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Friday, July 26, 2013

Top Greek shipowner jailed on fraud charge

A leading Greek shipowner and investor, Victor Restis, has been jailed after charges were filed against him for fraud and money laundering. Court officials said the 45-year-old was taken into custody Friday ...


George Osborne's description of the economy is near-Orwellian

The fact that even Labour accepts the UK is 'on the mend' shows how low our expectations of economic performance are

If all else fails, they say, you can always lower your standards. This is what we have become used to doing in relation to the UK economy. The UK's economic performance since the start of the coalition government in May 2010 has been so poor that Thursday's announcement of 0.6% growth in the second quarter of 2013 was greeted with a collective sigh of relief.

Having declared the UK economy to be "on the mend" on the strength of this growth figure, George Osborne is said to have regained his swagger. Even the opposition grudgingly acknowledged that the latest figures were good enough news, although it was quick to add that the benefits of the recovery have been almost exclusively concentrated at the top.

But even the opposition's interpretation may be too charitable. Including the last quarter, the UK economy has grown by just 2.1% during the 12 quarters since the current government came to power. This compares very poorly with the 2% growth that the economy had managed in just four quarters between the third quarter of 2009 and the second quarter of 2010. The coalition blames this poor performance on the eurozone crisis. But this argument is not very persuasive when output has more than recovered to pre-crisis level in many eurozone countries, including France and Germany, while UK output is still 3.3% less than what it was at the beginning of 2008.

It gets worse. During the past five years, the UK's population has grown by 3%. This means that, on a per capita basis, the country's income is 6.3%, not just 3.3%, less today than it was five years go. This performance is far worse than what Japan managed during its infamous "lost decade" of the 90s. At the end of that period, Japan had a per capita income 10% higher than at the start.

If the UK is to match this performance during what looks certain to be its own "lost decade", it will have to grow at the rate of 3.9% every year for the next five years (or 3.3% in per capita terms, assuming that the past five years' population growth rate of 0.6% per year continues). Even the most optimistic cheerleaders for the coalition government are not talking such numbers.

Thus seen, describing the UK economy as being "on the mend" is a near-Orwellian redefinition of economic recovery. The fact that most people accept that description, even if with reservations about the uneven distribution of its benefits, shows how low the standard of performance we expect of the UK economy has become.

But even applying this low standard, it is not clear whether we can expect a sustained recovery in the coming years. There are at least two factors that can derail the recovery process, especially given that it is so feeble. The first is the likely evolution of the global economy. The eurozone may be dragging itself out of a recession, but things can turn for the worse at any moment. Especially given the severity of austerity in countries such as Greece, Spain and Portugal, the policy's continuation may result in another bout of political unrest, negatively affecting the economy.

Thanks to its avoidance of the worst form of austerity policy, the US economy has recovered from the 2008 crisis more strongly than the European countries. But with another federal debt ceiling negotiation looming later in the year, it is possible that the US recovery will be set back by another round of budget cuts. The Chinese economy has visibly slowed down. And the Chinese government seems determined to keep it that way for a while. Concerned with financial stability, it has clamped down on credit expansion. Worried about seething public anger against government corruption and extravagance, it has imposed a ban on "wasteful" government spending (lavish buildings, banquets, and foreign trips). These are all good policies in the long run, but they will dampen Chinese demand in the immediate future.

The other two biggest "emerging" economies, Brazil (second largest) and India (third), have both seriously slowed down in the last couple of years. India's growth rate fell from 10.5% in 2010 to 6.3% in 2011, and then to 3.2% in 2012. The equivalent figures for Brazil were 7.5%, 2.7%, and 0.9%. Both these economies suffer from high inequality and social tensions, as shown by the recent protests in Brazil and the resurgence of Maoist guerillas called the Naxalites in the eastern part of India. Therefore there is always a possibility that political unrest may dampen these economies even further.

These global factors are, of course, beyond the UK's control, but there is another factor at least partially within its control that may derail the recovery. It is the asset bubbles that have developed in the stock market and the property market, fuelled by cheap credit (sounds familiar?).

Share prices have reached levels that simply cannot be justified by the state of the economy. In May 2013, the FTSE 100 share price index surpassed the pre-crisis peak of June 2007, although it has come down a bit since then. Given that the pre-crisis peak was supported by a buoyant (albeit unsustainable) economy, current share prices, which have no such support, can only be described as an even bigger asset bubble.

Although the rest of the country is still experiencing a stagnant housing market, property markets in London and the south-east are beginning to look inflated, given the state of the economy. And the government is stoking this property bubble with the Help to Buy scheme.

These asset bubbles have provided important sources of demand in the UK economy in the past few years. But the trouble is that they are quite shaky even for asset bubbles, for they are only sustained by historically low interest rates and the massive indirect subsidies given to banks through the so-called quantitative easing scheme.

The fragile nature of these bubbles is revealed by the nervousness with which financial market participants react to pronouncements by central bankers. They know that the current price levels are viable only with QE, so they are readying themselves to jump as soon as there is a sign that it may come to an end. When the asset bubbles deflate, there is likely to be a serious fall in demand that will derail the recovery.

In the past few years the UK should have found a way to stage a recovery without having to rely on state-sponsored asset bubbles. As it hasn't even tried, it is facing the prospect of having a "lost decade" that is even more "lost" than the original one in Japan.

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USDA awards contract to Chobani Greek yogurt for school lunch test

USDA awards contract to Chobani Greek yogurt for school lunch test (blog)
Chobani Greek Yogurt lab technicians Cindy Murphy (left) and Denise Signor review test sample results from a variety of yogurt products, including the pineapple flavor yogurt. The USDA today awarded the company a contract to provide its yogurt in ...
Schumer, Gillibrand, Hanna Announce New York's Chobani Yogurt Chosen for ...WBGH
Dannon Oikos still fastest-growing brand in Greek yogurt segment, with sales
Chobani to be served in school lunch pilot program13WHAM-TV

all 4 news articles »


Greek shipowner suspected of embezzlement detained

Greek shipowner suspected of embezzlement detained
A Greek shipowner was held in detention on suspicion of embezzlement and money laundering on Friday despite returning the sum he is accused of having pocketed, a judicial source said. A magistrate ruled that Victor Restis, who presented a marathon, ...

and more »


CAL STATE: Exhibit looks at Greek life and influence


CAL STATE: Exhibit looks at Greek life and influence
Ever wonder what the developing Western world was like during the pivotal time of Homer, Plato and Socrates? Patrons can get a glimpse into their world when the Robert and Frances Fullerton Museum of Art at Cal State San Bernardino features ancient ...

and more »


Greek shipowner jailed pending money laundering trial

Yahoo! News

Greek shipowner jailed pending money laundering trial
Yahoo! News
ATHENS (Reuters) - Greek shipowner Victor Restis has been imprisoned pending trial on money laundering and embezzlement charges, court officials said on Friday, making him one of only a few prominent businessmen to be jailed amid public anger over ...


Euro zone lenders unlock aid to Greece on Friday

Euro zone lenders unlock aid to Greece on Friday - sources
BERLIN/ATHENS, July 26 (Reuters) - Officials working for euro zone finance ministers will sign off the payment of the next batch of rescue loans to Greece on Friday and it will be disbursed following approval in individual member states on Monday, euro ...


Sir Jon Cunliffe career profile

The new Bank of England deputy spent most of his career in the Treasury, and was a key figure alongside Gordon Brown in 2008

The appointment of Sir Jon Cunliffe as deputy Bank of England governor puts a civil servant who has spent most of his career in the Treasury at the heart of the central bank.

For the last 18 months he has been David Cameron's man in Brussels in his role as UK permanent representative to the European Union, but prior to this high-profile posting most of his time was spent in committee representing the chancellor of the day. For much of his career that meant Gordon Brown.

A life-long Arsenal supporter and father of two daughters, Cunliffe, 60, is known as a smooth backroom operator. Since the coalition took power, ministers have billed him as someone who will stand up to Europe as it tries to impose new regulations on the City.

But rightwing Tories are suspicious that he harbours pro-European tendencies.

Douglas Carswell, the noisy Tory backbench MP, said Cunliffe's role during the Greek debt crisis, when the UK agreed to Athens receiving an EU backed bailout "managed to make us part of the euro debt union, if not the currency union".


Cunliffe studied at Manchester University and lectured at the University of Western Ontario before entering Whitehall in 1980. A succession of jobs took him from managing director of finance, regulation and industry at the Treasury in 2000 to second permanent secretary in 2005 when he became a regular visitor to Threadneedle Street as the Treasury's eyes and ears at monetary policy committee meetings.

In 2007, following Gordon Brown's appointment as prime minister, Cunliffe was appointed head of the European and global issues secretariat. In this role he accompanied Brown in discussions at the G8 and G20 and was credited with helping Brown forge a co-ordinated response to the banking crash.

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Thank God we have an archbishop who views Wonga's loans as modern slavery

Justin Welby is keen to recover the economic meaning of salvation as redemption. We are lucky to have him

"Forgive us our sins, as we forgive those who have sinned against us." The familiar words of the Lord's prayer, right? Except, in the earliest Greek manuscripts, the word isn't sins, it's debts. "Forgive us our debts as we forgive our debtors." That is how the King James Bible renders the Lord's prayer, though it still feels clunky when used in church.

But it feels even more clunky in the context of the whole Jesus v Wonga debate. The archbishop may want the church to have a greater role in supporting credit unions. But what sort of a lending model can be sustained when the mission statement of that organisation has the forgiveness of debts at its heart?

OK, to be fair, it's not the church that will be doing the lending on the Welby plan. The idea is for the churches (who have more outlets that the banks) to offer their facilities and human resources in support of credit unions. And it is credit unions that will be doing the lending. But even so, the church does have serious historic issues with money and the advent of a capitalist archbishop serves to bring these to the surface.

Though lots of Christians talk about sin (often translated in the mind as sexual misadventure), debt is the more basic theological category. Redemption, for instance, is a word that the church has borrowed from the ancient financial services industry. It is the recovery of something pawned or mortgaged. In a world of slavery, that something can be one's very life. And so it is today. Those who are trapped in Wonga's wicked 5,000% APR, often borrowing money to pay off other loans, thus deepening the crisis, have their lives owned by other people – by those, in this instance, making £50m a year profit off their misery. This is modern slavery.

Those who argue that it is not the church's business to get involved in this have little knowledge of the Bible. Redemption is absolutely what the church is for. And it is something supremely practical. Of course, when the church itself was subject to a successful takeover bid by the Roman Empire, all this forgiving debts stuff had to be re-imagined (as did all the anti-war stuff too). And what better way for the marketing department of the caesars to do this than to turn its newfound religion into something spiritual. Better "blessed are the poor in heart" (St Matthew) than "blessed are the poor" (St Luke). And in this process of ideological rebranding, sin becomes a more convenient category than debt.

But if the debt and slavery idea was conveniently re-thought, the church retained a peculiar and eventually poisonous doublethink about money. Lending money at interest was deemed a sin for centuries. And this meant that Christians ended up forcing Jews to do it for them, and then hating them for doing it, thus generating the conditions for European antisemitism. It took Calvin to argue that usury was not lending money at interest but lending money at excessive interest. As Max Weber famously explained, this was the point at which capitalism was given moral sanction by the church. Even so, Calvin would have been perfectly comfortable with the idea of legislating against Wonga's 5,000% APR – ie a cap on interest rates – rather than having to out-compete them through credit unions, which is the Welby caring-capitalism plan.

And however much I am with Calvin on this one, the C of E is lucky to have found an archbishop who is keen to recover the economic meaning of salvation as redemption (listen up, church commissioners). In Liverpool and Durham, he recognised the existence of modern slavery. And thank God he is pressing the church to do something about it.

Twitter: @giles_fraser

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