On 25 November 2009, the DAC welcomed South Korea as its newest member.

Korea joined the OECD in 1996 and a decade later began motions to join the OECD’s Development Assistance Committee.

A team of experts from the DAC Secretariat visited Korea in June 2009 to verify that its aid programme meets DAC standards. They noted, among other things, Korea’s sound aid volumes, strategies, policies and institutional frameworks, as well the country’s reliable system for monitoring and evaluating performance.

The Korean government has pledged to increase its aid from the present 0.09 per cent of its GDP to 0.15 per cent of GDP by 2012 and 0.25 per cent by 2015.

In 2008, the Korea International Cooperation Agency (KOICA) spent US$ 11.7 million on water and sanitation activities, of which US$ 4.5 million in Asia, US$ 3.6 million for Africa and US$ 2.9 million for Latin America. Roughly half of the activities were training courses.

In 2011, Korea will host the Fourth High Level Forum on Aid Effectiveness, where progress on global efforts to make aid more effective in reducing poverty and promoting economic growth will be assessed.

Source: OECD, 25 Nov 2009 ; KOICA statistics

Catherine Rampell explains:

The Organization for Economic Cooperation and Development today released new data on tax burdens in its 30 member countries. Across the organization, overall tax revenue totaled an estimated 35.2 percent of gross domestic product in 2008, down half a percentage point from 2007. The organization expects that tax burdens will fall further in 2009.

Denmark had the highest total tax revenue as a percentage of G.D.P., at 48.3 percent, followed by Sweden at 47.1 percent. Turkey and Mexico had the smallest tax burdens, at 23.5 percent and 21.1 percent, respectively.

In the United States, tax revenues represented 26.9 percent of total output last year.

Welcome to the OECD Insights blog – where we explore, analyse and debate the important issues facing society today.

To kick off our new site, we will publish From Crisis to Recovery, a new book from the OECD Insights series here on the blog, chapter-by-chapter.   This book traces the roots and the course of the crisis, how it has affected jobs, pensions and trade, while charting the prospects for recovery.

These chapters are “works in progress” and their content will evolve.  Reader comments are encouraged and will be used in shaping the book.

By way of introduction…

The events of 2008 have already passed into history, but they still have the power to take our breath away. Over a matter of months, a succession of earthquakes struck the world’s financial system – the sort of events that might normally happen only once in a century.

In reality, the warning signs were already there in 2007, when severe pressure began building in the subprime securities market. Then, in March 2008, the investment bank and brokerage Bear Stearns collapsed. More was to come. Early in September, the United States government announced it was taking control of Fannie Mae and Freddie Mac, two huge entities that underpin mortgage lending in the U.S. Then, in the middle of that month, came news of the collapse of investment bank Lehman Brothers. A fixture on Wall Street, Lehman had been a home to the sort of traders and dealers that novelist Tom Wolfe once dubbed “masters of the universe”. Around the same time, another of Wall Street’s legends, Merrill Lynch, avoided Lehman’s fate only by selling itself to the Bank of America.

It wasn’t just investment banks that found themselves in trouble. The biggest insurer in the U.S., American Insurance Group, teetered on the brink of failure thanks to bad bets it had made on insuring complex financial securities. It survived only after billions of dollars of bailouts from Washington.

How did the stock markets react? In New York, the Dow Jones Index fell 777 points on 29 September, its biggest-ever one-day points fall. That was a mirror of wider fears that the world’s financial system was on the brink of meltdown. The mood was summed up on the cover of The Economist, not usually given to panic, which depicted a man standing on the edge of a crumbling cliff accompanied by the headline, “World on the edge”.

What happened?

Why was the world financial system plunged apparently so suddenly into what many feared at the time would become a crisis to rival the Great Depression? This chapter looks at the pressure that built up in global finance in the years before the crisis struck, and the ways in which new approaches to banking greatly amplified those pressures.

The dam breaks

So, what were the roots of this crisis? One way of answering that question is in terms of a metaphor – an overflowing dam.

The water in the dam was a global liquidity bubble – or easy access to cheap borrowing. This resulted from low interest rates in key economies like Japan and the United States and what amounted to huge support for U.S. finances from China. This idea of a supply of easy money might seem rather abstract, but it had a real impact on everyday life. For example, low inflation helped by the huge supply of goods coming out of Asia, low U.S. interest rates and Asian investment in U.S. Treasury securities made mortgages cheap, encouraging buyers to get into the market and so fuelling a bubble in house prices. Other assets, like shares, also rose to levels that were going to be hard to sustain over the long term.

With a real dam, channels might be dug to ease the pressure of water. In the financial world, however, the channels that were created only contributed to the problems. These channels were poor regulation, which created incentives for  money-making activities that were dangerous and not always well understood. The result was that banks and other financial institutions suffered huge losses on financial gambles that wiped out their capital.

While the problems had been brewing for years, it was only in September 2008 that the full scale of the looming crisis entered the public’s consciousness. Subsequently, the crisis moved far beyond Wall Street and affected economies around the world.

But, to go back to basics, why did the liquidity bubble form – why did the water build up behind the dam? And what happened to regulation that allowed banks to make such dangerous mistakes?

Water in the dam: What caused the liquidity bubble?

Asset price bubbles are not rare in human history. As far back as the 17^th century, the Dutch were gripped by “tulip mania,” when speculation in tulip bulbs sent prices soaring – according to one estimate, at the height of the mania the price of some bulbs exceeded $100,000 in present-day values. In the 1920s, share prices soared in New York in the run-up to the 1929 Wall Street Crash. Over the next three or four years, they lost almost nine-tenths of their value. It would take until the middle of the 1950s for New York-listed shares to return to their pre-1929 levels. More recently, the “dotcom bubble” of the late 1990s and early 2000s saw a huge run up in the price of Internet-related shares before they, too, came back down to earth.

By leading to cuts in U.S. interest rates, the crash that followed the dotcom bubble helped lay the ground for today’s problems. Let’s look in greater detail at how that happened, and at two other factors that helped lead to the build up of water – or credit – behind the dam.

Low U.S. interest rates: Following the collapse of the dotcom bubble, the U.S. Federal Reserve sharply cut interest rates to stimulate the economy. Low interest rates encourage businesses and consumers to borrow, which boosts spending and, thus, economic activity and jobs. A combination of strong jobs growth, low rates and policies to encourage zero-equity loans helped drive house prices higher but also made home loans more available to lower income households.

Low Japanese interest rates: Japan’s central bank set interest rates at 0% in 2001 as the country sought to secure its economic recovery following the “lost” decade of the 1990s. Such low rates made yen borrowings very cheap, and led to the emergence of the so-called yen carry trade. In basic terms, this meant borrowing yen (at interest rates of virtually 0%) and then buying much higher yielding assets, such as U.S. bonds. This had the effect of pumping money into any financial system where potential returns were higher.

The impact of China and sovereign wealth funds: In recent decades China has become an export powerhouse, manufacturing and selling huge quantities of goods overseas but importing and buying much less. The result is a large surplus, much of which is recycled to the U.S. Because China chooses to manage its exchange rate, these flows mean that the central bank carries out much of the recycling by accumulating foreign exchange reserves, which are typically invested in U.S. Treasury securities. China is now the biggest investor in these securities, but it is not alone: Many Middle Eastern and East Asian countries, including China, operate Sovereign Wealth Funds, which invest national wealth, often overseas. As oil prices boomed in 2007, the value of some of these funds grew greatly, which added yet more liquidity to the emerging global bubble.

Dangerous channels: Mounting insecurities

So, the world economy was awash with easy credit, leading to a big run up in the price of assets such as houses and shares – in effect, a bubble emerged and, like all bubbles, the day would come when it had to burst. That’s serious enough, but what made the problem even worse was a failure to adequately regulate the ways banks and financial institutions managed these flows of cheap credit.

One of the most serious issues was an increase in home loans to people with weak credit records – so-called subprime mortgages – which was encouraged by public policy, for example with the so-called American Dream legislation (see below). It was attractive to financial institutions to buy these mortgages, package them into mortgage securities and then, with the revenue from the up-front fee banked, to pass the risk on to someone else. There were important tax advantages to brokers in this process and it contributed to the explosive growth of the credit default swap market (problems in which played a large role in the spread of the crisis between financial institutions).

This process of mortgage securitisation played a key role in helping to create the crisis, so it’s worth looking in a little more detail at how the process works: A mortgage provides a bank with the promise of future cash flow over a long period of years as the mortgage borrower pays back the loan on his or her home. However, the bank may not want to wait that long, and may opt for a quicker return by creating a security, or specifically, a residential mortgage backed security, or RMBS. In simple terms, a security is a contract that can be bought and sold and which gives the holder a stake in a financial asset. When a bank turns a mortgage into a security and then sells it, the purchaser is buying the right to receive that steady cash flow from those mortgage repayments. This purchaser is most often a special purpose vehicle (SPV) that sells notes of different quality to buy-and-hold investors (like pension funds). The bank, meanwhile, is getting quick fee revenue for doing the deal, and may or may not have obligations to the SPV in the future (depending on contractual details).

However, things can go wrong: If the mortgage holder can no longer make his or her payments, the promised cash flow won’t materialise for the holder of security. Of course, the house could then be repossessed and sold, but if property prices have started to fall the sale price may not be sufficient to cover the size of the mortgage. Because home lending became more widespread over the past decade (for reasons we’ll look at in more detail below), the risk of mortgage default grew. Many of the securities became “toxic” to banks that kept commitments to them. Banks became cautious about lending to each other, because it was not clear how big the losses on these securities might be, and whether or not it was “safe” to be using other institutions as counterparties in interbank and swap markets, so fuelling the credit crunch.

A brave new world of banking

Why did banks create these securities, and why did they invest in them with what – in retrospect – looks like recklessness? The answers to these questions are complex and often quite technical, but to a large extent they lie in new approaches to regulation that allowed or effectively encouraged banks to change the ways they did their business.

To understand why, we need to know how banks work. In very simple terms, when you put money into your account you are effectively lending money to your bank, in return for which the bank pays you interest. (Because you can ask for it back at any time, the money you deposit is considered as part of the bank’s liabilities.) Your money doesn’t just sit in the bank: It will be lent to other people, who will pay higher interest rates on their loans than the bank is paying to you. (Because such loans will eventually be paid back to the bank, they are considered as part of the bank’s assets.) So, your money flows through your bank as if through swing-doors – in one side and straight out the other.

But what happens if you want your money back? By law, the bank must have a financial cushion it can draw on if it needs to. This is capital or equity, or the money that shareholders or investors put into the bank to set it up in the first place (it sits on the liabilities side of a bank’s balance sheet). Traditionally, the need for a bank to adhere to a capital adequacy requirement – or a minimum share of capital as a proportion of its loans – limited how much it could lend and, thus, its growth. Banks were thus usually conservative businesses – investors who bought bank shares expected to hold onto them for a long time, enjoying small but consistent dividends rather than a rapid price rise.

In the 1990s, this approach changed. Many banks began increasingly to focus on growth, both for their businesses and for their share prices – and the way they were regulated increasingly allowed them to do so. Instead of focusing mainly on earning revenue from the spread, or difference, between what a bank pays its depositors and what borrowers pay to the bank, banks increasing relied on trading income, which is money earned from buying and selling financial instruments, and fees from mortgage securitisation.

This new approach changed the timeframe over which banks expected to earn their money – rather than waiting patiently over the years for interest payments on loans, they increasingly sought “upfront” returns, or quick payments, from fees and from selling financial products. The way banks paid their staff reflected this new focus: The size of bonuses grew in relation to fixed salaries and they were increasingly based on an executive’s ability to generate upfront income. Staff were also offered shares and share options, which meant it was in their interest to drive up the share price of the bank by generating quick earnings.

These innovative approaches to banking – relying increasingly on securitisation and on capital market sales – were pursued most avidly by investment banks, a class of banks that serves mainly the needs of the corporate world by raising capital, trading securities and assisting in takeovers and acquisitions. In Europe, many regular banks also have investment banking arms. In the United States, there had long been a division in banking, a legacy of the Great Depression. That split was designed in part to prevent contagion risks between high-risk securities businesses, insurance and commercial banking. For instance, if an investment bank organised a share sale by a company that subsequently ran into trouble, its commercial arm might feel compelled to lend to the company, even if such a loan didn’t make great financial sense. In the 1990s, the barriers began to fall, most notably with the repeal of the Depression-era Glass-Steagall act in 1999. The result was that the appetite for risk-taking spread more widely in U.S. banking conglomerates, which ultimately led some of them and their European counterparts to get into severe difficulties.

Making the most of capital

We saw earlier that there are limits on how much a bank can lend – in very basic terms the size of its lending is limited by the size of its capital, although the way in which this capital adequacy requirement is calculated under the so-called Basel capital rules is technical and complex (for instance, riskier loans must be matched by more capital). In recent years, however, banks have been able to do more lending without an equivalent expansion in the size of their capital bases. Two developments allowed this to happen:

The emergence of “originate-to-distribute” banking: The idea behind “originate-to-distribute” banking is fairly straightforward, although the means used to put it into practice can be complicated. In simple terms, it means that a bank makes (or “originates”) loans, and then find ways to get them off its books (to “distribute” them) so that it can make more loans without breaking its capital requirements.

One way to do this was through the securitisation of mortgages and placement of them in SPV’s like structured investment vehicles – or SIVs – and collateralised debt obligations, or CDOs (see box). SIVs were entities created by banks that borrowed cheap in the short-term to fund assets that were of a longer-term duration. The SIVs made their money from the spread – or gap – between the cost of their short-term borrowing and the return from the longer-term holdings. Provided the bank did not provide letters of credit and other such facilities of a year or more, these would not be subject to Basel capital rules.

The main downside was this: SIVs constantly had to persuade lenders to continue giving them short-term loans. As the credit crunch hit, these lenders became ever more cautious, and interest rates on such short-term borrowings rose. SIVs also saw falls in the value of their long-term mortgage-backed securities as it became increasingly clear that many of these were built in part on bad loans. So, SIVs were left facing big losses, and it was the banks that created them that were left with the bill for cleaning up the mess.

The switch from Basel I to Basel II: The size of banks’ minimum capital requirements are governed by an international agreement, the 1988 Basel Accord (or “Basel I”). As banking and finance evolved throughout the 1990s and into this century, the need was seen for a new agreement, which led to the publication of proposals for a new “Basel II” accord in 2004.

These accords are highly technical, and their impact on the development of banking practices – as well as their role in fuelling the crisis – is still a matter of debate. Nevertheless, two points are worth noting. Firstly, Basel II effectively regards routine mortgage lending as less risky than its processor did, which allows banks to issue more mortgages without affecting their capital adequacy requirements. Secondly, and as a consequence of this, it made sense for banks in the transition from Basel I to Basel II to move existing mortgages off their balance sheets through methods such as mortgage securitisation; they would then be able to take early advantage of the new and more attractive arrangements for mortgage lending laid out in Basel II.

Making the Most of Tax

Another great attraction of the securitisation model has been the ability to take advantage of opportunities in different tax regimes that apply to buy-and-hold investors on the one hand and to brokers on the other in respect of income and capital gains. Use of insurance via credit default swaps (CDS) and offshore locations for SPVs allowed tax-based returns to financial firms that couldn’t be used properly by the investors. This is because the capital gains tax in some jurisdictions is low relative to income tax, and the company tax rate is higher. In a sense, by choosing low-quality mortgage based securities, losses could be optimised to everyone’s advantage—provided a global financial crisis didn’t cause liquidity to dry up. As the solvency crisis spread, CDS obligations became one of the key mechanisms for spreading the crisis between banks and insurance companies like AIG.

Why did it happen when it happened?

Many of the trends described so far in this chapter have been a fact of financial life for some years, so it’s tempting to wonder not only why, but also when, matters came to a head. Media coverage often dates the start of the crisis to the tumult of September 2008. But the cracks in the financial system had begun showing well before then – even in early 2007 it was clear that many holders of subprime mortgages would not be able to repay them.

Residential mortgage-backed securities versus other securitised assets

As the chart shows, there was a veritable explosion in the issuing of residential mortgage backed securities from 2004.

Source: “The Current Financial Crisis: Causes and Policy Issues”.

But rather than wonder when exactly the crisis began, it may be more useful to ask when the factors that led to the crisis really started to come together. The answer to that is 2004. As the chart shows, that year was marked by a something close to an explosion in the issuing of residential mortgage-backed securities – a process that ultimately pumped toxic debt deep into the world’s financial system and that governments and banks have since struggled to clean up. So, what happened in 2004? The following events were key:

New U.S. policies to encourage home ownership: Enacted the previous year, the Bush Administration’s “American Dream” home-owning policies came into force. Their aim was to help poorer Americans to afford a down-payment on a home. While the policy had good intentions, critics argue that it encouraged many Americans to step on to the property ladder even when there was little hope they could go on making their mortgage payments.

Changes to Fannie Mae and Freddie Mac rules: The United States has a number of “government-sponsored enterprises” that are designed to ensure the availability of mortgages, especially for poorer families. The two best known are Fannie Mae and Freddie Mac, which buy and securitize mortgages from lenders such as banks, so freeing banks to provide more home loans. In 2004, the federal government imposed new controls on Fannie Mae and Freddie Mac, which opened the way for banks to move onto their patches. Such a move was probably inevitable: Banks and other mortgage firms faced a loss of revenue if they could no longer pass on mortgages to Fannie Mae and Freddie Mac. Their response was to create Fannie and Freddie lookalikes through SIVs, which had the affect of shifting a large quantity of the American mortgage pool from the federal to the private sector.

Publication of Basel II proposals: As discussed above, this effectively encouraged banks to speed up mortgage securitisation.

Changes to rules on investment banks: Finally, 2004 also saw a change in how the Securities and Exchange Commission, or SEC, which regulates the securities business in the United States, supervised investment banks. In return for an agreement from the larger investment banks to let the SEC oversee almost all their activities, the SEC allowed them to greatly reduce their capital requirements, which freed up even more funding to pump into areas such as mortgage securitisation. That move allowed investment banks to go from a theoretical limit of $15 of debt for every dollar in assets, to up $40 for every dollar.

And on to the real world…

What began as a financial crisis quickly morphed into a crisis in the real economy. Beginning in late 2008, global trade began to go into freefall, jobs were lost and economic growth rates plummeted, with countries around the world slumping into recession. In the next chapter we trace how that slowdown spread through the real economy and affected the lives of millions of people around the world.

This chapter draws heavily from “The Current Financial Crisis: Causes and Policy Issues,” by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee, and from “The Sub-prime Crisis: Causal Distortions and Regulatory Reform,” by Adrian Blundell-Wignall and Paul Atkinson (see References for publishing details).

References

Blundell-Wignall, Adrian, Paul Atkinson and Se Hoon Lee, ”The Current Financial Crisis: Causes and Policy Issues”, OECD Journal: Financial Market Trends, Vol. 2008/2.
doi: 10.1787/fmt-v2008-art10-en

Blundell-Wignall, A. and P. Atkinson (2008), “The Subprime Crisis: Causal Distortions and Regulatory Reform”, in Lessons from the Financial Turmoil of 2007 and 2008, proceedings of a conference held at the H.C. Coombs Centre for Financial Studies, Kirribilli, on 14-15 July 2008, Reserve Bank of Australia, Canberra; available at www.rba.gov.au/PublicationsAndResearch/Conferences/2008/Blundell-Wignall_Atkinson.pdf.

Choudhry, M. (2007), Bank Asset and Liability Management, John Wiley & Sons, Hoboken, N.J.

Cooper, G. (2008), The Origin of Financial Crises, Harriman House Publishing, Petersfield, Hampshire

Labaton, S. (2008), “Agency’s ’04 Rule Let Banks Pile Up New Debt”, 3 October, The New York Times, New York, N.Y.

Morgenson, G. (2007), “Shaky Loans Haunt Mortgages, And Investors, As Crisis Looms”, 11 March, International Herald Tribune, New York Times Co., New York.

Morgenson, G. (2008), “U.S. Lenders’ Attitude: Don’t Ask, Don’t Tell”, 6 April, International Herald Tribune, New York Times Co., New York.

Menschel, R. (2002), Markets, Mobs, and Mayhem: A Modern Look at the Madness of Crowds, John Wiley & Sons, Hoboken, N.J.

OECD (2009), The Financial Crisis: Reform and Exit Strategies, OECD Publishing, Paris.
doi: 10.1787/9789264073036-en

Wolf, M. (2009), Fixing Global Finance, Yale University Press, New Haven.

by ACN Newswire, November 26, 2009.

A survey on the corporate governance standards of companies listed in Hong Kong conducted by The Hong Kong Institute of Directors (“HKIoD”) and Hong Kong Baptist University (“HKBU”) found a slight improvement in the quality of corporate governance practices of Hong Kong companies last year.

“The HKIoD Corporate Governance Score-card 2009″ survey is organised by HKIoD and executed by HKBU’s research team led by Professor Stephen Cheung, Chair Professor of Finance and Dean of  School of Business, and sponsored by the Corporate Governance Development Foundation Fund. The first report was published in 2004 and the latest set of findings is the third, which have shown improvement over the years.

Compared with the second Score-card published in 2006, the 146 companies studied on average achieved a 1.44% improvement in their Corporate Governance Index (“CGI”) score. As for the five areas “rights of shareholders”, “equitable treatment of shareholders”, “role of stakeholders”, “disclosure and transparency” and “board responsibilities” the first three improved notably whereas the last two had slightly lower CGI scores. The decline might have stemmed from the expanded number of rating criteria mostly used in the last two areas in this survey…(continue reading)

This post, as with the prior ones on trade clusters, aims to help visualize patterns of trade in the OECD from 50 years of partner trade statistics. The data is rich, meaning we should be able to develop rich intuition by exploring it visually.

These slides follow the method laid out in Jong-Eun Lee, “Two Maps for the World’s Trade Integration,” Applied Economics Letters, 11:4 (2004). All computations were performed in R.

Achieving Better Value for Money in Health Care – OECD Health Policy Studies – 18 November 2009
OECD Publishing
Version: Print (Paperback) + Free PDFAvailability: Available  Publication date:  18 Nov 2009  Language: English 

Pages: 164  ISBN: 9789264074200  OECD Code: 812009171P1

“Rising public health care spending remains a problem in virtually all OECD and EU member countries. As a consequence, there is growing interest in policies that will ease this pressure through improved health system performance. This report examines selected policies that may help countries better achieve the goal of improved health system efficiency and thus better value for money. Drawing on multinational data sets and case studies, it examines a range policy instruments. These include: the role of competition in health markets; the scope for improving care coordination; better pharmaceutical pricing policies; greater quality control supported by stronger information and communication technology in health care; and increased cost sharing.”

Table of contents:

      Introduction
      Chapter 1. Patterns of Health Care Spending Growth
      Chapter 2. Market Mechanisms and the Use of Health Care Resources
      Chapter 3. Improving Health Care System Performance through Better Co-ordination of Care
      Chapter 4. Ensuring Efficiency in Pharmaceutical Expenditures
      Chapter 5. Using ICT to Monitor and Improve Quality in Health Care
      Chapter 6. The Impact of User Charges in Health Care

The expected introduction of the European Union’s (EU) Lisbon Treaty in 2010 will fundamentally alter how EU external action is conducted. This presents both risks and opportunities for EU development cooperation. The general expectation of EU Member States’ Senior Officials is that progress in EU integration and a stronger EU profile in the world would strengthen EU development cooperation and improve policy coherence for development This would also help to ensure better cooperation with partner countries in the South. But there were varying assessments on how these aspirations might best be achieved. See the ECDPM background document. Source: ECDPM. http://dev.afflux.com/ecdpm/manager2/link.php?ID=1125

Das Handelsblatt hat folgende Weisheit der OECD für uns parat:

Nach den neuesten Wachstumsprognosen der OECD, welche die Industrieländerorganisation am Donnerstag vorlegte, wird die Wirtschaftsleistung der USA in diesem Jahr mit minus 2,5 Prozent deutlich weniger schrumpfen als die des Euro-Raums mit minus vier Prozent. Die USA würden diesen Rückgang schon 2010 wieder wettmachen und 2011 dann eine Wirtschaftleistung erzielen, die fast drei Prozent über der von 2008 liegt.

Europa hinkt hinterher

Man sollte anmerken, dass das Wachstum der USA in Dollar gemessen wird und das Europas in Euro. Drehen wird die Sache doch mal um: Wer kommt dann wohl besser durch die Krise?

(Quelle| spiegel.de) OECD drängt Regierungen zum Staatsgeld-Entzug
Die Konjunktur in Europa erholt sich – deshalb fordert die OECD ein Ende der milliardenschweren Konjunkturprogramme. Doch ein schneller Stopp wäre heikel: Fahren die Staaten ihre Hilfen zu schnell runter, könnte die fragile Wirtschaft in eine neue Krise stürzen. Von Michael Kröger mehr…

Our tresuarer Wanye Swan, otherwise I called him the “Pied Piper of Canberra”.

He’s recent continuing praises of Australia is still outperforming the rest of the world according to these OECD data, While expecting Australia to “to experience a relatively more robust recovery, having been affected less by the global crisis than most other OECD countries”.

“Stimulus, both fiscal and monetary, has meant Australia has avoided the permanent skills and capital destruction that generally accompanies deep downturns and has meant less permanent damage to our economy”.

As its forecasting 0.8 per cent in 2009, rising to 2.4 per cent in 2010 compared to other countries economies are shrinking before growing by 1.9 cent in 2010.

While the OECD forecasts Australia’s unemployment to pack at 6.3 % in 2010, compared with the Government’s forecast of 6.75%.

As the OECD gives its thumbs up for the continuing stimulus as Wanye reenforces his stand on the stimulutes “A more sudden withdrawal of stimulus would hurt small businesses, cause many more jobs losses and put our economic recovery at risk”.

Finally the OECD goes on saying:

“However, an increase in housing investment would seem to be taking shape with a recovery in house prices and mortgages.”

A huge decline of activity will not be ruled out as a result of reducing the stimulus and even though confidence may improves the ‘enhance the vigour’ of local demand.

“There are also uncertainties over the external environment with regard to trends in the financial sector and the strength of the recovery in the OECD area,” it said.

Whats my thoughts on this?

Both Wanye Swan and the OECD is dead wrong with unemployment, growth and asset prices.

Unemployment in Australia is almost twice the figure of both the Fedural government and the OECD sees and forecasts. They never counted those who are working part-time or unemployed.

The way Growth in Australia is measured by spending, earning and borrowing? How could both of them are so stupid that Australia economy has grown more than 0.8%? Australia already has taken more debt, buys more products overseas, export less and hours of working is declining.

Also the Wanye Swan is already in a more bigger hole than ever, withdrawing the stimlus or not releasing the stimlus will hurt our economy much harder. We will head for recession anyway regardless of the stimlus being in place and drying up. Stimlus programs only delays recessions and doesn’t prevent them.

House prices and other asset prices increased because of the expansion of credit and the money being used to encourage people to get into the housing market is just adding inflation into these assets. If there’s a slow down in housing, then consumer confident will go plummeted. All the new homeowners or mortgagees will be the biggest losers with huge amount of debt to pay off, when wages are declining.

Its an illusion of wealth to be honest.

At least they were right about the uncertainties about the trends in the financial sector and its role that plays the strength of the recovery in the OECD area.

The financial sector is the problem! they add more debt to consumers as all they really care.

Thats the reasons why I called Wanye Swan the Pied Piper of Canberra.

Cheers

Khoa

Mark Pearson of the OECD

Cuba: Broadband and Other Such Matters – Español

by Nelson P. Valdés for Cuba-L Analysis (Albuquerque)

I’m singing
When the cat’s away
The mice will play
Political violence fill ya city
Yeah-ah
Don’t involve rasta in your say-say
Rasta don’t work for no CIA
- Bob Marley + the Wailers

On October 29, the Cuban magazine Temas held its monthly meeting/debate, which has come to be known as “Last Thursday [of the month].”  The discussion was to be about the Internet and Cuban culture.  This in itself is an enormously complex topic in today’s world, and still more complicated in Cuba’s case since all access to and use of the Internet has been politicized by those in opposition to the island’s government.  The Internet, at the same time, has become just one more instrument used by the United States government to project its foreign policy and influence internal processes in the rest of the world. [1]

During the discussion on Internet and culture held by Temas, Yoani Sánchez asked for and received the opportunity to speak.  Her first question was in regard to whether broadband has anything to do with not allowing the majority of Cubans to have access to the Internet.

I’ve dealt with the subject of Internet and Cuba before. [2]  In that essay I presented the thesis that bandwidth is an essential element in shaping the topology and architecture a country’s connectivity will have and that in itself affects the number of users and the speed of data transmission. This is now well known by the general public, but it was not as known years ago. The thesis, of course, is based on the cost of connectivity (digital lines, servers, routers, etc.) and furthermore, the consideration as to whether the access is obtained by satellite or another medium.  In highly industrialized countries, the per person user cost would be much lower, since the necessary infrastructure would be within reach for people with sufficient resources – in other words, economies of scale would reduce the per user cost.  For a smaller population with lesser income, the cost of connectivity tends to increase drastically.

These economic factors are usually not considered in the debate over Cuban connectivity.  However, there is a “digital divide” on a global level.  This same inequality is also found within societies.  The inequality in high-speed Internet access can be found even in the most developed societies.

The user model of the capitalist world that is based on individual usage, through a household or handheld computer – that the majority of the world’s poor does not possess – must also be taken into consideration.

Furthermore, it must be noted that the Internet, by its nature, breaks with an entire series of old parameters.  First, it breaks with logical and sequential thought and argumentation.  Hyper-connection destroys historical sensibility.  There’s no beginning, middle or end.  Now the jump is made from one side to another without rhyme or reason – connectivity provides no real judgment of sources. It’s not easy to determine whether or not an information source is reliable.  Most all of the information is commercial.  Someone has to pay to post, send or receive it.

There’s nothing surprising in thinking that this technology would be liberating.  Technological determinism is nothing new.  The same was thought of the radio, the television, the telephone, the telegraph, and now it’s said of the PC, Twitter, Bluetooth, etc.; that they will contribute to the democratization of societies.  Such projections conquer the logic of the naive, politicians and opportunists alike.  The inherent implications of the Internet are not as clear-cut as with political, social or economic systems, but they do affect our own epistemology and cultural values.  The social and personal relations between people occupying a common geographical space and the already famous “social networks” in virtual space are not the same. Calling someone by telephone is not the same as reaching out and “touching someone” no matter what the ads try to sell us.

It’s clear however, that the debate over the Internet inside and throughout Cuba assumes premises inherent to highly developed countries.  The question about broadband should be answered by Cuban authorities charged with such matters.  However, it’s worth mentioning that the Obama administration has decided to spend no less than $6.3 billion dollars toward improving U.S. broadband penetration. Although the U.S. has the largest broadband market in the OECD countries, about 70 million subscribers, as a proportion of its total population with broadband it ranks 15th.[3]

A single person using YouTube, HDTV, and others require bandwidth of 8 megabits per second in both directions to be functional. All of Cuba, using its present infrastructure, can download 65 megabits and upload 124. The virtual dissidents, therefore, can only be sending their images using a connectivity that is not depending on the Cuban state resources; otherwise, all of Cuba would have to stop to allow them to upload their materials to YouTube and the like.

There are some pertinent questions that we ought to ask of the virtual Yoanis found in Cuba, and who evidently have been able to access the Internet even though the entire country’s broadband access is insufficient. Their experiences might have a positive impact on those with lesser resources.

What is broadband?  What is its importance?  And how much does it cost? [33% of U.S. Internet users do NOT have broadband.] However, in the U.S., high speed cable modem is available to 96% of end-users and 79% of them have DSL.
In the majority of poor countries neither of the three is widely available.  Steve Song, a specialist on the subject of broadband from the International Development Research Center noted in 2008 that “the average university in Africa has the same aggregate bandwidth as a single home user in North America or Europe.” He also noted that the typical university in Africa “pays more than 50 times for this bandwidth than their counterparts in Europe or North America do for much more capacity.” [4]

What is the relationship between broadband, its use, and cost?  This is a cost that Cuba might not be able to provide to everyone as an entitlement or as Cubans say “me toca”. Finland, this past October, made 1 megabit broadband a legal right to begin July 2010. France, on the other hand, has established that Internet access is a “basic” human right [speed does not count]. But you have to pay for it.

As the Mexican comedian Cantinflas used to say: “En el detalle está la diferencia” – It is the little detail that makes the difference. The French initiative says nothing about affordability; the private person has to pay. The Helsinki Times reports that the meaning of a “legal right” is that no household “would be farther than 2 kilometers from a connection capable of delivering broadband Internet with a capacity of at least 100 megabits of data a second.” Thus, the superhighway will be nearby, it is up to you, nonetheless, to pay for the connection.[5]

On November 6th, Business Week, approvingly, noted that the European Parliament has “abandoned a bid to declare Internet access a fundamental right.” Five months earlier, Cuban dissident bloggers issued a statement proclaiming the right of access to Internet.[6]

The foreign press stationed in Cuba claims that a dissident in Havana has a blog that is translated into 16 or more languages and has from 1 to 14 million visits a month. That is impressive for anyone worldwide. For someone in Cuba it borders on a Fatima-like miracle.[7]

From a logistical standpoint, this is an unusual accomplishment. Is it possible for such traffic to be handled by Cuba today? Who is/are the administrator[s] of the web pages in all these languages?  Translation is complicated, time-consuming, and a worldwide translation team is costly. How is this work done? How is it paid for?  And what is the mechanism for transferring this payment?

In Cuba, it’s not possible for a person to earn enough to maintain these costly services and systems.  Yet, the  blogs exist. Someone or some institution has to incur costs to access the Internet, Twitter, etc. Perhaps there are good Samaritans. Perhaps…

We do know that the  USAID Cuba Program financially supports “independent journalists” within the island.[8] Is this also the case with the “independent bloggers”?

In fact, United States foreign policy has as one of its foundations the premise that the Internet could elicit regime change. That is why the US Treasury Department has informed Google and Microsoft to allow chat services into Cuba. [9]

The U.S. Department of Defense provides some indication that the Internet should be utilized to fulfill United States government objectives – i.e. targeting “regime change”.  This includes, “develop[ing] a global web site supporting U.S. strategic communications objectives” where “contents should be primarily from third parties with greater credibility to foreign audiences than U.S. officials.” Moreover, the same report notes that the Pentagon should “identify and disseminate the views of third party advocates that support U.S. positions. These sources may not articulate the U.S. position the way that the USG would, but they may nonetheless have a positive influence.” [10]

There are numerous US private contractors and universities around that are more than willing to serve the interests of empire although claiming “complete independence” from Washington’s foreign policy. [11]

Which Internet, then?

Is Internet the technology with the capacity to enhance and liberate human potential, knowledge, understanding and cooperation among nations? Or, is it one more  instrument to be used, as in the past, to maintain and extend the unequal exchanges and power relations that have existed between the nations of the world? That is a struggle that is presently fought throughout the world. Is Internet a public forum or is it a commercial enterprise? That is the debate going on in the United States and other capitalist societies.[12] It is a struggle within Cuba itself, where national self determination and
American hegemony confront each other in numerous and not so obvious ways.

BIBLIOGRAPHY:

[1] New Inequality Frontiers: Broadband Internet Access by Economic Policy Institute, 2006].

[2] 03/09/08 – Cuba-L Analysis (Albuquerque) – Cuba and Information Technology – 2001[Part 1]
http://cuba-l.unm.edu/?nid=45032&q=Nelson%20P%20Valdes%20and%20Internet&h=
03/10/08 – Cuba-L Analysis (Albuquerque) – Cuba and Information Technology – 2001 [Part 2]
http://cuba-l.unm.edu/?nid=45055&q=Nelson%20P%20Valdes%20and%20Internet&h=
03/09/08 – Cuba-L Analysis (Albuquerque) – Cuba and Information Technology – 2001[Part 3]
http://cuba-l.unm.edu/?nid=45100&q=Nelson%20P%20Valdes%20and%20Internet&h=
03/12/08 – Cuba-L Analysis (Albuquerque) – Cuba and Information Technology [Final]
http://cuba-l.unm.edu/?nid=45151&q=Nelson%20P%20Valdes%20and%20Internet&h=

[3] Organization for Economic Cooperation and Development, broadband Growth and Policies in OECD Countries, Seoul, Korea, 17-18 June 2008. OECD Ministerial Meeting. http://www.oecd.org/dataoecd/32/57/40629067.pdf and
Bill Schrier, Third World Broadband – In the United States. See:
http://www.digitalcommunitiesblogs.com/CCIO/2009/03/third-world-broadband-in-the-u.php

[4] IDRC, Acacia news, February 2008.
http://www.idrc.ca/en/ev-122116-201-1-DO_TOPIC.html and Indrajt Basu, “Not All Americans View Broadband as Necessity, But Finland’s Another Story,” [October 26, 2009.] See:
http://www.digitalcommunitiesblogs.com/international_beat/

[5] http://www.helsinkitimes.fi/htimes/domestic-news/politics/3179.html

[6] http://www.businessweek.com/globalbiz/content/nov2009/gb2009116_710422.htm
and the bloggers statement:
http://bottup.com/200906014676/Internet/comunicado-para-defender-los-derechos-en-cuba.html

[7] http://en.wikipedia.org/wiki/Yoani_S%C3%A1nchez

[8] http://www.usaid.gov/locations/latin_america_caribbean/cuba/photogallery/cu01.html

[9]“US Wants Microsoft to End Message Ban in Iran,Cuba” Bloomberg, October 29, 2009.
http://news.yahoo.com/s/bloomberg/20091029/pl_bloomberg/afpeerwgcyla_1

[10] U. S. Department of Defense, Information Operations Roadmap, 30 October 2003, p. 27.
http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB177/info_ops_roadmap.pdf

[11] A case in point is the Berkman Center for Internet & Society at Harvard Law School and its Internet and Democracy Project which has a 2 year grant of $1.5 million from the US Department of State’s Middle East Partnership Initiative.
http://blogs.law.harvard.edu/idblog/the-internet-and-democracy-project/

[12] “FCC Set To Take On Aggressive Role As Internet Traffic Cop, “SiliconValley.com, October 20, 2009. See:
http://www.siliconvalley.com/sectors/ci_13603357

I would like to thank Machetera, Rafael Hernandez, Saul Landau, Robert Sandels and Louis Head for their assistance with translation, editing and offering numerous comments.

Machetera is a member of Tlaxcala, the network of translators for linguistic diversity. This translation may be reprinted as long as the content remains unaltered, and the source, author, and translator are cited.

Over at Investor’s Business Daily, Wayne Crews and I make the case against a Value Added Tax. Policy makers have been flirting with the idea as a way to reduce the $1,400,000,000,000 budget deficit.

We argue that a VAT is:

-Complex; it would require roughly doubling the size of the IRS.

-Untransparent; most VATs don’t show up on receipts the way sales taxes do. Taxpayers are clueless as to how much tax they actually pay.

-Vulnerable to special-interest tinkering; politically incorrect goods are routinely penalized with higher rates. Politically favored goods are granted exemptions.

-Prone to increases; 20 out of 29 OECD countries with a VAT have increased their rates since implementing a VAT.

A point we didn’t make is that VATs affect industrial organization. VATs are applied at each stage of the production process. That gives companies an incentive to reduce the number of taxable steps. That means more vertical integration than would otherwise occur. This can decrease the efficiency of the manufacturing process. Which means higher prices and fewer goods. Plus the tax.

Parliamo ora di cose serie. Uno dei principali ostacoli fra la persona comune e la statistica sono i numeri. Il 70% della popolazione italiana è affetta da deficit di numeracy (italianamente detta “capacità di fare di conto” o “alfabetizzazione numerica”), il che comporta non solo una diffusa difficoltà a ragionare in termini matematici, ma anche l’incapacità di comprendere informazioni numeriche (percentuali, tassi, ..) e di leggere grafici e tabelle. Tutto ciò rende l’uomo comune vulnerabile alla strumentalizzazione che giornalisti, politici e comunicatori fanno dei dati statistici ufficiali. Insomma, molti sanno tenere i conti di casa ma ben pochi sono in grado di interpretare gli andamenti dell’inflazione (anche se spesso per colpa di giornalsti che, consapevoli o meno, usano le cifre per inventarsi fenomenali avvenimenti economici o sociali). Bien, per ora non ho detto nulla di nuovo. Allora passiamo direttamente al tema dell’articolo. L’OECD (per chi non lo sapesse è l’Organizzazione per la CoOperazione Economica e lo Sviluppo, OCSE da noi; ha sede a Parigi, membri sono circa una trentina di Paesi dall’Europa, agli USA al Giappone, un budget da 320 milioni di euro, nonchè uno dei principali produttori e fornitori di statistiche internazionali) si è occupata e continua ad occuparsi del problema della numeracy, arrivando a pensare che per comprendere la statistica (e perchè no, per far fare statistica) i numeri nn servano. La supposizione si è rivelata essere esatta. Pochi anni fa è stato sviluppato da un demografo e da un programmatore di videogiochi un programmino che permette “raffinate” comparazioni sociologico-demografiche nonchè economiche di portata mondiale. Questa meraviglia è stata battezzata Gapminder: vi assicuro che divertirvi con i dati OECD è un gioco da ragazzi, dato che questo software è stato messo nelle mani di ragazzini delle scuole medie che hanno prodotto piccoli rapporti da sociologi in erba. Se vi va di giocare un po’… buon divertimento!

Today, TRACE launched The TRACE Compendium, the only online, fully-searchable database containing summaries and analyses of international anti-bribery enforcement actions and investigations in the U.S. and throughout the world. Users can quickly bring themselves up-to-speed on the latest enforcement trends by pulling up summaries based on categories, such as cases involving gifts and hospitality, cases resulting in the imposition of a compliance monitor or all cases involving a specific country.

The TRACE Compendium contains summaries of all U.S. Foreign Corrupt Practices Act (FCPA) enforcement actions, as well as summaries of cases and ongoing investigations by authorities outside of the U.S. The TRACE Compendium will initially contain summaries of hundreds of enforcement actions by agencies such as the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the United Kingdom’s Serious Fraud Office, the Munich Public Prosecutor’s Office, the Swedish Prosecution Authority and the Public Prosecutor’s Office of Japan. The TRACE Compendium will be kept current, with new summaries published as soon as the latest developments are announced.

In creating the TRACE Compendium, TRACE collaborated with many different partners, including international law firms and many of the companies involved in particular bribery investigations. The goal is to produce and maintain the most accurate and thorough review of international anti-bribery enforcement activity available.

Visit the TRACE Compendium to stay on top of the latest international anti-bribery enforcement activity.