The Great Debate UK

from The Great Debate:

“Risk free” rate going way of free lunch

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James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

One of the many comfortable but unreliable certainties now coming unglued is the idea that U.S. Treasury interest rates are the paramount benchmark, a measure of "risk free" investment, an idea at the heart of finance.

In the old days we quaintly believed that U.S. government debt yields represented a benchmark against which all other types of risk taking could be measured. The 30-year yield, later supplanted by the 10-year, used to be called the most important rate in the world for just that reason. All other risk taking began from this handy jumping off point and all capital allocation decisions used it as an implicit or explicit input.

That role of the benchmark of benchmarks, which greases the wheels of finance making it more "efficient" but more prone to spectacular error, is now under attack from a number of directions.

In retrospect, it seems clear that artificially low interest rates, due in large part to Treasury purchases by China seeking to keep its own currency and exports competitive, helped to turbo charge risk taking during the boom.

from FaithWorld:

The irrelevant and the interesting in Obama’s religious views

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There's been a lot of discussion over the past few months on this and other blogs about Barack Obama and religion. Looking back at it now that the campaign is over and he is starting to shape his administration, it's interesting to see how many of those discussions shed little light on what he would actually do. There were comments about him being a hidden Muslim, for example, or not a real Christian. That speculation seemed based on thin evidence and the assumption he was running for preacher and cleric-in-chief rather than president and commander-in-chief. As a journalist covering religion in public life, after learning whether a candidate professes a certain faith, I want to know how that faith will really influence his or her decisions in office. This is not necessarily the same as listing the soundbite positions used on the campaign trail. (Photo: Barack Obama at the Apostolic Church of God in Chicago, 15 June 2008/John Gress)

Seen from this point of view, probably the most interesting fact about Barack Obama's religious views is one that rarely gets mentioned. It's that he's an admirer of the late American Protestant theologian Reinhold Niebuhr (1892-1971). The President-elect has clearly named "America's leading public theologian" as a major influence on his thinking. It comes out less in specific positions than in the way he looks at problems and discusses policies in terms with a "Niebuhrian" ring about them.

from The Great Debate:

Getting Russia into proportion

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Paul Taylor Great Debate-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --It's time to get Russia back into proportion.Moscow's resurgence as a major power, determined to be treated with respect and to stamp its influence on its neighborhood, has been one of the big stories of 2008.The sight of Russian tanks rolling into Georgia in August, coupled with a Kremlin drive to extend its control over energy supply routes to Europe, sent shivers through former Soviet satellite countries and drew loud condemnation from Washington.President Dmitry Medvedev's threat to site short-range missiles in Kaliningrad aimed at Poland if Warsaw deploys part of a planned U.S. missile shield raised the rhetorical stakes.Yet the global financial crisis, the collapse of oil prices, the aftermath of the Georgia war and U.S. President-elect Barack Obama's victory have all cast doubt on Russia's real weight.The credit crunch has hit Russia harder than other emerging economies, hammering confidence in its stocks, bonds and the rouble and forcing the central bank to spend some of its huge foreign currency reserves to stabilize the financial system.Foreign portfolio investors have fled and many Russian investors have parked more of their money in foreign currency abroad, at least partly due to heightened political risk since the military action in Georgia.State gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), feared in many parts of Europe as a predator seeking a stranglehold on the continent's gas supply, has lost more than two-thirds of its market capitalization since May.SHRINKING POPULATIONWith oil prices down from a peak of $147 a barrel in July to below $50 now, the heavily oil-and-gas-dependent economy looks more vulnerable, especially since Russia needs Western technology to boost its energy extraction.Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, says that after a 10-year boom, growth will fall to between 0 and 3 percent next year.Russia remains a lucrative market for Western consumer goods, but concerns about state meddling in business, widespread corruption and shortcomings in the rule of law have contributed to its failure to diversify away from hydrocarbons and minerals.Compounding the weakness of its non-energy economy, Russia's demographics are among the worst in the world, with a life expectancy of just 67 (60 for men) and the combination of a low birth-rate, an aging population and a public health crisis.The Organization for Economic Cooperation and Development (OECD) projects the population could shrink by nearly one-third by 2050 to 100 million from 143 million.Diplomatically, Russia overreached itself after its lightning military victory in Georgia by recognizing the breakaway regions of South Ossetia and Abkhazia as independent.Only Nicaragua followed suit. Major allies such as China and India, fearing the precedent, pointedly declined.The European Union, the main customer for Russian gas, has responded by accelerating efforts to reduce its dependency, planning an alternative supply corridor through Turkey and seeking new suppliers in Africa, the Middle East and Central Asia.Other former Soviet republics, including Azerbaijan, Belarus and Turkmenistan, have sought closer ties with the West.True, the U.S.-led NATO alliance has gone no further toward giving Georgia and Ukraine a roadmap to membership -- the issue is off the agenda for now -- and it has now resumed some frozen contacts with Russia, as has the EU.But Moscow's efforts to reshape the security architecture of Europe, sidelining the role of the United States and of the Organization for Security and Cooperation in Europe, loathed by Moscow for its election monitoring, have gained little traction.STATUS QUO POWER?Russian analysts insist the Georgia war was a defensive action responding to pro-Western Georgian President Mikheil Saakashvili's bid to retake control of South Ossetia by force."Russia is a status quo power, not a recidivist aggressor on the prowl," says Dmitry Trenin, head of the Moscow office of Carnegie Endowment for International Peace.Moscow has taken a number of steps recently to suggest it wants peaceful solutions to other "frozen conflicts" in its neighborhood, brokering the first summit talks between Armenia and Azerbaijan over Nagorno-Karabakh, and seeking a deal between Moldova and its breakaway region of Transdniestria.In Ukraine, the biggest former Soviet republic where a democratic "Orange Revolution" in 2004 infuriated the Kremlin, Russia has other political and economic levers it can pull to maintain influence without having to use force.Getting Russia into proportion does not mean ignoring Moscow or its security interests. Its location and the fact it supplies 40 percent of Europe's gas imports mean it cannot be neglected.The United States and the EU have an interest in binding Moscow rapidly into rule-based international bodies such as the World Trade Organization and the OECD, although they put both processes on hold in reprisal for the Georgia war.Some Western analysts believe a weak Russia could be more dangerous, if mishandled, than a strong one.In NATO circles, some see a risk of the "Weimarisation" of Russia, comparing it to Germany's economically enfeebled Weimar Republic that was swept away by the rise of Hitler's Nazi party.Political humiliation and economic instability could lead to a surge of aggressive nationalism.After the collapse of the Soviet Union in 1991, wags branded Boris Yeltsin's rump Russian Federation "Upper Volta with nukes," capturing the paradox of a failed state with a ruined economy sitting on a huge arsenal of atomic weapons.When Vladimir Putin succeeded Yeltsin in 2000, he was determined to restore Russia's power and pride after a decade in which many Russians felt the West ignored their interests by expanding NATO in ex-communist eastern Europe.Today, it sometimes seems that Russophiles and Russophobes in Europe and the United States have become objective allies in exaggerating the importance of or the threat from Moscow.A more self-confident Europe and a less unilateralist America need to find a way of engaging with Russia according to its true weight, without treating it as a giant.

from UK News:

Plane stupid?

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Environmental protest group Plane Stupid manage to prevent at least 21 flights taking off when  they  invaded a runway at Stansted airport for five hours on Monday morning.

The group are protesting over the government's decision to allow the expansion of Stansted Airport with a second runway. The protest also follows the decision last week by Transport Secretary Geoff Hoon to delay the decision on whether to build a third  runway at Heathrow until January.

from The Great Debate:

Will Obama raise fuel taxes?

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John Kemp Great DebateJohn Kemp is a Reuters columnist. The views expressed are his own.

LONDON, Dec 8 (Reuters) - China's decision on Friday to link domestic fuel prices to the international price of crude oil, but increase consumption taxes on gasoline and diesel sharply to spur more efficient use of energy in the medium term, raises the question whether the incoming Obama administration might be tempted to do the same.

China is taking advantage of a cyclical pull back in energy to push through a permanent structural increase in taxes and prices. The aim is to combine a short-term boost to the economy with longer-term and more consistent incentives for improving energy efficiency.

from Pakistan: Now or Never?:

Assessing U.S. intervention in India-Pakistan: enough for now?

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In the immediate aftermath of the Mumbai attacks, India's response has been to look to the United States to lean on Pakistan, which it blames for spawning Islamist militancy across the region, rather than launching any military retaliation of its own. So after U.S. Secretary of State Condoleeza Rice's trip to India and Pakistan last week, have the Americans done enough for now?

According to Pakistan's Dawn newspaper, Rice told Pakistan there was "irrefutable evidence" that elements within the country were involved in the Mumbai attacks. And it quotes unnamed sources as saying that behind-the-scenes she “pushed the Pakistani leaders to take care of the perpetrators, otherwise the U.S. will act”.

from The Great Debate:

Hidden emotions, hidden agendas

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Wow, Thomas Friedman writing in the New York Times let fly with a zinger with his opinion piece "Calling all Pakistanis", presumably aimed at stirring compassion in Pakistani hearts over last week's horrifying attack in Mumbai.

Pakistanis were Peace protesters in Lahoreready enough to take to the streets to vent their anger and indignation over cartoons in Denmark, why can't they demonstrate a shared sense of outrage over the cold-blooded killing of 171 people in the country next door, asks Friedman.

from The Great Debate:

In China, OPEC’s nightmare comes true

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John Kemp Great Debate-- John Kemp is a Reuters columnist. The opinions expressed are his own --

China's decision to link domestic fuel prices indirectly to the international crude oil market, subject to a price cap, while hiking the consumption tax on gasoline and diesel and phasing out a variety of road tolls and other fees shows Saudi Arabia's worst fears about high prices and demand destruction are starting to come true.

It seems likely to confirm the kingdom's determination to see prices stabilize around $75 per barrel, well below recent price peaks, and far below the level sought by some other OPEC members, as well as international oil companies and advocates of alternative energy.

from The Great Debate:

Banking spins destruction myth: Hoocoodanode?

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James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Just as every society has a creation myth, banking is now busily writing a destruction myth that seeks to explain and soothe in a world torn to its foundations.

The myth, as expounded by regulators, bankers and their various service providers, is that we were hit by a perfect storm, a 1,000-year flood so unpredictable that we can't possibly be held accountable for it. An act of god, rather than the folly of man.

Can anyone stop the dominance of iTunes?

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**Tom Dunmore is Editor-in-Chief of Stuff magazine. The views expressed are his own.**

tomdunmoreeicstuffmagazine2Amazon’s music download service has finally arrived in the UK. That’s great news for music fans, who will benefit from lower prices and greater choice – but it’s not going to save the music industry from the dominance of iTunes.

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