Monday 28 February 2011

Man's best friend lives the good life in China.

Money changes everything, sometimes in the most unexpected ways.

With wealth and the rise of a prosperous middle-class in China, the dog has come into its own. 

The dog loving community is on show everywhere, and its beloved pooches will be decked out in jackets, and smart cravats, with bows in their hair and bells on their toes - well, on their feet,  anyway. 
                                                                   
(AFP in Daily Telegraph)
Sad, you think? Think again. Think Money.

That's just what 34 year old Tang Yang thought, when he realised his girlfriend was spending approx. £45 a month feeding her pet rabbit.

He dreamed of a sort of Facebook for pets. And so www.goumin.com (loosely translated as dogpeople.com) was born.

Now, seven years on, Mr Tang already has 530,000 pet owners registered on his site, with 600 joining every day. He reckons he will have no trouble raising the $10m (£6.2m) to fund his expansion plans, with a possible public listing in a few years.

It's estimated that pet owners spend somewhere around $2 million a years on their pets.

It's the same old story. Find what lots of people like and, regardless of what you think about their choices, you'll find that's where money is to be made.

However, with wealth come the problems of over supply and flooding of the market.  So much so that a new law has had to be rushed through. From May 15, only one dog per houseshold will be permitted. However, people who already have two or more licensed doggies can keep them.

But from May 15th puppies must be given to eligible no-dog households or government-approved agencies, before the pups are 3 months old.

Rather sensible really. It's all apart of the regulations concerning the environment, in regard to unscooped waste and sanitation rules.
So doggies like this buddle of fluffy fur with panda eyes, will have to be as well trained and well behaved as their middleclass owners the world over.  (photo courtesy of Daily Telegraph, AP).

Yes, it's a dog's life in China these day.

Monday 21 February 2011

Foolish dictators and clever bankers

On the L. The Channel Islands

I do wonder sometimes about the commonsense of the rich.  I'm not concerned with morality, too much hypocrisy hovers around that concept. But I am surprised at the lack of  foresight that so often brings disaster down upon the heads  of those leaders we are seeing tumbling from power at the moment.

Take Mubarak.  Some people have thrown around ridiculous figures suggesting his wealth is of the order of 70billion pounds. But even if he had only a paltry l or 2 billion pounds, I question the wisdom of how he handled it. Because the way he handled  it  made him very unpopular, and now he's lost the lot.

It seems such an unnecessary disaster to have brought upon himself.  Over the years he has been in power in Egypt,  commonsense should have told him that  if he donated a portion of his large private fortune to his country -  perhaps set up an efficient health service, or revamped the economy so it provided more jobs for more people -  he would still be left with loads of money, plus, in his position,  the endless capacity to make more. And by putting some of his gains back into the public pot he might  have been loved by his countrymen and ended up dying a great and admired leader. 
As it is, he has ended up with nothing, with all his funds frozen by some Swiss bank, and everyone hating his guts.

The same has happened to the Tunisian top man, Zine El Abidine Ben Ali, who has taken refuge in Saudi. The Ivory Coast President, Laurent Gbagbo, (disputed since a controversial election decision) has also had his assets frozen by the Swiss. 

You'd think that when the first fallen dictator had his assets frozen, the others would move pdq to get their money out of the hands of the Swiss banks whilst they were still in power. But they don't seem to learn that they can't rely on the Swiss Banks when trouble hits. A bit slow on the uptake, you could say.

 In a previous post I spoke about the increasing gap between the rich and the rest of the world - and the fact that history shows that gap is dangerous and ultimately ends in trouble, and often in revolution. In many parts of the world, we're now seeing that happen.  Yet, if the rulers in each case had not been so greedy, and had distributed a portion of their great wealth to ensure the wellbeing of their citizens, the end result would be good karma  for them and they'd still be as rich as Croesus anyway. Why is it some of the rich rulers don't see this?

With corporations it's a very different story.  A ruler's first job should be to run his country well, and look after its citizens in a civilised way. A corporation is different. It is a business.  And when it's a bank, its purpose is to make money and safeguard the money of its depositors and its shareholders.

Take Barclays, for instance.  A likely bunch of lads, much in the news this week.

Barclays made £11.6 billion in 2009.  Astonishingly, the total tax it paid on this in the UK was only about £113 million. 
This has obviously outraged a lot of people.  Naturally. Especially as the UK desperately needs all the tax revenue it can get.

Let's try and untangle some of what's going down here with Barclays. This is as I see it.

Of the overall total tax bill Barclays paid of £1.3billion, £200 million or so related to the sale of Barclays Global Investors' (BGI) - (and the large profit involved in that sale is due to the hugely generous rules on capital gains by corporates introduced by Gordon Brown, a great friend of powerful corporations.  Did you think it was only Tony Blair  who liked the rich?  Check again,  Brown cosied up to the rich, too. ) -  and the rest to ordinary activities.

In June 2009, BlackRock agreed to acquire Barclays Global Investors (BGI) from Barclays for about £13.5 billion - this was reported to be one of the largest deals in the money managment industry.
Under the terms of the deal for BGI,  Barclays received $6.6bn in cash and a 19.9pc stake in BlackRock, worth $6.9bn.

The deal was also said to produce a windfall of about £607.5m for 200 of the most senior staff at BGI, including the truly dazzling Bob Diamond, the president of Barclays, who was said to receive approx. $30m,  and joins the Black Rock board. (And who is rumoured to be in line for a £9m bonus from Barclays).

In 2008, if you remember, unlike several other major banks Barclays resisted taking a bail-out from the Government as crisis swept the through the system, so this injection of cash  strengthened Barclays' capital position, and its financial position was given a green light from the Financial Services Authority.

 The current rate of corporation tax in the UK is 28% but Barclays only pays 23%  -  good tax planning, that. Global banks like Barclays, which has hundreds of overseas subsidiaries, including many in tax havens,  do not generate all of their profits in their domestic market.

Barclays biggest commercial loan book is in the US, but its biggest retail operation is in the UK. Around 78% of its profits come from Barclays Capital, believed to be largely located in London and New York.  Yet only 10% of Barclays worldwide corporate tax is paid in the UK.

This seems to be because Barclays,  a UK bank , is able to offset all its head office costs and all its losses on Barclays Corporate (and there may be losses in Europe, too) into the UK to offset what profits it does make here, so paying a astonishingly low amount of tax in its home country, the UK. 

Barclays says:
"The corporate tax affairs of an organisation with the global footprint of Barclays are complex and not reducible to simplistic comparisons.  Any link between Barclays Group profits and the amount of tax paid to the UK government is inappropriate - there is no direct correlation between the two." 
The Cayman Islands

A disingenuous reply, of course. As though having 30 subsidiaries in the Isle of Man, 38 in Jersey and 181 in the Cayman Islands,  is unconnected with tax? It is connected with tax, but nothing of what Barclays has done is illegal.  They are a business operation and their job is to maximise their profits, not to help bail out the UK.

On the other hand, the job of the UK government is to protect the interests of its citizens and get the economy back on track as soon as possible.  So the fact that income tax which might have been paid into the Treasury coffers, thus helping  to ease the present financial climate,  has been diverted to lower-tax territory,  creates an awkward situation.

 I am in favour of tax havens. Often, my hard earned money is taxed and used incompetently, and wasted by the Government, or spent on projects with which I do not agree, and to which I do not willingly contribute.   However, I also strongly believe in the tax system, to fund education, health care, the police for instance, and I would always pay what I am legally bound to pay.  But if I were wealthy and had a lot of money left over, having done my duty by the Inland Revenue I would certainly move that money out of the reach of the Government and put it somewhere safe, in a low taxed territory. And then,  I would have more of my money to devote to causes in which I passionately believed, and where I could see for myself that the money was
being spent efficiently and doing good.

Tax avoidance, in other words intelligent tax planning, is perfectly legal according to the law of the land. Of course, when the rich, and huge corporations like Barclays, do just that, the Government loses much needed tax revenue.  But after all, it's the Government that makes the law of the land and the Government needs to encourage the rich to come to the UK because it's profitable for the country.

It is a balancing act for the politicians and the economists  and in times of prosperity the system works well. It's only in times of trouble, like the present, when the gap between the rich and the rest of the population becomes too obvious and too large, that resentment begins to build up.

And that has the potential to lead to trouble.

Friday 11 February 2011

The Rich Really Are Different - And You'd Better Believe It

If you were rich, you could buy this apartment on 5th Avenue in New York.


or you could gaze out on Central Park from the balcony of this apartment below which used to belong to Madoff - before he was caught, of course.



So let's talk about being rich and what it means in the year 2011.

London is still the 24 hour centre of the global financial world. It is big in stocks and shares, but it's the intangible, the international that it specialises in. And it's the international bit that we're concentrating on in this post.
1.7 trillion dollars of currency passes through London's trading Rooms every day,
2/5th of the global market
70% of eurobond business is done in London
The City contributes 10% GDP to the UK economy.
In the City, good old London still rocks!


Alan Greenspan was, from 1987 - 2006, the legendary chairman of the United States Federal Reserve, in other words he was head of the central banking system of the United States of America, one of the most influential men in the world, and the high priest of free market capitalism.

Discussing our present economic situation, Greenspan says, "Our problem basically is that we have a very distorted economy, in the sense that there has been a significant recovery in our limited area of the economy amongst high-income individuals...
"Large banks, are doing much better and large corporations are in excellent shape. But the rest of the economy, small business, small banks, and a very significant amount of the labour force, which is in tragic unemployment, long-term unemployment - are pulling the economy apart. They are fundamentally two separate types of economies."

And he is right.

Two huge trends have developed over the past 30 years that have seriously reshaped the world's economy.

One is a surge in the size and connectedness of international markets, which has created a burst of global prosperity that has lifted hundreds of millions out of absolute poverty and into the middle class, particularly in the rising Asian power-houses of China and India.

But the second trend, even as the global economy has grown overall, is that within countries the gap between rich and poor has increased. For example: In the US, between 2002 and 2007, 65% of all income growth went to the top 1% of the population. And the divide has not only opened up in the US and European countries, the gap has developed in the booming emerging markets, too. The gap between rich and poor in Communist China is as big as that of the USA.

On one side you have the super-rich.
On the other side? Everybody else.

This dramatic split has been named 'the plutonomy' - it describes a society where the majority of wealth is controlled and consumed by an ever-shrinking minority of the very very rich.

So obviously, the economic growth of that society becomes dependent on the fortunes of that very very rich group.

And that rich group are different to the rich of previous years.
For the most part, today's rich are not a leisured, landed gentry of inherited wealth.
Emmanuel Saez, an award winning economist who is one of the premier students of the super-elite, has found that in 1916, the richest 1% of Americans received only one-fifth of their income from paid work. In 2004, that figure had tripled, to 60%.

Many of today's plutocrats are the beneficiaries of globalisation. And even those who made their money at home have figured out that to make more they need to embrace the global economy.

As a result, there is a growing trans-global community of peers who have more in common with one another than with their countrymen back home.
They belong to no country. They acknowledge no borders.
Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves. They have, in fact, created their own virtual country.

 If you lived in the country of the rich you, too, could watch TV in your deliciously modern  (and rather) macho dream of a pent house in Moscow, in the wonderful Triumph building, designed by Geometrix, complete with Russian bear bearing down on you from the ceiling.  And you could sip your vodka in the early evening while viewing Moscow from your balcony.  (courtesy of Adelto)



One of the places where that virtual country meets up is in Davos, Switzerland, at the annual meeting of the World Economic Forum (WEF), the premier convener of the global super-elite. But there even the very very rich are getting worried that income inequality has grown to extremes.

The Forum's Global Risks report for this year's conference reports that "Economic disparity and global governance failures both influence the evolution of many other global risks and inhibit our capacity to respond effectively to them"

So the global risk context in 2011 is defined by a 21 Century paradox: as the world grows together, it is also growing apart.

And here we have the dilemma.

In today's hyper competitive global economy we need our super rich and the innovative companies they create more than ever. But they need us too - as consumers, as employees, as fellow citizens.

But here is the lesson of history. In the long run super elites can only survive in one of two ways - by suppressing dissent, or by sharing the wealth.

Seems it pays sometimes to be generous and share a little of your billions.

(many thanks to Paul Mason and Chrystra Freeland).



Sunday 6 February 2011

Julian Assange in court Monday


Tomorrow, 7 February, Julian Assange, the face (and heart) of Wikileaks, faces a court hearing to fight extradition to Sweden concerning sex assault claims made against him by two Swedish women.  The hearing is expected to take two days. There is suspicion that the accusations by the women are politically motivated.  The judge is expected to defer the decision.  If the ruling goes against Assange, he will appeal the decision all the way up to the supreme court.

Sofia Wilen and Anna Ardin
(Photos courtesy of Whyfame.com posted Dec 8 2010, but a number of sites have photos of the two women.  One site has also posted their addresses and phone numbers.)

Assange himself fears being eventually handed over the USA, where he feels he would not get a fair hearing and could face the death penalty for violation of the Espionage Act of 1917.  Because of the current extradition proceedings between Sweden and Britain, handing him over to a third country would require approval from both countries, says Nils Rekke, legal chief at the Stockholm prosecutor's office. Rekke notes that Britain is a closer ally to the United States.


According to the Swedish Justice Ministry, since 2000, the U.S. has requested the extradition of seven citizens from Sweden. Five of the requests were approved, and two were rejected because the suspects were no longer believed to be in Sweden.

Britain and the U.S. signed a fast-track extradition treaty in 2003 intended to speed the transfer of terror suspects. Since it came into force in April 2007, 23 people have been extradited from the U.K. to the U.S., according to British government figures. Extradition lawyer Karen Todner said Assange would probably stand a better chance of resisting extradition to the U.S. if he were in Sweden than if he were in the U.K.

Some questions arise as to whether the Swedish government has been influenced by pressure from the US to seek Assange's detention. However, most Swedish legal experts agree prosecutors would never accept orders from politicians, which is illegal.  But supporters of Asange note that Sweden has responded to US pressure before, including in the crackdown on file-sharing site The Pirate Bay, and the secret rendition of two Egyptian terror suspects.

Friday 4 February 2011

GOLD IS STILL KING

Leaving aside for moment the subject of power and power plays, as in Egypt and Wikileaks, let's talk about the other great subject, wealth.
We saw in Tunisia that when a leader/dictator falls, or runs into trouble, the first thing they do is to ship gold out of the country - and rumour says that Mubarak's family has already shipped tons of gold to the Netherlands.

In time of civil breakdown and real trouble, gold is still king.

Maybe the psychologically flawed and incompetent UK ex Chancellor, Gordon Brown, forgot that, when between 1999 and 2102, in 17 auctions,  Brown as Chancellor of the Exchequer, sanctioned the sale of 395 tonnes of gold, 60% of the UK gold reserves, just before a protracted bull market.  In other words, at the bottom of the market, at the lowest possible price, announcing in advance that he was going to do so, thus ensuring a loss to the country of 2 billion pounds.

Critics say that signalling such a large sale of bullion to gold traders, the Government helped to drive the precious metal to a 20-year low.

Philip Hammond, shadow secretary to the Treasury, said: "Gold traders confirm that it was because the Government announced in advance that it was planning to sell such a large quantity of gold that the markets became depressed. The low price Gordon Brown got for selling our gold wasn't caused by bad luck. It was a staggering display of economic incompetence that has landed taxpayers with a $7 billion black hole."

Figures released by the Treasury since show that the total proceeds from the sales was around $3.5billion. According to a Parliamentary answer, if the gold was sold last month, on December 15, it would have raised $10.5billion.

The difference - $7billion - would be worth £4.7billion if the proceeds were converted into pounds yesterday.

Returning to the present, the price of gold reached an all-time high of $1432 per ounce in December,  rising 29% in 2010 following uncertainty in the equity markets and European sovereign debt problems.

The biggest individual holders of gold - Central banks, International entities and governments - are believed to account for approximately 16.5 percent of the world's gold, holding about 29,978 tons.

So out of interest, let's look at the chart telling us which countries hold the most gold. Here's the top 15. Guess who is at No 1? Yes, you're right.



gold bar and roulette wheel
 
1. USA

Value: $387.32 billion dollars

Tons: 8,965.6

2 GERMANY

Value: $161.99 billion dollars

Tons: 3.749.8

3. IMF

Value: $135.56 billion dollars

Tons: 3,137.9


4 ITALY

Value: $116.75 billion dollars

Tons: 2,702.6

5. FRANCE

Value: $115.97 billion dollars

Tons: 2,684.6

6. CHINA

Value: £$50.90 billion dollars

Tons: 1,161.9

7 SWITZERLAND

Value: $49.53 billion dollars

Tons: 1,146.5

8. RUSSIA


Value: $36.91 billion dollars

Tons: 854.5

9 JAPAN

Value: 36.43 billion dollars

Tons: 843.5

10 NETHERLANDS

Value: $29.67 billion dollars.

Tons: 675.2

11. INDIA

Value: $26.56 billion dollars

Tons: 614.8

12. EUROPEAN CENTRAL BANK

Value: $23.88 billion dollars

Tons: 522.7

13. TAIWAN

Value: $20.17 billion dollars

Tons: 466.9

14 PORTUGAL


Value: $18.21 billion dollars

Tons: 421.6

15 VENEZUELA

Value: $17.33 billion dollars

Tons: 401.1

However, I have heard it said that gold is the most secretive of all markets, so all published statistics from whatever the source may be open to question!
(Photos courtesy of fotosearch.com).

BEHIND THE KILL SWITCH

Returning to my post on the switch-off of the Internet in Egypt on the first day of the current protests, Laura Flanders blogged an interesting piece in The Nation a couple of days ago, on the Social Media Off-Switch.

A US-based company seems to be the maker of the Internet off-switch. Tim Karr of Free Press notes the US company Narus, sited in California,  was founded in 1997 by Israeli security experts.

(Free Press is a liberal non-profit reform group who are, in their own words, "working to make media reform a bona fide political issue in America. Powerful telecommunications, cable and broadcasting companies have plenty of lobbyists to do their bidding. We're making sure the public has a seat at the table, and we're building a movement to make sure the media serve the public interest.")

As the lobbyists put it: “Narus is the leader in real-time traffic intelligence for the protection and management of large IP networks…. Used by the world’s service providers and governments, Narus has developed and patented state-of-the art algorithms to detect network anomalies and manage unwanted IP traffic. Additionally, Narus has the unique ability to precision target and fully reconstruct all types of IP traffic, including e-mail, Web mail and instant messages.”

Egypt Telecom, the state-owned communications company, are a client of Narus. Others include Pakistan and Saudi Arabia. During Iran’s protests in 2009, dissidents were tracked, imprisoned and in some cases executed by the use of what seems to have been similar technology.

Narus is owned by Boeing, the nominally US-based company that has outsourced jobs all over the world—and the US State Department has been promoting them. So I guess the US has also bought this tool for themselves - though it's obvious that any country would find this an extremely useful tool to have in times of trouble.