"The old order changeth, yielding place to new,
And God fulfils Himself in many ways,
Lest one good custom should corrupt the world."
[Morte d'Arthur - Tennyson]

The world must move on, as there is no formula for success. The enterprise is much greater than that.

APRIL 5th 2008
At last we can start building a coherent approach to the new global reality brought about by the industrial and technological evolutions and their effects. There are still those who are reluctant to understand the Global Warming element. Only yesterday news that global temperatures had not risen in the past decade caused some to think our concerns were premature, overlooking the fact that the amount of ice-melt and evaporation was enough to have absorbed the energy without the need to attribute any cooling this year to el Nino.

Brown warns on global cash crisis

The world is facing "the first truly global financial crisis", the prime minister has told leaders.

Gordon Brown said institutions such as the World Bank and United Nations need reform to tackle the double threat of economic turmoil and climate change.

He is hosting the two-day gathering in Watford attended by delegates including ex-US president Bill Clinton and Australian PM Kevin Rudd.

Topics including climate change and development will be on the agenda.

South African President Thabo Mbeki, New Zealand Prime Minister Helen Clark and EU representatives are also taking part.

Mr Brown and Mr Mbeki are due to hold one-to-one talks at some point on Saturday, with the election in Zimbabwe likely to feature heavily in discussions.

Arriving at the summit, Mr Mbeki said the international community should await the results of last Saturday's poll.

"It's time to wait and see the outcome of the election results. If there's a re-run of [the] presidential election, let's see what comes up with that," he said.

"I think that's the correct way to go."

The UK prime minister has already spoken to the leaders of Ghana and Liberia about the situation in Zimbabwe.

'Early warning system'

Speaking at the start of the Progressive Governance conference of centre-left leaders and politicians, Mr Brown said that the old institutions established in the aftermath of World War II were now unable to cope.

"We now have to reshape our global rules and global institutions for this new era," he said.

"We are facing a global financial crisis which is probably the first truly global financial crisis of the modern world.

"We have to reform our global financial institutions. It is absolutely clear that the national supervision that we have is inadequate and we need a global agreement."

The prime minister said the International Monetary Fund (IMF) needed complete re-structuring so it could act as an "early warning system" for the international economy.

He said the World Bank should help developing nations move towards cleaner economic development.

Mr Brown also suggested there should be an international reserve force of volunteers ready to help rebuild countries such as Rwanda and Bosnia following global crises.

APRIL 6th 2008
The question now is to work out the relationship between the solution to the Global Warming issues and the Global Finance issues, first on a rational basis (the probabilities and alternatives) then politically (the individual, collective and global choices).

An interesting edition of "Analysis" on BBC Radio 4 discussed the merits of investing in Climate Change Mitigation or Climate Change Adaption, as if these were alternatives. One self-styled expert, asked if money invested in one meant less invested in the other said "Yes, a pound or a dollar can only be spent once." Well, this man clearly does not understand money. Every pound or dollar gets spent again and again and again. A pound invested in a new building is not buried in the stone or concrete. That pound has incentivised human energy and ends up in the pockets of architects, builders, accountants, suppliers etc. who then spend it elsewhere. What we have to decide is how money is spent both by individuals and by government, so that a greater proportion of it is spent, continually as it circulates through the economy, in ways that both mitigate and adjust to climate change, energy conservation and sustainable practice in every realm.

The trick is to do this without inflating the money-supply. Some of the jokers in the pack are money launderers, black marketeers, and those who make money out of money through manipulation of system over which they have privileged control, when these people are not interested in, let alone dedicated to, environmental good practice. Money that escapes from both political control or control by responsible individuals will always exist, but we need to keep tabs on it and note any instances where it is preventing successful mitigation of or adaption to, climate change.

That said, we need to agree officially that mitigation and adaption are not a zero-sum game, nor is carbon reduction the only way to stop or even reverse global warming, just a necessary part of it and a good thing in its own right.

APRIL 21st 2008
I m glad the Tories have 'broadly welcomed' the Bank of England's action today in taking over 50 billion pounds worth of mortgaged properties from the leading banks at 30% discount. Vince Cable is (Lib Dem) is still bleating about it having to be secured, and still calling it a 'loan', but it is not a loan. The banks have taken a loss, if the housing value falls even further the banks will have to hand over more properties to balance the sum they have received. If they need more funds on these terms the Bank can supply. The so called 'tax-payer' a phrase used by George Osborne quite often regardless of the fact that he does not even know what it means, is not involved any more or less that any other class of citizen using our land and our currency. There is no need to rub the banks' noses in it. However, all this affair should be a useful lesson to any Scots who were thinking of voting for independence. What's that, yer wee lads? What sort of independence would you like. Please define.

JUNE 1st 2008
The smoke  and dust is starting to clear from the collapsing rubble of the credit crunch. It reveals a disaster area of extraordinary proportions. The global finance 'industry' is in a position of self-strangulation. We have bought some temporary stability but the banking system is largely discredited.

It is necessary to understand that any national/international system that uses tradable currency and financial instruments that value debt as an asset (rather than a liability) on the basis that the debt earns interest and any default is apparently insured, is based on a dynamic model that depends on the dynamics for its existence. If the music stops, we need to count the chairs. At the moment, the number of dancers exceeds the number of chairs not by 10% but by over 50% in some major western economies.

There is going to be a quite astonishing recession, regardless of what you may hear, and we shall have to recover on a different basis. It is rather depressing that so many of the highly paid executives who have been playing the finance game will have escaped with their ill-gotten gains but there you go. The private equity boom is over and we should be thankful for that. The greatest problem for politicians is how to support the lower levels of the economy on a fair basis.

The complexity of the instruments used by financiers have been rightly blamed for obscuring realities. Have a read of:
The lack of confidence in the value of debts has meant that official interest rates are now not a measure of global liquidity.
For background to international interest rate fixing see
As a longtime advocate of the EU, EMU and the EURO I have to say that I hope this crisis will assist our moves to joining the European project on a proper basis.

JUNE 2nd 2008     An excellent piece from the IHT

The world is upside down

By Roger Cohen Published: June 1, 2008

RIO DE JANEIRO: For a while the world was flat. Now it's upside down.

To understand it, invert your thinking. See the developed world as depending on the developing world, rather than the other way round. Understand that two-thirds of global economic growth last year came from emerging countries, whose economies will expand about 6.7 percent in 2008, against 1.3 percent for the United States, Japan and Euro zone states.

The sharp rise in prices for energy, commodities, metals and minerals produced mainly in the developing world explains part of this shift. That has created the balance of payments surpluses fueling dollar-dripping sovereign wealth funds in countries like China. They amuse themselves picking up a stake in BP here, a chunk of Morgan Stanley there, and why not a sliver of Total.

We of the developed-world Paleolithic species are fair game for the upstarts now, our predator role exhausted. The U.S. and Europe may soon need all the charity they can get.

To place this inversion in focus, it helps to be in Brazil, where winter (so to speak) arrives with the Northern Hemisphere summer, and economic optimism, as exuberant as the vegetation, increases at the same brisk clip as U.S. foreclosures.

Huge offshore oil finds, a sugarcane ethanol boom, vast reserves of unused arable land, mineral wealth and abundant fresh water contribute to Brazilian buoyancy. But natural resources are only part of the story. As in China and India, an expanding internal market is bolstering growth. So is increasing corporate sophistication and global ambition.

At the annual National Forum, a gathering of business leaders, I felt like a first-world pipsqueak as leaders of the national energy company Petrobas (bigger than BP, Shell and Total) and Companhia Vale do Rio Doce, or CVRD (the world's second largest mining company), reeled off head-turning statistics.

Petrobras, which has spearheaded Brazil's push to self-sufficiency from heavy dependence on imported oil 30 years ago, will more than double oil production to 4.2 million barrels a day in 2015 from 1.9 million barrels today.

"With the latest discoveries, the South Atlantic will become a huge oil producer," predicted José Sergio Gabrielli de Azvedo, its chief executive.

Roger Agnelli of CVRD waved away the United States ("It's full of debt") to focus on the company's ambitions in Asia. It was imperative to be there, he said, because that's where growth, capital and ambition are. China, he noted, will account for 55 percent of iron ore consumption, 31.6 percent of nickel, and 42 percent of aluminum by 2012. Case closed.

Like many other big emerging-market corporations, CVRD has been on a buying-spree. It's not just sovereign wealth funds that are acquiring first-world companies these days. It's the new giants of the NAN (Newly Acquisitive Nations).

Emerging-market mergers and acquisitions are up 17 percent this year to $218 billion, while for the rest of the world they're down 43 percent to $991 billion, according to Thomson Reuters.

The 2007 Unctad World Investment Report said developing-world direct foreign investment totaled $193 billion in 2006, compared to a 1990s annual average of $54 billion. The U.S. 2006 figure was $216.6 billion.

CVRD bought Canada's Inco, a nickel miner, for $17 billion in 2006. It came close to acquiring the Anglo-Swiss miner Xstrata for $90 billion this year. Just last week, India's Vedanta Resources reached a $2.6 billion deal to buy U.S. copper miner, Asarco. That deal is being challenged by Grupo Mexico, creating a Latin-American-Asian fight for a U.S. company.

If you have trouble getting your mind around that, try standing on your head.

That's also a good position from which to view India's Tata Motors agreeing to buy Land Rover and Jaguar from Ford for $2.3 billion, or Tata Steel's acquisition last year of the Anglo-Dutch Corus Group steel company for $12 billion.

Globalization is now a two-way street; in fact it's an Indian street with traffic weaving in all directions.

"In an inverted world, not only have developing economies become dominant forces in global exports in the space of a few years, but their companies are becoming major players in the global economy, challenging the incumbents that dominated the international scene in the 20th century," said Claudio Frischtak, a Brazilian economist and consultant.

A shift in economic power is underway whose implications the developed world has not grasped. Of course the G-8 and the permanent membership of the UN Security Council need to be expanded to reflect this change. The 21st century can't be handled with 20th-century institutions.

That's obvious. Less obvious is how the United States, which underwrites global security at vast expense, begins to share this burden, so that the new multi-polarity of wealth is reflected in a multi-polarity of security commitments.

Headstands are in order for the next U.S. president.

SEPTEMBER 15th 2008
The situtation as I summarised it on June 1st has evolved as predicted. The US has tried massive acts of stabilisation with Bear Stears, Fanny Mae/Freddy Mac. The Bank of America has purchased Merril Lynch (who these days remebers Pierce, Fenner or Smith!). But Lehman Bros are too dependent on the financial trade-wind and sailing too fast to find anyone mad enough to board or take them in tow. The velocity of operations and the wages of the high performace crew are just too dangerous to take over so the ship will beach, crash or sink, which ever metaphor you prefer. Beachcombers (or rather agents of the wealthy, posing as beachcombers) will now pick through the wreckage - if they can get away with it.
See RECESSION for further comments.

OCTOBER 19th 2008
I have left this file rest for over a month to let what I wrote myself and what I drew readers attention to sink in. I am not going to say "I told you so" because the whole point of this web site is to say "I told you so".

I would like to say something about the accusations from David Cameron and Alex Salmond that Gordon Brown brought about the 'Credit Crunch' and the 'Global Financial Crisis'. Not only could no one national leader bring such a thing about until its time was due, I will say without fear of error that had Gordon Brown been responsible then he should be thanked heartily.

There was no way to manage the last decade without using the dynamic methods available to finance important domestic investment which previous UK governments had neither the will or the nous to carry out. It is easy to say in hindsight the forces unleashed in the globalised capital markets should have been regulated and controlled to avoid an overreach and crash, but in reality there was no possibility of that. It had to be tested to destruction by being given enough rope to hang. It was not the old UK boom-and-bust cycle. It was a global boom, a poker game in which the UK had no choice but to participate in until the lead player, the US, blew it by betting with chips it had clearly been printing without backing in its housing boom.

Now, with the EU, the US and the rest of the world realising we must design a global financial structure we have a wonderful opportunity which only a collapse could allow, giving us a way to deal with many things the global market was ignoring. At the same time it will allow domestic priorities in individual countries to be attended to. You need a crash to get a redesign, keeping the best. I remember when Les Paul, who mostly invented the electric guitar and certainly invented how to play and record it, broke his arm and nearly died in a car crash. He said it was the best thing that ever happened to him. He was able to ditch all old mental and muscular musical habits yet use all the knowledge he had gained. It was like having a chance to start your life again. It can be like that with global and domestic finance and banking if we keep our cool. Of course in the US the legal gloves are off and millions will be spent on retribution makng lawyers rich. Chaqu'un a son gout. In Russia, they might just jail them all first, but I doubt there is a sub-prime scandal or any equivalent where the general public are involved in the investment, deposit and banking systems.

Leaders to rethink global finance

President George W Bush has invited world leaders to gather in the US by the end of the year to discuss reform of the global financial system.

The summit would be the first of a series announced after talks between Mr Bush, French President Nicolas Sarkozy and EU Commission chief Manuel Barroso.

But the agenda is unclear and differences are already emerging.

Mr Bush said any plan must not undermine free markets. Mr Sarkozy said "hateful practices" must be abandoned.

Before he arrived at Camp David, the US presidential retreat in the state of Maryland, the French leader warned the world could not "continue to run the economy of the 21st Century with instruments of the economy of the 20th Century".

Calls for action

After the meeting, Mr Bush said: "It is essential that we work together because we are in this crisis together."

Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again
US President George W Bush

He went on to invite world leaders to an economic summit after the US election in November, to discuss responses to the current financial crisis.

"Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again," he added.

But Mr Bush said any plan to rethink financial mechanisms should "preserve the foundations of democratic capitalism" and include "a commitment to free markets, free enterprise and free trade".

'New order'

Mr Sarkozy said the crisis could offer a "great opportunity" to build the capitalism of the future and leave behind the "hateful practices" of the past.

We cannot continue along the same lines because the same problems will trigger the same disasters
French President Nicolas Sarkozy

"We cannot continue along the same lines because the same problems will trigger the same disasters," he warned.

Mr Sarkozy said the hedge funds, tax havens and financial institutions operating without supervision should all be re-thought.

"This is no longer acceptable," he added. "This sort of capitalism is a betrayal of the sort of capitalism we believe in."

European Commission President Manuel Barroso, who also took part in the talks, said: "We need a new global financial order."

Details of the summits are still to be worked out, but White House spokesman Tony Fratto said the first was likely to be held in November.

He added that Mr Sarkozy had recommended New York as a location. UN Secretary General Ban Ki-moon has proposed using the organisation's headquarters there as a venue.

That summit would seek to "review progress being made to address the current crisis and to seek agreement on principles of reform needed to avoid a repetition," the leaders said in their statement.

"Later summits would be designed to implement agreement on specific steps to be taken to meet those principles," it added. Other world leaders are to be consulted over the plan.

Correspondents say such meetings would echo the Bretton Woods conference of 44 nations after World War II, which established many of the institutions and monetary systems that are now under threat.