Replies to post #144561 on Tornado Alley (PROG)

[SilverSurfer]

that's what happens when Big Government is in charge instead of a complex network of billions of voluntary, mutually beneficial relationships ........
http://www.smartmoney.com/invest/markets/the-one-stimulus-government-hasnt-tried-1308845009681/?link=sm_newsticker

[StephanieVanbryce]

The Assets Greece Needs To Sell To Get Another Bailout

Olympic venues that once housed baseball, taekwondo and hockey are up for sale.


Land on Greek islands, such as Mykonos
A portion of the famously beautiful island Mykonos has been put up for sale. Several other full islands are
for sale at prices ranging from €2 million ($2.46 million) to €15 million ($18.5 million).


20% of OTE, the state telecommunications company


4 Airbus A340 Jets


Monte Parnes Casino, 10.6 miles outside of Athens (Greece keeps 40%)


TrainOSE SA, Greece's state-owned train operator


Sewage and water supplies in Athens and Thessaloniki


Mining company Larco General Mining & Metallurgical Company S.A


Hellenikon airport in Athens, empty since 2001


The country's main electricity provider, PPC


Hellenic Horse racing Organization S.A. -- a betting and horse-racing company


State Lottery Tickets



..........Embedded links and details here
http://www.businessinsider.com/greek-assets-sale-2011-5

[StephanieVanbryce]

Bailing Out Europe's Elite

Updated June 20, 2011, 02:01 PM

Simon Johnson, a professor at the M.I.T. Sloan School of Management and a senior fellow at the Peterson Institute for International Economics, is the co-author of "13 Bankers: The Wall Street Takeover and The Next Financial Meltdown."

The Greek government owes more than it can afford to pay, now or in the near future, at market interest rates. There are two options: reduce the payments through some form of restructuring, or move the debt into the hands of people who are willing to charge below market rates for the foreseeable future.

In this decision, the International Monetary Fund has relatively little to say. This is really a political decision to be made by the European Union, with discreet backing from the U.S. and China.

While European Union leaders are surely tired of Greek politicians at this point, they also fear the implications for other euro zone countries if Greece says it can’t pay or won’t pay. And the damage would not be limited to Spain.

Do not underestimate the smugness with which the euro zone has completely and utterly failed to prepare for any kind of sovereign default. The lack of loss-absorbing capital in major European banks is a first order scandal that could bring down governments.

Fortunately for the undeserving European policy elite, the I.M.F. has plenty of money it can lend at low rates and the Europeans have plenty of votes at the I.M.F.

The I.M.F. can also access considerably more funding as needed, with the agreement of the United States, which really does not want another short-term shock to the world economy. And funding is available from China and other emerging market countries with large stockpiles of foreign exchange reserves.

China has every interest in making sure that the euro survives and prospers as a major reserve currency, and that over a longer period of time the U.S. dollar will decline as the primary place in which to hold public and primary rainy day funds.

The I.M.F. will do as it is told by its major shareholders: help refinance Greece, and effectively protect creditors and euro zone politicians to the fullest extent possible.



One article from the Series: The I.M.F., Greece and Europe: Who Benefits?

What are the lessons from the I.M.F.'s intervention in Argentina and other troubled economies? - There are Eight other reports.


http://www.nytimes.com/roomfordebate/2011/06/19/draft-the-imf-greece-and-the-argentina-option/bailing-out-greece-and-europes-elite

[StephanieVanbryce]

Paul Krugman states .. in referring to this article [ As Greece Ponders Default, Lessons From Argentina
http://www.nytimes.com/2011/06/24/business/global/24peso.html?_r=1&pagewanted=all ]

Don’t Cry For Argentina

OK, I guess I don’t quite see how Argentina’s default, of all examples, can be viewed as a cautionary tale for Greece:



Argentina suffered terribly from 1998 through 2001, as it tried to be orthodox and do the right thing. After it defaulted at the end of 2001, it went through a brief severe downturn, but soon began a rapid recovery that continued for a long time. Surely the Argentine example suggests that default is a great idea; the case against Greek default must be that this country is different (which, to be fair, is arguable).

I was really struck by the person who said that Argentina is no longer considered a serious country; shouldn’t that be a Serious country? And in Argentina, as elsewhere, being Serious was a disaster.


http://krugman.blogs.nytimes.com/2011/06/23/dont-cry-for-argentina/

[StephanieVanbryce]

Lessons From Argentina

Updated June 20, 2011, 11:52 AM

Alan Cibils is the chair of the political economy department at the Universidad Nacional de General Sarmiento in Buenos Aires.

As an economist who lived through the Argentine crisis nearly a decade ago, I am distressed by the trouble in the euro zone because it has many of the same ingredients that led to the Argentine debacle.

The International Monetary Fund's mistaken prescriptions (yet again) and the European Central Bank’s intransigence leave Greece no option but to default and exit the euro zone. A brief recap of the Argentine experience may shed some light on where Greece is inevitably headed.

The Argentine crisis was the consequence of a decade of I.M.F.- and World Bank-sponsored free market economic reforms, which included pegging the peso to the U.S. dollar on a 1 to 1 exchange rate. This all but eliminated the ability to conduct independent monetary policy -- much like the euro arrangement today. All barriers to trade and financial flows were removed, and all state enterprises were privatized. The 1994 privatization of its social security system alone explains Argentina's explosive debt accumulation between 1994 and 2001 and the resulting default.

Argentina's policy framework proved too restrictive when a recession set in during the last quarter of 1998. When external sources of funding dried up, Argentina turned to the I.M.F., which recommended the same austerity policies currently being promoted for Greece (and Ireland, Portugal and Spain). The I.M.F.-promoted spending cuts only deepened the Argentine recession, as any introductory macroeconomics student would have predicted. By 2001, the recession had turned into a depression, making accumulated debt impossible to service and resulting in enormous capital flight, a run on deposits and the largest sovereign default in history.

After the default and the January 2002 devaluation, Argentina's economy continued to contract for only one more quarter. By the second quarter of 2002, Argentina's economy began to grow and did not stop until 2009, when the global financial crisis made its impact felt there. The doom and gloom predictions of what would happen after default never materialized. Furthermore, after defaulting, Argentina no longer needed to access international capital markets, eliminating their stronghold on Argentine economic policy.

Greece (and Ireland, Portugal and Spain) should learn lessons from Argentina's experience. First, the I.M.F. still promotes policies that inevitably make matters worse, demonstrating an inability to learn from past mistakes. Second, default can be a solution, since it can end an unsustainable situation, frees up fiscal resources for more productive use and eliminates the need for access to bond markets. And third, regaining control of the national currency and the ability to conduct independent monetary and fiscal policies are essential for economic recovery.


http://www.nytimes.com/roomfordebate/2011/06/19/draft-the-imf-greece-and-the-argentina-option/lessons-from-argentinas-default

[StephanieVanbryce]

Interactive maps of Debt Rising in Europe [ http://www.nytimes.com/interactive/2010/04/06/business/global/european-debt-map.html?ref=europe ]

Greece is not the only country in Europe with problems with credit and debt.

First Map - E.U. and euro zone countries

Second 2010 Debt as a percentage of G.D.P.

Third 2005 Debt as a percentage of G.D.P.

Fourth 2000 Debt as a percentage of G.D.P.

Fifth gross domestic product

Sixth Budget deficit as share of G.D.P.

Seventh Interest rate spread from Germany

[fuagf]

This is just peachy ..

"Whether or not American banks are at serious risk from this crisis, the fact is that nearly three years after A.I.G., derivatives are still largely unregulated. The financial reforms that are supposed to improve transparency and reduce speculation — trading derivatives on fully regulated exchanges, strict reporting requirements to regulators and new rules on capital adequacy and business conduct — have yet to be implemented.

The process has been slow in the face of heavy lobbying by the banks. Republican lawmakers are bent on derailing reform by any means necessary, including starving regulatory budgets, impeding the confirmation of regulatory nominees and pressing regulators to adopt light-touch rules. Some Democratic lawmakers and Obama officials are in favor of exemptions on specific derivatives rules that Wall Street opposes."

HI ho (whatever) Silver!!!! Let them run free!

[StephanieVanbryce]

Greece granted €120bn EU bailout

EU leaders accepted David Cameron's argument that the cost should be borne by those using the single currency


Silvio Berlusconi, George Papandreou and David Cameron chat at the start of an European Union leaders' summit in Brussels.

Ian Traynor in Brussels Friday 24 June 2011

European leaders agreed to launch a fresh bailout of Greece subject to parliamentary passage of an austerity package next week. Britain is to be spared from taking part in the rescue after leaders accepted David Cameron's argument that the bailout, expected to total up to €120bn (£107bn) should be borne by the other 16 countries using the single currency.

The Brussels summit of the EU's heads of government was scheduled to focus on the European economy, immigration policy and upheavals in the Middle East, but was overshadowed by the sovereign debt crisis in Greece, which is perceived to be on the brink of a meltdown that might trigger a fresh international banking crisis.

A statement said that the draconian package of €28bn in spending cuts and tax rises plus a €50bn privatisation programme "must be finalised as a matter of urgency in the coming days" by Greece to qualify for the new bailout.

The rescue would be provided by Greece's "euro partners and the International Monetary Fund", meaning that Britain would be exempted from the European part of the package.

In Prague , Cameron reiterated his refusal to take part in the latest Greek bailout except through Britain's contributions to the IMF.

Germany had been insisting that the bailout should be partly funded by all 27 EU members, but backed off. "It would have been too divisive while not supplying very much money, so there was no point making an issue of it," said a European commission official.

"It's not part of the package," said Herman Van Rompuy, the European council president who chaired the summit, of the fund to which the entire EU contributes.

"This is the right outcome for the British taxpayer," said a Downing Street source.

Washington and the IMF have been piling the pressure on EU leaders to deal decisively with the Greek emergency.

While George Papandreou, the Greek prime minister, was fighting for his political life and with Greece's fate in the balance, the opposition leader, Antonis Samaris, also came under pressure from EU leaders to line up behind his political foes for the sake of the nation.

At a meeting of European centre right leaders in Brussels before the summit, Germany's chancellor, Angela Merkel, and others pressed Samaris to drop his opposition to Papandreou and to support the austerity package in parliament. Samaris has sworn his opposition and his New Democracy party all voted against Papandreou in a vote of confidence early on Wednesday morning.

The EU, the IMF, and the European commission all say that the Greek austerity package has to be carried by the broadest possible majority next week.

In July and August, the Greek government has to redeem bonds to the tune of €9.4bn. Without €12bn from the eurozone and the IMF – the fifth tranche of last year's 110 billion bailout – by mid-July, Greece will be broke, sparking a sovereign default and a bigger international crisis.

The Greek finance minister, Evangelos Venizelos, announced details of the austerity measures, which include lowering the minimum threshold for income tax to €8,000 a year from its current level of €12,000.

Greece will also levy a one-off solidarity tax ranging from 1-5% depending on income, increase tax on heating fuel, and impose a minimum tax on the self-employed, who are widely regarded as some of the country's most flagrant tax evaders.

To try to ease Greece's plight, José Manuel Barroso, the European commission president, pleaded with EU governments to agree to fast-track €1bn from the EU budget to Greece for poverty and unemployment relief.


http://www.guardian.co.uk/world/2011/jun/24/greece-eu-bailout-david-cameron

[fuagf]

Japan PM warns of Greece-like debt crisis


Japan's Prime Minister Naoto Kan delivers his policy speech at Parliament in Tokyo Friday, June 11, 2010. Kan, speaking
in his first address to Parliament after taking office Tuesday, warned that his country could face a financial mess
like that of Greece if it did not deal urgently with its swelling national debt. (AP Photo/Koji Sasahara)

Mari Yamaguchi, Associated Press Writer, On Friday June 11, 2010, 6:44 am EDT

TOKYO (AP) -- Japan could face a financial mess like the one that has crippled Greece if it does not deal urgently with its swelling national debt, the new prime minister warned Friday.

While Japan is on firmer financial footing than Greece because most of its debt is held domestically, Prime Minister Naoto Kan's blunt talk appeared designed to push forward his agenda, which may involve raising taxes.

Insert: List of sovereign states by public debt .. % of GDP (CIA and Eurostat) .. % of GDP (IMF) (2010)

Speaking in his first address to Parliament after taking office Tuesday, Kan said Japan cannot continue to let government debt swell while state finances are under pressure from an aging and declining population.

"It is difficult to sustain a policy that relies too heavily on issuing debt. As we have seen with the financial confusion in the European community stemming from Greece, our finances could collapse if trust in national bonds is lost and growing national debt is left alone," he said.

Japan, the world's second-largest economy, has the largest public debt among industrialized nations at 218.6 percent of its gross domestic product in 2009, according to the International Monetary Fund.

Kan, who became Japan's sixth prime minister in four years after a short stint as finance minister, promised his government would work closely with the Bank of Japan to avoid an increase in deflation and would focus on developing a "strong and comprehensive" policy.

Kan has said he will also consider raising taxes, an issue he said previous governments had been too timid to face. A social progressive and a fiscal hawk, Kan said he would announce further details of his economic growth plan later this month.

But he said he aims to have the economy grow by more than 2 percent annually by fiscal 2020.

After amassing a vast public debt and overspending to the tune of 13.6 percent of gross domestic product in 2009, Greece was saved from defaulting on its loans by the first installment of a euro110 billion ($131 billion) rescue package from the International Monetary Fund and the 15 other nations that share the euro currency.

Analysts said Kan's warning comparison with the recent development in Greece is an overstatement, since the Japanese investors who hold the majority of the government's debt are seen as long-term stakeholders who are less likely to bolt for other, more lucrative markets overseas.

"Greece had a huge public debt and huge overseas loans," said Hiromichi Shirakawa, chief economist at Credit Suisse Japan. "Japan has a trade surplus, and it's a major creditor nation ... I don't think Japan's fiscal conditions is facing a similar crisis."

Instead of focusing too much on fiscal tightening, Kan should simply focus on growth strategy that works for Japan's matured economy as the nation's population continues to age and shrink, he added.

Kan's predecessor abruptly quit last week after he failed to keep a campaign promise to move the Marine Corps Air Station Futenma off the southern island of Okinawa.

Kan is enjoying a jolt of public support, with approval ratings of between 60 and 70 percent boding well for his party heading into next month's elections.

His Democratic Party is considering a July 11 date for the polls, but that has caused a row with their coalition partner and prompted its leader to announce in the early hours Friday his resignation from a Cabinet post. The junior coalition party wants instead to extend the current parliamentary session to vote on a key postal reform bill.

http://finance.yahoo.com/news/Japan-PM-warns-of-Greecelike-apf-4204817830.html?x=0

Who you money to makes a difference.

[StephanieVanbryce]

What makes the IMF think it's right about Greece?

The same economists who failed to predict the 2007 financial crash are still in the driving seat – and just as clueless in a crisis


In Greece, workers are being urged to work longer for a smaller pension as part of the austerity package urged on their government by the IMF and ECB; meanwhile, IMF economists, who missed the looming financial crisis in 2007, can expect to retire on six-figure pensions in their early fifties.

When did the IMF learn about the economy?

Dean Baker Monday 20 June 2011 19.46 BST

That's what people around the world should be asking as the IMF presents its latest assessment of the fiscal and economic prospects for nations around the world last week. Much of the world remains mired in the worst downturn since the Great Depression; a downturn that the IMF totally failed to predict, as noted by the IMF's own Independent Evaluation Office.

This was not a minor mistake; this was a horrendous failing. It's comparable to the surgeon amputating the wrong leg or leaving his operating tools inside the patient. This is the sort of incredible mess-up that most people lose their jobs over and likely never find work again in the same field.

Yet, as far as the world knows, not one person at the IMF lost their job. In fact, it's not even clear that anyone missed a scheduled promotion. As far as anyone can tell, an economic downturn that ruined the lives of tens of millions of people around the world has had no impact whatsoever on the people who actually have the responsibility for preventing such calamities, at the IMF and in other major governmental and international financial institutions.

This makes the IMF's stance behind the continued drive for austerity in much of world especially infuriating. How can Greek workers feel about being told that they will have to work longer for smaller pensions by IMF economists who can retire with six-figure pensions in their early fifties? The vast majority of Greek workers do their jobs. The IMF economists failed at their job.

Beyond the issue of fairness is the question of competence. The IMF economists obviously did not understand the implications of asset bubbles that were building up in the United States, the United Kingdom, Spain and other wealthy countries. The financial and economic crisis caused by the collapse of these bubbles caught them by surprise.

This is really remarkable. While the IMF economists performed no worse than the vast majority of mainstream economists, this fact cannot provide much consolation for the people who are expected to rely now on their expertise. Is there any reason to believe that the same people who were so completely clueless in their understanding of the economy just four years ago are now qualified to be giving advice to governments around the world? Did these people go back to school and re-learn economics? Did they at least take night classes where they could learn the basics of economics so that they would not make the same sort of mistakes again?

Judging from their latest policy prescriptions, there is little evidence that they learned much from recent history. Instead of encouraging Greece and other troubled euro-linked economies to go through additional rounds of austerity, which will only lead to further declines in GDP and higher unemployment, the IMF should be telling the European Central Bank (ECB) to increase its inflation target to a 3-4% range.

If the euro zone maintained a moderate rate of inflation, it would allow the Greek economy to become competitive without experiencing a wrenching process of wage deflation. It would also erode the real value of debt alleviating the burden on both heavily indebted countries and homeowners throughout the euro zone.

The IMF does not have to look far for respectable economists arguing for higher inflation as an alternative to continued austerity. Its own chief economist, Olivier Blanchard, made exactly this argument in an IMF paper last year (pdf). It would reasonable to expect that the IMF economists giving advice to countries around the world would at least be familiar with the writings of the organisation's chief economist. If there is an effective response to Blanchard's argument, it has not appeared on the IMF's website.

In fact, another benefit of going the route advocated by Blanchard is that the ECB, as part of its efforts to moderately increase inflation, could simply hold much of the debt that it buys for this purpose. In other words, if attaining a 3-4% inflation rate requires the ECB to buy an additional €3tn of the debt of member countries in order to pump reserves into the banking system, the ECB could simply hold this debt indefinitely.

This has the advantage that the interest paid on debt held by the ECB is refunded to member countries. This reduces the interest burden that these countries will face in future years as a result of the deficits needed to boost the economy in a crisis. At least for the debt held by the ECB, the interest burden would simply be an accounting entry. Interest would be paid to the ECB and then refunded to the member states.

To prevent the additional reserves from creating a problem of inflation once the economy has recovered, the ECB could simply raise its reserve requirement. This would have the same impact on the larger money supply as withdrawing reserves from the system by selling off its debt holdings, but the higher reserve requirement route has the advantage of reducing the interest burden of the debt for member states.

Unfortunately, we don't hear the IMF pushing for a more expansionary policy from ECB. Nor do we hear it discussing ways that the ECB (and other central banks) could reduce the debt burden for its member states. It seems that the IMF's economists' understanding of the economy is no better today than it was before the economic collapse.


http://www.guardian.co.uk/commentisfree/cifamerica/2011/jun/20/imf-economists-greece-crisis

[F6]

The Luxury Frontier


Mongolian Street Style
Photograph by Andrea Fazzari

What happens when a country previously hindered by vastness and foreign rule awakens to wealth on its doorstep? With Louis Vuitton on one corner and one of the world's largest gold deposits down the road, the previously nomadic society of Mongolia is putting down some rich roots.

By MAUREEN ORTH
JUNE 23, 2011


A 131-foot-tall statue of Genghis Khan sits on the steppes outside Ulan Bator.
Photograph by Andrea Fazzari

There he stands alone on his horse, a fierce giant shimmering out of nowhere rising 131 feet against the vast Mongolian sky. Eight hundred years after he declared the Great Mongolian State in 1206, Genghis Khan rides again, all 250 stainless-steel tons of him. As I bump along on one of the few paved roads 20 miles outside the capital, Ulan Bator, this kitschy monument to the new mineral-rich and independent Mongolia seems more like a huge middle finger raised to its powerful neighbors, China and Russia. July marks the 21st anniversary of Mongolia's robust democracy after more than 200 years of despised Chinese rule followed by 70 years as a satellite of the Soviets, during which time the proud history of Genghis Khan, who spawned the largest contiguous empire in world history, was banned from public view and utterance. Today, owing to deposits of 80 different minerals, including immense reserves of coal, copper, gold and uranium, as well as ongoing exploration of oil, this sparsely populated country, twice the size of Texas, is undergoing a dizzying transition. No other nation today so squarely faces the choice that Mongolia does. Will it become Nigeria or Chile? Venezuela or Australia?

"Mongolia really is the land of opportunity," says Howard Lambert, head of corporate banking for ING in Mongolia. "Everything can be done here. The financial infrastructure doesn't exist, so you can be a part of building it. Instead of sitting in an office in London turning a wheel, you can build the machine. Every day I see new buildings, developments going up—people buying sports cars in a country that doesn't have roads. The social divide is getting wider."


Tibetan monks outside a monastery in Ulan Bator.
Photograph by Andrea Fazzari

Nothing illustrates the topsy-turvy nature of Mongolia today more than the capital city's main Sukhbaatar Square, where a bronze statue of Lenin once presided. Now a gleaming Louis Vuitton store, opened in October 2009, offers clients champagne in a circular VIP room outfitted with a lavish ceremonial Mongolian saddle and antique caviar case. Outside the store, however, several hundred yards away, a group of dissident poor have pitched their round felt and wood yurts (gers in Mongolian) to protest the government's cozying up to foreigners and not doing enough for them. "We want jobs. The poor need to have a better quality of life," 52-year-old I. Baganuur tells me. "The government is implementing policies for themselves, not for its citizens."

Sharing the same luxury mall with Vuitton are Burberry, Zegna, Emporio Armani and Hugo Boss. Burberry is planning a second store in a Shangri-La hotel currently under construction. Ferragamo and Dunhill are also looking for space. At the same time, the capital, which boasts the most vibrant democracy in Central Asia, does not have street addresses and has just begun to introduce zip codes. "The irony for Mongolia," says American ambassador to Mongolia Jonathan S. Addleton, "is the more successful they are, the more challenging it becomes."

How could it be that luxury retailers have come to Mongolia? The country has only 2.8 million people, almost half of them living in a capital built for 500,000, including 700,000 destitute former nomads whose gers crowd the surrounding hills and who burn coal and even plastic bottles in the harsh winters, choking the city with extreme pollution. I wanted to understand how a luxury brand could turn a profit in this antiquated land where the livestock outnumbers the people 16 to 1.

My first interview with a Mongolian official is the tieless, 38-year-old vice minister of finance, C. Ganhuyag, whose office sports a putting machine with a strip of artificial turf. "I decided to install casual Fridays," Ganhuyag proffers. (In Mongolia, last names go first, often indicated only by an initial, and people are routinely referred to by first names.) After recounting his latest stay at Davos and directing me to his website, which promotes the new Mongolian "Wolf Economy," because wolves can survive in Mongolia's minus-40-degree winters (Ulan Bator has the lowest average temperature of any world capital), Ganhuyag explains how Mongolia is trying to cope with its two largest mining treasures.

First, in October 2009, a $4 billion deal with Ivanhoe Mines of Canada and Australia's Rio Tinto for Oyu Tolgoi, the world's largest undeveloped copper-and-gold deposit, was finally signed by the government. Currently under construction, the mine is estimated to contain a staggering 40 million tons of copper and 46 million ounces of gold and should start operating in 2012. Next, six competing companies are waiting to hear which of them will win an even bigger deal to develop what will perhaps become the world's largest coal mine, Tavan Tolgoi. Both of these behemoths are situated in the southern part of the Gobi Desert not far from the northern border of the voracious, commodity-hungry China. The area today contains mostly nothing except a few nomads, rare animals and priceless scenery. To manage the coal mine, a city of 60,000 is being planned.

"Mongolia has always been here," Ganhuyag says. "With all our riches, with all our hearts, we were trying to reach out to the West. The West noticed us too late, fortunately for us. If we were Czechoslovakia, they would have grabbed us in the first five years and everything would have been snatched. We suffered through 200 years of Chinese rule, 70 years of Soviet rule and 20 years of being ignored by the West. In retrospect, we had time to educate ourselves. We learned all the tricks of privatization."


New construction in Ulan Bator. In the foreground is a Tibetan monastery.
Photograph by Andrea Fazzari

It took six years to hammer out the gold and copper deal of which the Mongolian government owns 34 percent and will get a healthy 59 percent of pretax profit without having to advance any money. Along the way there have been some bumps, however. At one point Mongolia instituted a 68 percent windfall profits tax on mining, since revoked, which scared all the banks away. During the last election, in 2008, politicians promised the populace cash handouts that amount to about $17 a month to everyone, rich or poor, taken from the down payments made to the government for the gold and copper deal. Today that cash is moving into the deficit zone and the handouts have been widely criticized for taking funds away from desperately needed infrastructure projects, as well as creating a welfare dependency.

Even so, Ganhuyag says Mongolia's current GDP of $7 billion a year is set to grow at least 20 percent a year for the next decade. "We are going to double our economy every three to five years—even the IMF agrees on that. That's why luxury retailers get a good smell from us. It all depends on the global markets. If China is trying to equip every man with a car, then the demand for copper, coal, iron, gold, gas, uranium, which we also have, will be endless."

Louis Vuitton, which first created its trunks for African explorers, is indeed pleased with its entry into the Mongolian market and the demand does not even have to be endless. Rather, LV CEO Yves Carcelle thought it was a special sign when he learned that "How are you?" in Mongolian is asked, "How did you travel?" I tell Carcelle that Burberry says their Mongolian customer base is little more than a thousand people and they are happy. He agrees. "One to two thousand people is all you need. You can't judge by average income—average doesn't mean anything. The question is, do you have a few thousand people who can afford luxury? What you need is a stable political environment and the necessary environment to put your store where you are the place."


After opening in October 2009, the Louis Vuitton store has become an attraction in Sukhbaatar Square, former home to a statue of Lenin.
Photograph by Andrea Fazzari

What I observe in Louis Vuitton is a clientele of women ages 30 to 40 already sporting LV bags and men shopping for gifts. LV's interest, of course, was sparked after going into Russia and China. "In 20 years China has become our biggest client," Carcelle says. "Apart from that, our expansion is quite well spread around the world. Because of media today, luxury and fashion have become the universal language." Mongolia follows global trends too. "People look at fashion and TV online here. We get Russian Vogue, and Cosmo Mongolia just came out," B. Delgermaa, a fashionable Mongolian woman, tells me. "You have to subscribe to American Vogue and it's very expensive."

It is traditional for Mongolians to display their wealth on themselves. "Nomads move around the country four times a year," Ts. Ariunaa, executive director of the Mongolian Arts Council, says. "All your wealth goes to jewelry and costume, your horse and saddle." Adds Delgermaa, "Culturally, Mongolians like to show off. Mongolians are very proud of themselves—there is only one me. They think they deserve exclusivity."

A rich nomad today is known for having a satellite dish and a solar panel for his ger and a motorbike for himself. But his primary relationship has always been with nature. According to Ariunaa, "First you sing about the land, your horse, your mother, and then you sing about your loves and relationships. Mongolians are better at communing with nature than with each other. You live on the steppes in a ger. You don't need to know what your neighbor is thinking." Nomads are also used to "singing outside, so you need to listen in a big space."


Like high-end fashion in the city, motorcycles and gers furnished with satellite dishes and solar panels are a Mongolian display of new wealth.
Photograph by Andrea Fazzari

Thanks to its years under Soviet rule, Mongolia has a literacy rate of 98 percent, as well as 151 universities where 70 percent of the students are female. A less fortunate hangover from Soviet rule is the rate of alcoholism, especially among Mongolian men, up to 25 percent of whom are classified as alcohol-dependent. I traveled to an orphanage in Mongolia's second-largest city, Darkhan, about a three-hour drive from Ulan Bator, where some of the 40 or so orphans had ended up because of the alcohol problems of their parents. "You can buy a bottle of vodka for 75 cents, less than a cup of coffee," says Meloney C. Lindberg, country representative for Mongolia of the U.S. NGO the Asia Foundation. I was told that if you collapsed on the street in the capital from a heart attack, no one would help you because they would probably think you were drunk. "We never before used hard drink like vodka," B. Baabar, one of Mongolia's leading intellectuals, tells me. "Our alcohol came from milk like sake [from rice]."

Baabar is one of the best-loved figures in Mongolia. He gave up his job as a biochemist to become a historian, writer, publisher and activist. He led the project to translate the Encyclopedia Britannica into Mongolian and was jailed by the Russians, whom he clearly does not like. He believes that the Mongolian government today is still too reflexively Socialist and the central-planning Russian model of state paternalism too often prevails. "The people here who are running the system still think like Communists or Socialists," he says. "Every five years the Soviet Union gave Mongolia $5 billion. This supplied Mongolian industry, agriculture and military. On the other side, it made Mongolia fully dependent."

He is angry that the Mongolian government started giving cash handouts that he calls "economic infantilism," a product of those educated under the Soviets. "Members of Parliament must go through elections and make many promises to the people. If the people are fed like children from this guy who acts like the father and promises cash money, free education and everything free because the state is getting richer and richer—that is the bad side of this sudden wealth."


A housing estate in Gorkhi-Terelj National Park
Photograph by Andrea Fazzari

The inner sanctum of the cash cow that everyone hopes the Oyu Tolgoi copper-and-gold project becomes is the Ulan Bator office of Cameron McRae, the redheaded, 52-year-old Australian CEO and president in charge of the site construction. The "first step" investment of Ivanhoe and Rio Tinto is $7 billion, he says, and they are currently spending $7 million a day to dig the mine.

His computer contains numerous animated models of the construction site, where a tiny Eiffel Tower is used for scale, towered over by the vast project. "We are building at a scale never tackled in this country," McRae says. "We are facing a shortage of artisans and technologists and people with large-scale construction experience." At its peak, the construction site will require 17,000 people and when completed, the mine is expected to produce 50 to 55 million tons of ore annually.

The government has already received about a half billion dollars in fees and taxes and has not had to put up a penny. Yet because of a lack of technically trained Mongolians, two of the mine's major contractors are Chinese—the mine is located only 28 miles from the Chinese border and up to 80 trucks a day from China carry in necessary building supplies. "We made a commitment to the Mongolian government to train up to 5,000 Mongolians," McRae says. Once the mine is built, "a minimum" of 90 percent of the workers will be Mongolian.

The mine's remote South Gobi location requires considerable amounts of power and water, not to mention an airport. "We'll help bring power to Gobi and upgrade roads. We'll build a powerline to China and tap into the Chinese grid," McRae says. But the amount of water required, especially in a desert, is unprecedented. "We're exploring for water. We found a very large ancient aquifer in a gravelly area not related to anything else." I ask McRae where he thinks they will be in five years. "We'll be the second-largest copper mine in the world with a very inexperienced workforce with a big training program."


B. Baabar, a prominent Mongolian intellectual, with his family.
Photograph by Andrea Fazzari

Before World War II, Mongolia served as a buffer state between Japan and the Soviet Union, and after, between the USSR and China. Beijing is just 340 miles from the southern Mongolian border and the Great Wall was constructed mainly to keep out the Mongols; 70,000 Russian troops were once stationed in Mongolia. Those old enmities are hard to overcome. For example, the Trans-Mongolian Railway conforms to the gauge of the Russian railroad, not the Chinese one, so each train to China from Mongolia must go through a tedious re-fitting process. Under the guise of "national security concerns" there is now a major debate going on in Mongolian business and political circles over how to export the coal from Tavan Tolgoi—by rail to Russia or by truck to China? It would require hundreds of miles of new rail to be constructed to ship out through Russia, or the coal could simply be trucked 150 miles to the Chinese border.

National security concerns is code for concern about the possible use of the railway for military intervention," says Graeme Hancock, who until recently was the senior mining specialist for the World Bank in Mongolia. "These Cold War concerns are still being played out all over Mongolia. They consider the Russians their Big Brothers, their friends, and for 70 years they've been told there's a big yellow evil to the south." He adds, "From our perspective, Mongolia places too much [emphasis] on national security interests and not enough on economic interests. Instead of basing decisions on what's good for the economy of Mongolia, decisions are based on geopolitical considerations." I actually came across the lingering reverence for Russia in, of all places, Mongolia's only five-star hotel resort, the lavishly appointed Terelj. I was startled to find the deposed statue of Lenin ousted from the main square of Ulan Bator in 1993 stuck behind the building in one of its gardens.


An aerial view of Ulan Bator's Sukhbaatar Square shows the Mongolian Parliament. Nomads have pitched their gers nearby to protest the government.
Photograph by Andrea Fazzari

Changes in Mongolia are happening so fast that L. Sumati, the country's leading pollster, says it is impossible to group people into social classes—mobility is too rapid. At the same time the situation is made more complicated by the fact that almost all of the poor have accumulated in the ger areas of the capital city, many forced there after the horrendous winter of 2009–2010 caused nearly six million of their livestock to die. "An army of the poor is besieging UB. Any political party standing for election has a tough time negotiating with these people," Sumati says. "They are very volatile and just asking for survival. In some ways they are angry. They see a widening gap between the rich and the poor and they see no way out." I ask him why he can't classify who is wealthy. "We have a group of very rich people supported by their access to power," he says, referring to the crossover between business ownership and government. "The rich are not a class yet because there is still very high mobility both up and down." Although Mongolia has strict laws requiring top officials to publish their assets and a lively media that includes 22 daily papers in Ulan Bator plus 21 TV news channels, there is no freedom of information act and cross-ownership of media and business interests abound. I'm told editorial control is nearly always held by owners and there are ways to pay to get a story on the news.

Corruption here is endemic. The Asia Foundation pays Sumati to poll a thousand households quarterly to benchmark attitudes toward corruption and how many bribes they have paid in the previous three months—usually to doctors, teachers, administrators and police. The last poll showed that Mongolians consider corruption to be the government's third most serious problem after unemployment and poverty, and that while the number of bribes decreased from 16 percent of households in March 2010, to 13 percent in September 2010, the amounts of the bribes more than doubled. Of course, these surveys do not address the big guys and government officials who somehow may be secretly attached to these lucrative concessions, a lot of which are done on an all-cash basis, the preferred method of the Chinese. "The Chinese come in with a suitcase full of cash," says banker Lambert. "A Chinese guy buys a bottle of vodka and he will buy your mine for $7 million with no due diligence. Even though the Mongolians don't like the Chinese, they have a healthy respect for them."


An elaborate ger constructed in front of Terelj, Mongolia's only five-star hotel, is used for meetings and ceremonies.
Photograph by Andrea Fazzari

The transition from Communism is still being felt. The alphabet is Cyrillic and there are many parts of the capital that look a lot like old Moscow. The era after the Soviet Union collapsed is still recalled painfully. Those who made out like bandits were similar to the apparatchik of Russia—people who had had contact with the West. One such person is national rich guy Kh. Battulga, one of the most controversial figures in political and business life today. He is a former national judo champion, a man who drives a Bentley and paid $10 million out of his own pocket to build the gargantuan statue of Genghis Khan on Mongolia's steppes. Battulga is a developer—he is turning the land around the statue into a resort—and also happens to be the minister of road, transportation, construction and urban development and a powerful leader of Parliament. He traveled the exterior as an athlete, started trading by selling electronic appliances from China, graduated to computers and now owns a large meat-processing plant that supplies the country. In 2004, "my own needs were met," he says, so he decided to run for Parliament.

Today, his grand vision is to build a $10 billion industrial complex the Mongolians call a "production city" named Sainshand, also in the middle of nowhere in the Gobi, 300 miles from the Russian border, 125 miles from China and about 200 miles northeast from the proposed Tavan Tolgoi coal mine. It would be connected by highway and rail to the capital and by rail only to Russia. Instead of selling unrefined ore and coal to the Chinese, who collect it in trucks, Sainshand would process the minerals and refine the oil. Mongolia could then sell its commodities at an increased profit of at least 30 percent, according to estimates, and create hundreds of thousands of new jobs. But first the city has to be created from scratch. Then the coal will have to travel 3,000 miles from the mine, including a connection to the Russian railroad, before reaching the port of Vladivostok. Battulga told me he got the Sainshand idea because a Buddhist thinker in the 19th century predicted that one day a great metropolis would grow there.

All over Ulan Bator I hear naysayers on Sainshand. The local gossip is that Battulga is in cahoots with the Russians. "The Russians quite naively believe if they monopolize the railroad around the minerals they'll have control of the mineral wealth," says J. Od, who with his brother is one of Mongolia's biggest businessmen and taxpayers, doing a lot of business with the Chinese. He dismisses it all as politics, declaring that's the way "the clowns" in government mix politics with business. "Sainshand," he continues, "is some so-called geopolitical policy of Russia. It cannot be implemented in Mongolia today—it's too late." Battulga counters: "For Mongolia it's not profitable to sell raw materials to China. It's not geopolitical, it's business. We want minerals sold to the world market."


A local in the traditional deel robe.
Photograph by Andrea Fazzari

The fragile coalition government that is up for reelection next year is literally besieged on all sides. To hedge against inflation and to share the wealth, Parliament has passed a law creating a Sustainability Fund with money set aside from mining industry revenue including the Tavan Tolgoi coal profits; sometime in the future, all citizens will also be issued 10 percent of the shares of an IPO the government will offer on the Hong Kong and London stock exchanges. (The government has also established a more general Development Bank.) They know they cannot count on the fluctuating prices of commodities to sustain their long-term growth. When I spoke to Z. Gombojav, minister for foreign affairs and trade, he chose to spin the country's many immediate needs as "vast opportunities and room for investment in infrastructure, including roads and railways, energy, urban construction, light industry and food production."

The reality on the ground is more challenging. For example, Mongolia has the best cashmere in the world, but domestic producers who refine the wool say they are in danger of being put out of business because the government does not collect the 30 percent export tax from the Chinese, enabling them to buy vast amounts of raw wool from the herders at higher prices while domestic producers are fully taxed. According to D. Erdene-Ochir, head of sales for Goyo Cashmere, the government is sacrificing them to the herders. "It's terrible politics to treat herders badly. So there are no taxes and the Chinese manipulate the market. They are supposed to pay the government, but the government doesn't collect. Mongolian companies have to pay income and VAT taxes. . . . If I want to be elected, I cheat the producers not the nomads." He also accuses the Chinese of mixing the cashmere with wool, silk and cotton. "They mix it and call it anything they want. We will be extinct very soon."

There is no doubt that Mongolia is white-hot in multinational-investment circles. One night I attended GE's welcome reception celebrating Mongolia as the 130th country where it does business. GE will begin by selling MRI machines to the country's underequipped and overburdened hospitals. Caterpillar already has a $100 million business going there. "Mongolia is like baking a cake," says business consultant Jackson Cox. "All the ingredients are on the table. You've got everything you need in Mongolia to build a modern, prosperous economy. The only thing that's missing is the political leadership to make the tough decisions. You have to envision the Mongolia you want 25 years from now and then take on the decisions to plan the education, infrastructure and health care to get there."

Nevertheless, most of the Mongolian hands I dealt with seemed to believe things would somehow work out in the end, even though environmentalists rightly fear precious grasslands and watersheds could be destroyed in a country that so far has only been 25 percent geologically explored. As Graeme Hancock says, "There is a very, very active civil society. Companies don't get away with making a mess very long."

The looming question is what Mongolia will do once its finite treasures have run out. "Twenty years from now, if all this mineral wealth—which is not renewable—is not turned into renewable wealth, which is knowledge, then we will have missed the point," says newspaper columnist D. Jargalsaikhan. "This underground wealth needs to stay aboveground to suit our will and aspirations."

"Money without policy does more harm than good," says J. Od, who believes "we are only at the tip of the iceberg" in knowing how rich Mongolia really is.

Copyright ©2011 Dow Jones & Company, Inc.

http://online.wsj.com/article/SB10001424052702304186404576388153101917860.html [with comments and slideshow]

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(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=52713561

[StephanieVanbryce]

Treasury urges British banks to take big losses to help Greece avoid meltdown

Effort to persuade banks to take hit comes despite David Cameron's assurance that UK taxpayers will not foot the bill


Demonstrators protest in front of the Greek parliament against planned austerity measures which have been
.........demanded in order to make a bailout possible.

Heather Stewart and Toby Helm Saturday 25 June 2011 19.48 BST

Britain's banks will be urged by the Treasury to take multimillion pound losses as part of Europe-wide plans to prevent a catastrophic meltdown of the Greek financial system.

Despite the assurance of David Cameron that the UK taxpayer will not pay towards the latest EU bailout of Greece, Treasury officials are working behind the scenes to persuade British banks holding Greek bonds to take a "haircut" now as the best way to avert a potential global crisis. Britain's banks hold about £2.5bn of Greek bonds.

One idea, proposed by Germany, is that the banks would be persuaded to swap Greek bonds for loans on less favourable terms when they expire – a so-called "soft restructuring" that would help ease the pain for Athens.

Politicians across the EU are battling to secure "private sector involvement" in the Greek rescue alongside government and IMF help in the hope of preventing Athens from defaulting on its debts, a move they fear could start a ripple effect in world markets.

Analysts say even a debt swap, under which Athens would pay its debts over a longer period, would leave bondholders facing a reduction in the value of their investment. But officials argue that only if private banks take a hit now can the damage be limited.

The Treasury so far has been on the sidelines of EU discussions about how to ensure private sector creditors play their part, partly because of Cameron's insistence that UK taxpayers will not help to finance a second Greek bailout.

The prime minister's refusal to put money into the latest rescue led to criticism of the UK's stance behind the scenes at a summit in Brussels last week. Senior European figures said London needed to focus more urgently on the potential effect of a Greek default on the UK's banking sector and economy.

"The UK has the third largest exposure after France and Germany," said a high-level EU source. "It should be aware of the effect of standing aside from discussions."

But Whitehall insiders have confirmed that chancellor George Osborne's staff are on the case, working on ways to involve British bondholders in rescue moves that will almost certainly involve a short-term hit.

Another worry is that Britain's banks and hedge funds have written multibillion-pound insurance contracts – credit default swaps – that would be triggered if Greece defaults.

Erik Britton, director of City consultancy Fathom, said: "It's not the direct exposure, it's the indirect exposure and the implications of an unruly default that I would be worried about. French and German banks bought Greek bonds, and they took out insurance against default. Who did they take out that insurance with? The US and UK banks. There has to be a loser – who's the loser?"

A fresh bailout for Greece will go ahead on condition that its parliament votes for new austerity and reform programmes. It is expected to total about €110bn, with about €30bn coming from bondholders, €30bn from privatisations and the rest from eurozone members and the IMF.

Persuading the private sector to play a part is seen as crucial to the chances of averting a Greek disaster and was a key part of German chancellor Angela Merkel's pitch in Brussels. Without this, EU leaders fear Greece will default, triggering payouts on a web of complex financial insurance products and creating chaos in world markets as investors struggle to work out who owes what. Some analysts fear default could create a "Lehman moment", like the aftermath of the collapse of the giant US investment bank in 2008, when investors lost confidence in each other and the world financial system froze up.

At the inaugural press conference for the Bank of England's new financial policy committee, governor Sir Mervyn King described the deteriorating situation in the eurozone as a "mess" and warned that, although Britain's banks own a relatively small number of Greek bonds – about £3bn worth – there could be dramatic knock-on effects if a default resulted in a loss of confidence throughout the global financial system.

That gives Treasury officials a strong incentive to ensure that the banks sign up. Without a voluntary agreement from investors, the powerful credit ratings agencies will declare that Greece has defaulted, spreading chaos. US Federal Reserve governor Ben Bernanke last week urged European governments to resolve the Greek crisis or risk threatening "the European financial system, global financial system, and European political unity".


http://www.guardian.co.uk/world/2011/jun/25/greece-debt-british-banks

[StephanieVanbryce]

Greece debt crisis: how exposed is your bank?

The Greece debt crisis could hit Europe's banks hard. Find out which are most affected


Greece debt crisis exposure by banks: Greek indignados participate in the people's general
.........assembly in central Syntagma square in Athens.

How exposed are the world's big banks to the Greece Debt crisis?

The crisis is tying up many of Europe's leaders in constant negotiations to agree a bailout deal.

Investment bank researchers at UBS have looked at which banks are the most exposed to the crisis.

The banks with the highest exposure to Greek's problems are not necessarily those with the most invested - the UBS figures also compare the banks' exposure to Greek debt to their total equity, to illustrate whether they have sufficiently strong reserves to handle a Greek debt default.

........There's an interactive map AND they are listed

So, which banks are worst hit?

After the Greek banks, the hardest hit would be those from France and the 11 German banks with stakes in the country.

There is also some €2.3bn invested by British banks too.

The full data is below. What can you do with it?

http://www.guardian.co.uk/news/datablog/2011/jun/17/greece-debt-crisis-bank-exposed