Shale Revolution Fuels Agricultural Boom in Parts of India

One of the multiplier effects of the ongoing Shale gas boom has been to promote a special agricultural product, a bean grown in India, required for horizontal fracking.

From the Wall Street Journal (hat tip Professor Mark Perry)

From its place on humble Indian tables, a little-known Indian bean called “guar” is making the fortunes of poor farmers.

The demand for guar has soared since gum made from guar seeds started being used to extract shale gas late last year.

Mostly grown in the heart of India’s desert lands, the price of the vegetable has jumped from about 40 rupees ($0.7) a kilogram at the time of the September-October harvest to around 300 rupees ($5.4) per kilogram today.

As a result, barefoot farmers who until recently struggled to make a living are now riding cars and motorbikes and carefully locking the seeds away, according to B.D Aggarwal, managing director of Vikas WSP, an exporter of guar gum.

“There was very strong demand from the overseas oil industry because of a new technology – that is horizontal fracking – for shale gas extraction. There is no alternate to guar for this technology,” said Mr. Aggarwal.

Shale gas, natural gas trapped within shale formations, has become an increasingly important source of natural gas in the United Stated over the past decade, with some analysts expecting its supply to surge to around half of the natural gas production there by 2020.

Horizontal fracking, which requires the use of guar gum as a gelling agent, is considered safer for the environment than the other alternative – a technology known as “hydraulic fracking.”

Guar gum has other uses as well, including for oil drilling and in the textile and paper industries.

Mr. Aggarwal estimates that around 80% of the 1.2 million tons of guar that were harvested last season were snapped up for oil and gas drilling.

For investors such opportunity is what one would call a "pick and shovel play" (Investopedia.com) or a strategy where investments are made in companies that are providers of necessary equipment for an industry, rather than in the industry's end product.

America’s Asia Military Strategy: Encirclement via Air Power

Naval presence, according to historian Eric Margolis, has not been the real issue of US military expansion in Asia, which has been aimed at a supposed encirclement strategy of China, as already half of US warships, aircraft, and logistics vessels have already been deployed in the region.

The real goal is to expand air power.

Writes Eric Margolis,

However, naval forces are no longer the primary expression of America’s power. The US Air Force has dominated much of the non-communist globe since the 1950’s and serves America’s strategic interests in the same way the Royal Navy imposed the British Empire’s military and commercial power. Air power has played the decisive role in all of America’s military victories since World War I.

The Pentagon plans to strengthen its Pacific air power. This likely includes re-establishing US air bases in the Philippines and Australia, and expanding air bases in Guam, Okinawa, and South Korea.

America has been at war for decades. Its aircraft and warships are aging rapidly. Equally threatening, Congress may force deep military spending cuts as deficits worsen – at a time when the US military is being ordered to keep China bottled up on the Asian mainland.

China need only build its military power close to home. The United States must project and maintain its naval and air power 10,000 km across the Pacific Ocean, a hugely expensive, complex undertaking that gives cash-rich China an important, even decisive advantage.

The recent report of a Drone strike against supposed terrorists in Mindanao coupled by a free hand use of Subic and Clark facilities seems to validate this theory as well as partly my theory of the stealth resurrection of US bases here.

Material Bank Note Order: Writing on the Wall for the EU?

A company which produces bank notes recently had a press release which noted of a “material bank note order”.

From Digital Journal (hat tip Zero Hedge) [bold emphasis added]

Fortress Paper Ltd. ("Fortress Paper" or the "Corporation") (TSX:FTP), announces that its wholly-owned subsidiary, Landqart AG, a leading manufacturer of banknote and security papers, has had a material banknote order reinstated. This order was unexpectedly suspended in the fourth quarter of 2011 which negatively impacted the financial results of Landqart's operations in the first half of 2012.

Chadwick Wasilenkoff, Chairman, Chief Executive Officer and President of Fortress Paper, commented, "The recommencement of this previously delayed order will provide Landqart with momentum to realize additional orders and maximize operating efficiencies. This important order allows Landqart to better optimize the overall mill and should provide a meaningful contribution to its margins compared to recent quarters."

About Fortress Paper

Fortress Paper operates internationally in three distinct business segments: dissolving pulp, specialty papers and security paper products. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose Mill located in Canada which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its specialty papers business at the Dresden Mill located in Germany, where it is a leading international producer of specialty non-woven wallpaper base products. The Company operates its security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its Fortress Optical Facility located in Canada, where it manufacturers optically variable thin film material.

This could herald a major policy move, such as a Greece or German (or other crisis affected EU states) exit from the EU or Bernanke’s helicopter drop, the ECB edition.

Interesting times.

Big Brother now a Reality in the US

The Philippines has a popular reality TV program, called the Pinoy Big Brother (PBB) which is a local version of a foreign reality show.

The basic concept of which is that a select number of participants, who are called “housemates”, live in a camera ubiquitous house and strictly according to the "entertaining" rules of ‘Big Brother’. These housemates competes to survive through elimination rounds, as nominated by Big Brother, where audiences determine the victor, who receives material prizes. Of course, the other implied goal for these participants is to be "discovered" as celebrities.

PBB, according to Wikipedia.org, follows the same premise as its many foreign counterparts around the world: twelve Philippine residents are forced to live with each other inside a house for about 3 months or at least 100 days. (italics mine)

So the sublime message of these shows has been one of generating social acceptability for people to forcibly live under the dictates of a “big brother”, a.k.a despot or a tyrant.

Once people are seduced to the idea of condescension and submission, then the implementation of social policies under a 'compassionate' “big brother” regime becomes easier.

In the US, the city of San Francisco has reportedly started using cameras to supposedly prevent crimes

From the New American,

The United States continues its slow morphing into Big Brotherdom, this time through the use of cameras that predict crimes before they take place based on “suspicious” behavior. The cameras will then summon law enforcement to help pre-empt the crime from taking place.

The Daily Mail (Britain) reports, “Using a range of in-built parameters of what is ‘normal’ the cameras then send a text message to a human guard to issue an alert-or call them.” They can track up to 150 people at a time and will build up a “memory” of suspicious behavior to begin determining what is inappropriate.

BRS Labs, the company behind the camera, indicates that the cameras “have the capability to learn from what they observe.”

BRS Labs President John Frazzini said that the technology involves 11 patents that deal with the camera’s ability to learn.

They are also equipped with the technology to adjust for poor light or shaky imagery, and have a series of “trip wires” that become activated and then alert a human supervisor. The footage is then sent over the Internet to employees with a text message summarizing the details.

“The video surveillance technology we have invented is distinctly and materially different from the simple recognition capabilities found in video analytics solutions currently available from a number of vendors in the physical security market,” Frazzini said in astatement. “Generally speaking, video analytics software receives video data from cameras, and issues alerts based on very specific and narrowly defined human programmed rules that have failed to provide operational value in the video surveillance market. In strong contrast to those limited and deteriorating solutions, the patented technology of BRS Labs does not require any human pre-programmed rules, thereby providing an inherently scalable enterprise class software platform to the video surveillance market.”

The cameras have already been installed in prime tourist attractions, government buildings and military bases, and are now being prepared to be installed throughout the transportation system in San Francisco, including buses, trams, and subways.

According to the company, the cameras will eventually be placed in 12 San Francisco stations, 22 cameras per station, totaling nearly 300 cameras in all.

The San Francisco cameras include a special feature that turns the footage into code before they are analyzed.

The reality is that such measures are designed not really to prevent crimes or terrorism, where policies have always been marketed under the cover of some pretentious public good, but about the slippery slope towards the establishment Big government, if not totalitarianism, for the benefit of the political class and their cronies. Shades of George Orwell's dystopian society of 1984.

Hilarious Spoof Hitler Videos

Hitler Long the US Dollar (hat tip Charleston Voice)

Hitler on Scott Walker's victory at the Wisconsin Recall election (thanks to Dan Mitchell)

Estonian President Slams Paul Krugman

When apologists for the state don’t have developments going their way, they intuitively employ verbal sleight of hand as defense mechanism.

Given that Estonia has recently been recognized as the pro-austerity model of success, which I recently posted here, Keynesian high priest Paul Krugman quickly wrote to downplay on such progress. Mr. Krugman's comments drew a vitriolic rebuke from the Estonian president.

From the Huffington Post (hat tip Cato’s Dan Mitchell)

The president of Estonia chewed out Paul Krugman on Wednesday, using Twitter to call the Nobel Prize-winning economist "smug, overbearing & patronizing," in response to a short post on Estonia's economic recovery.

Krugman's 67-word entry, entitled "Estonian Rhapsody," questioned the merits of using Estonia as a "poster child for austerity defenders." He included a chart that, in his words, showed "significant but still incomplete recovery" after a deep economic slump.

President Toomas Hendrik Ilves responded to Krugman in a series of outraged tweets, taking offense to Krugman's tone and writing that Krugman didn't know what he was talking about.

"We're just dumb & silly East Europeans. Unenlightened. Someday we too will understand," he tweeted. "Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a "wasteland". Must be a Princeton vs Columbia thing."

Estonia, which in 2011 became the latest country to join the eurozone, has been heralded by some as an austerity success story. That year, it clocked a faster economic growth pace than any other country in the European Union, at 7.6 percent. Estonia is also the only EU member with a budget surplus, and had the lowest public debt in 2011 -- 6 percent of GDP. Fitch affirmed its A+ credit rating last week.

Politics becomes a religion when people resort to lies and misrepresentation to desperately defend ideas that has been proven to be based on faith and wishful thinking than from reality.

Video: Greek Central Planner Goes Berserk!

Writes Bob Wenzel at the Economic Policy Journal,

Central planning in action.

Greek far-right Golden Dawn Mp slaps another member on LIVE Tv. Golden Dawn spokesman Ilias Kasidiaris was apparently provoked when his alleged involvement in an armed robbery was mentioned. The fun stuff comes in the last 12 seconds of the clip

Politics is religion to many.

For central planners and their followers, who assume that they have far superior knowledge than the rest, any opposition to their views may lead to violent responses as they are hardly tolerant of adverse opinion.

First they resort to fallacies, then ad hominem to score debating points, and eventually such personal attacks incites physical violence.

This essentially exhibits the innate ethical philosophy of statism: the use of force.

Some pseudo experts try to dominate discussions through supposedly a 'gentle' persuasion approach. But whose subtle but incessant (nonsensical) bombardments represent no more than attempts to brainwash, in the guise of 'investment insights' or 'social justice'. They think that discussions should strictly run along their lines (even if they are based on gaping fallacies). You may even consider their spiels, a spam. And if you resist, you are deemed an idiot. They simply cannot respect diversity. For them it is either black or white, with me or against me (false choice).

Nonetheless, fatal conceit in action.

Drone Warfare Hits Philippine Shores

The “War on Terror” theater has expanded to the Philippines. A US drone reportedly targeting local terror groups hit a part of Mindanao scored heavy fatalities.

From Brookings.edu (thanks to the Facebook group Filipinos for Ron Paul 2012)

Early last month, Tausug villagers on the Southern Philippine island of Jolo heard a buzzing sound not heard before. It is a sound familiar to the people of Waziristan who live along Pakistan's border with Afghanistan, where the United States fights the Taliban. It was the dreaded drone, which arrives from distant and unknown destinations to cause death and destruction. Within minutes, 15 people lay dead and a community plunged into despair, fear and mourning.

The U.S. drone strike, targeting accused leaders in the Abu Sayyaf and Jemaah Islamiyah organisations, marked the first time the weapon has been used in Southeast Asia. The drone has so far been used against Muslim groups and the Tausug are the latest on the list.

Just as in Pakistan and other theatres of the "war on terror", the strike has provoked controversy, with a Filipino lawmaker condemning the attack as a violation of national sovereignty. This controversy could increase with the recent American announcement that it plans to boost its drone fleet in the Philippines by 30 per cent. The U.S. already has hundreds of troops stationed on Jolo Island, but until now, the Americans have maintained a non-combat "advisory" role.

The expansion of U.S.' drone war has the potential to further enflame a volatile conflict involving the southern Muslim areas and Manila, which has killed around 120,000 people over the past four decades. To understand what is happening in the Philippines and the U.S.' role in the conflict, we need to look at the Tausug, among the most populous and dominant of the 13 groups of Muslims in the South Philippines known as "Moro", a pejorative name given by Spanish colonisers centuries ago.

While local terrorist groups should be brought to justice for their dastardly acts, the reported incident shows that US has now directly and brazenly intervened in Philippine politics.

This could be part of the protective umbrella deal, which the Philippine government may have secretly struck with the US, owing to the recent territorial disputes. [Again giving weight to my thesis on Scarborough incident as a false flag]

The Philippines rejected the renewal of 1947 Military Bases Agreement in 1991, yet it appears that the treaty has been tacitly revived with clearance and approval of the incumbent local government to use Subic and Clark bases.

This seem to partly validate my thesis

What seems to be the common denominator between now and two decades ago when the Bases Extension Treaty was rejected by the Philippine Senate?

Well both has the Aquino administration (mother and son)taking on the side of—or has fought for an extension of—US foreign policy in the country.

Not that this about the Aquino administration being an American stooge, although they may well be, but about the developing trend in US foreign policy and the possible implications here.

Aside from the free hand to use Philippine facilities to suit US President Obama’s thirst for military expansionism (imperialism) in Asia, drone warfare has substituted for bases to become an intrusive influence to Philippine politics, with the implicit license to kill any US government labeled terrorist (true or not).

Echoing Judge Andrew Napolitano remonstrations

Since 9/11, the United States government has set up national security systems that function not under the Constitution, not under the Geneva Conventions, not under the rule of law, not under the rules of war, not under federal law, but under a new secret system crafted by the Bush administration and personally directed by Obama, the same Obama who condemned these rules as senator and then extended them as president. In the name of fighting demons in pick-up trucks and wars that Congress has never declared, the government shreds our rights, taps our cellphones, reads our emails, kills innocents abroad, strip searches 87-year-old grandmothers in wheelchairs and 3-year-old babies in their mothers' arms, and offers secrecy when the law requires accountability.

Obama has argued that his careful consideration of each person he orders killed and the narrow use of deadly force are an adequate and constitutional substitute for due process. The Constitution provides for no such thing. He has also argued that the use of drones to do his killing is humane since they are "surgical" and only kill their targets. We know that is incorrect. And he has argued that these killings are consistent with our values. What is he talking about? The essence of our values is the rule of law, not the rule of presidents.

Obama’s war on terror has made him judge, jury and executioner even in the Philippines.

Quote of the Day: Private Arbitration

Enter 21st century technology: there’s a relatively new service called Judge.Me, an online arbitration service whose decisions are legally binding in 146 countries, from Afghanistan to Zimbabwe… and yes, including the US, Canada, and Western Europe.

At just $299, disputes can be settled in a matter of days, and the firm’s case history shows that 96% of all arbitration awards have been honored.

This is the sort of thing that makes me very excited– the private sector displacing the public sector. And there’s going to be a lot more of it coming.

The more insolvent governments become, the more they’re going to be forced to axe all the things they can’t afford. We’re already starting to see this in places from California to England that can no longer hide from their fiscal reality.

With the government monopoly out of the way, the private sector will mop up every service that it can turn a profit on– trash collection, security, fire, prisons, libraries, etc. This forces competition, higher quality service, and lower prices for everyone.

The people who protest against austerity, or think it’s a tragedy when a courthouse closes down due to budget constraints, are really missing the larger point: the sooner this corrupt house of cards collapses, the better off we’ll all be.

Another gem from the maverick Simon Black at the Sovereign Man.

This serves as another example or evidence of how the information age has been transforming our lives and that will lead to decentralization.

War on Internet: Google will warn Users of State Sponsored Attacks

Hail Google. Google will warn their users of state sponsored privacy intrusions.

From Foreign Policies the Cable

UPDATE: A senior Senate aide confirmed that this evening he received a warning on his Gmail account that Google suspected he had been the target of a state-sponsored cyber attack.

Web giant Google is about to announce a new warning informing Gmail users when a specific type of attacker is trying to hijack their accounts -- governments and their proxies.

Later today, the company will announce a new warning system that will alert Gmail users when Google believes their accounts are being targeted by state-sponsored attacks. The new system isn't a response to a specific event or directed at any one country, but is part and parcel of Google's recent set of policy changes meant to allow users to protect themselves from malicious activity brought on by state actors. It also has the effect of making it more difficult for authoritarian regimes to target political and social activists by hacking their private communications.

"We are constantly on the lookout for malicious activity on our systems, in particular attempts by third parties to log into users' accounts unauthorized. When we have specific intelligence-either directly from users or from our own monitoring efforts-we show clear warning signs and put in place extra roadblocks to thwart these bad actors," reads a note to users by Eric Grosse, Google's vice president for security engineering, to be posted later today on Google's Online Security blog, obtained in advance by The Cable. "Today, we're taking that a step further for a subset of our users, who we believe may be the target of state-sponsored attacks."

When Google's internal systems monitoring suspicious internet activity, such as suspicious log-in attempts, conclude that such activities include the involvement of states or state-backed initiatives, the user will now receive the specialized, more prominent warning pictured above. The warning doesn't necessarily mean that a user's account has been hijacked, but is meant to alert users that Google believes a state sponsored attack has been attempted so they can increase their security vigilance.

Google wants to be clear they are not singling out any one government for criticism and that the effort is about giving users transparency about what is going on with their accounts, not about highlighting the malicious actions of foreign states.

Read the rest here

War on Internet: Anonymous will do a Wikileaks this December

The war on the internet continues.

Despite a string of legal harassment suit waged against activists like Wikileaks, internet activism will persist to haunt governments and their cronies.

Another activist group called the Anonymous announced that they will do a Wiki-leaks expose this December.

From Personal Liberty.com (hat tip Sovereign Man)

The global “hacktivist” syndicate Anonymous wants people all over the world to expose evidence of corruption and injustice by leaking documents to which they have access.

In a recently posted video, the group urges anyone who has access to evidence of corporate or government wrongdoing to purchase a USB drive and document the evidence for publication on the Internet.

“Imagine you purchase a USB drive. Imagine you take it to your work place. Imagine you collect evidence of illegality and corruption. Imagine together we expose all lies. Imagine we leak it all,” scrolls across the screen in a recent video posted by the group.

The initiative, dubbed Project Mayhem 2012, will take place over the 10-day period from Dec. 12 to Dec. 21, during which the video claims “the World will see an unprecedented amount of Corporate, Financial, Military and State leaks that will have been secretly gathered by millions of CONSCIENTIOUS citizens, vigilantes, whistle blowers and insiders worldwide.”

The group claims to be in the process of developing a Wikileaks-style platform called TYLER where the information can be anonymously posted.

Video here.

HOT: India Joins Pledge for Stimulus

Wow. Only hours after China’s announcement, India joins the bandwagon for stimulus.

From Bloomberg,

Indian stocks climbed to the highest level in a month after Prime Minister Manmohan Singh pledged to revive growth in Asia’s third-largest economy.

ICICI Bank Ltd. (ICICIBC), the nation’s second-biggest lender, paced gains among its peers.Reliance Industries Ltd. (RIL), owner of the world’s largest oil-refining complex, rose to a four-week high after Chairman Mukesh Ambani unveiled plans to plans to invest 1 trillion rupees ($18 billion) over five years to double its operating profit. The BSE India Sensitive Index (SENSEX)advanced 1.2 percent to 16,649.05, its highest close since May 7, bound for its best week this year with a 4.3 percent gain.

India’s Singh yesterday outlined port, railways and road projects and a push to add power-generation capacity to bolster the economy. The government’s pledge follows the central bank’s signal to cut borrowing costs to support an economy expanding at the weakest pace in almost a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports.

“From a very low level of confidence there’s now hope that things will happen,” Hitesh Zaveri, head of investments of portfolio management services at Mumbai-based Birla Sun Life Asset Management Co., said in a phone interview. “There’s expectation of a stimulus coming from Europe and of a rate cut locally. That forced short-sellers to cover their bets.”

Stimulus really does nothing but to juice up the markets over the short term at the expense of redistributing wealth from taxpayers to the bankers and cronies, as well as, fueling boom bust cycles which is negative for any economy over the long term.

Again promises are one thing, actions are another.

The US Federal Reserve’s FOMC will meet on June 19-20th, will they be next?

HOT: China Cuts Lending Rates and Deposit Rates

China has fired the opening salvo of a series of interventions which I expect from global central bankers.

From Bloomberg.com

China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth.

The benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year deposit rate will fall to 3.25 percent from 3.5 percent. Banks can also offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent…

Today’s move signals policy makers are concerned that the cost of borrowing is crimping companies’ spending and holding back expansion in the world’s second-biggest economy. Three bank officials told Bloomberg News last month that the nation’s biggest banks may fall short of loan targets for the first time in at least seven years as demand for credit wanes.

Slowdown Worsening

The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.

The next thing is to observe the reaction of China’s financial markets and the prices of global commodity markets, particularly gold, over the coming days.

If these cuts won’t stop the bleeding as with bank reserve requirements, then we can expect more cuts to come.

Integrating PSE with ASEAN Equity Markets

The Philippine government plans to improve local equity standings through regional cooperation.

From Finance Asia

The Philippine Stock Exchange can boast a handful of companies that international investors are comfortable with — the biggest banks, telcos and conglomerates. But there are also a handful of companies in foods, pharmaceuticals and services that are well-run, growing businesses.

In an exclusive interview with FinanceAsia, Cesar Purisima, secretary of the Philippine department of finance, said that he hopes these dynamic firms will become future corporate champions through initiatives such as Asean Exchanges — a collaboration of seven exchanges from Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

“We’ve been trying to encourage more of these start-ups and family-owned companies to come to the capital markets,” said Purisima. “It is important that Asean develops a deeper capital market that attracts investors from both within the region and outside. The problem for most of the exchanges right now is that it is simply not deep enough, not big enough. The Asean Exchanges will help us address that problem.”

A deeper pool of liquidity could make it more worthwhile for start-ups and other growing businesses to consider listing, but would also help bigger firms with international ambitions.

“We have companies that are starting to go beyond the boundaries of the Philippines,” said Purisima, “Getting funding from outside is crucial not just from a capital perspective, but also in terms of matching risk.”

The main reason that I am not sold to the notion of decoupling (yet), aside from globalization, has been because regionalization has already been happening, if not intensifying. So the political framework for deeper regional collaboration through equity markets are, in effect, responses to an ongoing phenomenon.

Yes, ASEAN has already embarked on a cross listing program via the Singapore Exchange and the Monetary Authority of Singapore (MAS) which began this month with Malaysia, Singapore and Thailand as pioneer participants. The Philippines, Indonesia and Vietnam has announced interests to join in the future.

While I am one with Mr. Purisima’s goal to deepen the domestic equity market partly through ‘collaboration’ with Asean exchanges and eventually through cross-listing, Mr. Purisima misses out the main reason for why many family owned businesses have been reluctant to list.

This basically boils down to economic opportunities: many economic opportunities has been politically derived, which also extrapolates to the lack of opportunities outside the political realm.

In a way, the Philippine political economy resembles Greece.

Robert Kaplan at the Stratfor describes the fundamental Greece political economy

Roughly three-quarters of Greek businesses are family-owned and rely on family labor, making meritocratic promotion difficult for those outside the family. Tax cheating is rampant. The economy suffers from a profound lack of competitiveness, even as Greece is mainly a service economy, relying on tourism, in which manufacturing constitutes a weak sector. Of course, these features have much to do with bad policies enacted over the years and decades, but they are also products of history and culture, which are, in turn, products of geography. Indeed, Greece lacks enough productive land to be an agricultural power.

Then there is political underdevelopment. Long into the 20th century, Greek political parties had a paternalistic, coffeehouse quality, centered on big personalities -- chieftains in all but name -- with little formal organizational support. George Papandreou, the grandfather of the recent prime minister of the same name, actually headed a party called the "George Papandreou Party." Political parties have been family businesses to a greater extent in Greece than in other Western democracies. The party in power not only dominated the highest echelons of the bureaucracy, as is normal and proper in a democracy, but the middle- and lower-echelons, too. State institutions from top to bottom were often overly politicized.

In other words, the structure of the economy reflects on the structure of politics.

As I pointed out before,

There about 250 political dynasties in the Philippines (New York Times 2007) and this number has been growing. The 14^th Philippine congress has an estimated more than 75% of lawmakers from old political families (Wikipedia.org).

In short, the key problem has not been about ‘corporate governance’ or ‘corruption’ (which has been alluded to as obstacles by Mr. Purisma) both of which signifies as symptoms rather than the disease, but one of economic freedom.

Because greater economic freedom allows for MORE economic opportunities, economic freedom will likely reduce the incentives by families to keep a tight lock on their business holdings and allow more public ownership. Alternatively, family business owners are likely to be provided with more options to diversify or even to switch fields of investments, given the liberal business environment.

Lastly corporate governance has not been an issue of oversight from ‘virtuous’ regulators over scheming stockholders and managers, as the government has been guilty of the many sins endured by the economy and by unscrupulous corporate agents; particularly through taxes, manifold regulations (as licenses, disclosure rules, insider trading etc..) [ which diminishes profits, distorts profits and spurs corruption and transferring of resources to wasteful consumptive expenditures by governments], ownership restrictions, labor regulations (raises the cost of labor and thus unemployment) and more.

Corporate governance is largely the about the contractual relationship between the entrepreneurs, capitalists and managers.

As the great Ludwig von Mises explained,

The general direction of a corporation's conduct of business is exercised by the stockholders and their elected mandataries, the directors. The directors appoint and discharge the managers. In smaller companies and sometimes even in bigger ones the offices of the directors and the managers are often combined in the same persons. A successful corporation is ultimately never controlled by hired managers. The emergence of an omnipotent managerial class is not a phenomenon of the unhampered market economy. It was, on the contrary, an outgrowth of the interventionist policies consciously aiming at an elimination of the influence of the shareholders and at their virtual expropriation. In Germany, Italy, and Austria it was a preliminary step on the way toward the substitution of government control of business for free enterprise, as has been the case in Great Britain with regard to the Bank of England and the railroads. Similar tendencies are prevalent in the American public utilities. The marvelous achievements of corporate business were not a result of the activities of a salaried managerial oligarchy; they were accomplished by people who were connected with the corporation by means of the ownership of a considerable part or of the greater part of its stock and whom part of the public scorned as promoters and profiteers.

Politically based corporate governance can, thus, serve as a vehicle for government control of corporations and for cronyism.

Eurozone’s Proposes Grand Bailout: Regional Banking Union

So the rally incited by the Eurozone yesterday may have been triggered by reports of a proposed region wide banking union.

From the CNN Money

The European Union unveiled a plan Wednesday to create a coordinated banking union rather than leaving troubled nations to deal with their own banking crisis.

But the plans for more a unified EU bank regulator and bailout fund won't come in time to deal with the crisis sweeping Europe right now, including the beleaguered Spanish banking system which has become the epicenter of the European sovereign debt crisis.

The EU proposal would include a single deposit guarantee organization covering all banks in the union, something similar to the FDIC that covers U.S. bank deposits.

There would also be a common authority and a common fund that would deal with bailouts needed for the cross-border banks that are major players in the European banking system.

G7 keeping close tabs on Euro crisis

In addition, there would be a single EU supervisor with ultimate decision-making powers for the major banks, and a common set of banking rules.

"Today's proposal is an essential step towards a banking union in the EU and will make the banking sector more responsible," said European Commission President Jose Manuel Barroso in a statement. "This will contribute to stability and confidence in the EU in the future, as we work to strengthen and further integrate our interdependent economies."

The amount of the common bank rescue fund was not disclosed.

Many substantially important questions that begs to be answered:

Guarantees based on what and paid for by whom? Mostly the Germans? And since resources are limited or scarce, up to what extent are the Germans and other productive EU nations be willing to redistribute their resources to the unproductive and capital consuming economies? How will this affect EU regional politics particularly the relationship between rescuers and the rescued? How will this affect domestic politics particularly of the rescuing nations?

The idea of ‘risk free’ from government guarantees has proven to be a mirage and a regional banking union will be no different.

And as previously noted, banking union based on deposit insurance will likely mean the endgame for the euro.

The only thing this does is to centralize the EU banking system which even magnifies systemic fragility. What really would emanate from this coordinated plan would be massive inflationism. It’s still a plan, though. But markets appear to be reading through the plan as something imminent. [As a side note, everything has been so fluid, such that I can’t find confidence on this until after an official response has been made.]

Bailout schemes have short term effects with nasty longer term consequences. As proof, the Euro debt crisis has been a continuing crisis since 2008 and seems self-perpetuating amidst the series of past failed bailouts.

Sadly the other cost of this region-wide banking union will be the loss of liberty for many of the freedom loving Europeans, over the interim, or until the dismemberment of the euro currency (and the EU), and of further economic tumult ahead.

Quote of the Day: Dangerous Word Called “We”

‘We’ is one of the most dangerous words in the English language, particularly when bandied about in Western representative democracy.

It’s a term often used when a politician wants to thrust a burden or obligation onto everyone else’s shoulders, but without being too direct about it.

‘We’ masks responsibility by pushing the burden to some nebulous collective like ‘society’ or ‘the country’ rather than directly to individuals. This makes things much more palatable.

For example, it’s easier to say “We have a responsibility” rather than ”You three guys– Don, John, and Bill, have a responsibility.”

‘We’ is disarming. It makes the stakes seems smaller, so it’s easier to achieve buy-in. And this is what makes it so dangerous… because in actuality, ‘we’ is code for ‘you’.

That’s from Simon Black at the Sovereign Man discussing the Soda Ban in New York.

In the world of politics, language is deliberately contorted so as it would be made to appeal to the unthinking masses who then becomes subject to manipulations via brainwashing by political agents.

Well what else is new?

China’s Deepening Capitalism: Mushrooming Self Development Facilities

Self help or self development books, seminars and conferences have been mushrooming over China. Capitalism has been gaining the upper hand.

Reports the BBC

Not long ago, capitalism was a dirty word in communist China - it was impossible to start your own business or think about getting rich.

But all that changed with a series of economic reforms launched three decades ago that unleashed a wave of entrepreneurial spirit.

Many Chinese people now spend much of their free time thinking, reading and learning about how to get ahead.

They turn to seminars, self-help books and novels in search of inspiration and to help them understand the rules of this new game.

One firm looking to help - and cash in - on this thirst for knowledge is Hengtaidatong Gold, which tries to persuade people to invest in this precious metal.

Every few weeks it organises glitzy gatherings for Beijing's well-heeled residents to teach them how to make money from this valuable commodity.

Read the rest here

The blooming force of entrepreneurship has also been evident by her growing influence or clout on the political sphere.

From Risk OFF to Risk ON: To Stimulus or Not?

Financial markets have become totally distorted and reliant on what the central bankers and policymakers does.

Following a heavy selloff just a few days ago, global markets have fiercely been rebounding on the prospects of “stimulus”. Thus the last few days have switched into a RISK ON environment.

From Bloomberg,

Asian stocks advanced for a third day, extending a global rally, and oil climbed on speculation policy makers will take steps to revive the slowing economy.

The MSCI Asia Pacific Index (MXAP) increased 1 percent by 9:45 a.m. in Tokyo, heading for its longest winning streak in two months. The Nikkei 225 Stock Average added 1.1 percent, while Standard & Poor’s 500 Index futures rose 0.3 percent. Oil gained 0.5 percent in New York, strengthening for a fourth day. The Australian dollar slipped 0.3 percent before a report showing the nation’s jobless rate may have risen.

European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens. Federal Reserve Vice Chairman Janet Yellen said the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus. China delayed plans to tighten bank capital rules to ensure lending support to its economy, while Indian Prime Minister Manmohan Singh pledged to revive growth in Asia’s third-largest economy through infrastructure spending.

“The Chinese will take action to stimulate the economy and the Americans will similarly respond,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “For a sustained rally, we need a period of stability where we’re not in a fire-fighting crisis mode.”

The MSCI All-Country World Index (MXWD) climbed 2.1 percent yesterday, the biggest gain since Dec. 20, and the S&P 500 jumped 2.3 percent. Two regional Fed bank presidents who vote on policy this year, San Francisco’s John Williams and Atlanta’s Dennis Lockhart, said yesterday the central bank should be prepared to take action if the economy deteriorates further.

In reality, financial markets have been desperately slobbering for stimulus, or differently said, financial markets have been PRESSURING policymakers to act.

And with expectations mounting, applied stimulus may or may not come in line with public’s clamor which may spur further volatilities. There is also a risk that stimulus may not arrive.

So far I would say that the Risk ON environment represents residues from the last stimulus.

And as one would notice, policymakers have now become the ultimate insider traders by having to chose winners and losers and by manipulating the financial markets directly and indirectly (the Risk ON environment is also in response to central banking’s signaling channel or communication to project policy intentions, and which seems like the Pavlov classical conditioning experiment through the famous Pavlov Dogs)

Let me drive a simple point. Hope must NOT be confused for action. There is no clarity yet on what path policymakers will undertake.

So do expect “more period of intense volatility on both directions but with a downside bias”

Be very careful out there.

Estonia Booms Amidst the Euro crisis

From CNBC.com

Sixteen months after it joined the struggling currency bloc, Estonia is booming. The economy grew 7.6 percent last year, five times the euro-zone average.

Estonia is the only euro-zone country with a budget surplus. National debt is just 6 percent of GDP, compared to 81 percent in virtuous Germany, or 165 percent in Greece.

Shoppers throng Nordic design shops and cool new restaurants in Tallinn, the medieval capital, and cutting-edge tech firms complain they can’t find people to fill their job vacancies.

It all seems a long way from the gloom elsewhere in Europe.

Estonia’s achievement is all the more remarkable when you consider that it was one of the countries hardest hit by the global financial crisis. In 2008-2009, its economy shrank by 18 percent. That’s a bigger contraction than Greece has suffered over the past five years.

How did they bounce back? “I can answer in one word: austerity. Austerity, austerity, austerity,” says Peeter Koppel, investment strategist at the SEB Bank.

Let me be clear, the issue here isn’t about the euro, rather the issue here is about how Estonia managed to deal with the crisis even as part of the euro bloc. Estonia began to use euro in January 2011

And as pointed above and as blogged earlier, Estonia resorted to the common sense approach of letting the markets clear and work and passed with flying colors.

Indeed, Estonia’s budget has shown a slight surplus (from tradingeconomics.com)

Estonia ranks 16th as the economically freest country in the world and 7th among 43 nations in the Eurozone

Writes the Heritage Foundation

Estonia upholds all four pillars of economic freedom relatively well, with the rule of law strongly enforced by an independent and efficient judicial system. However, respect for the principle of limited government has eroded as government spending has risen as a share of GDP. Public finance management could be enhanced through clearer coordination between central and local governments as well as better targeting of social benefits. The debt burden remains quite low and has not undermined long-term economic competitiveness.

Flexibility and openness have equipped Estonia’s small economy with an impressive capacity to adjust to external shocks. Sound economic policies grounded in a strong commitment to economic freedom have ensured high levels of investment and entrepreneurial activity. The overall investment code is conducive to dynamic growth, and the financial sector remains competitive.

Estonia and Sweden's case should become the paragon for dealing with a crisis. Unfortunately, Eurozone politicians has stubbornly been fighting to retain their privileges from an unsustainable parasitical relationship. Worse, the regional political trends suggests that policies might run in the direction opposite to what is required. On that condition the crisis is likely to worsen before it gets better (when markets forces the hand of politicians).

Politics a Key Factor for Facebook Unfriends

From Slate

Spouting off about political issues on Facebook and other social sites may be bad for your friend count, according to a new study released Monday by the Pew Internet & American Life Project.

Eighteen percent of the 2,253 adults surveyed by Pew said they had blocked, unfriended, or hidden a friend on a social network over a political post. It isn’t hard to see why: The Pew survey found that because people who post about politics tend to be very liberal or very conservative, the offending posts are more likely to be out of line with other people’s views. Indeed, only one in four users surveyed by Pew said they "usually" or "always" agree with their friends’ political posts; 73 percent said they only sometimes or never do.

Though most people—roughly two in three—take no action over political posts they disagree with, some 28 percent said they counter with a comment or competing post, another behavior the Pew survey said leads to friends going their own way.

My experience says that this is very true.

First of all, you can’t please everyone. Second, the truth hurts or stings the ego. Third, I am not after social desirability or about “friend count” or after "likes". I can say stupid abstract emotional themes, which isn't really me, or popular positions based on economic nonsense, just to get the "likes". But I am after speaking the truth from where I see it or where I stand. Lastly, for many politics IS a religion.