Here is the Saturday, January 2nd, 2010 edition of what’s making news and interesting reads from around the world. Also please note that off to the left there are two widgets with updates on news from Asia and the world in a separate page: Around Asia & Around the World New Feeds.
Mexico’s Year of Living Dangerously
It’s the quiet war right next door. Drug violence claimed the lives of an estimated 7,600 people in Mexico in 2009 surpassing the record set in 2008 of 6,500 drug-related victims. Since President Felipe Calderón took office in December 2006, over 15,000 have died in the spiraling violence. The violence was most acute in Ciudad Juárez, across the Rio Grande border from El Paso, with an estimated 2,575 slayings in the city in 2009 versus an estimated 1,600 homicides in 2008.
A week before Christmas, Mexican Navy special forces killed Arturo Beltrán Leyva, one of the country’s most wanted drug lords, in a shootout in the well-to-do resort of Cuernavaca , notching an important victory in President Calderón’s three-year-old battle against the drug cartels. Four other suspected drug traffickers died, including one who apparently killed himself rather than be arrested. One Mexican Navy officer, Ensign Melquisedet Angulo Córdova was killed. The day after his funeral, Gunmen broke into his mother’s home of and gunned down his mother, brother, sister, and an aunt in a reprisal killing that shocked the country. One thing that we learned in Colombia is that you never ever publish the names of fallen heroes.
More on Mexico’s year of living dangerously at CNN and from the The Newshour with Jim Lehrer.
US Intelligence Believes Peter Moore Was Held in Iran
General David Petraeus, the head of US central command, confirmed the US intelligence assessment that Peter Moore, a British citizen had been working for US management consultancy Bearingpoint in Iraq when he was kidnapped in 2007 along with four bodyguards, spent at least part of his 31 months in confinement in Iran. The British newspaper The Guardian had reported on Wednesday that evidence suggested that the five British men kidnapped in Iraq were taken in an operation led and masterminded by Iran’s Revolutionary Guard.
The British Foreign Office has repeatedly said that there is no evidence that Peter Moore was ever held inside Iran, dismissing the report in The Guardian as “speculation”. But General Petraeus flatly contradicted the official British view at a Baghdad press conference. US intelligence believes that the Britons were incarcerated in prisons run by the al-Quds force, a unit that specialises in foreign operations on behalf of the Iranian government.
An Oil Tanker Super Glut Stretches 26-Miles
Bloomberg reports that “a 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.”
The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.
Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet.
“The tanker market has been defying gravity,” said Martin Stopford, a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971.
More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles.
Harsh Lessons We May Need to Learn Again
US progressive economist and Nobel Laureate Joseph Stiglitz has an op-ed in the China Daily reflecting on the global economy in 2009 and its prospects for 2010. Professor Stiglitz argues that unless the United States and other advanced industrial countries make much greater progress on financial-sector reforms in 2010, these economies may need to relearn five harsh lessons.
The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.
The second important lesson involves understanding why markets often do not work the way they are meant to. There are many reasons for market failures. In this case, too-big-to-fail financial institutions had perverse incentives: if they gambled and succeeded, they walked off with the profits; if they lost, the taxpayer would pay. Moreover, when information is imperfect, markets often do not work well – and information imperfections are central in finance. Externalities are pervasive: the failure of one bank imposed costs on others, and failures in the financial system imposed costs on taxpayers and workers all over the world.
The third lesson is that Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster. Other countries succumbed to the old orthodoxy pushed by the financial wizards who got us into this mess in the first place.
The fourth lesson is that there is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked.
The fifth lesson is that not all innovation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are not well aligned with social returns, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation. For example, while the benefits of many of the financial-engineering innovations of recent years are hard to prove, let alone quantify, the costs associated with them – both economic and social – are apparent and enormous.
The full op-ed is at the link above.