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Wednesday Night Salon
#1301 Feb 7, 2007 Page 2
Introduction
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In the annals of Wednesday Night, 02/07/2007 will stand out as an exceptional evening.
With the happy surprise of the coincidental appearance of two Europe-based Friends of Wednesday Night, the somewhat meandering agenda proposed in the Invitation was promptly jettisoned. Tom Windmuller, heads governmental affairs at IATA and Misha Crnobrnja ("Former Ambassador of the Former Yugoslavia to the Former European Community", and author of "The Yugoslav Drama"), is now the Vice Dean of Centre for Advanced European Studies and Research (CAESAR) of the University of Novi Sad in Belgrade where he teaches European Integrations and Economy of Transition. The two conducted, in the words of one effusive guest, " [a] riveting dialogue … as they discussed the Balkans, Russia, the 'Stans', Europe and their politics and economics on a macro scale to the extent time permitted [which] held the attention of everyone in the room. The questions asked and observations made by other guests, particularly some of the younger ones, were well placed and definitely in order."
There was a preponderance of younger faces in the room – including first-timers, Carlos Fraenkel, Jotham Kinder, Philippe-Antoine Lévesque, Thibaut Revenaz and Andrew Echenberg –, who added to the discussion with refreshing views based on wide-ranging expertise, from philosophy to history, aeronautical engineering, law, political science, business, and development work in Africa and Asia.
Europe
In defiance of the dictum that "Nature evolves away from constraints, not towards objectives", the evolution of the states of Europe into the European Union is recognized as both an extraordinary and unlikely achievement. When the Treaty of Rome was signed in March of 1957, there were few believers and certainly almost none who could have envisioned the huge changes that have resulted since the earliest days of the European Economic Community.
A half-century of its evolution affords us the opportunity to take a second look at the integration and future of the European Union. The diversity of member countries and those knocking on the door for entry is so great that Euro-sceptics had well-founded arguments. However, when one considers the almost unthinkable act on the part of Germany and France of having abandoned the Deutschmark and Franc, symbols of their identity, in favour of a common European currency, total integration seemed truly possible. Since then, one of those countries, France, and Holland have rejected the proposed constitution (although it has been ratified by 16 countries).
Europe has gone through periods of broadening growth and deepening growth. Today it can do neither. It cannot broaden because the population is tired of absorbing new (poor) states, not even a relatively resource-rich country like Turkey because it is not viewed as being 'European'. There appears to be a grand economic project on the one hand but no equivalent social or political project, - no European identity. As identity generally comes with education, until European modules that are not based on trans-Atlantic differentials are included in all educational systems of all member states, it is virtually impossible to develop the European identity.
Unlike South America whose nations share a common religion, culture and nearly share a common language, the cultural diversity of Europe dating back centuries makes it an unlikely successful candidate for integration. Even within Belgium, Switzerland, Spain and Alsace Lorraine, the various cultural entities are at odds with each other. Eire and Northern Ireland have attempted integration for some time without success, so the difficulties encountered in attempting to establish a stable unified Europe should not be surprising. As dissimilar as member states are culturally, their differences appear to be greater as the number of borders between them increases. These differences become even more obvious in moving from west to east. Objectively and certainly economically, Turkey would represent a very acceptable addition to the European Union, were it not for religious and cultural differences.
Immigration is both a problem and an economic necessity. The developed nations of Europe need people who will do the work that their own citizens refuse to do. Unlike North America, which was by and large a melting pot, France, Germany, Switzerland have a healthy rivalry between regions but do not allow immigrants to integrate. France, for example, puts its immigrants in affordable housing where they are separated from French people, giving them little if any opportunity to integrate in a local community. And, despite the fact that the State views all French nationals as equal without, institutional discrimination exists against Arab French youth seeking jobs. Others point out that in the UK it is the religious and cultural biases between immigrants that are the major causes of problems and disruptions of social peace.
North America, Australia and other new countries enjoyed the luxury of starting off from scratch (if one ignores the First Nations), building a new system and thus making people conform to the system irrespective of their race, creed or colour. In Europe every country has a history that goes back at least 1000 years (albeit not as the states that exist today).
Russia
There is some fear that the cold war still exists with Russia. Having paid off practically all of its debt including that of the U.S.S.R. and currently doing very well financially by supplying much of Europe with gas and oil, Russia has in fact become more an economic than political Big Power. Furthermore, political influence is more one of economics than ideology. Unlike some other communist states, Russia’s long-term historical heritage has been that of extreme authoritarianism that exists to this day, widening the gap between the wealthy and the very poor (but that is also a problem in other parts of the world such as China and India). The people support Putin, despite what some might term his 'ham-fisted' attempt to use oil and gas resources to establish the new sphere of influence, because the population of Russia has this long authoritarian heritage of respect for authority. However, the reaction in the states of the former USSR has been quite different, despite their need for those resources (or in some cases, adequate infrastructure to enable their export), driving them towards not only the European Union but (unthinkable!) to NATO. Thus, the possibility of a new Eastern Europe political bloc appears unlikely.
In contrast to its economic stability, Russia faces serious demographic problems including the declining birthrate, low life-expectancy and an increasingly unhealthy population.
The Balkans
The Balkans which formerly represented an example of diversity held together only under an unacceptable dictatorship are now considered transitioning economies as they move from socialism to capitalism/democracy, and are thriving financially, continuing to co-exist partly thanks to the NATO and U.S. presence. Despite the underlying instability, a source of concern for the future, they enjoy the competitive advantage of a pool of well-qualified, technically competent cheap labour, - an example is the Serbian branch of the Montreal School of Animation. European investments have been pouring in. Serbia enjoys the fruits of a customs union with Russia [a market of 155 million], which has resulted in a healthier economy. Another powerful indicator of economic growth is the explosion of the area's popularity for 'second-homes' – property prices up by several 100 percent.
The U.S. Economy & Budget
Despite the cost of the Iraq war, the U.S. economy is actually a bright spot. As long as investments in T-Bills keep pouring in it is not that bad for the American and global economies. Meanwhile, as long as the US consumer continues to consume and not save a penny, the economy will continue to flourish.
At least one Wednesday Nighter believes that it would be good and healthy for the market to have a correction following the recent upward leg. Failing to do so within a two-week window, could very well lead to a rerun of the 1987 experience.
The budget of $2.9 trillion will not prevent the Americans from continuing to lower their fiscal deficit and heading into surplus, however it must be remembered that the budget is simply the first phase of negotiation between the White House and Congress. This budget is different in that for the first time it incorporates the short-term costs of the wars in Afghanistan and Iraq; previously these have been sent to Congress separately and months later. In any event, there is no doubt that the Democratic Congress will vote this budget down because of the $100 billion cuts to social programs.
[Editor's Note: for a different American analysis of the budget see: Seattletimes.]
Iraq
Whatever the original motives for invading Iraq, the Administration failed to understand that winning the war is easy; it is winning the peace that is difficult. Worse, there was no accepted plan for winning the peace, as there has usually been in the history of conquests over the past 4,000 years. These failures should not be attributed to the lack of many policy options that would have been put forward, but to the failure of the White House and its inner circle to give credence to any view that did not confirm the decision to invade.
Now, unable to democratize disparate segments of the population each of which appears to believe that it is in sole possession of the ultimate truth, the U.S. finds itself in the position of alien invader rather than liberator and unifier. America, in the logic of the Middle East, has become for each of the factions a part of the traditional enemy. President Bush made a major mistake when he refused to accept the lifeline that was offered by the Iraq Study Group (ISG) Report, better known as the Baker Hamilton Report (see usip.org/isg/) Instead he decided to do it his way at a cost not only to the U.S. taxpayer, but to millions around the world who will suffer the consequences arising from the on-going problems in Iraq and the Middle East.
Today the challenge for the U.S. is find a solution that will leave Iraq and the region better than "we found it" and at the same time save face. But the truth is there are no options. Not even difficult decisions.
The Guardian reports that the United States sent $12 billion in shrink-wrapped $100 bills from New York to Baghdad in 2004 and distributed the cash with no control over who received the money or how it was distributed. Henry Waxman, the chairman of the House Oversight and Government Reform Committee, is following the money trail and summoned Paul Bremer to testify on Feb. 6 (see: huffingtonpost.com/
Although 'losing" $12 billion in cash seems almost inconceivable, one explanation is that U.S. efforts to rebuild the country are thwarted by the inability of the diplomats, aid workers and others to leave the safe area of the Green Zone in order to adequately directly supervise U.S.-funded reconstruction.
Thank-Yous
I think we have had a lot of debate from all corners of the world, every possible culture and religion is usually represented in this room, and I think this room would be a fabulous example on a world basis to show how you can actually put people around a table to have a debate without bloodshed.
A special thanks to Misha and Tom for being in agreement on so many issues, but also for being so articulate in their disagreements on some others – it was an unexpected privilege and intellectual challenge to have the two of you here together…
… I was born in Hungary, somewhere in the centre of this discussion … despite coming from Europe and paying a lot of attention to events in Europe, I must say that I have learned from Tom and Misha things today I never heard before.
1301 Roslyn Takeishi Thanks 1:25
What will happen to the price of oil?
Real estate
Canadian dollar is expected to decline against its U.S. counterpart.
The economy
See also JACQUES CLEMENT: Pages ON THE ECONOMY
Videos 1301 Jacques Clément & Ron Meisles Reoprt 3 min Feb 7
for Wed1301
Jacques Clément's forecast Wed1301
February 7, 2007-02-08
CANADA
The T.S.X. reached a record 13,183 yesterday with a sharp firming of energy prices (crude oil traded close to $60.00 U.S. from an intraday $49.90 January 18, the largest increase in sixteen months and natural gas reached a two month high at $7.63) and metals, (nickel near a record level as stockpiling reached a ten year low, copper recovering from a ten month low and zinc, as the hedge fund Red Kite Metals may not have to sell its long term position after sustaining heavy losses). Gold reached $664.00 U.S., a six month high and is up $57.00 in the last month. Silver has also gained $1.00 to $13.67. The Canadian dollar has weakened to a fourteen month low of 84.35¢ U.S. last Friday and perhaps explains the statement by a Deputy Governor of the Bank of Canada (David Longworth) yesterday that “there is no reason to cut interest rates as economic growth is picking up quite strong in the first half.” After third quarter growth of only 1.7%, a flat October and only 0.2% in November (+1.6% year/year), the Bank appears to be too optimistic, with productivity evaporating, housing starts and building permits tumbling almost 8% in December and the energy sector (-2½ %), with declines in extraction and exploration of oil and gas. After eight months, the fiscal surplus is at six billion dollars with revenues climbing by 6% and program spending rising by 7.8%.
U.S.
The Dow-Jones reached a record 12,674 on February 1 and the S.P.500, a six year high, despite the rise in energy and metal prices, as the U.S. dollar weakened to $1.3021 U.S. for the Euro on February 1. The stock market responded to double digit profit expectations for the fourth quarter and a strong economic outlook. The G.D.P. in the fourth quarter rose by 3.5%. Productivity in the fourth quarter rose at 3% annual rate with unit labour costs decelerating to 1.7% annual rate from 3.2%. Employment was robust in the fourth quarter with almost 500,000 new jobs created. January produced an additional 111,000 jobs and unemployment stood at 4.6%, close to a six year low. Personal income continued to rise strongly (+0.5%) as did personal consumption (+0.7%) in December. The P.C.E. core inflation remained at 2.2% and the savings rate at -1%, negative for the fourth time in history and below the Depression level! Manufacturing is strong with December durable goods rising by 4.7% (November-December) and factory orders by 3.6%. On housing, December existing home sales weakened by close to 1% but new home sales surged by over 12% in the last two months of 2006. The service sector was very strong in January for the forty-sixth consecutive monthly increase. Consumer confidence January surveys showed a two year high on Michigan and six year high in the Conference Board, given the strength in the job market. The Fed remained steady at 5¼%, Fed funds on January 31 and 6¼% in the discount rate, with prime rate at 8¼% The 2008 fiscal budget of $2.9 trillion is unlikely to be passed by Congress, given the $100 billion cutback in social security, Medicaid and Medicare.
Near Term Trading Outlook Feb 7 2007
Videos 1301 Jacques Clément & Ron Meisles Reoprt 3 min Feb 7
Near Term Trading Outlook: 1301
Jan 22 video Charlie Rose - Robert Rubin some surprising comments
Previous Videos
Notes by Herb Bercovitz OWN
Editor: Diana Thébaud Nicholson OWN
Radio, the long-lasting treasure
intro Wed1301 | Wed1301 slide show
Oil
Note
Wednesday-Night creates charts and follows stocks, including timely related financial news items, in which Wednesday Nighters are interested and in order to demonstrate a service that could eventually be developed and marketed. Wednesday Nighters are invited to participate and help to test the service.
see Wednesday-Night.com Flip charts
QUOTES of the EVENING from recent
Wednesday Nights
Past Quotes Best or All
W-N Links for #1301
2007 Notes for #1301
Kosovo Mews on W-N
Boyars of Belgravia Saturday 10 February 2007
HE weapons in this war are not high explosives, nor even gas pipelines, but stories about them. The battlefronts are seminars, think-tanks and dinner parties in the posher parts of London. Not since Alexander Herzen’s day has Britain's capital been party to such arguing over Russia’s future.
08 February 2007 nyt Mr. Bush’s Improbable Budget
The new $2.9 trillion budget request is a smokescreen for making the president’s tax cuts permanent.
$2.900,000,000,000.00
The budget is based on a series of improbable, if not dishonest, assumptions. To make it appear as if the tax cuts are affordable in the near term, it assumes that the Pentagon will not spend a single penny on Iraq or Afghanistan after 2009. It also assumes there will be no costs for fixing the alternative minimum tax after this year, even though Mr. Bush and virtually every politician in America is committed to such relief.
Thu 08/02/2007 The budget ec Fiscal frustrations George Bush sent his budget to Congress. The $2.9 trillion request asks for more funding for the military and reduces spending on health care and other domestic programmes over five years. It also forecasts reduced federal deficits that eventually reach a surplus in 2012. Sceptics wondered how this could be twinned with Mr Bush's request to extend his tax cuts. See article
The Fog of Accountability
The new Democratic Congress is finally investigating the missing billions of dollars of Iraqi oil revenues and other aspects of the Iraq war’s mismanagement.
Friday 09 February 2007 ts Ron Meisels: Bull Market Could End in 'Disorderly Bang' Without Correction Soon
Ron Meisels of North American Marketletter points out that while recent pullbacks have been treated as buying opportunities, there is now some technical weakness in what he considers an aging bull market.
Rex Murphy's
Point of View index
Menu to mitworld.mit.edu/ on-demand videos of significant public events at MIT. in RealPlayer
Ex Thomas L. Friedman. While you were Seeping The World IS Flat Video length is 1:15:04.
Stephen S. Poloz VP EDC Economics Weekly Commentary
India: Integrative Trader - February 7, 2007
Everyone agrees that India has great potential, and other countries all want a piece of the action. Understanding how India will bring about its growth miracle is essential to participating in it. Past issues | his WN page
Wednesday-Night.com on Privacy
Canadian dollar vs euro | Dow 30 w-n chart | TSX
Paul Martin | Stevie Harper
see also Wednesday-Night.com MedicalNotes
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