Private banks have failed — we need a public solution; Austerity undermining Europe’s grand vision; India’s ‘child Picasso’; Flatter world shaping our future; SA’s abused husbands

1 Private banks have failed — we need a public solution (Seumas Milne in The Guardian) The greatest danger of the rate-fixing scandal now engulfing the City of London is that it will be managed and defused in the usual way, and nothing will really change. The forced resignation of Bob Diamond, the Barclays chief executive, follows well-worn procedures for dealing with crises that potentially threaten those in power: denounce the worst offenders, let a few symbolic heads roll, set up an inquiry under a safe pair of hands, and tweak the regulations to prevent a repetition of the most egregious misdemeanours.

The financial system has already failed at huge economic and social cost. It has been shown to be corrupt, incompetent, rapacious and economically destructive. The City’s claims to be an indispensable jobs and tax engine for the British economy are nonsense: the bailout costs of 2008-9 dwarfed the financial tax revenues of the boom years, which were below those of manufacturing even at their peak.
Tougher regulation or even a full separation of retail from investment banking will not be enough to shift the City into productive investment, or even prevent the kind of corrupt collusion that has now been exposed between Barclays and other banks. As a report by Manchester University’s Cresc research team argues this week, the size and complexity of the modern banking system makes it “near ungovernable”.

Only if the largest banks are broken up, the part-nationalised outfits turned into genuine public investment banks, and new socially owned and regional banks encouraged can finance be made to work for society, rather than the other way round. Private sector banking has spectacularly failed – and we need a democratic public solution.

2 Austerity undermining Europe’s grand vision (Amartya Sen in The Guardian) The dream of the unification of Europe goes back at least to the 15th century, but it is the nastiness of the world wars in the 20th century that established its urgent need in our time. It is important to appreciate that the movement for European unification began as a crusade for cross-border amity and political unity, combined with freer movement of people and goods. Giving priority to financial unification, with a common currency, came much later, and it has, to some extent, started to derail the original aspiration of European unity.

So what has gone wrong? Two issues need to be separated out: one, the counterproductive nature of the policy of austerity imposed on (or, as in Britain, chosen voluntarily by) governments; and two, a reasoned suspicion about the lack of viability of the shared euro. The moral appeal of austerity is deceptively high (“if it hurts, it must be doing some good”), but its economic ineffectiveness has been clear at least since Keynes’s debunking of “the remedy of austerity” in the Great Depression of the 1930s, with unemployment and idle capacity due to a lack of effective demand.

The problems we are seeing in Europe today are mainly the result of policy mistakes: punishments for bad sequencing (currency unity first, political unity later); for bad economic reasoning (including ignoring Keynesian economic lessons as well as neglecting the importance of public services to European people); for authoritarian decision-making; and for persistent intellectual confusion between reform and austerity. Nothing in Europe is as important today as a clear-headed recognition of what has gone so badly wrong in implementing the grand vision of a united Europe.

3 India’s ‘child Picasso’ (The Guardian) “I want to do some painting’ said the small voice underneath the dining table. “But first I want to shoot someone.” Kapow! A green foam ball pinged out from beneath the tablecloth, shortly followed by Shorya Mahanot, wielding a luminous pumpgun. Clearly pleased that he had hit one of his big sisters, Asia’s youngest abstract painter ran off to get changed.

Dubbed a “child Picasso” by the Indian media, five-year-old Shorya hit the headlines last month when India’s most famous cartoonist took him under his wing. RK Laxman, 90, welcomed the budding artist into his home in Pune, Maharashtra. He was so impressed, his father, Aditya Singh says, that he suggested the pair put on a joint exhibition in Mumbai next month. Neemuch, a dusty town in central India is best known, if at all, for its opium production and the unusually high number of locals who donate their eyes after death. But if Aditya Singh’s dream comes true, Neemuch may soon be famed as the birthplace and workplace of India’s greatest contemporary artist; a south Asian Giverny; a place as synonymous with 21st-century abstraction as New York is for pop art.

4 Flatter world shaping our future (BBC) In 2006, Thomas Friedman’s book The World is Flat portrayed a global population that was more borderless and interconnected than ever before. Since Friedman’s book, we’ve moved even further into the future, with nearly six billion connected mobile devices and two billion people on the internet. Today organisations can tap into scalable, on-demand cloud-computing resources from Amazon Web Services and Google.

This new wave of cloud services is challenging long-standing assumptions about how information should and can be shared, and how organisations should be structured. The convergence of cloud, social and mobile in emerging enterprise technologies is revolutionising how businesses share and collaborate, and radically flattening them in the process. The barriers that once existed between and within corporations are now disappearing, at an ever-increasing speed.

And in the process, entire industries are being remade. The flattening of sharing and collaboration is changing how we explore space, how digitally animated movies are rendered, how the analogue publishing industry conducts business digitally and how the world’s biggest companies leverage distributed talents to bring new products to market.

5 Manchester United seeks US listing (BBC) Manchester United has applied to list on the US stock market in a share sale aimed at raising $100m. In documents filed with the Securities and Exchange Commission, the Premier League giant said it was listing on the New York Stock Exchange. The club had earlier explored the possibility of a $1bn floatation on the Singapore stock market. United, among the best-supported clubs in the world, said it would use money from the listing to repay debt.

6 SA’s abused husbands (Johannesburg Times) Dozens of men have taken to the streets of Hillbrow, Johannesburg, to seek protection from their abusive wives, who regularly beat them up, according to a report. “We have a database of men who have been abused from all social classes, including pastors, men from informal settlements and medium-to-low density suburbs,” Moshate Men’s Right Organisation spokesman CEO Nashilo Mnisi told The New Age. The men marched under the organisation’s banner at the weekend. Mnisi said women were increasingly becoming more abusive towards men.

7 Net-addicted Arab kids (Khaleej Times) Emirati teens are trendsetters when it comes to keeping up to date with the latest technology, but that may have a downside, according to the top executive of a marketing research company citing a survey. Gagan Bhalla, CEO of AMRB, — which in part conducted the survey — said while Emirati teens have the latest smartphones and computers, these same diversions are preventing them from focusing on hitting the books.

Fuelling their tech-savvy lifestyle is the fact Emirati teens get four times more pocket money than their global counterparts, Bhalla said. “Here they spend Dh400 a week compared to Dh130 for teens across the globe,” he said. Emirati teen Ali Omran says he believes spending time online can be useful. The 15-year-old is a self-professed Twitter addict and spends nearly seven hours a day on his computer, compared to the one-to-two hours spent online by the teens surveyed. He also owns two phones, a Nokia and a BlackBerry.

8 India’s currency reserves are smaller than they seem (The Wall Street Journal) India officially has $286 billion in official foreign currency reserves, but its usable amount is less than that, according to an analysis by Deutsche Bank economists, Taimur Baig and Kaushik Das. The amount of reserves matters for India because the Reserve Bank of India has been using those reserves to intervene in currency markets to buoy the sinking rupee, which has fallen 18% in the past year. The bigger the reserves war chest, the more confidence investors will have that the bank can fight off a speculative attack on the currency.

Of the $286 billion official figure, Deutsche Bank notes that around $253 billion are “usable reserves” — meaning the RBI can tap them at short notice. The balance is held as $2.8 billion in US dollars at the IMF, $4.4 billion in the form of “special drawing rights” a quasi currency used by the IMF, and $25.6 billion as gold.

This, however, is “not the complete picture,” the economists note. India reports to the IMF other liabilities in the form of derivatives bets the RBI has made in the currency forwards and futures markets. This category has risen dramatically in recent months as the RBI has dipped into financial markets to support the falling rupee. Playing in forwards and futures can be an easier way for the RBI to affect the actual spot level of a currency that most people watch.

The total amount of these derivatives bets was as much as $14.2 billion as of May. Deutsche Bank subtracts that $14.2 billion from the “usable” $253 billion and that leaves India with about $239 billion. The smaller actual reserves “don’t raise alarm bells,” according to Deutsche Bank, as it’s still equal to about six months of India’s imports. This number could become important if the rupee resumes its slide.


About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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