The Great Debate UK

All pain, no gain for Germany

By Laurence Copeland. The opinions expressed are his own.

Whenever the question of the future of the euro zone comes up, you can always rely on someone (often a German) to say something like “Yes, of course the Germans don’t like having to foot the bill for the weaklings… but at the same time, they do get enormous benefits from having a fixed exchange rate. I mean, just look at their trade surplus. All those Mercs and BMW’s you see in Milan and Athens and…”

This argument is utter nonsense, and the economists especially ought to know better.

Consider what they are saying. In the end, it is worth the Germans bailing ClubMed out – directly, as it has done whenever Greece faced default, or indirectly with euro bonds, as they are being pressured to do in future – because that will enable the Southern Europeans to carry on “buying” the products churned out by Germany’s redoubtable export industries.

But since the Greeks et al will essentially be buying their Porsches with loans which, to the extent that the debts are nationalised, they can never be made to repay, the cars and equipment supplied by Germany are essentially gifts. They can hardly be called exports at all, since they are not sales to the rest of the world. Whichever way you look at it, they are simply international aid-in-kind. They are not exports any more than the food and medicines distributed as bilateral aid to impoverished African countries.

from The Great Debate:

With Chavez gone, what of ‘Chavismo’?

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“The End of the Chávez Era” That was the headline on Colombia’s major newspaper, El Tiempo, the day after Hugo Chávez’s death.

True, Chávez’s controversial and colorful 14-year rule has ended, and Venezuela has lost a president who evoked uncommonly intense passions among followers and detractors.   Venezuelans will not easily forget a leader who, for better or worse, was the consummate showman and left an indelible mark on a highly polarized society.

If only more CEOs were like Andrew Mason

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By Kathleen Brooks. The opinions expressed are her own.

Groupon’s ex-CEO won’t be remembered for his stewardship of the internet deal company, but he is likely to go down in history as writing one of the best and most honest goodbye memos of all time when he was sacked at the end of last week.

Two things in the memo to Groupon employees announcing his departure stand out: humour and honesty. This has to be the best opening line in the history of the departure letter: “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today.” How many times have we heard CEOs, politicians and other leaders use the “family” card to disguise the fact they have been unceremoniously dumped from their role of authority?

from The Great Debate:

A blueprint to make banks behave

Banking integrity has become an oxymoron. Top bankers need to change this and take responsibility for tackling ethical issues. For this to happen, every part of the organization – from senior management to human resources managers to those on the trading floor and beyond – should be assessed according to the contribution it makes to promoting ethical values, not just the bottom line.

The investigations into the LIBOR rate-rigging scandal showed how commonplace bribery among dealers had become. For example, between September 2008 and August 2009 a single trader at the Royal Bank of Scotland had made corrupt payments to interbank brokers on 30 occasions, by means of risk-free transactions known as "wash trades."

from The Great Debate:

Can diplomacy prevail with Iran?

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New talks with Iran ended Wednesday with a surprising forward spin. More meetings are planned in the now decade-long American-led effort to ensure the Islamic Republic does not get nuclear weapons.

Iran must now accept or reject a proposal that offers some sanctions relief in return for Tehran’s reducing its stockpile of uranium enriched close to weapon-grade. This hopeful note – Tehran’s reaction was positive – comes as a showdown looms, because Iran continues to inch ever closer to being able to make a nuclear weapon.

from The Great Debate:

How close is Iran to nuclear weapons?

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Israeli Prime Minister Benjamin Netanyahu claimed last week that new second-generation centrifuges, which Iran plans to start up at its Natanz uranium enrichment facility, could cut by a third the time needed to create a nuclear bomb – underlining his deadline of this summer to take military action against Iran.

Netanyahu’s prediction, however, appears to be based on some unsubstantiated assumptions regarding Iranian intentions and capabilities. Yet it can provide ammunition to the hawks in Washington and Jerusalem, who could rush us into another needless and counterproductive war in the Middle East. Netanyahu’s assertions do not stand up to technical scrutiny.

from The Great Debate:

How to do PR for banks

Big banks -- at least in Europe -- are putting on a new, highly branded, and more contrite face.  Barclays is embarking on something it calls “Project Transform”’; Deutsche Bank has announced its “2015+” strategy and is pushing for what its CEO has called “deliberate” “uncomfortable change”. UBS has its own 2015 strategy, and the head of its investment banking unit publicly proclaimed that the industry has become “too arrogant, too self-convinced”.

Should we buy any of this? William Cohan, for one, isn’t a fan of Barclays CEO Anthony Jenkins’s “new morality”. Cohan’s right to point out that all of this hat-in-hand talk comes after a long period of transgression at Barclays:

What the horsemeat scandal tells us about risk

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By Kathleen Brooks. The Opinions expressed are her own.

The developing horse meat furore is a keen reminder how companies need to always be on the lookout for the next big scandal that could rock their business. Take Findus, the frozen food company. It’s 100% beef lasagne, it turned out, was 100% beef free. The company who owns Findus –private equity firm Lion Capital – spent GBP 1.1 billion acquiring the firm in 2008.

The numbers may have added up when Lion did its analysis prior to the sale, but in hindsight it would have been more expedient to check the supply chain and ensure that Findus did what it said it did on the pack. The Findus brand has been in financial trouble for some time, including breaching debt covenant deals last year. However, through a complicated debt-to-equity deal with some of its lenders, Lion managed to hold onto the business. Maybe the effort wasn’t worth it. Lion will have to fight hard to dissociate its image form dodgy processed food companies flogging horse meat dressed up as beef to the unsuspecting consumer.

Don’t Mention the War!

–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–

Modern wars have no clear start and no clear end, leaving politicians free to deny their existence when it suits them and to claim victory even in the face of obvious defeat.

from Jack Shafer:

Horsemeat hysteria

Disgust, the gag reflex and flights to the vomitorium greeted this week's news that horse flesh had breached the beef wall to contaminate burgers and frozen beef meals (lasagna, spaghetti Bolognese, shepherd's pie, meatballs) all over Europe. Some of the "beef" products contained 100 percent horsemeat, and early forensic tests hinted that the contamination might go back as far as August 2012.

Both the British government and the European Union called for "horsemeat summits" to investigate the food scandal, with British officials surmising that a criminal conspiracy would be found responsible for adulterating beef products with cheaper horse. But for all the horsemeat hysteria recorded and amplified by the press, "no risk to consumer health" was posed by the products, as the Food Safety Authority of Ireland reported. The injuries from eating horsemeat were not physical, they were psychological, and where they were not psychological they were anthropological, or else simply nonexistent. According to the Ireland health authority, every beef-and-horse burger it analyzed tested negative for phenylbutazone, a common horse medicine that's banned from the food chain.

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