Daily Archives: September 18, 2008

Chinese call for a New Currency Order in wake of “Financial Tsunami”

China paper urges new currency order after “financial tsunami”

Reuters | Sep 17, 2008

BEIJING (Reuters) – Threatened by a “financial tsunami,” the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

The commentary in the overseas edition of the People’s Daily said the collapse of Lehman Brothers Holdings Inc (LEH.P: Quote, Profile, Research, Stock Buzz) “may augur an even larger impending global ‘financial tsunami’.”

The People’s Daily is the official newspaper of China’s ruling Communist Party, and the overseas edition is a smaller circulation offshoot of the main paper.

Its pronouncements do not necessarily directly reflect leadership views, but this commentary by a professor at Shanghai’s Tongji University suggested considerable official alarm at the strains buckling world financial markets.

China’s central bank earlier this week cut its lending rate for the first time in six years, a move analysts said was aimed at bolstering the economy and the battered stock market.

“The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States’ financial oversight and supervision,” writes the commentator, Shi Jianxun.

“The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.”

But Vice Premier Wang Qishan, on a visit to the United States, told U.S. trade officials in a meeting on Tuesday that China and the United States needed to maintain close economic ties with global markets going through such turbulence.

“The Chinese government is well aware of the fact that the United States, which is the world’s largest developed country, and China, which is the world’s largest developing country, should have constructive and cooperative economic and trade relations,” he said.

China is a major buyer of U.S. Treasury bonds, and through its sovereign wealth fund it has taken stakes in two large U.S. financial institutions.

In July 2005, China revalued the yuan and freed it from a dollar peg to float within managed bands. But the yuan and China’s trade remains tightly linked to the fortunes of the dollar.

The commentary suggested China must brace for grave economic fallout and look to alternatives, saying the crisis brings to mind the Great Depression of the 1930s.

“Lehman Brothers announced bankruptcy will not only have a domino effect on the global financial world, it will bring a shock to the world economy,” the front-page comment stated.

(Reporting by Chris Buckley; Editing by Ken Wills)

Russian mafia take over as world’s top crime gang

Daily Record | Sep 17, 2008

By Ian Brandes

THEY trade in everything from stolen art to nuclear technology and leave rivals riddled with bullets in the streets of Moscow.

Now the worst thugs in the Russian Mafia have blasted their way to the top of the global organised crime league.

Moscow’s Solntsevskaya Bratva, known as the Brotherhood, have just been named the worst criminal gang in the world in a major survey.

And the planet’s most famous mobsters, the “Five Families” of the New YorkMafia, barely scrape into the top 10.

The Brotherhood took over the underworld of south-west Moscow in the 1980s after godfather Sergei Mikhailov learned his criminal trade in the Siberian labour camps.

Then, by linking up with other gangs, they built an empire worth tens of billions of pounds across Russia and beyond.

The survey says: “From its base in Moscow, this syndicate runs rackets in extortion, drug trafficking, car theft, stolen art, money laundering, contract killings, arms dealing, trading nuclear material, prostitution and oil deals.”

Anyone who threatens the Brotherhood’s business tends to end up dead.

They murdered a string of rival hoods in Moscow in the early 1990s and a bid to put Mikhailov on trial in Switzerland in 1996 had to be abandoned after several witnesses were shot or blown up.

Former FBI agent Bob Levinson says the Russian Mafia are “the most dangerous people on earth”.

But the survey, compiled by online men’s mag askmen.com, reveals that they have rivals in every corner of the world.

No 2 in the gangland top 10 are the Yamaguchi-gumi syndicate, the biggest of Japan’s Yakuza crime clans.

Based in the city of Kobe and run by mastermind Shinobu Tsusaka, the 40,000- strong Yamaguchi-gumi run extortion, gambling, vice, drugs and loan-sharking scams. They also take kickbacks from building projects and peddle online porn.

Third place in the poll goes to an Italian Mafia gang – but not the Sicilian Cosa Nostra or the Camorra of Naples.

The little-known “‘Ndrangheta”, based in the southern district of Calabria, have ties to Colombian drug barons.

Some believe they are responsible for 80 per cent of Europe’s cocaine trade.

While other Mafia gangs have been crippled by informers, the ‘Ndrangheta have kept their vows of silence because the mob is built on close family ties.

Most gangs only care about cash. But the fourth mob on the list, India’s D Company, have sinister ties to Islamic terror.

Boss of bosses Dawood Ibrahim masterminded a wave of bombings that killed 257 people in Mumbai in 1993.

Ibrahim has links to al-Qaeda and the Taliban and is widely believed to be hiding in Pakistan. He is rumoured to have had plastic surgery to alter his face.

Fifth on the list are the ruthless 14K triad from Hong Kong, who trade in human beings as well as drugs and assassinations.
The Sicilian Mafia only make sixth place in the poll after a string of high-profile arrests of their bosses.

Seventh are the Chinese Dai Huen Jai gang, many of whom are veterans of Chairman Mao’s Red Guards.

One of the world’s most violent mobs, theMexican Tijuana Cartel, take eighth place. Turf wars between the Cartel, led by Eduardo Arellano-Felix, and other gangs have killed hundreds in recent years.

Ninth spot goes to Taiwan’s United Bamboo triad.

And despite their Hollywood reputation, the five New York Mafia families are left bringing up the rear.

The Bonanno, Colombo, Gambino, Genovese and Lucchese clans have been relentlessly harried by the FBI.

Many bosses are now behind bars, including Gambino godfather Nicholas Corozzo, who was held in March.

Top 10 criminal organizations

1 Solntsevskaya Bratva

2 Yamaguchi-gumi

3 ‘Ndrangheta

4 D Company

5 14K

6 Sicilian Mafia

7 Dai Huen Jai

8 Tijuana Cartel

9 United Bamboo

10 The US Mafia ‘The Five Families’

Worst Financial Crisis Since the Great Depression With No End in Sight

“From now on, depressions will be scientifically created.”

– Congressman Charles A. Lindbergh Sr., following the passage of the Federal reserve Act in 1913

The financial crisis that began 13 months ago has entered a new, far more serious phase.

Wall Street Journal | SEP 18, 2008

By JON HILSENRATH, SERENA NG and DAMIAN PALETTA

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem — troubled subprime mortgages — in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There’s also a growing sense of wariness about the health of trading partners.

The consequences for companies and chief executives who tarry — hoping for better times in which to raise capital, sell assets or acknowledge losses — are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring government intervention that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.

Expectations for a quick end to the crisis are fading fast. “I think it’s going to last a lot longer than perhaps we would have anticipated,” Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.

“This has been the worst financial crisis since the Great Depression. There is no question about it,” said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. “But at the same time we have the policy mechanisms in place fighting it, which is something we didn’t have during the Great Depression.”

Spreading Disease

The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. The illness seems to be overwhelming the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied. Fed Chairman Bernanke and Treasury Secretary Henry Paulson, walking into a hastily arranged meeting with congressional leaders Tuesday night to brief them on the government’s unprecedented rescue of AIG, looked like exhausted surgeons delivering grim news to the family.

Fed and Treasury officials have identified the disease. It’s called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can’t pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

At least three things need to happen to bring the deleveraging process to an end, and they’re hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.

But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets’ prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms’ share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a “financial accelerator.”

“Many of the CEO types weren’t willing…to take these losses, and say, ‘I accept the fact that I’m selling these way below fundamental value,'” said Anil Kashyap, a University of Chicago Business School economics professor. “The ones that had the biggest exposure, they’ve all died.”

Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.

Not Enough

Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down $408 billion worth of assets and raised $367 billion worth of capital.

But that doesn’t appear to be enough. Every time financial firms and investors suggest that they’ve written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit $636 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 — the equivalent of $250 billion in lost goods and services each year.

“This is a deleveraging like nothing we’ve ever seen before,” said Robert Glauber, now a professor of Harvard’s government and law schools who came to Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. “The S&L losses to the government were small compared to this.”

Hedge funds could be among the next problem areas. Many rely on borrowed money to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many have taken out loans to make their investments and are finding it more difficult now to borrow.

That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.

Debt-driven financial traumas have a long history, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help — and may have prevented or delayed a deep recession. But, at least in this instance, they don’t suffice.

In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. President Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong’s free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange-traded fund and making money.

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Satan worshippers kill and eat four Russian teenagers after stabbing each of them 666 times

A Satanic upside-down cross marks the spot where the four Russian teenagers were ritualistically slaughtered

Daily Mail | Sep 15, 2008

By  Will Stewart

A gang of Satan worshippers has killed and eaten four Russian teenagers, police have revealed.

Three girls and one boy were each stabbed 666 times, dismembered and cooked on a bonfire in a revolting Satanist ritual in the Yaroslavl region, 300 miles north-east of Moscow.

Their limbs, hearts, scalps, breasts and genitals were cut off and were recovered in a pit along with the body of a small rodent crucified on an upside-down cross.

The number 666 is revered by Satanists who see it linked to the devil.

The victims, all described as goths, were aged between 16 and 17 and were allegedly forced to get drunk before the ritualistic murders.

Their killers then allegedly lit a bonfire under a tree near a cottage where they cooked and ate their victims’ body parts.

Anya Gorokhova, Olga Pukhova, Varya Kuzmina and Andrei Sorokin went missing from their homes in June and their bodies found only in the middle of August.

Police, who arrested eight Satan worshippers in connection with the crime, realised all four made calls to the apartment of alleged leader Nikolai Ogolobyak – 250 metres away from the pit where they were discovered.

One of the arrested Satanists said: ‘Satan will help me to avoid responsibility, I made lots of sacrifices to him.’

Another, Alexander Voronovic, said the gang had previously dug up a dead girl’s grave and eaten her heart.

Most of the alleged Satanists had been moody at school and of lower than average intellect, according to teachers.

One of the gang said, when asked what made him do it: ‘I tried to turn to God, but it didn’t bring me any money. I prayed to Satan, and things improved.’

Leader Ogolobyak had previously been in his local church choir, according to his grandmother.

All the dead knew Ogolobyak and other members of the Satanist gang.

The father of victim Andrei Sorokin said: ‘My son said he knew some goths, and that he had goths and Satanists among his friends.

‘I wasn’t scared. I thought, “Well, let him spend his time sitting around in a cemetery, there’s not much harm in that, is there?”’

Palin ‘Ready to strike Russia’

Hindustan Times | Sep 12, 2008

Alaska Governor Sarah Palin left open the option of waging war with Russia if it were to invade neighboring Georgia and if the former Soviet republic were a NATO member, and used her first televised interview since becoming the Republican vice presidential candidate to reassure Americans that she was up to the responsibility.

Palin — who was little known before she was chosen by John McCain to be his running mate — said she would favour including Georgia and Ukraine in NATO, despite warnings by Russian Prime Minister Vladimir Putin that his country would not tolerate meddling in former Soviet republics.

The interview was conducted on the same day that McCain and Democratic rival Barack Obama set aside their difference to honour those killed in the September 11, 2001, attacks

Asked whether the United States would have to go to war with Russia if it invaded Georgia, and the country was part of NATO, Palin, who has been criticised by Democrats for what they say is her lack of experience especially in foreign affairs, said: “Perhaps so.”

“I mean, that is the agreement when you are a NATO ally, is if another country is attacked, you’re going to be expected to be called upon and help,” she said in the interview with ABC News.

“What I think is that smaller democratic countries that are invaded by a larger power is something for us to be vigilant against … We have got to show the support, in this case, for Georgia,” Palin said, when pressed on the subject.

“It doesn’t have to lead to war and it doesn’t have to lead, as I said, to a Cold War, but economic sanctions, diplomatic pressure, again, counting on our allies to help us do that in this mission of keeping our eye on Russia and Putin and some of his desire to control and to control much more than smaller democratic countries,” she added.

Palin comments on Russia came the same day Putin insisted his country has no intention of encroaching on the sovereignty of Georgia, following a war that left Russian troops in firm control of two breakaway regions. Putin also aggressively defended the decision to send troops to Georgia, saying Russia had to act after Georgia attacked South Ossetia last month.

Makes us proud: Palin tells son

Republican vice presidential nominee Sarah Palin said farewell on Thursday to 4,000 US troops heading to Iraq, including her 20-year-old son, and assured them that victory was in sight.

Palin urged the troops to “make us proud” and that they should allow their loved ones to shed a few tears at their departure. “We can’t help it, we’re going to miss you,” she said at a deployment ceremony at Fort Wainwright, a US Army base near Fairbanks.

The troops based here are known as America’s Arctic Warriors.

Track Palin, the oldest of Palin’s five children, is leaving in the next week or so for Iraq as part of the 4,000-soldier 1st Stryker Brigade Combat Team. His brigade will be on a 12-month deployment there.

Sarkozy friend forced to apologize for saying 9/11 was an inside job

Jean-Marie Bigard: “I will never speak again about the events of 11 September,” he said. “I will never express any more doubts.”

Sarkozy’s comic friend says sorry for 9/11 comments

Independent | Sep 11, 2008

By John Lichfield in Paris

France’s favourite stand-up comedian has been forced to apologise for claiming that the 9/11 terrorist attacks on the US seven years ago tomorrow were an “enormous lie” orchestrated by the American government.

The allegations by Jean-Marie Bigard have caused consternation in France because the comedian – who specialises in foul-mouthed, scatological and sexist humour – is a close friend of President Nicolas Sarkozy.

On a radio show last Friday, the comedian interrupted a discussion on American politics, to say that it was “absolutely sure and certain” that the US government had stage-managed the 9/1l attacks in which 2, 896 people died.

“The two planes which crashed in a forest and on the Pentagon never existed. There never were any planes. It’s an absolutely enormous lie,” M. Bigard said.

“It was an American missile which hit the Pentagon. That’s now been proved. It was a programmed demolition.”

Asked by the presenter of the show on Europe 1 radio where he found his information, M. Bigard replied “the internet”.

In a statement to Agence France-Presse yesterday, M. Bigard said that he wanted to “apologise to everyone”.

“I will never speak again about the events of 11 September,” he said. “I will never express any more doubts.”

He stopped short, however, of saying that he accepted that his comments were untrue.

The comedian’s remarks are said to have caused embarrassment at the Elysee Palace. President Nicolas Sarkozy has gone out of his way to present himself as an Americophile politician and to distance himself from the gut anti-Americanism of a minority of the French Left and Right.

M. Bigard, unknown abroad but capable of filling large concert halls in France, is part of M. Sarkozy’s large coterie of show-business friends. There was astonishment last December when the comedian – a kind of French Bernard Manning but a devout Catholic – accompanied M. Sarkozy on an official visit to Pope Benedict in Rome.

Conspiracy theories about 9/11 remain popular among a fringe of French people. They were first publicised in 2002 by a French author, Thierry Meyssan, in a book which was widely rubbished by the mainstream French press.

Comments by the actress Marion Cotillard, giving credence to the conspiracy theories, caused fury in the United States in January. The comments, made by Mme Cotillard several years ago, were unearthed after she won an Oscar for the Edith Piaf bio-pic, “Vie en Rose”.

A Canadian conspiracy movie about 9/11, “Loose Change”, has attracted more than 100,000 viewers on the French internet video site “Dailymotion” in recent weeks. The highly selective evidence presented in the movie appears to have been the basis of the remarks by M. Bigard.

Wall Street crisis will create a “New World Order”, says RCM CIO

City Wire | Sep 16, 2008

By Danielle Levy

As the sell-off in global markets continues, RCM’s CIO for Europe Neil Dwane believes the aftermath of Monday’s events will lead to the formation of a ‘new world order’, in which the remaining financial giants will flourish.

‘Merrills rushed into the arms of Bank of America (BoA) who last night shut down its investment banking operations admitting failure. Surely BoA will not indulge Merrills’ investment banking operations anywhere near to the extent that the old Merrills’ management had done?’ Dwane asks.

Dwane believes the key implication of the Fed’s decision not to facilitate the sale of Lehmans Brothers is that it shows that capacity is being removed from the markets, alongside the clear message that ‘policy will not bail out all investors and losers’.

‘Moral hazard is back and negligent Boards will find there to be no willing supplier of capital except on very onerous terms. The key messages of this weekend remain that capital remains scarce, leverage and accounting for the leveraged assets remains incomplete and inconsistent and a New World order is being born where financial behemoths are best placed,’ he says.

One of the key features of this ‘New World order’ will be increased regulation, transparency and risk control, according to Dwane. However, the CIO of the equity specialist of Allianz Global Investors is anxious that ‘investors remain complacent over the changes to come and the lower returns and earnings power of the sector in the future’.