In my June 2011 article “Is it Time to Rethink Sovereign Debt” I described how, “…in our globalised economy, no country is an island.  Every nation has internal debt (owed to lenders within a country- often that countries citizens or banks) and external debt (owed to foreign lenders- often other countries, or large international financial institutions) and the numbers are staggering.  According to figures published in the CIA world fact-book, the USA has external debts alone of USD 14 trillion (around USD 45,097 per person), the European Union has external debts USD13.7 trillion (around USD 27,864 per person)   To put these figures in context, the value of the entire US economy is $14.2 trillion and the value of the entire European Union economy is $16.2 trillion.  These relationships are not clear-cut.  Many international banks, which are systemically important in their own countries will hold huge tranches of ‘risk free’ government debt, which are then leveraged against other investments here and abroad…“

The European debt crisis has been the most visible of the continent’s many elephants in many rooms.  The visibility of this elephant has been made more astonishing by the seeming lack of political will to arrive at a decisive and timely solution to what can only be described as potentially Europe’s most economically significant threat since the great depression.  On December 21st Bloomberg reported that European banks ‘devoured’ the ECB’s offer of almost half a trillion Euros of fresh cheap capital (primarily to refinance maturing debt).  Bloomberg added that , “….politicians, including French President Nicolas Sarkozy, are also pushing the banks to use the cash, which is borrowed at a current interest rate of 1 percent, to purchase higher-yielding southern European sovereign debt, thereby forcing down borrowing costs in the region.“  There is no doubt that the ECB’s latest intervention has averted a frighteningly serious domino of defaults- but their logic has been described as many as giving cash to the child of a serious drug addict, hoping the child will wean the parent off drugs by buying them more… Continue reading →

“..It is hard to overestimate how much is at stake for the world after the sudden death of Kim Jong Il, the North Korean despot, on December 17th…” wrote the Economist.  Political leaders (particularly those in the West) looked on as this poverty stricken failed state (armed with nuclear weapons) went largely silent- releasing only token-propaganda.

This is a country who are known to be one of the most brutal and systemic abusers of human rights in the world.  Since 1997, the world has observed that, “…North Korea is indeed on the verge of a major disaster… International aid agencies say they have never seen anything quite like it… it is like watching a famine in slow motion.” (this was a famine that killed up-to 1m people in the country).  Fast-forward to 2011, and reports emerged that, “The UN’s World Food Programme (WFP) is preparing to distribute emergency aid to 3.5m North Koreans suffering from ‘severe malnutrition’“.  It was also around this time that evidence began to emerge of, “…an arbitrary judicial system, an expansive conception of crime, and horrific abuses.  These abuses include extreme deprivation, particularly with respect to food and medical treatment, torture and public executions.”.  This a country  where “…witnesses have described watching entire families being put in glass chambers and gassed… left to an agonising death while scientists take notes. ” and where hundreds of thousands of people exist in prison camps (akin to concentration camps) with (as reported by Amnesty international), “…virtually no rights, treated essentially as slaves, in some of the worst circumstances we’ve documented in the last 50 years…“

It is not unreasonable for to assume, at this juncture, that the presence of nuclear weapons in the hands of this nation’s provocative leadership is a significant contributor to the ‘blind eye’ turned by the rest of the world to these blatant crimes against humanity. Continue reading →

Guest article written for AllAboutAlpha.com – the official publication of the  Chartered Alternative Investment Analyst (CAIA) Association

originally posted at: http://allaboutalpha.com/blog/2011/12/15/alpha-hunters-investing-in-global-development/

From our ‘developed world viewpoint‘ it is sometimes easy for us to forget that there was a time when the United States and Europe were (as we would classify them now) ‘developing’ economies- largely based around agriculture, with some limited trade, and huge income inequality.  The industrial revolution changed everything, and began a series of events which brought massive opportunity for hundreds of millions.    From our viewpoint, we also sometimes forget that during these revolutions- immense investments took place to finance the development of industry and infrastructure – while great philanthropists of the time provided social opportunity to lift people out of poverty.

 ”…The changes associated with the industrial revolution go far beyond the merely technical; they include  population growth, large-scale and extensive industrial investment, and the remarkably pervasive effects of  the application of science to industry, and have, in the past, led to a new system of social, industrial, legal and other relations, often described as modern industrial capitalism.” wrote Pollard in “The Economic History Review” (Vol. 11, No 2. 1958).  He continued, “…In the present state of techniques, every important nation may sooner or later pass through that stage of economic development.   Nevertheless, the technical similarities of the process of industrialization impose certain common features on each industrial revolution, of which the pressure on consumption, caused by massive simultaneous investment, is one of the most important.  This pressure may in the future be obviated by large-scale foreign investment, or by new techniques beyond our present understanding. Without such help, one might venture to prophesy that the countries in the Soviet orbit will find it extremely difficult to ‘catch up’ on the consumption of the West… while the ‘underdeveloped’ countries in the rest of the world, as they come to the hurdle of their industrial revolution, will find it hard to maintain rigorous limitations on real wages and other incomes within a democratic framework…..” Continue reading →