Sovereign Wealth Fund Makes Threats

Head of Dubai World threatens to take his money out of Europe
By David Prosser, Deputy Business EditorSaturday, 1 March 2008
The boss of Dubai World, the powerful sovereign wealth fund, has issued a thinly veiled warning to critics of the $2.5trn (£1.25trn) sector, threatening to take his money elsewhere if the European Union tried to regulate his activities.
Sultan Ahmed bin Sulayem, Dubai World's chairman, told the BBC's World at One programme yesterday that initiatives such as the proposed EU code of conduct for SWFs were "dangerous" for countries and companies in need of investment.
"If somebody comes with regulations that make it difficult for someone from certain geographical locations to invest in Europe or the West, people will take their investment somewhere else," he said. "I think it's dangerous when this money and liquidity is so badly needed – we are investors and we are free to go wherever we want. If you squeeze us, we will go elsewhere."
Mr bin Sulayem's comments follow calls from two European commissioners this week for better corporate governance standards and greater transparency from SWFs. Charlie McCreevy, the EU's internal market commissioner, and Joaquin Almunia, the EU's monetary affairs commissioner, said the funds did not make enough disclosures of key financial information and backed calls for a code of conduct for the sector.
The EU's concerns reflect similar anxieties voiced by a number of European and American politicians over the past 18 months, as SWFs have taken a greater number of large stakes in a range of different companies. Two years ago, Dubai World was forced to sell off the US ports owned by P&O when it bought the British company, amid American fears about key infrastructure coming under foreign ownership.
Yesterday, however, Mr bin Sulayem rejected calls for greater regulation of funds such as his, arguing that there had never been an example of an SWF buying up Western companies for political or strategic reasons, rather than on the basis of potential investment returns. "If you put a politician in charge of an investment, believe me, that investment fund will not last for a very long time," he said.
The Dubai World chairman's comments reflect growing anger among the leaders of SWFs at the attacks on their activities. At last month's World Econ-omic Forum in Davos, a string of SWF executives made similar warnings.
Bader al-Sa'ad, managing director of the Kuwait Investment Authority, said: "The KIA has been operating for 55 years and has never made a political decision – we look to the bottom line."
The EU's attempts to curb the power of SWFs are being led by the French and German governments, which have both been openly hostile towards the sector. The UK has offered limited support for calls for more transparency, though ministers have been at pains to make it clear they welcome SWF investment in British companies.

Oil At $102/Barrel.........What Else Would Happen?

Stocks Tumble Around Globe Following Fears of US Recession
VOAMonday, March 3, 2008
Share prices on major exchanges in Asia and Europe fell sharply Monday, after Friday's deep decline on Wall Street increased fears that a recession may hit the United States.
India's benchmark index plunged more than five percent, while Japan's Nikkei index was down 4.5 percent. Benchmark stock indexes in Australia, Hong Kong, Singapore and Jakarta fell about three percent. Indonesia's market was off by 2.6 percent.
European indexes were off one percent or more in afternoon trading, while U.S. shares declined in early trading.
At the same time, the dollar slid to a three-year low against the yen. The weak dollar hurts Asian exports and drives up the price of dollar-priced commodities.

Sputtering To A Halt

The Federal Reserve's rescue has failed

By Ambrose Evans-Pritchard, International Business
The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.

Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter.
The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.
It is hard to imagine a more plain-vanilla outfit than the Port Authority of New York and New Jersey, which manages bridges, bus terminals, and airports.The authority is a public body, backed by the two states. Yet it had to pay 20pc rates in February after the near closure of the $330bn (£166m) "term-auction" market. It had originally expected to pay 4.3pc, but that was aeons ago in financial time.
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"I never thought I would see anything like this in my life," said James Steele, an HSBC economist in New York.
No sane mortal needs to know what term-auction means, except that it too became a tool of the US credit alchemists. Banks briefly used the market as laboratory for conjuring long-term loans at Alan Greenspan's giveaway short-term rates. It has come unstuck. Next in line is the $45trillion derivatives market for credit default swaps (CDS).
Last week, the spreads on high-yield US bonds vaulted to 718 basis points. The iTraxx Crossover index measuring corporate default risk in Europe smashed the 600 barrier. We are now far beyond the August spike.
Sub-prime debt is plumbing new depths. A-rated securities issued in early 2007 fell to a record 12.72pc of face value on Friday. The BBB tier fetched 10.42pc. The "toxic" tranches are worthless.
Why won't it end? Because US house prices are in free fall. The Case-Shiller index for the 20 biggest cities dropped 9.1pc year-on-year in December. The annualised rate of fall was 18pc in the fourth quarter, and gathering speed.
As the graph shows below, US households are only halfway through the tsunami of rate resets - 300 basis points upwards - on teaser loans.
The UK hedge fund Peloton Partners misjudged this fresh leg of the crunch. After an 87pc profit last year betting against sub-prime, it switched sides to play the rebound. Last week it had to liquidate a $2bn fund.
Like many, Peloton thought Fed rate cuts from 5.25pc to 3pc (with more to come) would end the panic. But this is not a normal downturn, subject to normal recovery. Leverage is too extreme. Bank capital is too eroded. Monetary traction eludes the Fed. An "Austrian" purge is under way.
UBS says the cost of the credit debacle will reach $600bn. "Leveraged risk is a cancer in this market."
Try $1trillion, says New York professor Nouriel Roubin. Contagion is moving up the ladder to prime mortgages, commercial property, home equity loans, car loans, credit cards and student loans. We have not even begun Wave Two: the British, Club Med, East European, and Antipodean house busts.
As the once unthinkable unfolds, the leaders of global finance dither. The Europeans are frozen in the headlights: trembling before a false inflation; cowed by an atavistic Bundesbank; waiting passively for the Atlantic storm to hit.

Half the eurozone is grinding to a halt. Italy is slipping into recession. Property prices are flat or falling in Ireland, Spain, France, southern Italy and now Germany. French consumer moral is the lowest in 20 years.
The euro fetches $1.52 (from $0.82 in 2000), beyond the pain threshold for aircraft, cars, luxury goods and textiles. The manufacturing base of southern Europe is largely below water. As Le Figaro wrote last week, the survival of monetary union is in doubt. Yet still, the ECB waits; still the German-bloc governors breathe fire about inflation.
The Fed is now singing from a different hymn book, warning of the "possibility of some very unfavourable outcomes". Inflation is not one of them.

"There probably will be some bank failures," said Ben Bernanke. He knows perfectly well that the US price spike is a bogus scare, the tail-end of a food and fuel shock.
"I expect inflation to come down. I don't think we're anywhere near the situation in the 1970s," he told Congress.
Indeed not. Real wages are being squeezed. Oil and "Ags" are acting as a tax. December unemployment jumped at the fastest rate in a quarter century.
The greater risk is slump, says Princetown Professor Paul Krugman. "The Fed is studying the Japanese experience with zero rates very closely. The problem is that if they want to cut rates as aggressively as they did in the early 1990s and 2001, they have to go below zero."
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This means "quantitative easing" as it was called in Japan. As Ben Bernanke spelled out in November 2002, the Fed can inject money by purchasing great chunks of the bond market.
Section 13 of the Federal Reserve Act allows the bank - in "exigent circumstances" - to lend money to anybody, and take upon itself the credit risk. It has not done so since the 1930s.
Ultimately the big guns have the means to stop descent into an economic Ice Age. But will they act in time?
"We are becoming increasingly concerned that the authorities in the world do not get it," said Bernard Connolly, global strategist at Banque AIG.
"The extent of de-leveraging involves a wholesale destruction of credit. The risk is that the 'shadow banking system' completely collapses," he said.
For the first time since this Greek tragedy began, I am now really frightened.

South America At War? Now THIS Is Exciting!

South America on brink of war
March 3, 2008 By Martin Arostegui - SANTA CRUZ, Bolivia — South America was on the brink of war yesterday as Venezuela and Ecuador amassed troops on the Colombian border in response to the killing of a Marxist rebel leader. Venezuelan President Hugo Chavez threatened to join the rebels in a war to overthrow hard-line Colombian President Alvaro Uribe, a key ally of the United States, deploying tanks, fighter jets and thousands of troops along the Colombian border. Ecuadorean President Rafael Correa also ordered troops to the border, expelled Colombia's ambassador and recalled its ambassador to Bogota, but left its embassy open. Venezuela closed its embassy in Colombia and ordered all diplomats home. A weekend battle sparked the mobilization, in which Colombian forces killed a top leader of the Revolutionary Armed Forces of Colombia (FARC), in a camp in Ecuador. "The obsessive conduct of those who prize the military option sharpens the armed conflict with grave possible consequences" read a statement from Venezuela's Foreign Ministry after the weekend killing of FARC's second in command, Raul Reyes. On his weekly Sunday talk show "Hello President," Mr. Chavez accused Colombia of "invading" Ecuador, and compared the action to Israeli attacks against Palestinians. "The Colombian government has become the Israel of Latin America," Mr. Chavez said. He called Colombia a "terrorist" state and its president, Mr. Uribe, a criminal; "Dracula's fangs are covered in blood." Mr. Correa said Colombia deliberately carried out the strike beyond its borders. "There is no justification," he said last night, snubbing an earlier announcement from Colombia that it would apologize for the incursion. Colombia's government said yesterday documents found in a jungle camp in Ecuador where Colombia troops killed Mr. Reyes showed ties between the FARC rebels and Mr. Correa, including contacts with his government about political proposals. Police Cmdr. Gen. Oscar Naranjo said documents found in computers belonging to Mr. Reyes showed contacts between a top Correa government minister and the FARC commander to discuss political proposals and projects on the frontier. "The questions raised by these documents need concrete answers," Gen. Naranjo said. "What is the state of relations between the Ecuadorean government and a terrorist group like the FARC." Mr. Uribe has often accused the FARC of using Venezuelan and Ecuadorean territory as safe havens from military attacks. Mr. Chavez has been trying to negotiate a prisoner exchange between the Colombian government and FARC, which holds hundreds of hostages including three American contractors and former presidential candidate Ingrid Betancourt. He has brokered the recent release of seven hostages thus far, including four late last month. During yesterday's television appearance, Mr. Chavez appeared to side with FARC's four decade effort to oust the government and establish a revolutionary state. "Someday Colombia will be freed from the hand of the [U.S.] empire," Mr. Chavez said. "We have to liberate Colombia." In another rhetorical flourish, he gave orders to Venezuela's military as millions watched on TV. "Mr. Defense Minister, move 10 battalions to the border with Colombia for me, immediately — tank battalions, deploy the air force," Mr. Chavez said. "We don't want war, but we aren't going to permit the U.S. empire, which is the master ... to come divide us." Estimates of the number of troops in 10 Venezuelan battalions ranged from 3,000 to 6,000. Yesterday's threat pushes already tense relations between the South American neighbors to their lowest point since Mr. Chavez took power in 1999, vowing to make Venezuela a revolutionary socialist state. Speaking in Texas, U.S. National Security Council spokesman Gordon Johndroe said officials were monitoring the situation. "This is an odd reaction by Venezuela to Colombia's efforts against the FARC, a terrorist organization that continues to hold Colombians, Americans and others hostage," Mr. Johndroe said. Colombia denied it violated Ecuador's sovereignty but acknowledged attacking the camp maintained on Ecuadorean soil by FARC. "The terrorists, among them Raul Reyes, have had the custom of killing in Colombia and taking refuge in the territory of neighboring countries. Many times Colombia has suffered from this situation," Colombia's Foreign Ministry said. In addition to Mr. Reyes, 16 Colombian rebels died in the attack. U.S. Embassy spokeswoman Suzanne Hall, in Bogota, would not comment on possible American involvement in the operation that led to Mr. Reyes' death. "This is a government of Colombia operation," she said. "Talk to the government of Colombia for any operational details." Mr. Correa said Colombia's military violated Ecuadorean airspace and entered to carry away Mr. Reyes' body. Mr. Reyes, 59, whose real name is Luis Edgar Devia Silva, had been mentioned as a favorite to succeed aging leader Manuel "Sureshot" Marulanda. His death marks the biggest single victory since Mr. Uribe took office in 2002 with a vow to defeat the rebels. He has received billions of dollars in U.S. military aid. Colombia has already carried out limited operations against FARC sanctuaries in Venezuela. In 2004, an undercover team snatched the group's "chancellor," Rodrigo Granda, from Caracas. In another incident last year, two Colombian soldiers were killed while on an intelligence mission along the border of both countries. While the Colombian army is numerically superior and is thought to be better trained than Venezuela's, Mr. Chavez's recent acquisition of 53 Russian combat helicopters and 24 Sukhoi SU 30 warplanes potentially gives him air superiority, military analysts say.

Free Passes To All Illegals

Sabotaging Border Security From Within
William F. Jasper JBSFriday, February 29, 2008
The Bush administration is planning to waive security checks for tens of thousands of new immigrants, a move raising concerns about national security.
Follow this link to the original source: "U.S. to Skirt Green-Card Check"
While the Bush administration continues to insist that American citizens must accept increased inconveniences at airports and more privacy intrusions under the Real I.D. Act, it is waiving security checks for tens of thousands of new immigrants, including many who are being hired as Border Patrol officers.
"Facing a rapidly growing backlog of immigration cases, the Bush administration will grant permanent residency to tens of thousands of legal U.S. immigrants without first completing required background checks against the FBI's investigative files," the Washington Post reported on February 12. The change, it said, applies to about 47,000 permanent residency, or green-card, applicants whose FBI checks have been pending for more than six months.
Christopher S. Bentley, a spokesman for the U.S. Citizenship and Immigration Services, told the Post the decision "just seems like a very logical way to get people who deserve benefits in a very fair and timely manner without compromising national security or the integrity of the immigration system." Mr. Bentley did not explain how the administration can speed the process along by dispensing with the security checks 'without compromising national security or the integrity of the immigration system."
Even more disturbing is information that the administration is using the same "wave them through" policy when it comes to applicants for the Border Patrol, including applicants who are "former" members of violent Mexican gangs and Mexican drug cartels. "A lot of [Border Patrol] agents are very upset by the big influx of Mexican gang-bangers" into the service, a recently retired BP agent told me. "This is insane, and is being done under the excuse of increasing the number of ‘native Mexican speakers’" in the Border Patrol.
According to the former agent, the admitted gang members are merely asked to promise that they have broken with their gangs and then are being allowed to continue the application process. "Some of our [Border Patrol] background investigators have brought up serious security concerns about many of these guys, things that in the past would have weeded bad guys out. But the investigators get over-ruled by higher-ups in the administration. This will be disastrous if it is allowed to continue."

The Answer To Everything Is More Taxes

State lawmakers consider highway tolls to fight global warming

Andrew GarberSeattle Times Friday, February 29, 2008
OLYMPIA — Two global-warming bills likely to pass the Legislature this session could open the door to tolls on major highways in the central Puget Sound region as a way to reduce traffic and greenhouse-gas emissions.
Environmental groups consider the bills critical to a larger effort to get people out of their cars and into public transportation. Transportation accounts for almost half of the state's greenhouse-gas emissions.
House Bill 2815 requires the state to sharply reduce greenhouse gases between now and 2050. It also calls for slashing the number of miles traveled by vehicles in the state by half in the same time period.
The second bill, House Bill 1773, says tolls should be used to reduce greenhouse gases. It would allow tolls to become permanent and to vary in price based on the time of day.
Both bills passed the House and are in the Senate. They're expected to become law.
Any widespread tolling strategy would likely face strong political opposition and wouldn't happen any time soon.
But environmental groups backing the measures ultimately want the region to use tolls to discourage travel by car, especially during peak travel times. The tolls also could raise billions of dollars to maintain highways and bulk up public transit as an alternative way to travel.
Such a strategy is often referred to as congestion pricing or variable tolling.
A study done last year found the state could raise up to $36 billion over 20 years by charging variable tolls on major highways from Lakewood, Pierce County, north to Everett and as far east as Issaquah.
"Congestion pricing is a key piece of the puzzle," along with increased public transportation and more walkable communities, said Jessyn Farrell, executive director of the Transportation Choices Coalition, which backs the legislation.
Such a tolling system would provide "a guaranteed commute where right now you're stuck in traffic," Farrell said.
State officials shy away from saying Washington is headed toward widespread tolling.
"I don't know what will happen in the future," said House Transportation Committee Chairwoman Judy Clibborn. "I don't think people are ready to get out of their cars yet."

The Upside To A Dismal Economy