than no Board at all globally, it would be better for there to be a global board - and one along the lines that I proposed in my article in the New York Times Online ("DayBook" section) at the end of June this year. Sphere: Related Content

When does non-discrimination against a minority go so far as to become discrimination against the majority?

When there is a concerted effot to enshrine it in provisions such as are foreseen in the USA's Employment Non-Discrimination Act (ENDA) which is apparently set to be debated on September 23.

As far as I can see:
if passed, ENDA will make it difficult for sports organisations to decline applications for employment from those who believe (like myself) that sports are bad for health.

ENDA will make it difficult for anti-nuclear (peace) organisations to keep out those who are committed to encouraging nuclear weapons.

We can expect to see the depressingly entertaining spectacle of environmentalist organisations being infiltrated by a dedicated minority of anti-environmental activists with the sole purpose of closing down the enviromentalist organisations.

And ENDA will make it impossible to prevent card-carrying members of the Communist Party from being recruited for the managerial cadre of US Government Agencies including the Defense Forces!

Welcome to the new and fascinating world of the United States of Lunatica. Sphere: Related Content

What causes share prices to move?

If you want a nice academic discussion about the two principal views regarding why share prices fluctuate, go to:
http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/agreeing_to_disagree/

One view is the "rational expectations" one, which opines that the market rationally analyses all news in relation to a company, and decides....

The other is the "differences of opinion" model, which believes that different market players come to different conclusions about a company and that it is the "clash of views" which eventually results in a particular level of demand for a company's shares (thus determining the price of the shares).

Unfortunately those models won't give you much real insight into the question of what causes fluctuations in share prices, because academic researchers usually take a fragmented and atomised view, divorced from real life.

In real life, the share price of a particular company shifts mainly because of reasons that are never discussed in the literature.

It is elementary economics that price is a function of demand versus supply. Naturally, if the number of shares of a company increases for any reason that could affect the share price too, but the share price usually moves because of fluctuations in demand - or, to be more precise, because of fluctuations in the numbers of people wanting to sell those shares versus the numbers of people wanting to buy those shares. Naturally, price plays a role here too, so the picture is a little complicated. But let's simplify it by saying that when an individual or mass of people with a large amount of money wants to buy shares in a particular company, the price of that company's shares is going to rise. Contrariwise, when a large number of people who hold a company's shares want to sell, the price is going to drop.

So what determines whether a lot of money chases or wants to exit a particular stock? Regretfully for our academicians above, both "rational expectations" and "differences of opinion" are second-order drivers of behaviour.

What are the first-order drivers of behaviour? This becomes easier to see if you look at it not from the point of view of the company in question but from the viewpoint of investors.

OK, so what drives investor strategy? It is essentially portfolio theory. As anyone who has ever professionally managed a portfolio will tell you, portfolio managers are seeking to balance two things: making as much money as possible on the one hand and, on the other hand, seeking to reduce risks - because investing in shares can produce profits, but you can also lose some or all your money if you have to sell at a lower price than you bought or if "your" company becomes bankrupt.

How does looking at a portfolio of investments enable one to achieve a balance between risk and profit? By deciding, in view of one's life circumstances and personal risk-appetite, what proportion of the portfolio should be put in relatively safe assets (let us say US Treasury Bonds) and what proportion should be put in riskier assets. Naturally, there is a gradation here, and some bonds are riskier than others (with junk bonds being among the riskiest) - on the other hand, some companies may be relatively stable while others are of course relatively volatile.

The rule of thumb is "no gain without pain" or "no risk, no fun". In other words, the safer options produce fewer returns on investment but you are less likely to lose your money - while the riskiest investments may produce the largest returns.

Having established the rough proportions to be allocated to safe versus exciting possibilities, how does a portfolio manager go about deciding where to invest the money that has been allocated to the exciting possibilities? The first thing that is looked at is country risk. So if China is viewed favourably (as it is at present, totally irrationally), then the portfolio manager is likely to want to put a relatiely large proportion of the money, with which s/he wants to play, in that country. On the other hand, if a particular country is looked at unfavourably, for example Zimbabwe(for rational or irrational reasons), then the portfolio manager is likely to want to exit that country (if indeed s/he has investments in that country to start with). The second thing at which any portfolio manager looks is the relative profitability of the different "sectors" in which investments can be made. Everyone knows that in boom times some industries flourish whereas those industries may do badly in times of recession - and that the case for other industries is vice versa.

It is only after the country and sector allocation has been decided that a professional manager decides which companies to look at within that sector and country.

In other words, the largest movements of capital take place primarily because of country and sector reasons, and only very secondarily because of reasons to do with particular companies.

Let us take an example. My son is the CEO of an Indian food company in Switzerland. His company is NOT publicly traded, so nothing will be gained or lost by using that as an example.

If I as a portfolio manager, had let us say 1 billion British pounds to put into exciting investments, the first question I would decide would be: in which countries to put how much money. This would be influenced, among other factors, by perceptions of political risk as well as currency risk. So let us say in current circumstances, that I decide to invest 25% in the USA, 25% in the EU, 10% in Switzerland, 10% in Japan, 10% in China, 10% in India and 10% in the Middle East.

Of my one billion, I now have only 100 million to invest in Switzerland.

Now, to what sectors am I going to allocate these 100 million? Let us imagine it is 40% to green industries, 10% to the manufacturing and machine tools sector, 10% to the financial services industries, 10% pharma, 10% to "fast moving consumer goods", 10% to tourism and 10% to "other" companies.

Now, of my 100 million, you can see that there is only 10 million that is available for all the "other companies"! Let us say that, for some reason, the portfolio manager decides to put 1 million into the leisure and entertainment sector, and for some reason decides to put 100,000 francs into my son's company.

Now let us see what happens if there are rumours of a political crisis or a natural disaster or some financial scandal with wide implications in China. Clearly the portfolio manager will decide to eliminate or reduce her/his China investments. Let us say s/he decides to reduce the China investments by 50%. Now s/he suddenly has 50 million to put somewhere else. Clearly, this money could be re-allocated according to the rest of the existing proportions between the areas concerned, or it could be disproportionately distributed. Naturally, as the world is so interlinked, the portfolio manager is going to think about which companies are going to be hit by the problems in China. S/he might conclude that most US companies are going to be hit as China is going to be forced to disinvest from the US - with a resulting hit to the US dollar. In addition, s/he might conclude that the EU is going to be hit because the European economy being highly manufacturing based and export-oriented, is so exposed to the Chinese market. So that leaves Switzerland, Japan, India and the Middle East. Let's say the portfolio manager decides to put 10 million each into the others, but 20 million into Switzerland (as it is considered a safe haven). You can see that even if this money was allocated in the exact proportions that the earlier money was put into Switzerland, suddenly 200,000 become available to be invested in my son's company - which should lead to an immediate rise in the price of his shares, even if nothing material has changed in his company.

That, in rather simplified terms, is the entire magic of the movement of the price of shares. "Rational expectations" affect the choice of a company within a sector. "Differences of opinion" do affect this to a certain extent but have a much larger impact on country allocation.

However, the above explanation depends on the traditional view of the world which has come into question in the last 20 odd years - and with the crisis, everything is up for grabs. With too much money being printed, country-performance was converging in an overall global bubble as was sector-performance over the 20 years preceding the crisis.

Now no one knows anything about how sectors will perform, let alone countries. The "best-peforming countries" (e.g. China) are notoriously opaque.

That is why everyone rushes around like sheep or like lemmings trying to follow where the share price appears to be moving, one finger in the air, the other hand's fingernails being bitten to the quick trying to get into markets which appear to be rising to get out of markets before they deflate.

It is not so much "difference of opinion" as "non-existence of opinion" (because no one understands what is happening). And it is certainly not "rational expectations".

If only all this had no effect on your life's savings, investing might be quite fun right now. Sphere: Related Content

What has driven gold to over $1000?

Clearly, enough of the big boys do not believe that the economy is improving, or they would not be putting their money into gold.

An alternative explanation is that momentum trading has gone mad once again, expanding further the bubble in the gold price.

A third explanation is that investors are becoming aware of the constraints on growth (and therefore returns), and are therefore searching for more reliable returns - or at least security.

Probably all three factors have contributed to the rise in the gold-bubble.

Will be interesting to watch how big the bubble grows and who gets hurt when it collapses. Sphere: Related Content

two steps forward (and, so far, no steps backward)

Regulators have now agreed at least a few rules that will help prevent another bubble similar to the one whose burst-effects we all suffer at present

Last weekend the G20 agreed on proposals that have now been given shape by regulators at Basel. The new rules will force banks to improve the quality and extent of the capital buffers they hold to absorb shocks such as the ones that led to the bursting of the bubble.

Moreover there are now going to be limits on how much banks can borrow. Wheter these are adequate remains a moot point: the ceiling on borrowings is likely to be 25 times assets.

In my view, this is too huge a multiple. The parallel would be if a company with assets of 1 billion, could borrow 25 billion. Or if you as a private individual with assets (perhaps a house) worth 1 million could borrow 25 million. If such a proportion is preposterous for individuals and for companies, it is equally preposterous for banks.

However, it is certainly better than the previous situation where banks could borrow an unlimited amount, at least in theory. And 25x may be the most that regulators can achieve at present without upsetting the global economy too much.

In any case, the unfortunate result is going to be even less lending by banks! At least for the time being. And therefore an even longer recession.

But that relatively short-term cost is worth paying: if the soundness of banks improves, they will run into trouble less often and will therefore need to be rescued by taxpayers less often - and the fortunes of the global economy will be smoother as a result.

One other piece of progress is that bank supervisors can now limit, in good times, how much banks pay out to shareholders. That will enable and indeed force banks to build “counter-cyclical” buffers for bad times.

Isn't it a sign of our degenerate age that such commonsensical activity as saving for a rainy day (which every individual surely should try to practice without being forced to do so!) needs legislation?

Naturally, these (and other rules which will come into play soon) will make banks less attractive to investors interested in quick and high returns.

Equally, however, this will make banks MORE attractive as more reliable and secure long-term investments.

The precise rules are still being formulated and the Basel committee is expected to publicise concrete proposals by the end of the year and adjust them by the end of 2010 after carrying out an impact assessment. Expect people who have their eye fixed on short-term profits (whatever the cost to the rest of the world) to lobby fiercely against the letter as well as the spirit of such rules. Sphere: Related Content

A Question for Transparency International: Is Finland really one of the least corrupt countries in the world?

For evidence that Finland is more corrupt than commonly realised, perhaps even inside that country, see Jacob Matthan's forthcoming book, INHERITANCE NIGHTMARE.

Summary, chapter of contents and ordering information are all at: http://ouluchaff.blogspot.com Sphere: Related Content

Are the financial structures beginning to change? Yes...

Before the crisis, I was one, of only a handful of people that I knew about, who focused on the role of speculation in driving up commodity prices.

While that is still unconventional, I am pleased to see this morning that one major global financial institution, Deutsche Bank, stopped issuing "oil notes", which let speculators bet on oil prices. This is the first product in exchange-traded commodities to be abolished in anticipation of the regulatory crackdown on energy speculation


This could be seen as only a tiny step in the reform of the financial system - and, in a sense, it is. But it is a giant step for Deutsche Bank, and I salute it this morning for having eventually done the right thing.

Many more financial institutions need to follow. And regulation does indeed need to kick in to eliminate other still-legal but unhelpful practices.

I should say that I am not a great believer in regulation, except in sofar as it creates a level and reliable field for playing the right sorts of financial games.

What are the right sorts of financial games? Those that help create genuine human welfare - and therefore genuine wealth. Sphere: Related Content

Reginald Massey's book ‘INDIA: Definitions and Clarifications’

Reginald Massey's book ‘INDIA: Definitions and Clarifications’, published in the UK and reviewed earlier on my Blog, finally has an Indian publisher.

Abhinav Publications is bringing out an updated edition under the title: ‘SOUTH ASIA: Definitions and Clarifications’. Sphere: Related Content

Finally, the end of the legacy of Mrs Thatcher?

The bubble that built up after the "roll-back" of the state under Mrs Thatcher burst some months ago, but the philosophy that she espoused seems to be up for challenge only now.

In today's Financial Times a British think tank, Policy Exchange, calls for a publicly-funded bank focusing on energy, communications, utilities, schools and hospitals - not to mention transport!

This would amount to re-nationalisation by the back door, and is being called for in an exchange (or reversal) of policies not merely by ANY think tank, let alone a leftist think tank, it is an exchange of policies being called for by the favourite think tank of the CONSERVATIVE leader, David Cameron, who has inherited Mrs Thatcher's mantle. What delicious irony! Policy Exchange indeed!

The danger is that the backlash against Thacherite policies will go too far.

What Policy Exchange, or any other think tank for that matter, ought to pursue before specific recommendations such as this publicly-funded new bank, is a debate on the role of the state versus the role of the private sector - and not merely in the UK but globally.

Without that global perspective, debate and consensus we are condemned to swing between on the one hand the Keynesianesque/ trade union extreme that preceded the Reagan/Thatcher era, and on the other hand the monetarist/ bubble era heralded by the Reagan/Thatcherite extreme. Sphere: Related Content

Should central banks target stock prices?

That is the title of a paper just published by Paul De Grauwe, on behalf of the Centre for European Policy Studies, Burssels, Belgium: http://tinyurl.com/ksu5tr
[Open in new window]

Based on a more academic Working Document, it asks whether central banks should target stock prices so as to prevent bubbles and crashes from occurring.

This was as unthinkable only a few weeks ago as Lord Turner championing the idea of the Tobin Tax (see http://tinyurl.com/lt3cax
[Open in new window].

While I have long argued for the Tobin Tax, I maintain that targeting stock prices alone is half-baked. We need a system of independent, comprehensive watch on global stability such as outlined in my article in the New York Times Online ("DealBook" section) some weeks ago.

Not only can an independent comprehensive view never be provided by individual countries or by individual measures such as targeting stock prices, doing such things would be simply counter-productive in terms of system stability. Sphere: Related Content

Russian President Medvedev becomes a Buddhist goddess, apparently becaue he upholds the Rule of Law

On the first official visit by a head of state to Ivolginsky, a Buddhist monastery in Buryatia, eastern Siberia, President Medvedev was hailed as a Buddhist goddess, Tara.

Tara is not much known in the land that is the birthplace of Buddhism (India) but Tara is thought, at least by some devotee, to be the mother of all Buddhas. She is considered to typify compassion and serenity, which Medvedev is thought to embody - at least according to the spiritual leader of the monastery, Pandito Khambo Lama Damba Ayusheyev.

When asked about the president’s spiritual elevation, the Pandito is reported, by the the Interfax news agency, to have responded: “It’s very hard to understand this for non-Buddhists and even for some Buddhists too.”

Yes, very hard indeed.

Russia’s Buddhists consider all the country’s leaders to be an emanation of the female Buddha - a belief that dates back to the 18th century when the Empress Elizabeth officially recognised the religion.

According to the Pandito: “The leader of the country is a man who bears very serious responsibility for others. The Buddhists must support him, identifying him as a deity.”

Well, what are gods and goddesses supposed to do? Fulfil your wishes, of course! So it was entirely appropriate for Medvedev to promise financial support to the Buddhist community and to announce that he will introduce Buddhist chaplains to the Russian Federation’s army.

The latter action may make him popular among the nation's 0.7% who are Buddhist, but is likely to make him much less popular among the nation's 63% who are Russian Orthodox. After 70 years of thorough Marxist propaganda, only 16% say they are non-believers, according to a poll by the Russian Public Opinion Research Center.

So why has President Medvedev accepted the role of a Buddhist goddess? According to Geoffrey Bamford of the Oxford Centre for Buddhist Studies:“It’s a psychological thing that doesn’t quite have a parallel in our language. It’s philosophically based. Saying he is a goddess is a bad translation.For Buddhists he represents a bundle of qualities on the contemporary political scene. Identifying him as White Tara is a shorthand way of visualising that bundle of qualities in order to summon them up in oneself. Medvedev’s thing is the rule of law – he’s a lawyer. He produced a remarkable state of the nation address in November last year in which he anatomised the difficulty of making a modern state out of Russia. It was basically about being a law-based society and this, I think, is the characteristic that the Buryats and the Kalmyks identify in him when contemplating the White Tara.”

Interesting philosophical and practical question: Is accepting the role of a god in line with promoting the rule of law?

Another interesting question: Which societies have been most committed to the rule of law?

Readers of my blog will be aware that my answers to these questions are, respectively, "No", and "Northern Europe and North America". Sphere: Related Content

Are we anywhere near recovery yet?

That the answer is "No" is confirmed by the latest figures from the Federal Deposit Insurace Corporation:

All the institutions insured by it together reported a net loss of US$3.7 billion in th quarter ending June 2009, even though they had a net income of US$7.6 billion in the previous quarter.

Provisions for loan losses totaled $66.9 billion in the 2nd quarter this year, an increase of $16.5 billion (32.8%) year-on-year.

Extraordinary losses stemming from writedowns of asset-backed commercial paper totaled $3.6 billion.

Noninterest expenses were $1.7 billion (1.7%) higher year-over-year - though it must be conceded that this may have been primarily due to increased FDIC deposit insurance premiums.

Indicators of asset quality continued to worsen during Q2.

And so many people still want to believe not merely that we have reached the bottom of the cycle but that things are actually improving! Sphere: Related Content

Are we at the bottom of the crisis?

It is difficult to say whether we are.

While most "authorities" are happy to have announced teh end of the crisis, we need to keep in mind the following factors:

1. I have commented earlier that there is too much printed money in the world, as a result of over-printing over the last 20 or so years. This money acts as a natural booster of the economy, because no one who holds money likes to keep it under the mattress so to speak. In other words, there is a systemic "push" to invest, and everyone has been indoctrinated in the last 20 years to believe that equities will always outperform other forms of investment "in the long run" (whatever that is). So even Pension Funds which should have an interest in stable long term returns, and therefore should invest largely in bonds, tend to invest largely in equities. Beliefs about where the money should go act as a self-fulfilling prophecy - money goes to where people believes it should go, creating a demand for equities that is systemically too high (i.e. higher than it should be, given fundamentals). That is what explains "animal spirits" in the stock market.

2. We can therefore say that the crisis is over not when investors rush into the stock market (which has happened, and will happen several times before the crisis really eands), but when real expenditure returns to the market. That is mostly cosumer expenditure historically, but there is no reason why capital expenditure should not take its place. In fact, tax incentives to increase capital expenditure in relation to green technologies would be the most intelligent way of increasing consumption, but no one is doing that in any substantial way at present, leaving it to private consumption to drive the economy. What about government expenditure? It is of course a significant factor at present, but it can never be large enough to really drive the economy, first because it is not large enough in relation to private and capital expenditure and because it usually takes too long and is usually not productive enough (governments tend to spend on defence, infrastructure and social services). Briefly, government expenditure is up practically all over the world, but capital and private expenditure is not up - and till that improves the crisis will not be over.

Private expenditure tends to be driven by three factors (beliefs, employment levels and house prices). The beliefs can be manipulated by government propaganda and stock prices. Employment figures can be manipulated by governments to a certain extent. House prices tend to be relatively objective, though of course governments can and do intervene in the housing market.

We have been told that employment will not pick up for some time. But that is simply what the US government believes, or would like us to believe.

As for housing, The S&P/Case-Shiller 20-City Composite Index fell is still declining, having fallen 15.4% y/y in June 2009 after declining 17.1% y/y in May.

By June 2009, average home prices were at similar levels to what they were in early 2003.

From the peak in mid-2006, the 10-City Composite is down 32.5% and the 20-City Composite is down 31.4%. If one agrees that the peak was hugely exaggerated, the questions are: (a) has the decline now reached the lowest it is going to reach? and how long will it be before there is a sustained (even if slow) rise in price of say 3% or more a year? My answer to (a) is "No", though I do not know how much further house prices have to fall (I hope not a lot). My answer to (b) is that no one knows, not even governments who have made public their "belief" that house prices, employment levels and the economy in general will start coming out of the recession in 2010.

For the reason that I mentioned at the start of this post, too much money sloshing around the system creates systemic distortion and unpredictability. It can (as it has already) cause an apparent end to the crisis very much sooner (or very much later) than 2010.

My view continues to be that we will continue to yo-yo along something like the bottom, reaching marginally lower levels (which will be systemically discounted - at least, so I hope!) and touching marginally higher levels (which will be systemically heralded as the end of the crisis.

Certainly it helps if large numbers of business leaders and ordinary people behave as if the crisis is over.

But watch the fundamentals I mention above.

Governments have begun to put many sensible things in place, which I have been arguing for, and which are helping to resolve the crisis, but we still have the unresolved question of toxic assets - all that we have done is move them from private hands to the hands of governments. In one or two small countries, we see encouraging signs that at least some of the toxic assets are no longer toxic. Assets become less toxic or eventually beneficial as the economy improves, but become more and more toxic as the economy deteriorates. It is only as the bulk of toxic assets in the world economy as a whole are sorted out that the fundamentals will have been addressed sufficiently. Sphere: Related Content

The idiocies of Lists and Rankings

Forbes magazine (USA) has just a Special Report listing "The 100 Most Powerful Women".

According to this, the most powerful woman in the world is Chancellor Angela Merkel of Germany. This is possibly true.

The 2nd most powerful woman is Sheila Bair, the Chairman of the United States' Federal Deposit Insurance Corp - also possibly true.

However, the 3rd most powerful woman - hold on to your seat! - is Indra Nooyi, the CEO of PepsiCo. This too might be true, except that, down at number 13 on the list, BELOW Cristina Fernandez, President of Argentina, is our own Sonia Gandhi!

Well, Forbes is an American magazine, so I guess their perspective must be that the further away geographically from the US one is, the less important one must be! Sphere: Related Content

The latest from the Global Association of Risk Professsionals

In relation to my review of Dr Willi Brammertz's book, a friend draws my attention to last week's Newsletter of the Global Association of Risk Professionals (GARP), which had a stunning bit of news:

GARP has now moved to accepting that standard contract types need to be defined for credit derivatives. It also now accepts that higher capital charges need to be made if standards are not followed. You may recollect that these are two key proposals made in Dr Brammertz's book.

The new GARP view is a bit of a revolution for the organisation - even if, in light of the crisis, the change of heart is not wholly unexpected.

At present, the GARP proposal is limited to credit derivatives - but it should be applied to all financial contracts, as Dr Brammertz quite correctly argues in his book. Sphere: Related Content

Iran is apparently now going to have WOMEN in the Government!

Well, to be precise, what is being signalled is women members of the Cabinet:

Iran's president, Mahmoud Ahmadi-Nejad, said he would nominate at least three female ministers to his cabinet, reaching out to the women who have been particularly active in post-election protests against his government:
http://preview.tinyurl.com/q2b5ad

Even if it is a result of mere politics of the most cynical sort, the move should be welcomed by all people of goodwill as a dilution of Islamism (which, by the way, is a heady but contradictory mixture of Koranic, traditional and reactionary views).

Most importantly, it should be welcomed as signalling a change in the oppression of women that has occured again in newly-Islamised societies - think, for example of the re-suppression of education for women in Afghanistan and of acid being thrown on women who are not dressed in the traditional burqa.

If women are in the cabinet in Iran it will be more difficult to suppress women's rights not only in Iran but in all the places where Iran's influence runs, from Lebanaon to Afghanistan (and much wider!). Sphere: Related Content

Are all religions the same?

In response to one of my posts, a friend writes: "All religions are the same. It is the belief which counts. Believe in Him and you can never fail".

I could respond with material to fill a book, but I'll confine myself to the following:

Dear A

Your sort of comment is often heard nowadays, but it doesn't bear examination.

First, not all "religions" accept that there is a "Him" (or "Her" or "Her/Him"). Buddhism, Jainism and Vedanta (if you consider them "religions") believe either in an "It" or finally in nothing, depending on which version of these you accept.

Then, it is not merely a matter of belief. In Judaism and Islam, e.g., what is expected is that you commit yourself to quite specific actions too - e.g. Ramadan or Shabbat or eating or not eating certain kinds of food or….

Finally, "believe in Him and you can never fail" is a modern corruption of traditional religions, most of which hold that you will reap the reward of your good deeds in the NEXT life though in this life you may and probably will have HUGE problems.

"So what?", you may retort, "The average person lives on the basis I have indicated and scholars may go hang".

Well, belief systems have consequences not only at the individual level but also at the social, economic and political level. That's why India is still so corrupt and backward while Northern Europe was cleaned up by the Protestant Reformation, with an impact slowly in other parts of the world due to the social, economic and political progress that resulted there being copied by other parts of the world - including our own country.

The attempt to produce the shoots without the roots is interesting and can even be encouraging, but roots have to be put down sometime if you want growth to be sustained. Sphere: Related Content

Encouragement

Having been a vigorous atheist from the age of 8, I became a follower of Jesus at the age of 14. Ever since then I have tried in my feeble and failing way to invest at least some energy in making the world a little better. That had huge consequences for my family, including having to leave the country I love. However, even in the more congenial West, one is always conscious of how deeply unfashionable and unrewarded it is to be engaged even partially in something so quixotic. From time to time, one gets discouraged.

Then I call to mind the story of the discouraged prophet who complained to God that he was the only prophet left unkilled by a wicked queen and that even he was being hunted. The prophet is told that actually seven thousand people were still faithful to God. In the Bible, three symbolises God, seven symbolises perfection, and ten symbolises plenitude - so you do not need me to spell out what ten times ten times ten indicates. In another story, the prophet Elisha asks God to give his discouraged servant a momentary glimpse of what is really going on, so that he is encouraged.

An experience like those happened to me yesterday, when I received the following mail from someone who I had never even heard of earlier:

"I teach both an undergraduate course in organizational behavior as well as an MBA course in leadership and organizational behavior at Rowan University in Glassboro, New Jersey.

"Ever since I heard your program on NPR's Speaking of Faith on “The Gods of Business,” I have begun these courses by asking the students to listen to that program and then write a three-page “working note” (based on the idea originated by A.K Rice at the Tavistock Institute).

"It has been a wonderful way to get business majors to take seriously the relationship between their goal of learning how to make lots of money and their responsibility as citizens of the human community. They respond thoughtfully and it sets the stage for a usefuI semester. I thank you and Krista Tippett for the conversation."

Dr. Thomas Michael, who is Professor Emeritus at the Rohrer College of Business, goes on to say "I intend to begin the MBA class with the program again this September" and then to ask some questions that I was happy to try to answer.

Dear Dr. Michael, thank you. I do not know if you realise it but in Hebrew, which is the language from which your surname comes, "Michael" means "Who is like God". Because Michael is the name of one of the chief angels in the Bible (as well as in the Koran), I take it that the name indicates that, of all created beings, Michael is most like God. In the two or three glimpses we are given of him in the Bible, Michael both works actively himself for God, and assists and encourages others in their work.

Dear Dr. Michael, I have no idea whether you put your trust in God or do not even believe that He exists. But in working for ethics and responsibility you are acting like the angel - indeed like God, as God Himself directly encourages us and requires us to be...and you may not have realised this either, but you encouraged me like your namesake angel yesterday. Sphere: Related Content

How can the economy grow if consumption does not pick up?

What is the basic problem with the global economy today?

I have made my view quite clear in this blog: unfashionably, I maintain that the fundamental problem is still toxic assets - and, while a temporary reprieve has been provided by governments being persuaded by our elites to spend an unprecedented amount of tax money, the result is the economic decline is merely slowed or halted, at the expense of massive public liabilities that will haunt the relevant countries for decades to come.

And "slowing down or halting the decline" is not the same thing as an economy that is growing healthily!

In the global economic model that we have at present, economic health depends entirely on consumption.

The US has been the primary consumer in the world, with private consumption in 2008 amounting to some US$10 trillion, which accounted for 16% of global output. By contrast, private consumption in the EU, even though it is a much more populated region, was about US$9 trillion; and the largest population group in the world, Asia, provided less than US$5 trillion of consumption. This was already in the middle of the crisis, with spending in the US and Europe slowing from their usual highs, and spending in Asia being artificially boosted by government actions.

US and EU consumption is continuing to slow due to more people being "let go" from their jobs, and those who have money becoming much more careful about when and how they spend.

Will Asia be able to take up the slack? As far as I can see, not in terms of private consumption. Even in the case of governments with cash, e.g. China, they have not so far succeeded in encouraging private consumption, rather the governments has spent money on things such as highways (which is of course very good, and which does indirectly put money in the hands of employees).

So we have two choices: either re-expand global consumption with all the ecological consequences, or we can re-orient the global economy towards a more rational and sensible model - on which I have written at several points in this blog and in various articles. Sphere: Related Content