1 Stocks fly high, not the economy (Linda Yueh on BBC) If only it were economic growth. Instead, it’s stock markets that have either hit all-time highs or are very close. Just look at the dizzying heights hit by the US S&P 500 and Dow Jones, as well as the UK’s 100 share index, Germany’s DAX and Japan’s Nikkei. It is an awfully strong rise in stock prices, even beyond the levels of the early dot.com bubble of the early 2000s, which, we recall, subsequently burst. That’s why many are asking: what’s driving the boom and is it a bubble?
Attention has turned to whether cheap cash is fuelling the stock rally. Central banks like the Fed, the Bank of England, and the Bank of Japan have undertaken quantitative easing (QE). But, will the bull market benefit the economy – the aim of these QE policies? Central bankers like Fed Chairman Bernanke say that their aim is to help Main Street and not Wall Street. It may well be what they intended to do. As more than half of American households own stocks, a rising stock market could make them feel wealthier. In other words, a rising market stabilises their estimated wealth. Think of it this way, your house may be worth $10,000 less, but your stocks are worth $10,000 more. At least, that’s the theory.
Of course, the other half doesn’t own stocks. Plus, most of the stock market is owned by institutions, such as pension funds. Those who have invested in pension funds will become beneficiaries in due course. But, that’s a little remote in terms of households hoping to benefit now from a rise in the market.
Eventually, companies may invest more in the economy or pay higher dividends. They, though, may also be wary of acting on possibly inflated share prices if consumers don’t look too robust. This is perhaps why there is such a stark contrast between the stock market and the economy. At least the US and Germany have recovered to their pre-crisis levels of output; the British and Japanese economies have not.
There’s a wariness that the policies used to address the last bubble could lead to the next one. Cue those who think that the post-dot.com bubble bust was supported for too long by low interest rates, which then led to the housing bubble and the 2008 financial crisis. Now, as QE is used to address the bursting of the US housing bubble, stocks are up again. It’s unsurprising that some are worried that history may be repeating itself.
2 African Union @ 50 (Georges Nzongola-Ntalaja in The Guardian) The African Union (AU) is now 50 years old. Amid the celebrations this week, the AU – which was established as the Organisation of African Unity (OAU) in 1963 – needs to take stock of its strengths and weaknesses as an intergovernmental organisation designed to promote the pan-African agenda politically and economically. That agenda consists of a three-dimensional project of political self-determination, economic self-reliance, and solidarity in the promotion and defence of African interests nationally and internationally.
Within the global context of the cold war, the more limited goals of the OAU were (1) the total independence of Africa from colonialism and white settler rule; (2) the peaceful resolution of interstate conflicts through negotiation, mediation and conciliation; and (3) greater solidarity and economic co-operation.
Decolonisation and majority rule, particularly in the colonial-settler states of Algeria, Kenya and South Africa where racism was institutionalised, were a major achievement of the project. The culminating event was the liberation of South Africa from apartheid in 1994, ending 82 years of struggle led by the African National Congress and 31 years of support by the continent through the OAU.
The OAU also had some achievements in conflict resolution, particularly mediating in border disputes, the major area of interstate conflict in Africa. However, most of the armed conflicts since independence have been internal rather than interstate. Unfortunately, the OAU failed to exercise its right of intervention in cases of state-sponsored terrorism and heinous crimes, including ethnic cleansing and genocide. Things changed for the better in the 1990s, particularly with the adoption in 1993 in Cairo of the OAU mechanism for conflict prevention, management and resolution, which gave the organisation a role in internal conflicts. Since replacing the OAU in 2002, the AU has increased its intervention in domestic affairs.
A major problem confronting the AU is resources. In addition to governments’ lack of political will, the lack of resources for peace and security, as well as economic co-operation, is partly because countries are also members of multiple regional institutions. As an organisation that reflects the social character of the states composing it, most of which are under authoritarian rulers who cling to power through force and electoral fraud, the AU is ill-equipped to meet people’s aspirations for democracy and social progress.
3 ‘Beardvertising’ takes a bow (Johannesburg Times) A US-based advertising agency has developed a concept that sees people’s beards being used as mini billboards, according to a report. “I think it’s the next big thing,” agency Cornett Integrated Marketing Solutions’ Whit Hiler told Business Insider. “Everybody loves beards.” The scheme pays men with facial hair $5 a day to walk around with a mini ad in their beards.
The ad comes in the form of a clip-on mini billboard, much like a hair clip, the patent for which the Beardvertising website says is pending. Previously, Green Day was one of many to buy ad space on Japanese girls’ temporarily tattooed thighs and many consumers sold body space for real tattoos of now-bust dot com businesses’ URLs, so ‘Beardvertising’, as it’s called, isn’t that strange of a concept, and is seen as “half joke, half genius”.
Hiler told BI that the campaign isn’t limited to Kentucky, but will be exported “anywhere that there were epic beards willing to host these little ‘beardboards’”. While this platform does serve a promotional piece, Hiler said: “We’re getting a ton of emails from guys with epic beards that want to host beardboards and we’re actually in talks with some brands that want to be Beardvertisers. Men (or women) with beards can sign up on the website.