- Bernd Debusmann is a Reuters columnist. The opinions expressed are his own -There are times when silence can be as eloquent as words. Take the case of Washington’s reaction to announcements, in quick succession, from Mexico and Argentina of changes in their drug policies that run counter to America’s own rigidly prohibitionist federal laws. No U.S. expressions of dismay or alarm.Contrast that with three years ago, when Mexico was close to enacting timid reforms almost identical to those that became effective on August 21. In 2006, shouts of shock and horror from the administration of George W. Bush reached such a pitch that the then Mexican president, Vicente Fox, abruptly vetoed a bill his own party had written and he had supported.What has changed? Was it a matter of something happening in August, when most of official Washington is on holiday? Or was it a sign of greater American readiness to rethink a war on drugs that has, in almost four decades, failed to curb production and stifle consumption of illicit drugs? And that despite law enforcement efforts that resulted in an average of around 4,700 arrests for drug offences every single day since the beginning of the millennium. (Just under 40 percent of those arrests are for possession of marijuana).Or was it a matter of more countries realising that, as drug reform advocate Ethan Nadelmann puts it, “looking to the United States as a role model for drug control is like looking to apartheid-era South Africa for how to deal with race.” Nadelmann heads the Drug Policy Alliance, one of several groups lobbying for reform of U.S. drug policies.Under the Mexican law that took effect in August, it is legal to possess small, precisely specified amounts, for personal use, of marijuana, heroin, opium, cocaine, methamphetamine and LSD. In Argentina, the Supreme Court declared unconstitutional criminal sanctions for the possession of small quantities of marijuana for personal use. The ruling opened the door to legislation similar to Mexico’s.Brazil decriminalised drug possession in 2006; Ecuador is likely to follow suit this year. In much of Europe, drug use (as opposed to drug trafficking) is treated as an administrative offence rather than a criminal act. America’s hard-line approach has helped to make the United States the country with the world’s largest prison population.Advocates of more flexible policies say they feel the winds of change beginning to rise in the administration of Barack Obama, a president who has admitted that in his youth, he smoked marijuana frequently and used “a little blow”(of cocaine) when he could afford it. But hopes for a break from long-standing orthodoxy might be premature, even though a recent Zogby poll showed 52 percent support for treating marijuana as a legal, taxed and regulated drug.AMSTERDAM’S SCHIZOPHRENIC PRAGMATISM “As regards to legalization, it is not in the president’s vocabulary and it is not in mine,” Obama’s drug czar, former Seattle police chief Gil Kerlikowske said in July. “Marijuana is dangerous and has no medicinal benefits.”Oddly, he made the statement in California, where an estimated 250,000 people can legally buy marijuana with a letter of recommendation from their physician. The drug is used for a variety of illnesses, from chronic pain to insomnia and depression. There is extensive academic literature on the medical benefits of marijuana.Medical opinion, however, conflicts with the congressionally-mandated job description Kerlikowske inherited when he took up the post. It says that the director of the Office of National Drug Policy, the White House group in charge of drug war strategy, must “oppose any attempt to legalize the use of a substance listed in schedule I of section 202 of the Controlled Substances Act.”Schedule I of the act, which took force in 1970 during the administration of Richard Nixon, the president who formally declared “war on drugs”, places marijuana alongside powerfully addictive drugs such as heroin. The wrong-headed classification matches that of an international treaty, the 1961 United Nations Single Convention of Narcotics Drugs. The convention is a major obstacle for signatory countries that want to legalize drugs.No country has actually done that. Even the Netherlands, the Mecca of marijuana aficionados, operates on a system best described as schizophrenic pragmatism. Amsterdam’s “coffee shops” are allowed to have 500 grams of marijuana on the premises and sell no more than 5 grams per person to people over 18. The runners who re-supply the shops routinely carry more than the legal quantity and violate the law. So do importers.While the failure of the drug war and the prohibitionist ideology that drives it have been analysed in great detail in scores of sober assessments by academics and government commissions, there have been few studies of the “how to” of legalization. What, for example, would happen to the criminal mafias that are now running a violent illicit business with a turnover estimated at more than $300 billion a year?Some drug traffickers would switch to other criminal activities and it is realistic to expect increases in such areas as cyber crime and extortion, according to Steve Rolles, Head of Research of the Transform Drug Policy Foundation, a British think tank. “But the big picture will undoubtedly show a significant net fall in overall criminal activity in the longer term,” he said in an interview. “Getting rid of illegal drug markets is about reducing opportunities for crime.”Rolles is author of the optimistically titled “After the war on drugs: Blueprint for Regulation,” a book scheduled for publication in November and meant to kickstart a debate on what he sees as something of a blank slate – the specifics of regulation for currently illegal drugs.On a global scale, nothing much can happen unless there are changes in the world’s largest and most lucrative market for drugs, the United States. If they happen, they won’t happen fast. “I see this as a multi-generational effort, with incremental changes,” said Nadelmann, who has been involved in drug policy since he taught at Princeton University in the late 1980s. “But for the first time, I feel I have the wind in my back and not in my face.”(You can contact the author at Debusmann@Reuters.com)
Just as Chinese stocks often rise without fundamental support, they are now tanking even though companies just had a better-than-expected earnings season.
Fears about a policy shift towards tighter liquidity are blamed for the 22 percent decline in the Shanghai market from its August peak. But those fears are largely overblown. Beijing might be talking about boosting domestic consumption, but structural reforms take time and there is little the authorities can do other than continuing to reinflate the economy in the short run.
There is a long list of outfits which have done well out of the banking bailout, but the U.S. Treasury and Federal Reserve are not among them.
According to calculations made for the New York Times, the Treasury’s Troubled Asset Relief Program (TARP) has reaped profits of about $4 billion, or 15 percent annualized, as eight of the largest banks to participate have fully repaid what they owe.
Meanwhile unnamed Federal Reserve officials told the Financial Times that the central bank’s liquidity facilities have generated a “gain” of $14 billion since August of 2007.
By making the war in Afghanistan his own, declaring it a war of necessity and sending more troops, President Barack Obama has entered a race against time. The outcome is far from certain.
To win it, the new strategy being put into place has to show convincing results before public disenchantment with the war saps Obama’s credibility and throws question marks over his judgment. Already, according to public opinion polls in August, a majority of Americans say the war is not worth fighting. Almost two thirds think the United States will eventually withdraw without winning.
There are similar feelings in Britain, which fields the second-largest contingent of combat troops in Afghanistan after the United States. A poll published in London this week showed that 69 percent of those questioned thought British troops should not be fighting in Afghanistan.
The People’s Bank of China’s ambitious plan to settle foreign trades in yuan has been given the cold shoulder by companies both at home and abroad. The failure of this experiment shows the difficulties China faces in internationalising its currency.
Launched by the PBOC with a fanfare almost two months ago, the pilot scheme has so far seen only thin volumes of yuan trade settlement. Guangdong province, the country’s export hub, was supposed to be the cornerstone of the plan, but local officials said they found few willing counterparties.
Activity in the U.S. housing market has bottomed – a huge plus for the economy – but a recovery in prices will not be sustained and the threat from real estate to bank capital remains acute.
We are over the worst, but only because of massive official support, support that will soon ebb. That could lead to a relapse, especially among more expensive houses, but nothing along the lines of what we have suffered so far.
The news has been good.
Newly built homes sold in July at the fastest pace in ten months, up 9.6 percent, in U.S. Commerce Department data on Wednesday. This echoes a fairly good showing in last week’s data on sales of existing homes which are selling at the fastest pace in almost two years.
If market performance is anything to go by, Taiwan is the biggest beneficiary of China’s economic stimulus.
Because of Taiwan’s heavy dependence on exports to Western consumers, it was assumed there was little Beijing could do about its downturn. But Beijing has gone out of its way to take care of the recession-hit island. This year, it sent several procurement missions to Taiwan to buy billions of dollars of goods, even though Taiwan’s trade surplus with China is already approaching as much as a fifth of its economy.
A proposal to give banks, hedge funds and private equity firms “affordable” credit default swap-based insurance against market panics will be very effective: it will effectively encourage even more risk taking and turn the next crisis into one about government credit.
Global central bankers assembled at the Jackson Hole conference last week heard the proposal, by two Massachusetts Institute of Technology economists Ricardo Caballero and Pablo Kurlat. Their idea is that most of the damage in panics is due to a combination of investors overestimating the damage during a market seizure and policy-makers being too slow to pull the trigger on bailouts.
The solution, therefore, is to send the banks into the next panic ready armed with a Fed-backed get out of jail free card which the authorities can activate at a moment’s notice.
The Chinese leaders have a dream. The banks pump trillions of yuan into the market, which props up asset prices, creates new demand, and gets the economic engine roaring again. Then, just before inflation starts to surge, the money is drained out of the system.
Others, from U.S. Federal Reserve Chairman Ben Bernanke to Bank of England Governor Mervyn King, share the dream but the Chinese economy, still largely driven by the state, should make it easier to realise. Unfortunately, investors in Shanghai’s stock market have their own ideas — the mere suggestion of credit tightening caused the index to plunge 20 percent in just two weeks to Wednesday’s close before bouncing slightly.
SYDNEY, Australia — Here’s a damning statistic: Australia spends 8.7 percent of its GDP on health care and covers everyone, irrespective of their employment status. The U.S., meanwhile, spends 16 percent of its GDP on health care — far more than any other industrialized country — yet 47 million of its citizens lack health insurance while millions more are underinsured.
Critics of nationalized health care paint systems such as Australia’s as anything but healthy or caring, with putrid public hospitals that offer little more certainty than a long waiting list. This is a point not lost on Australians, with the topic of hospital waiting lists a perennial hot-button topic at election time.