Irwin Stelzer
“COLOUR THEM GREEN,” warbled Barbra Streisand. That was in 1963, and she was singing about her envious eyes. But flash forward to today and those words would equally apply to the myriad players in the let’s-make-environmental-and-energy-policy game.
We are all green now. Al Gore took time off the speech circuit to collect a Nobel Prize for persuading the world that global warming threatens our very existence. Arnold Schwarzenegger, not content with painting California green, has formed an alliance with Tony Blair to press Europe’s politicians to do the same, and they have responded by seeking ways of forcing car makers and airlines to cut their emissions. Ken Livingstone has persuaded leading companies to sign up to a “Green 500” group that will publish its progress in reducing carbon emissions.
There’s more, but you get the idea: the green wave is rolling, and has drowned those who doubt whether the Earth is really warming, and question the role of human activity in any warming.
The physical science question having been resolved to the satisfaction of the greens, the question now becomes just what to do. Here we find strange bedfellows: oil producers and environmentalists.
The Opec oil cartel, which recently met in Abu Dhabi, and the 15,000 – or is it 20,000 – ministers, advocacy groups, journalists and suntan-hunting politicians meeting in Bali might not know it, but they have a common goal: high oil prices. The oil producers want to keep prices high so that the huge shift in wealth from consuming countries to their sovereign wealth funds continues.
The greens favour high oil prices because consumers use less of the stuff when it costs more, and because high prices for oil make other forms of energy more competitive. Nuclear power, solar energy, wind power or any of the other substitutes for fossil fuels can become more economically viable only if oil prices stay about where they are – and politicians stump up some generous subsidies, sceptics would add.
Meanwhile, the hunt for the proverbial free lunch is on. The most efficient way to cut the use of fossil fuels is to make them more expensive by taxing them, or the emissions they create. But politicians are as unenthusiastic about transparency in the cost of cleaning up the environment as they are about increasing the transparency of the funding of political parties. So most proposals to cut carbon emissions are built around a single proposition: hide their cost from voters.
Motor vehicles always come in for special attention. Some would require car companies to increase the fuel efficiency of their fleets, but fail to mention that the cost will be reflected in the price of cars and the higher death toll associated with lighter vehicles. Others mandate greater use of ethanol, but do not mention that current mandates have already driven up the price of corn and wheat, and of meat and poultry by making animal feed more expensive. Consumers of electricity will also pay for cooling the world when utilities are required to obtain more of their electricity from expensive renewable sources and nuclear power. And new taxes on oil producers will certainly drive up the price of petrol and heating oil.
Even the emerging favourite in the United States and Europe, a cap on emissions followed by a trading of permits, is a hide-the-cost device: costs of compliance will be passed on as higher prices. So the blame will go to car makers, supermarkets, electricity utilities, and oil companies, the applause to politicians. All so politicians can avoid the transparent device of a tax on carbon or carbon emissions.
This brings us back to Bali, where the negotiators had two main tasks. The first was to formulate an agenda that keeps America in the emissions-reduction game, which means persuading a Senate that was prepared to reject Kyoto by unanimous vote that the greening of America will not stifle economic growth. The second was to attract the developing countries, most notably China and India, into the game. Whether the agreed “road map” will achieve those goals, or prove as useless as the one designed to bring peace to Israel, remains to be seen.
That’s because so-called clean sources of energy have their own problems. A source high up in Britain’s nuclear industry tells me that there will be no new nukes unless the regulators agree on a uniform licensing standard, curb litigation, and cut construction delays. This is no more likely than a politically acceptable solution to the nuclear waste disposal problem.
Nor will renewables provide a free lunch. Offshore wind power, the poster-boy du jour of British policymakers and Greenpeace, “is more expensive than gas-fired”, notes Alan Moore, managing director of National Wind Power. And we have yet to see what will happen when objectors raise questions about the impact of specific wind farms on birds, wildlife and views.
Meanwhile, lurking in the background is the environmentalists’ bête noire, coal. Britain has approved ten new opencast coal mines, and China is building new coal-fired power stations this year with a capacity exceeding that of the entire UK electricity grid. That will make China the world’s largest emitter of greenhouse gases, and more than offset any reductions the developing nations manage. And in America some 45 new coal-fired power plants are under construction or have obtained planning permission.
So it’s going to be a long road from Bali to a meaningful agreement to reduce emissions. Followers of the new road map will have to pass through Washington, Beijing and New Delhi, places that have not yet been coloured a deep shade of green.
Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute.
Monday 17 December 2007
The environmental debate has to be rescued from the flagellants who would cut growth
Bruce Anderson:
Like all fanatical cults, they have their Devil, in the US, and their rituals, in recycling plastic bags, et al
Published: 17 December 2007
Last week, we saw some of the people who put "mental" into environmentalism. Important topics were discussed in Bali. That is not necessarily as absurd as it sounds. But it rapidly became so. Who popped up? A crying Dutchman in a flower-power shirt. The Flying Dutchman had better tunes.
Yet it could be dangerous to be distracted by laughing at the lunatics, who must not be allowed to obscure an important truth. At the core of environmentalism there is a common-sense proposition: man-made climate change. Climate change has occurred throughout the earth's history.
The causal link between carbon emissions and global warming is only a hypothesis. But as Karl Popper argued, we approach scientific truth through hypotheses, discarding them when they are proven wrong. Far from being proven wrong, carbon-burning climate change sounds plausible. You do not have to be a tree-hugging, tofu-eating America hater – or even a lachrymose Ivo de Boer – to recognise the risk that a huge increase in carbon emissions might destabilise the earth's atmosphere.
Sir Nicholas Stern's report does not read as if the typescript was tear-stained. It is a coolly argued document, proposing sensible measures. Nick Stern does not think that the human race ought to live in long houses eating roots and berries. He does not even believe that we need to renounce cars, supermarkets or air travel. He merely proposes sensible readjustments and this raises the question of the balance of proof.
Even if you do not accept that carbon has been proven guilty beyond any reasonable doubt, there are good grounds for siding with Sir Nicholas. Suppose he is wrong. In that case, there would have been unnecessarily early expenditure in order to find substitutes for carbon fuels. Yet, there would be gains. Fossil fuels not only tend to be located in geopolitically inconvenient regions; one day, they must run out.
So the Stern measures would not be that wasteful. But suppose he is right. If nothing is done over the next few years, the catch-up costs could be enormous – and insufficient to avert instability and perhaps war. Just because some of the silliest people on earth are proclaiming that there is a mortal threat to the planet, we cannot assume that they are mistaken.
Nor need we share their pessimism about Bali. Progress was made. Even if there are no figures for reductions, there is a framework which includes the US, China and India. That offers a basis for hope – as long as the next phase of the emissions' debate is sufficiently radical.
There were always two problems with Kyoto. It was far too influenced by the Greenpeace-style excesses of mid-90s environmentalism and it did not include America. At that stage, the anti-nuclear power movement was at its most powerful in both the US and Europe. Since then it has lost ground, largely because governments have had to think through the consequences of reducing carbon emissions and the real-world alternatives to fossil fuels.
In those days, however, a major US nuclear power programme would have been impossible. As a result, there was the worst possible stalemate. The Green Movement, though incapable of persuading Americans to consume less energy, did succeed in cutting off new energy sources, whether nuclear plants or offshore oil drilling.
America should not be criticised for failing to sign Kyoto. Someone ought to remind Al Gore there was never any question of it doing so. Anyone who doubts this should remember that, while Bill Clinton was president and Al Gore vice-president, the US Senate rejected Kyoto by 95 votes to nil. This happened because American legislators who agreed on little else did come together on one point. The Kyoto limits were incompatible with economic growth.
That is where the post-Bali negotiators must do better. What is needed is a fundamental change of emphasis. Instead of focusing on carbon reductions, much more attention should be given to the increased use of clean energy. Over the next dozen years, the Indian and Chinese economies might well double in size. Nothing ever seems to stop the US economy from growing. Europe desperately needs higher growth rates. So does Japan; so, above all, does the poor world.
Growth depends on energy. It might be possible to use emotional blackmail to persuade some Western countries to cut their growth rates. That will not work in India and China. Whatever Mr Gore now says, it is unlikely to work in the US and it ought not to work in the poor world.
Higher energy consumption is vitally important and there are only two ways of achieving it: fossil fuels or nuclear power. Although carbon capture and other technologies to ensure a cleaner burn could make it possible to increase fossil fuel use without grave consequences, there is only one answer to the problem of clean energy. Everyone who cares about the environment should agitate in favour of a greatly increased global nuclear power programme.
We can be fairly sure that this is not going to happen and the blame lies with the enviro-"mentals". They are not pursuing disinterested science, in the spirit of the Stern report. Their environmentalism is a religion. Like all fanatical cults, it is hostile to science and to reason. It has its Devil: the US, abetted by the Western consumer. It has its rituals: recycling plastic bags, etc. It offers endless excuses for self-flagellation, such as possessing plastic bags in the first place. It even has its own temples.
It could be argued that the British wind-turbines are the most wasteful public works programme since the Pyramids. But there is a difference. The Pyramids are objects of wonder, grandeur and beauty. In future, the turbines will, no doubt, be objects of wonder. People will wonder why our generation was so daft to build them when they require large subsidies for an uncertain output while despoiling large tracts of the British landscape.
There is no harm in the occasional domestic wind turbine. But anyone who believes that such turbines could be the answer to Britain's energy needs has either failed to understand the need for energy or is indifferent to the consequences of energy shortage.
The environmental debate has to be rescued from flagellants. It is perfectly possible for the world to go on enjoying a rising standard of living while reducing carbon emissions. If the problem is approached in that spirit, there is no reason why the Americans, Chinese and Indians should refuse to co-operate.
So there are grounds for believing that the Bali discussions could prove fruitful. The next meeting might achieve more, as long as one precondition is met. There must be no blubbing Dutchmen wearing two floral shirts, one on his upper body, the other between his ears.
Like all fanatical cults, they have their Devil, in the US, and their rituals, in recycling plastic bags, et al
Published: 17 December 2007
Last week, we saw some of the people who put "mental" into environmentalism. Important topics were discussed in Bali. That is not necessarily as absurd as it sounds. But it rapidly became so. Who popped up? A crying Dutchman in a flower-power shirt. The Flying Dutchman had better tunes.
Yet it could be dangerous to be distracted by laughing at the lunatics, who must not be allowed to obscure an important truth. At the core of environmentalism there is a common-sense proposition: man-made climate change. Climate change has occurred throughout the earth's history.
The causal link between carbon emissions and global warming is only a hypothesis. But as Karl Popper argued, we approach scientific truth through hypotheses, discarding them when they are proven wrong. Far from being proven wrong, carbon-burning climate change sounds plausible. You do not have to be a tree-hugging, tofu-eating America hater – or even a lachrymose Ivo de Boer – to recognise the risk that a huge increase in carbon emissions might destabilise the earth's atmosphere.
Sir Nicholas Stern's report does not read as if the typescript was tear-stained. It is a coolly argued document, proposing sensible measures. Nick Stern does not think that the human race ought to live in long houses eating roots and berries. He does not even believe that we need to renounce cars, supermarkets or air travel. He merely proposes sensible readjustments and this raises the question of the balance of proof.
Even if you do not accept that carbon has been proven guilty beyond any reasonable doubt, there are good grounds for siding with Sir Nicholas. Suppose he is wrong. In that case, there would have been unnecessarily early expenditure in order to find substitutes for carbon fuels. Yet, there would be gains. Fossil fuels not only tend to be located in geopolitically inconvenient regions; one day, they must run out.
So the Stern measures would not be that wasteful. But suppose he is right. If nothing is done over the next few years, the catch-up costs could be enormous – and insufficient to avert instability and perhaps war. Just because some of the silliest people on earth are proclaiming that there is a mortal threat to the planet, we cannot assume that they are mistaken.
Nor need we share their pessimism about Bali. Progress was made. Even if there are no figures for reductions, there is a framework which includes the US, China and India. That offers a basis for hope – as long as the next phase of the emissions' debate is sufficiently radical.
There were always two problems with Kyoto. It was far too influenced by the Greenpeace-style excesses of mid-90s environmentalism and it did not include America. At that stage, the anti-nuclear power movement was at its most powerful in both the US and Europe. Since then it has lost ground, largely because governments have had to think through the consequences of reducing carbon emissions and the real-world alternatives to fossil fuels.
In those days, however, a major US nuclear power programme would have been impossible. As a result, there was the worst possible stalemate. The Green Movement, though incapable of persuading Americans to consume less energy, did succeed in cutting off new energy sources, whether nuclear plants or offshore oil drilling.
America should not be criticised for failing to sign Kyoto. Someone ought to remind Al Gore there was never any question of it doing so. Anyone who doubts this should remember that, while Bill Clinton was president and Al Gore vice-president, the US Senate rejected Kyoto by 95 votes to nil. This happened because American legislators who agreed on little else did come together on one point. The Kyoto limits were incompatible with economic growth.
That is where the post-Bali negotiators must do better. What is needed is a fundamental change of emphasis. Instead of focusing on carbon reductions, much more attention should be given to the increased use of clean energy. Over the next dozen years, the Indian and Chinese economies might well double in size. Nothing ever seems to stop the US economy from growing. Europe desperately needs higher growth rates. So does Japan; so, above all, does the poor world.
Growth depends on energy. It might be possible to use emotional blackmail to persuade some Western countries to cut their growth rates. That will not work in India and China. Whatever Mr Gore now says, it is unlikely to work in the US and it ought not to work in the poor world.
Higher energy consumption is vitally important and there are only two ways of achieving it: fossil fuels or nuclear power. Although carbon capture and other technologies to ensure a cleaner burn could make it possible to increase fossil fuel use without grave consequences, there is only one answer to the problem of clean energy. Everyone who cares about the environment should agitate in favour of a greatly increased global nuclear power programme.
We can be fairly sure that this is not going to happen and the blame lies with the enviro-"mentals". They are not pursuing disinterested science, in the spirit of the Stern report. Their environmentalism is a religion. Like all fanatical cults, it is hostile to science and to reason. It has its Devil: the US, abetted by the Western consumer. It has its rituals: recycling plastic bags, etc. It offers endless excuses for self-flagellation, such as possessing plastic bags in the first place. It even has its own temples.
It could be argued that the British wind-turbines are the most wasteful public works programme since the Pyramids. But there is a difference. The Pyramids are objects of wonder, grandeur and beauty. In future, the turbines will, no doubt, be objects of wonder. People will wonder why our generation was so daft to build them when they require large subsidies for an uncertain output while despoiling large tracts of the British landscape.
There is no harm in the occasional domestic wind turbine. But anyone who believes that such turbines could be the answer to Britain's energy needs has either failed to understand the need for energy or is indifferent to the consequences of energy shortage.
The environmental debate has to be rescued from flagellants. It is perfectly possible for the world to go on enjoying a rising standard of living while reducing carbon emissions. If the problem is approached in that spirit, there is no reason why the Americans, Chinese and Indians should refuse to co-operate.
So there are grounds for believing that the Bali discussions could prove fruitful. The next meeting might achieve more, as long as one precondition is met. There must be no blubbing Dutchmen wearing two floral shirts, one on his upper body, the other between his ears.
We've been suckered again by the US. So far the Bali deal is worse than Kyoto
America will keep on wrecking climate talks as long as those with vested interests in oil and gas fund its political system
George Monbiot
Monday December 17, 2007
The Guardian
'After 11 days of negotiations, governments have come up with a compromise deal that could even lead to emission increases. The highly compromised political deal is largely attributable to the position of the United States, which was heavily influenced by fossil fuel and automobile industry interests. The failure to reach agreement led to the talks spilling over into an all-night session."
These are extracts from a press release by Friends of the Earth. So what? Well it was published on December 11 - I mean to say, December 11 1997. The US had just put a wrecking ball through the Kyoto protocol. George Bush was innocent; he was busy executing prisoners in Texas. Its climate negotiators were led by Albert Arnold Gore.
The European Union had asked for greenhouse gas cuts of 15% by 2010. Gore's team drove them down to 5.2% by 2012. Then the Americans did something worse: they destroyed the whole agreement.
Most of the other governments insisted that the cuts be made at home. But Gore demanded a series of loopholes big enough to drive a Hummer through. The rich nations, he said, should be allowed to buy their cuts from other countries. When he won, the protocol created an exuberant global market in fake emissions cuts. The western nations could buy "hot air" from the former Soviet Union. Because the cuts were made against emissions in 1990, and because industry in that bloc had subsequently collapsed, the former Soviet Union countries would pass well below the bar. Gore's scam allowed them to sell the gases they weren't producing to other nations. He also insisted that rich nations could buy nominal cuts from poor ones. Entrepreneurs in India and China have made billions by building factories whose primary purpose is to produce greenhouse gases, so that carbon traders in the rich world will pay to clean them up.
The result of this sabotage is that the market for low-carbon technologies has remained moribund. Without an assured high value for carbon cuts, without any certainty that government policies will be sustained, companies have continued to invest in the safe commercial prospects offered by fossil fuels rather than gamble on a market without an obvious floor.
By ensuring that the rich nations would not make real cuts, Gore also guaranteed that the poor ones scoffed when we asked them to do as we don't. When George Bush announced, in 2001, that he would not ratify the Kyoto protocol, the world cursed and stamped its foot. But his intransigence affected only the US. Gore's team ruined it for everyone.
The destructive power of the American delegation is not the only thing that hasn't changed. After the Kyoto protocol was agreed, the then British environment secretary, John Prescott, announced: "This is a truly historic deal which will help curb the problems of climate change. For the first time it commits developed countries to make legally binding cuts in their emissions." Ten years later, the current environment secretary, Hilary Benn, told us that "this is an historic breakthrough and a huge step forward. For the first time ever, all the world's nations have agreed to negotiate on a deal to tackle dangerous climate change." Do these people have a chip inserted?
In both cases, the US demanded terms that appeared impossible for the other nations to accept. Before Kyoto, the other negotiators flatly rejected Gore's proposals for emissions trading. So his team threatened to sink the talks. The other nations capitulated, but the US still held out on technicalities until the very last moment, when it suddenly appeared to concede. In 1997 and in 2007 it got the best of both worlds: it wrecked the treaty and was praised for saving it.
Hilary Benn is an idiot. Our diplomats are suckers. American negotiators have pulled the same trick twice, and for the second time our governments have fallen for it.
There are still two years to go, but so far the new agreement is even worse than the Kyoto protocol. It contains no targets and no dates. A new set of guidelines also agreed at Bali extend and strengthen the worst of Gore's trading scams, the clean development mechanism. Benn and the other dupes are cheering and waving their hats as the train leaves the station at last, having failed to notice that it is travelling in the wrong direction.
Although Gore does a better job of governing now he is out of office, he was no George Bush. He wanted a strong, binding and meaningful protocol, but American politics had made it impossible. In July 1997, the Senate had voted 95-0 to sink any treaty which failed to treat developing countries in the same way as it treated the rich ones. Though they knew this was impossible for developing countries to accept, all the Democrats lined up with all the Republicans. The Clinton administration had proposed a compromise: instead of binding commitments for the developing nations, Gore would demand emissions trading. But even when he succeeded, he announced that "we will not submit this agreement for ratification [in the Senate] until key developing nations participate". Clinton could thus avoid an unwinnable war.
So why, regardless of the character of its leaders, does the US act this way? Because, like several other modern democracies, it is subject to two great corrupting forces. I have written before about the role of the corporate media - particularly in the US - in downplaying the threat of climate change and demonising anyone who tries to address it. I won't bore you with it again, except to remark that at 3pm eastern standard time on Saturday, there were 20 news items on the front page of the Fox News website. The climate deal came 20th, after "Bikini-wearing stewardesses sell calendar for charity" and "Florida store sells 'Santa Hates You' T-shirt".
Let us consider instead the other great source of corruption: campaign finance. The Senate rejects effective action on climate change because its members are bought and bound by the companies that stand to lose. When you study the tables showing who gives what to whom, you are struck by two things.
One is the quantity. Since 1990, the energy and natural resources sector - mostly coal, oil, gas, logging and agribusiness - has given $418m to federal politicians in the US. Transport companies have given $355m. The other is the width: the undiscriminating nature of this munificence. The big polluters favour the Republicans, but most of them also fund Democrats. During the 2000 presidential campaign, oil and gas companies lavished money on Bush, but they also gave Gore $142,000, while transport companies gave him $347,000. The whole US political system is in hock to people who put their profits ahead of the biosphere.
So don't believe all this nonsense about waiting for the next president to sort it out. This is a much bigger problem than George Bush. Yes, he is viscerally opposed to tackling climate change. But viscera don't have much to do with it. Until the American people confront their political funding system, their politicians will keep speaking from the pocket, not the gut.
George Monbiot
Monday December 17, 2007
The Guardian
'After 11 days of negotiations, governments have come up with a compromise deal that could even lead to emission increases. The highly compromised political deal is largely attributable to the position of the United States, which was heavily influenced by fossil fuel and automobile industry interests. The failure to reach agreement led to the talks spilling over into an all-night session."
These are extracts from a press release by Friends of the Earth. So what? Well it was published on December 11 - I mean to say, December 11 1997. The US had just put a wrecking ball through the Kyoto protocol. George Bush was innocent; he was busy executing prisoners in Texas. Its climate negotiators were led by Albert Arnold Gore.
The European Union had asked for greenhouse gas cuts of 15% by 2010. Gore's team drove them down to 5.2% by 2012. Then the Americans did something worse: they destroyed the whole agreement.
Most of the other governments insisted that the cuts be made at home. But Gore demanded a series of loopholes big enough to drive a Hummer through. The rich nations, he said, should be allowed to buy their cuts from other countries. When he won, the protocol created an exuberant global market in fake emissions cuts. The western nations could buy "hot air" from the former Soviet Union. Because the cuts were made against emissions in 1990, and because industry in that bloc had subsequently collapsed, the former Soviet Union countries would pass well below the bar. Gore's scam allowed them to sell the gases they weren't producing to other nations. He also insisted that rich nations could buy nominal cuts from poor ones. Entrepreneurs in India and China have made billions by building factories whose primary purpose is to produce greenhouse gases, so that carbon traders in the rich world will pay to clean them up.
The result of this sabotage is that the market for low-carbon technologies has remained moribund. Without an assured high value for carbon cuts, without any certainty that government policies will be sustained, companies have continued to invest in the safe commercial prospects offered by fossil fuels rather than gamble on a market without an obvious floor.
By ensuring that the rich nations would not make real cuts, Gore also guaranteed that the poor ones scoffed when we asked them to do as we don't. When George Bush announced, in 2001, that he would not ratify the Kyoto protocol, the world cursed and stamped its foot. But his intransigence affected only the US. Gore's team ruined it for everyone.
The destructive power of the American delegation is not the only thing that hasn't changed. After the Kyoto protocol was agreed, the then British environment secretary, John Prescott, announced: "This is a truly historic deal which will help curb the problems of climate change. For the first time it commits developed countries to make legally binding cuts in their emissions." Ten years later, the current environment secretary, Hilary Benn, told us that "this is an historic breakthrough and a huge step forward. For the first time ever, all the world's nations have agreed to negotiate on a deal to tackle dangerous climate change." Do these people have a chip inserted?
In both cases, the US demanded terms that appeared impossible for the other nations to accept. Before Kyoto, the other negotiators flatly rejected Gore's proposals for emissions trading. So his team threatened to sink the talks. The other nations capitulated, but the US still held out on technicalities until the very last moment, when it suddenly appeared to concede. In 1997 and in 2007 it got the best of both worlds: it wrecked the treaty and was praised for saving it.
Hilary Benn is an idiot. Our diplomats are suckers. American negotiators have pulled the same trick twice, and for the second time our governments have fallen for it.
There are still two years to go, but so far the new agreement is even worse than the Kyoto protocol. It contains no targets and no dates. A new set of guidelines also agreed at Bali extend and strengthen the worst of Gore's trading scams, the clean development mechanism. Benn and the other dupes are cheering and waving their hats as the train leaves the station at last, having failed to notice that it is travelling in the wrong direction.
Although Gore does a better job of governing now he is out of office, he was no George Bush. He wanted a strong, binding and meaningful protocol, but American politics had made it impossible. In July 1997, the Senate had voted 95-0 to sink any treaty which failed to treat developing countries in the same way as it treated the rich ones. Though they knew this was impossible for developing countries to accept, all the Democrats lined up with all the Republicans. The Clinton administration had proposed a compromise: instead of binding commitments for the developing nations, Gore would demand emissions trading. But even when he succeeded, he announced that "we will not submit this agreement for ratification [in the Senate] until key developing nations participate". Clinton could thus avoid an unwinnable war.
So why, regardless of the character of its leaders, does the US act this way? Because, like several other modern democracies, it is subject to two great corrupting forces. I have written before about the role of the corporate media - particularly in the US - in downplaying the threat of climate change and demonising anyone who tries to address it. I won't bore you with it again, except to remark that at 3pm eastern standard time on Saturday, there were 20 news items on the front page of the Fox News website. The climate deal came 20th, after "Bikini-wearing stewardesses sell calendar for charity" and "Florida store sells 'Santa Hates You' T-shirt".
Let us consider instead the other great source of corruption: campaign finance. The Senate rejects effective action on climate change because its members are bought and bound by the companies that stand to lose. When you study the tables showing who gives what to whom, you are struck by two things.
One is the quantity. Since 1990, the energy and natural resources sector - mostly coal, oil, gas, logging and agribusiness - has given $418m to federal politicians in the US. Transport companies have given $355m. The other is the width: the undiscriminating nature of this munificence. The big polluters favour the Republicans, but most of them also fund Democrats. During the 2000 presidential campaign, oil and gas companies lavished money on Bush, but they also gave Gore $142,000, while transport companies gave him $347,000. The whole US political system is in hock to people who put their profits ahead of the biosphere.
So don't believe all this nonsense about waiting for the next president to sort it out. This is a much bigger problem than George Bush. Yes, he is viscerally opposed to tackling climate change. But viscera don't have much to do with it. Until the American people confront their political funding system, their politicians will keep speaking from the pocket, not the gut.
£1,000 bond planned for visits by overseas relatives
· Sponsor families could be subject to sanctions
· Tighter immigration rules would cut tourist visas
Alan Travis, home affairs editor
Monday December 17, 2007
Guardian
Families who sponsor visits by overseas relatives to Britain will first have to pay a bond, expected to be £1,000, under new immigration proposals out this week.The immigration minister, Liam Byrne, is also to outline plans to cut the duration of tourist visas from six months to three months and make the visa regime for business travellers to Britain more flexible.
Previous attempts to introduce a bond for visitor visas have foundered in the face of fierce criticism that visa applications should be decided on their merits rather the size of people's wallets.
The Home Office consultation paper to be published tomorrow forms the final part of the government's plans to reform the framework of the immigration system, which has been in operation since 1971. The main part of the overhaul is the introduction of an Australian-style points based immigration system in April.
"Over the next 12 months we will see the biggest shake-up in its history," said Byrne. "The final front, I believe, is foreign visitor routes where change is needed."
The plans to streamline the system of allowing foreign visitors into Britain from outside the EU were first announced last March as part of a "borders and visas" strategy. Only four categories of visa were proposed: tourist, business, student and sponsored family visits. So far only the student visas category has come into force, which happened last September.
The March proposals said the sponsored family route will require UK residents to vouch for their family member at the start of the application process and to maintain and house their visitor and fund any of his or her non-emergency medical care. These proposals also suggested that if the visitor broke the terms of their visa, by overstaying or working illegally, the sponsor could be held responsible and be subject to sanctions.
Now Byrne has made clear he would like to go further and revive the idea of a bond, which would be refundable only if the visitor returned home on time. Ministers also want to ensure that only those who are a close family relative and have full settlement rights in Britain can sponsor overseas visitors.
A Home Office spokesman said yesterday the consultation paper will raise the idea of a bond but not mention an actual amount.
The idea was first raised in 2000 when the then home secretary, Jack Straw, proposed a £3,000 visitor bond. But it was quickly abandoned after the Commission for Racial Equality said the bond was "clearly discriminatory" and unfairly targeted the Indian, Pakistani and Bangladeshi communities.
Tomorrow's document will propose changes to tourist and business visas. In March, the Home Office proposed that the duration of tourist visas be reduced from six months to three as this reflected the needs of the vast majority of those who visited Britain.
Business travellers are to be offered a more flexible system with simple short-term visas combined with expedited clearance processes, such as Business Express, for regular "trusted" travellers.
The development of more specialised or time-limited visas, which could include an Olympics visa to help support the promotion of 2012, will also be explored.
Think you know your TV, music and film? Try Search Charades!
· Tighter immigration rules would cut tourist visas
Alan Travis, home affairs editor
Monday December 17, 2007
Guardian
Families who sponsor visits by overseas relatives to Britain will first have to pay a bond, expected to be £1,000, under new immigration proposals out this week.The immigration minister, Liam Byrne, is also to outline plans to cut the duration of tourist visas from six months to three months and make the visa regime for business travellers to Britain more flexible.
Previous attempts to introduce a bond for visitor visas have foundered in the face of fierce criticism that visa applications should be decided on their merits rather the size of people's wallets.
The Home Office consultation paper to be published tomorrow forms the final part of the government's plans to reform the framework of the immigration system, which has been in operation since 1971. The main part of the overhaul is the introduction of an Australian-style points based immigration system in April.
"Over the next 12 months we will see the biggest shake-up in its history," said Byrne. "The final front, I believe, is foreign visitor routes where change is needed."
The plans to streamline the system of allowing foreign visitors into Britain from outside the EU were first announced last March as part of a "borders and visas" strategy. Only four categories of visa were proposed: tourist, business, student and sponsored family visits. So far only the student visas category has come into force, which happened last September.
The March proposals said the sponsored family route will require UK residents to vouch for their family member at the start of the application process and to maintain and house their visitor and fund any of his or her non-emergency medical care. These proposals also suggested that if the visitor broke the terms of their visa, by overstaying or working illegally, the sponsor could be held responsible and be subject to sanctions.
Now Byrne has made clear he would like to go further and revive the idea of a bond, which would be refundable only if the visitor returned home on time. Ministers also want to ensure that only those who are a close family relative and have full settlement rights in Britain can sponsor overseas visitors.
A Home Office spokesman said yesterday the consultation paper will raise the idea of a bond but not mention an actual amount.
The idea was first raised in 2000 when the then home secretary, Jack Straw, proposed a £3,000 visitor bond. But it was quickly abandoned after the Commission for Racial Equality said the bond was "clearly discriminatory" and unfairly targeted the Indian, Pakistani and Bangladeshi communities.
Tomorrow's document will propose changes to tourist and business visas. In March, the Home Office proposed that the duration of tourist visas be reduced from six months to three as this reflected the needs of the vast majority of those who visited Britain.
Business travellers are to be offered a more flexible system with simple short-term visas combined with expedited clearance processes, such as Business Express, for regular "trusted" travellers.
The development of more specialised or time-limited visas, which could include an Olympics visa to help support the promotion of 2012, will also be explored.
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Saturday 15 December 2007
The $4bn killing
By Stephen Foley in New York
Published: 15 December 2007
House prices are crumbling on both sides of the Atlantic, growing numbers of homeowners face repossession, financial markets are yo-yoing and the UK saw its first run on a bank in living memory. But for three audacious New York traders it all added up to a $4bn (£2bn) profit opportunity and the biggest jackpot in the history of Wall Street.
The young guns at the investment bank Goldman Sachs – none of them over 40 years old – were unmasked yesterday, prompting a wave of adulation and envy among their colleagues, and another bout of handwringing about Wall Street's ability to make multibillion-dollar profits even as millions of ordinary people face losing their homes.
Dan Sparks and two underlings, Josh Birnbaum and Michael "Swenny" Swenson, placed what were in effect giant bets against the US mortgage market at the start of the year and watched their winnings tick higher and higher as the rising numbers of mortgage defaults spiralled into a worldwide financial crisis. Throughout the year, they battled with more cautious bosses who feared the bets were too big and too dangerous, but in part because of their success Goldman Sachs will post record profits next week. In doing so, the firm will stand alone on Wall Street, where rivals have suffered huge losses from the credit market meltdown.
The trio themselves are in line for bonuses of about $10m apiece from a record bonus pool at Goldman of about $19bn. "They are very embarrassed that their names have come out," said a company source. "Until now, nobody had heard of them, including most of the people on the floor where they work."
The Wall Street Journal, the bible of the New York finance industry, revealed yesterday how the three men would forgo lunch breaks, weekend trips with their families and even sleep to keep on top of positions – but would always find time to pump themselves up at the gym before heading to the testosterone-fuelled trading desk.
Haunted by the spectre of Nick Leeson, whose unapproved trading racked up the £827m losses that sank Barings Bank in 1995, investment banks have tried to keep a tight leash on their traders, but Goldman Sachs has led a trend to put more and more of the bank's own money on the line in the search for bigger profits. Nonetheless, the trio had to engage in a running battle to keep their bets from being whittled away by more conservative risk managers, and at one point in February when an angry Mr Birnbaum shouted that it was "the wrong time" to be cutting the bets, he was overruled. The decision was reversed and the bets ratcheted back up later in the year.
Their $4bn success more than mitigated other losses on mortgages, and could put the three men into an elite group of legendary traders. Their profit eclipses the $1.1bn made by George Soros when his bets against the currency pushed sterling out of the exchange rate mechanism in 1992 and the estimated $1.5bn made by the hedge fund manager John Arnold last year from the collapse of a rival fund, Amaranth.
Goldman is one of the oldest and certainly the most illustrious firms on Wall Street, with a reputation for hiring athletes and military veterans – people who do not necessarily seek the limelight, and are able to be "team players". Wall Street bloggers were yesterday sniping that the revelations about the three traders at the heart of the bank's mortgage market bets had much to do with jockeying for favour as the bonus pool is divvied up.
Goldman itself is trying to play down the scale of the risks taken by the mortgage trading desk, saying that most of the trades were designed to reduce the risk of opposite holdings elsewhere in the business. The plans were being carefully directed from above, a company spokesman said. "These guys were the pilots flying the planes." The bank has also been trying to limit the political fallout from revelations that it made giant profits from a financial crisis that could see millions of Americans forced out of their homes and plunge the rest of the economy into a recession. Chris Dodd, a candidate for the Democratic party presidential nomination and head of the Senate's banking committee, has threatened to investigate Goldman's behaviour.
Wall Street banks have been fingered as a major cause of the credit crisis because of their insatiable demand for mortgages, which they buy and repackage into a dizzying array of complex financial instruments.
Goldman's traders positioned themselves for a crash by betting against some of those instruments – even while other parts of the mortgage business spent the first half of the year creating and selling new ones to hungry investors. Meanwhile, independent mortgage brokers were pushing unsuitable loans on to low-income Americans who may not now be able to pay them back.
Mr Dodd said he was concerned because it appeared that Goldman Sachs was "aggressively pushing sub-prime mortgages that they knew to be of concern while simultaneously shorting "mortgage derivatives".
And he has turned his fire on Hank Paulson, President George Bush's Treasury Secretary, who was head of Goldman Sachs until being persuaded to join the administration last year. Mr Paulson is in the awkward position of seeing his Goldman Sachs shares rise in value while having to organise a bail-out for American homeowners who cannot afford their mortgages.
Critics argue that Goldman's aggressive bets against the mortgage market have exacerbated problems in the financial markets, which in turn has made it impossible for many struggling borrowers to refinance.
What at the start of the year had appeared to be a serious but isolated problem for over-extended American homeowners has spiralled into a global financial crisis. The world's central banks this week unveiled a $100bn package of emergency measures to try to get the markets moving again.
The mortgage derivatives created by Goldman and others have been dubbed "toxic waste" by investors, who no longer want to buy them. Wall Street banks have suffered more than $50bn in losses as a result and have dramatically scaled back their activities, causing financial markets to freeze up. Smaller banks such as Northern Rock in the UK, which relied on the markets for funding, have got into trouble and many other sorts of business are threatening to scale back investment plans, which economists fear could lead to rising unemployment.
Agony on Main Street, ecstasy on Wall Street
Dan Sparks, 40
Those who get on at Goldman Sachs are those who can leap on a fleeting opportunity – a talent that Sparks exudes in his personal life, too. He bumped into a childhood schoolfriend in the street on a shopping trip to New York, invited her for dinner that evening and is now married with two children.
The long-time bond trader was promoted to head of Goldman Sachs' mortgage business a year ago, since when he has had a little less time for weekend trips to his alma mater, the University of Texas A&M, where he and his family are obsessive supporters of the American football team and donors to the athletics department.
Michael "Swenny" Swenson, 40
With no time to break for lunch, Swenson would order the same chicken and vegetable salad from a nearby deli and eat it at the trading desk every day. Nicknamed Swenny – everyone has a nickname on a matey Wall Street trading desk – the seven-year Goldman Sachs veteran entertains colleagues with a fast, biting wit.
At Williams College, Swenson was an ace hockey player and continues to visit the gym every morning,despite having to commute from the suburbs of northern New Jersey to downtown Manhattan in time to be at the desk by 7.30am. He has four children.
Josh Birnbaum, 35
In the Hamptons, Wall Streeters' exclusive summer getaway, Birnbaum has been something of a hot property. A local magazine last summer named him as one of the area's most eligible bachelors, a "power player" and a "well-mannered Mr Right". The profile also had him down as a "brainiac", and it true that he was the technical brains behind the trio's ability to place efficient bets against what are still obscure and difficult-to-trade mortgage derivatives. Swenson and Sparks wanted him to create a computer model for trading against a new mortgage index, and he netted $1m on his first day.
The big bets that came off...
George Soros made £550m on black wednesday, 1992
Soros studied at the London School of Economics in the 1950s, forming the view that economic growth was reliant on a tolerant and market-oriented society. He put that theory into devastating practice when Britain was forced to leave the exchange rate mechanism (ERM) on 16 September 1992.
Soros realised that the pound had been overvalued against the deutschmark when it joined the ERM and borrowed vast sums of sterling to convert into deutschmarks and French francs. When the inevitable devaluation came along, he sold his position, paid back his borrowings of about £10bn and pocketed a £550m profit – earning the sobriquet "The Man Who Broke the Bank of England".
Warren Buffett made £1bn on currencies since 2002
The famously frugal investor, who still lives in the house he bought in 1958 for $31,500, has a history of successful financial gambles. In 2002 he began buying contracts to deliver US dollars against other currencies – in effect betting on the fall in value of the dollar. The move surprised fellow investors, not least because Buffett had never before made an investment based on the movements of a currency. It has paid off handsomely, netting his company an estimated $2bn in profits. Buffett also trades on his reputation. In 1998 he started buying huge quantities of silver. Investors followed his lead, raising the price and earning Buffett a handsome profit.
Paul Tudor Jones made £50m from crash of 1987
Early in 1987, a young New York trader made a documentary predicting that the world's financial markets were grossly overvalued and a dramatic crash was inevitable. When Black Monday arrived on 19 October, causing the biggest single drop in stock markets ever seen in a single day, Paul Tudor Jones was feted as a soothsayer. His advice to his clients to sell their shares earned him a $100m pay cheque. Those feeling bullish about the current economic circumstances may do well to listen to the latest predictions by Robert Prechter, who influenced Jones's 1987 forecast. Prechter said recently that stocks are overvalued beyond the level that led to the Great Depression.
...and the ones that came a cropper
John Meriwether lost £2.3bn in 1998 financial crisis
Regarded as a genius in complex trades involving government bonds, Meriwether's hedge fund, LTCM, was a star performer in the first years of its existence, regularly making returns of more than 40 per cent. But as LTCM ran out of bonds to use for its impressive returns, it began to make investments in areas outside its expertise. When stock markets fell in south-east Asia in 1997 and Russia in 1998, investors started selling the government bonds that were the bedrock of LTCM's wealth. In a single month its equity fell from $2.3bn to $600m. By 1998, the Federal Reserve organised a $3.6bn bail-out to avoid a wider collapse in the markets. Total losses eventually reached $4.6bn.
Yasuo Hamanaka lost £1.5bn on copper trades in 1996
Copper trader Hamanaka was known as "Mr Five Per cent" in reference to the proportion of the world's annual supply of the metal that he controlled. For years he was allowed to dictate his company's copper-buying strategy, but he was running two accounts – one showing healthy profits and another huge losses. The deficit came to light in 1996 when the authorities in London and New York asked his employer, Sumitomo, to cooperate with an investigation into suspected price-fixing. Panic ensued and Sumitomo was forced to admit that Hamanaka had lost $1.8bn in unauthorised trading. Eventually the losses reached $2.6bn. Hamanaka was jailed for eight years.
Nick Leeson lost £827m at Barings Bank in 1995
In 1992, Leeson's employers had good reason to value his services. After a series of speculative trades on the Singapore currency exchange, he made the company £10m – a tenth of its total profits.
Soon, Leeson's luck changed. By the end of 1994, the deficit had reached £208m and on 16 January 1995, Leeson decided to place a huge bet on the Tokyo stock exchange going up. Overnight the Kobe earthquake struck and the exchange sank.
He tried to recoup his losses by betting again but this, too, failed. Leeson fled, leaving a note saying "I'm sorry". Barings collapsed as a result of his losses, and Leeson was eventually sentenced to six and a half years in prison in Singapore.
The young guns at the investment bank Goldman Sachs – none of them over 40 years old – were unmasked yesterday, prompting a wave of adulation and envy among their colleagues, and another bout of handwringing about Wall Street's ability to make multibillion-dollar profits even as millions of ordinary people face losing their homes.
Dan Sparks and two underlings, Josh Birnbaum and Michael "Swenny" Swenson, placed what were in effect giant bets against the US mortgage market at the start of the year and watched their winnings tick higher and higher as the rising numbers of mortgage defaults spiralled into a worldwide financial crisis. Throughout the year, they battled with more cautious bosses who feared the bets were too big and too dangerous, but in part because of their success Goldman Sachs will post record profits next week. In doing so, the firm will stand alone on Wall Street, where rivals have suffered huge losses from the credit market meltdown.
The trio themselves are in line for bonuses of about $10m apiece from a record bonus pool at Goldman of about $19bn. "They are very embarrassed that their names have come out," said a company source. "Until now, nobody had heard of them, including most of the people on the floor where they work."
The Wall Street Journal, the bible of the New York finance industry, revealed yesterday how the three men would forgo lunch breaks, weekend trips with their families and even sleep to keep on top of positions – but would always find time to pump themselves up at the gym before heading to the testosterone-fuelled trading desk.
Haunted by the spectre of Nick Leeson, whose unapproved trading racked up the £827m losses that sank Barings Bank in 1995, investment banks have tried to keep a tight leash on their traders, but Goldman Sachs has led a trend to put more and more of the bank's own money on the line in the search for bigger profits. Nonetheless, the trio had to engage in a running battle to keep their bets from being whittled away by more conservative risk managers, and at one point in February when an angry Mr Birnbaum shouted that it was "the wrong time" to be cutting the bets, he was overruled. The decision was reversed and the bets ratcheted back up later in the year.
Their $4bn success more than mitigated other losses on mortgages, and could put the three men into an elite group of legendary traders. Their profit eclipses the $1.1bn made by George Soros when his bets against the currency pushed sterling out of the exchange rate mechanism in 1992 and the estimated $1.5bn made by the hedge fund manager John Arnold last year from the collapse of a rival fund, Amaranth.
Goldman is one of the oldest and certainly the most illustrious firms on Wall Street, with a reputation for hiring athletes and military veterans – people who do not necessarily seek the limelight, and are able to be "team players". Wall Street bloggers were yesterday sniping that the revelations about the three traders at the heart of the bank's mortgage market bets had much to do with jockeying for favour as the bonus pool is divvied up.
Goldman itself is trying to play down the scale of the risks taken by the mortgage trading desk, saying that most of the trades were designed to reduce the risk of opposite holdings elsewhere in the business. The plans were being carefully directed from above, a company spokesman said. "These guys were the pilots flying the planes." The bank has also been trying to limit the political fallout from revelations that it made giant profits from a financial crisis that could see millions of Americans forced out of their homes and plunge the rest of the economy into a recession. Chris Dodd, a candidate for the Democratic party presidential nomination and head of the Senate's banking committee, has threatened to investigate Goldman's behaviour.
Wall Street banks have been fingered as a major cause of the credit crisis because of their insatiable demand for mortgages, which they buy and repackage into a dizzying array of complex financial instruments.
Goldman's traders positioned themselves for a crash by betting against some of those instruments – even while other parts of the mortgage business spent the first half of the year creating and selling new ones to hungry investors. Meanwhile, independent mortgage brokers were pushing unsuitable loans on to low-income Americans who may not now be able to pay them back.
Mr Dodd said he was concerned because it appeared that Goldman Sachs was "aggressively pushing sub-prime mortgages that they knew to be of concern while simultaneously shorting "mortgage derivatives".
And he has turned his fire on Hank Paulson, President George Bush's Treasury Secretary, who was head of Goldman Sachs until being persuaded to join the administration last year. Mr Paulson is in the awkward position of seeing his Goldman Sachs shares rise in value while having to organise a bail-out for American homeowners who cannot afford their mortgages.
Critics argue that Goldman's aggressive bets against the mortgage market have exacerbated problems in the financial markets, which in turn has made it impossible for many struggling borrowers to refinance.
What at the start of the year had appeared to be a serious but isolated problem for over-extended American homeowners has spiralled into a global financial crisis. The world's central banks this week unveiled a $100bn package of emergency measures to try to get the markets moving again.
The mortgage derivatives created by Goldman and others have been dubbed "toxic waste" by investors, who no longer want to buy them. Wall Street banks have suffered more than $50bn in losses as a result and have dramatically scaled back their activities, causing financial markets to freeze up. Smaller banks such as Northern Rock in the UK, which relied on the markets for funding, have got into trouble and many other sorts of business are threatening to scale back investment plans, which economists fear could lead to rising unemployment.
Agony on Main Street, ecstasy on Wall Street
Dan Sparks, 40
Those who get on at Goldman Sachs are those who can leap on a fleeting opportunity – a talent that Sparks exudes in his personal life, too. He bumped into a childhood schoolfriend in the street on a shopping trip to New York, invited her for dinner that evening and is now married with two children.
The long-time bond trader was promoted to head of Goldman Sachs' mortgage business a year ago, since when he has had a little less time for weekend trips to his alma mater, the University of Texas A&M, where he and his family are obsessive supporters of the American football team and donors to the athletics department.
Michael "Swenny" Swenson, 40
With no time to break for lunch, Swenson would order the same chicken and vegetable salad from a nearby deli and eat it at the trading desk every day. Nicknamed Swenny – everyone has a nickname on a matey Wall Street trading desk – the seven-year Goldman Sachs veteran entertains colleagues with a fast, biting wit.
At Williams College, Swenson was an ace hockey player and continues to visit the gym every morning,despite having to commute from the suburbs of northern New Jersey to downtown Manhattan in time to be at the desk by 7.30am. He has four children.
Josh Birnbaum, 35
In the Hamptons, Wall Streeters' exclusive summer getaway, Birnbaum has been something of a hot property. A local magazine last summer named him as one of the area's most eligible bachelors, a "power player" and a "well-mannered Mr Right". The profile also had him down as a "brainiac", and it true that he was the technical brains behind the trio's ability to place efficient bets against what are still obscure and difficult-to-trade mortgage derivatives. Swenson and Sparks wanted him to create a computer model for trading against a new mortgage index, and he netted $1m on his first day.
The big bets that came off...
George Soros made £550m on black wednesday, 1992
Soros studied at the London School of Economics in the 1950s, forming the view that economic growth was reliant on a tolerant and market-oriented society. He put that theory into devastating practice when Britain was forced to leave the exchange rate mechanism (ERM) on 16 September 1992.
Soros realised that the pound had been overvalued against the deutschmark when it joined the ERM and borrowed vast sums of sterling to convert into deutschmarks and French francs. When the inevitable devaluation came along, he sold his position, paid back his borrowings of about £10bn and pocketed a £550m profit – earning the sobriquet "The Man Who Broke the Bank of England".
Warren Buffett made £1bn on currencies since 2002
The famously frugal investor, who still lives in the house he bought in 1958 for $31,500, has a history of successful financial gambles. In 2002 he began buying contracts to deliver US dollars against other currencies – in effect betting on the fall in value of the dollar. The move surprised fellow investors, not least because Buffett had never before made an investment based on the movements of a currency. It has paid off handsomely, netting his company an estimated $2bn in profits. Buffett also trades on his reputation. In 1998 he started buying huge quantities of silver. Investors followed his lead, raising the price and earning Buffett a handsome profit.
Paul Tudor Jones made £50m from crash of 1987
Early in 1987, a young New York trader made a documentary predicting that the world's financial markets were grossly overvalued and a dramatic crash was inevitable. When Black Monday arrived on 19 October, causing the biggest single drop in stock markets ever seen in a single day, Paul Tudor Jones was feted as a soothsayer. His advice to his clients to sell their shares earned him a $100m pay cheque. Those feeling bullish about the current economic circumstances may do well to listen to the latest predictions by Robert Prechter, who influenced Jones's 1987 forecast. Prechter said recently that stocks are overvalued beyond the level that led to the Great Depression.
...and the ones that came a cropper
John Meriwether lost £2.3bn in 1998 financial crisis
Regarded as a genius in complex trades involving government bonds, Meriwether's hedge fund, LTCM, was a star performer in the first years of its existence, regularly making returns of more than 40 per cent. But as LTCM ran out of bonds to use for its impressive returns, it began to make investments in areas outside its expertise. When stock markets fell in south-east Asia in 1997 and Russia in 1998, investors started selling the government bonds that were the bedrock of LTCM's wealth. In a single month its equity fell from $2.3bn to $600m. By 1998, the Federal Reserve organised a $3.6bn bail-out to avoid a wider collapse in the markets. Total losses eventually reached $4.6bn.
Yasuo Hamanaka lost £1.5bn on copper trades in 1996
Copper trader Hamanaka was known as "Mr Five Per cent" in reference to the proportion of the world's annual supply of the metal that he controlled. For years he was allowed to dictate his company's copper-buying strategy, but he was running two accounts – one showing healthy profits and another huge losses. The deficit came to light in 1996 when the authorities in London and New York asked his employer, Sumitomo, to cooperate with an investigation into suspected price-fixing. Panic ensued and Sumitomo was forced to admit that Hamanaka had lost $1.8bn in unauthorised trading. Eventually the losses reached $2.6bn. Hamanaka was jailed for eight years.
Nick Leeson lost £827m at Barings Bank in 1995
In 1992, Leeson's employers had good reason to value his services. After a series of speculative trades on the Singapore currency exchange, he made the company £10m – a tenth of its total profits.
Soon, Leeson's luck changed. By the end of 1994, the deficit had reached £208m and on 16 January 1995, Leeson decided to place a huge bet on the Tokyo stock exchange going up. Overnight the Kobe earthquake struck and the exchange sank.
He tried to recoup his losses by betting again but this, too, failed. Leeson fled, leaving a note saying "I'm sorry". Barings collapsed as a result of his losses, and Leeson was eventually sentenced to six and a half years in prison in Singapore.
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Friday 14 December 2007
This just isn't cricket
The Australian proposal for day-night Tests has revealed a reactionary in this former radical
Mark Lawson
Friday December 14, 2007
The Guardian
English traditionalists, already appalled by the signing of the EU treaty in Portugal, yesterday faced another assault on their ancient way of life. The Australian cricket authorities confirmed that they are considering the possibility of introducing day-night Test matches.
Readers who would be happy if the sport of cricket were burned and the ashes transported to Australia should not turn over now, because the point of this story is - to borrow an ancient phrase - not cricket, or at least not just cricket. In the reaction to the Australian proposal, we see the classic shape of any standoff between conservatives and reformers: whether the practice facing change is the gender of clerics, the appropriate clothes to be worn in restaurants or the way in which foxes should die.
And what's strange for me is the side I'm on. So naturally drawn to modernism that my teachers had to force me to read books written before 1922, I would have voted for change in most controversies over alteration. But on this one my immediate instinct - as strong as Richard Littlejohn's on Europe - was that Test matches should commence just before elevenses and finish just before dinner.
Briefly to explain the debate to the uninitiated: Tests - known to the over-30s as "proper cricket" - are played across five eight-hour stretches of daylight, with the game suspended when dusk descends. One-day games have recently become "day-night", starting in the afternoon and concluding under floodlights, and the Aussies propose extending this to proper cricket. The horror of those opposed is increased by the fear that the meddling won't stop with the clock. Once artificial lighting is introduced, two other long traditions of Test matches - white clothing and red balls - will likely be replaced by lurid colour and white respectively.
The problem is that, for many who watch cricket, there is a visceral pleasure in the dew on the grass at the start and the sun falling behind the stands at the end. This arrangement has a natural rhythm to it. Many cricket-loving writers - Samuel Beckett, Harold Pinter, Simon Gray, John Arlott - have employed the late afternoon of a cricket match as some kind of metaphor for life: the fading of the light at close of play becoming an image of lost time. The only available equivalent in day-night games - switching the generator off - lacks the same poignancy, expect perhaps for poems about euthanasia.
Another source of grumpiness is that, as often in modern sport, the motivation to change is driven by the needs of television. Already, in British football, fans have been forced to endure long journeys home on a Sunday night because tea time on what used to be the Lord's day is the slot in which telly executives wanted matches to happen.
In cricket, Tests which started in the Australian afternoon would not only move half of their days into evening peak-time, when audiences and advertising rates are larger, but, when the opponents were England or South Africa, live overseas coverage would no longer be screened during the night but could attract perkier and more plentiful breakfast-time viewers.
But opposition to later beginnings for cricket matches goes beyond the football fan's complaint of inconvenience, because light and air are fundamental to the way in which the ball moves, and is seen in a way that does not apply in the winter game.
Another argument against the Australian proposal which is not just reflex traditionalism is that cricket, more than perhaps any other sport apart from baseball, depends on the comparison of present and past performances, so that modern players are measured against Bradman or Sobers. Even now, parallels cannot be exact - for instance, the rules on preparation and protection of pitches have changed - but there is still the baseline that players separated by generations batted and bowled across the same slice of the clockface.
Once a century, or a five-wicket haul, start being given the qualification "made under lights", then the game's great tradition of statistical pedantry, which is one of the things sustaining cricket-lovers as they age, begins to collapse.
And so I am now a reactionary. I keep telling myself, of course, that not all defences of the status quo are the same. Many of those who argued against female priests were misogynists, some foxhunters are psychotic snobs, and the opponents to European Union include racists. Those other debates between conservatives and liberals also touch on issues of economics and cruelty which have no equivalent in an argument over when games of cricket should start.
Even so, suffering this small experience of seeing something that has been an important part of my life exposed to meddling for reasons which seem dubious and ill thought-through has created the new experience of being on the side of the ancients against the moderns, and has given me a new tolerance for the misery and impotence of that position. I'm sorry, but it just isn't cricket.
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Thursday 13 December 2007
Rs 1,000 Crore? A River Is Yours
Maharashtra's water resources minister finds an ingenious way to raise the Rs 1,000 crore he doesn't have: put a river under the hammer
SAIKAT DATTA The River Of Profit... And Loss
Maharashtra government's justification:
- It doesn't have funds to complete construction of the Deogarh dam on the Nira.
- The government has no option but to invite bids to sell the river and dam for Rs 1,000 crore.
- The state will ensure that the private player provides water at reasonable prices.
- Private company will levy high water rates to recover Rs 1,000 crore, will cut off local communities from the river
- Activists fear that it will divert water from irrigation to industry.
- Only rich farmers will be able to afford water.
- Tourism and water sports offered as an incentive could lead to less availability of water.
***
Maharashtra's minister for water resources, Ramraje Naik-Nimbalkar,is a busy man. After all, it requires considerable ingenuity and a lot of paperwork to try and sell a 208-km stretch of a major river—the Nira—and the Deogarh dam on it to the highest private bidder. The river up for sale runs through the districts of Pune and Satara and is likely to have a command area that could also feed Solapur and Sangli. This is Naik-Nimbalkar's novel plan to generate the Rs 1,000 crore—the minimum price for the river—the state does not have to complete the Nira-Deogarh project, envisaged in 1984 to irrigate farmland. It will be the first major privatisation of a river and a dam in the country where the private player can manage the river and supply water for irrigation and domestic use for profit on a bot (build, operate, transfer) basis.***
The private player will invest
Rs 1,000 crore, finish the dam,
build canals. In return, he'll
control the river.
***
To set the process rolling, the Maharashtra Krishna Valley Development Corporation (MKVDC), which currently controls the river and is under Naik-Nimbalkar, issued an Expression of Interest (EoI). Cleverly worded, the EoI kept the "experience" of the companies which could bid open to generous interpretation—companies just needed to have worked on projects of a "similar magnitude". That means any player who has handled a Rs 1,000-crore project in any area eligible to bid for Nira.On November 17, five companies—Ashoka Buildcon, IVRCL Infrastructure Projects, IL&FS, Shinde Developers, Indian Hume Pipes Company—responded to the EoI. All have either little or no experience in managing a river or building and operating an irrigation project as envisaged in the Nira-Deogarh EoI. Worse, some have never been even remotely involved in any water projects!
***
"Water is a people's basic right,"
says a water activist. "How can
the state let anyone profit from it?"
***
Nira may not be the first river to be put on sale. Chhattisgarh's privatisation of the Sheonath river raised hackles in 2002. The proposed privatisation of the Nira-Deogarh project, however, beats it in sheer magnitude. At stake is nearly 208 km of the Right Bank Canal and 21 km of the Left Bank Canal of the project that will irrigate nearly 43,000 hectares of land. The Chhattisgarh government in contrast offered only 23 km of the Sheonath river.The private player's role too was restricted to supplying water to the Borai industrial area. The sale of the Nira-Deogarh project, on the other hand, is all about supplying water for irrigation. Simply put, the private player will invest money and complete the construction of the remaining 5 per cent of the Deogarh dam, build 164 km of canals and put in place the entire water distribution network.In return, he will have complete control over the river, the dam and its water.
While there are crucial ethical issues involved when privatising something as basic as a water resource, the mismanagement of the Nira-Deogarh project by the Maharashtra government is shocking every which way. To cite a few instances:
- Originally envisaged as a Rs 62-crore project, so far, nearly Rs 450 crore has been spent on it: Rs 196 crore in building 95 per cent of the dam, Rs 93.63 crore on canals, Rs 87 crore on acquiring land, Rs 21 crore on rehabilitation, and Rs 50 crore went on what's lumped as "other" expenses.
- In 2000-01, the MKVDC estimated it required another Rs 910 crore to complete the project. Last week, Naik-Nimbalkar told Outlook that another Rs 1,000 crore has to be pumped in to complete the project. That is the least amount that the private company which wins the tender for the project will have to shell out.
- Anyone who invests Rs 1,000 crore will have to recover the money as well as generate profits. Interest rates paid for loans taken to raise funds for the project will also have to be factored in.
- By all accounts, it will take the private player several decades to recover the investment.
Naik-Nimbalkar is clear that MKVDC is in no position to raise the Rs 1,000 crore, and hence the move to privatise the river. Ask him what the farmers will have to pay for their water and he says the Maharashtra water regulatory authority will ensure the prices are "reasonable". But water charges, though critical, are not the only issue here.
The EoI also promises the private company a "reasonable rate of return" via contract farming through land owners. Obviously farmers, who were kept in the dark while the EoI was issued, are up in arms. Says Dilip Ghadge, an onion and sugarcane farmer in the Lonand taluka in Satara district: "What all this means is that the large companies will come and sit on our land while we are driven out. It will be the last nail in our coffin."
Satara-based advocate and water rights activist since 1980, Balasaheb Bangwan, is shocked at the proposed privatisation. "This is a drought-prone area where we have already had a major drought from 2003-2005. The privatisation of the river will break the farmer's back. How can a private company own the whole distribution network of the dam?" he asks.
Besides the economic devastation that this privatisation is likely to cause, there are the social and ethical dimensions that the government has chosen to ignore. "Water is a basic and fundamental right and it is the state's social obligation that everyone has access to it. How can you allow anyone to profit from it," asks Shripad Dharamadhikary of Manthan Adhyayan Kendra, and a water activist for nearly 20 years. "It also speaks volumes about the government's priorities since it doesn't want to spend money on irrigation," he says.
Dr Bharat Patankar, who built up the equitable water distribution movement Saman Pani Watap Chalwal over several decades in southwestern Maharashtra, is shocked at the government's move. He has already written to the prime minister.Ramaswamy Iyer, a former Union water secretary and an acknowledged water expert and author, has stated in unequivocal terms that water cannot be treated as a marketable commodity.
In his book Towards Water Wisdom, Iyer states that "it is doubtful if a life-right or even a use-right can be converted into a tradeable property right". According to him, "the economic rights of some must not be allowed to endanger the fundamental rights of others". As for making profits from water, he points out that "the principle of full cost recovery is applicable to economic uses but not to water as a basic life-support".
So, why is Naik-Nimbalkar pushing for the privatisation of the Nira-Deohar project? "I am from the area (Phaltan), so I know the needs of the people," he claims. "They need water," he told Outlook over the phone. Point taken, but water at what cost? He also says that he is simply implementing the government's policy of privatising water, issued vide a government ordinance dated July 15, 2003 (GR No. BOT/702 (425/2002)/MP-1).
Many water activists, however, say the real culprit is the World Bank. They allege it is the $325 million loan to Maharashtra for "improvements" in the water sector which is behind the proposed privatisation of the Nira. Strangely enough, a project appraisal report (No. 31997-IN) for sanctioning the loan is a "restricted document" which can only be accessed by those in the government in the course of "official duties". As a result no one knows the other plans drawn up by the World Bank for Maharashtra. So much for transparency.
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