The Casual Truth

Merry Christmas and Happy New Year

admin — Thu, 23 Dec 2010 11:58:00 -0700

Dear readers

Thanks for keeping in touch with the world this year via The Casual Truth.

If you want to have a look at 2010 in review, Google sums it up pretty nicely with this video.

We will be taking a break now from December 25 until January 24. We hope you have a Merry Christmas, a Happy New Year and a great holiday.

Here are a few editors’ picks from the year to have a read over if you have time.

See you in 2011

The Casual Truth

1. What will happen when the world’s poor become rich?

2. The birth of human-made life forms

3. Obama presidency suffers major setback

4. The highly successful NFL business model

5. How fertility is solving the world’s problems

6. The oil curse of the Niger Delta

7. The unmatched influence of the American Jewish lobby

8. The revolution in Latin America

9. Some quietly successful countries

10. The murky world of hedge funds

Around the world in 60 seconds - 23 December 2010

admin — Wed, 22 Dec 2010 11:58:00 -0700

• Heavy snow delays European Christmas travel
• Ivory Coast on the brink of returning to civil war

Heavy snow delays European Christmas travel

Heavy snowfall across Western Europe on Saturday disrupted flights for five days leaving travellers stranded just before the Christmas holidays.

Europe’s busiest airport London’s Heathrow was the worst affected due to a lack of infrastructure to deal with heavy snowfall.

They only managed to clear the thick layer of snow and ice off one of their main runways on Tuesday.

A third of their flights began resuming on Tuesday and two thirds yesterday. However, airport officials said normal scheduling won’t begin until at least tomorrow, and that is providing there isn’t any more snow.

Angry passengers had to sleep on makeshift camp beds in the terminals and in marquees set up outside. It is believed that over 500,000 passengers have been affected by the delays.

The heavy disruption in England has had a flow-on effect around the rest of Europe and the world.

As well as flights being cancelled in Paris, Frankfurt and Dublin due to snowfall, other airports had to cancel flights as well because planes couldn’t land in England or were stranded there.

Most northern European cities can clear snow off their runways in a matter of hours and Heathrow has come under heavy criticism from the EU for being the “weak link” in the air travel infrastructure chain.

Ivory Coast on the brink of returning to civil war

On Tuesday, the United Nations Secretary-General Ban Ki-moon warned that there is a “real risk” of a return to civil war in the Ivory Coast after the standoff over the disputed presidential election intensified.

Numerous countries have warned their citizens either to leave the country or not to go there after at least 50 people were killed in post-election violence.

The internationally-backed winner Alassane Ouattara and his close supporters remain holed up in the luxury Golf hotel in the capital Abidjan which is protected by a group of 800 peacekeepers.

The UN has 10,000 troops in the country on a peacekeeping mission to oversee and certify the election process and result. Earlier in the week they extended their mission for another six months.

However, the army, which is loyal to the other self-declared winner current president Laurent Gbagbo, has surrounded the UN contingent at the hotel for several days and cut off supplies.

A spokesman for Gbagbo said if the UN does not leave the country then they will be treated as rebels, similar to the forces from the north that support Ouattara.

Gbagbo spoke in a television address on Tuesday saying that he was the legal winner and that an international panel could come and review the election results, which he says were rigged in the north to assure Ouattara of victory.

The recent election was supposed to be the final step in a three-year peace process ending the civil war that broke out early in the decade between north and south.

Photo – Snow-clearing trucks at Heathrow airport

A look ahead to 2011

admin — Tue, 21 Dec 2010 11:58:00 -0700

As we can look ahead to 2011, a few economic storm clouds are gathering that could rain heavily on some people.

But there is also cautious optimism that the growth of emerging nations could be strong enough to offset much of the global pain.

This will be the central issue next year for most people, but there will also be a few other things to look out for.

US gridlock

The big political change in the world in 2011 will be the Republicans taking over control of the House of Representatives in America’s Congress on January 1.

With Democrats controlling the Senate, Congress’s other house, and laws needing to be approved by both houses, there is potential for law-making paralysis and gridlock, given the two parties are so bitterly opposed.

This could potentially cause harm at home as economically-helpful policies may not get enacted due to political bickering.

But it could also cause harm abroad if US politicians continue to blame China for their problems (like its artificially low currency) rather than primarily themselves. Such a position could lead to trade protectionism and economic warfare.

It’s the economy

Undoubtedly, the world economy will be the most important issue in 2011. The year will mark the transition from government stimulus efforts post-financial crisis to government austerity measures (spending cuts and tax rises).

These mainly European measures have been announced this year in response to rising borrowing costs for governments, and are an attempt to persuade future lenders that they’ll get all their money back.

The impact of these budget-squeezing measures will come into force next year. Many government-paid workers in Europe will either lose their jobs or see their salaries cut.

This will decrease consumer spending and increase competition for jobs in the workforce, which will also squeeze incomes in the private sector.

It is a recipe for low economic growth and financial hardship. Some economies may even slip back into recession.

On the other side of the Atlantic, America’s housing market is still very weak, preventing people from spending freely or moving to where there are surplus jobs.

The government’s stimulus attempts of housing tax credits and cash for old cars have finished and the new Republicans have little appetite for more.

Fresh tax cuts (in addition to the recently extended ones) may provide some increase in consumer spending.

But now it seems that the only realistic solution to America’s struggling middle class is for businesses to export more, and this will take a few solid years of readjustment.

The big unknown is what effect this slowdown will have on emerging markets. Are they still too reliant on western demand for their locally-made products? Or are they now strong enough to provide each other with demand and growth?

If the answer is the latter then it’s good news for the West because they will keep the wheels of the global economy moving while rich countries get their finances in order and start creating new products that emerging countries want.

It’s an uncertain question but the answer will probably become known in 2011 when the private sector has to take over the economic reins from governments.

The other issues

In the Middle East, peace talks have collapsed between the Israelis and the Palestinians over continued Israeli settlement building in the West Bank.

The frustration and resentment caused by this could escalate into conflict at some point during the year.

The crucial counter force is the Fayyad plan for creating a Palestinian country, which is due to be completed in late 2011. This could provide both the hope and employment that is needed to prevent a third intifada (uprising) from materialising.

The scrap over Iran’s nuclear ambitions could get heated. President Obama has a preference for talking and sanctions but he could be pressured into using military force by politicians at home and abroad if suspicions get high.

In Afghanistan, the American plan is to start pulling troops out in July. But Obama may be advised by General David Petraeus to push back the deadline based on conditions on the ground. This will prove politically difficult given it’s already America’s longest war.

On climate change, the recent progress made in Cancun has raised hopes that a legally-binding agreement on emissions reductions might be possible in South Africa in November. But given America’s opposition, this still remains improbable.

And finally, Wikileaks will continue to leak secret information unless potential whistle-blowers have been discouraged by the rough prison treatment received by Bradley Manning, the suspected source of the classified American documents.

But for most people, 2011 will be about coping and hoping: coping with the flow-on effects of the massive government belt-tightening in the rich world, and hoping that the emerging market economies can prove strong enough to save the day.

By The Casual Truth

The US government sues BP and others for oil spill

admin — Mon, 20 Dec 2010 11:58:00 -0700

BP has been slowly recovering from the horrific four month-long oil spill that followed an oil rig explosion on 20 April in the Gulf of Mexico.

But dampening that recovery was the announcement by the US Justice Department last Wednesday that it was suing the oil giant and eight others for negligence in relation to the incident, signalling the start of a lengthy legal saga.

The government has refused to put a specific figure on the amount of damages it is seeking, largely because they don’t know what the total cost will be. But legal experts are suggesting it could amount to anywhere between US$40 billion and $60 billion.

The defendants and accusations

Nine companies have been named in the lawsuit: BP and its fellow exploration licence holders Andarko (x2 companies) and Mitsui; Triton Asset Leasing; Transocean, the rig owner and part operator (x3 companies); and a QBE insurance syndicate in Lloyds, Transocean’s insurer.

Despite several reports alleging they cemented the well incorrectly, American firm Halliburton hasn’t been named in the suit. Neither has Cameron International, the company that provided the seemingly faulty well cap.

However, US Attorney General Eric Holder said that it was an ongoing process and that additional defendants and charges could be added to the lawsuit.

For now, the charges have been laid under the Oil Pollution Act and the Clean Water Act.

The government has made the following accusations:

• Failing to take necessary precautions to keep the Macondo well under control in the period leading up to the 20 April explosion

• Failing to use the best available and safest drilling technology to monitor the well’s condition

• Failing to maintain continuous surveillance

• Failing to use and maintain equipment and material that were available and necessary to ensure the safety and protection of personnel, equipment, natural resources and the environment

That is essentially legal speak for alleging that BP and its partners caused or contributed to the explosion on the Deepwater Horizon rig and the gigantic oil spill that followed.

The government has said that they intend to hold the defendants responsible for government removal costs, economic loss (lost revenue to businesses) and environmental damages, without limitation on the amount.

The defendants will inevitably have to pay the government something. But what will determine whether the sum is larger than expected is if the government can prove that the defendants were grossly negligent in their failures to do the above.

The potential cost

The cost of the cleanup, the damage to the environment and the economic loss to businesses is still unknown as the cleanup is still underway and compensation claims are still being processed.

But in addition to these costs, the companies face a minimum fine of $1,100 per barrel of leaked oil. This makes the total fine $5.3 billion, given the US government claims 4.9 million barrels were spilled (BP is disputing this figure).

But if the defendants are proven to be grossly negligent, then the fine would increase to $4,300 per barrel, or $21 billion.

BP itself has been extremely up front about its financial obligations. It has set aside US$40 billion for the total cost – $20 billion for damages claims, $11 billion to pay for the cleanup and $9 billion to cover any possible fines.

This will cover most of what the government is demanding in the lawsuit, which is why share price only slightly dropped on the news.

The only fear for BP investors is the threat of major fines stemming from gross negligence, which would add an extra $16 billion to the bill and make it extremely difficult to get money out of BP’s two licence partners.

What now?

The trial, which will be held in a district court in New Orleans, won’t actually begin until 2012, and the case could last years if not decades if all the appeals and different legal options are pursued (the lawsuit for the Exxon Valdez spill in Alaska lasted over 20 years).

BP, who knew the lawsuit was coming, has said that they will respond in a timely manner (they have 30 days), but that none of the claims constitute a finding of liability as yet.

Transocean has issued a stronger statement saying that they shouldn’t be held responsible for the actions of others and that no drilling contractor has ever been held liable for such mistakes under the Oil Pollution Act.

Various investigations are still ongoing into the accident, but it is the findings of the Justice Department’s own investigation that will be used to support the government’s case.

Meanwhile, 300 separate lawsuits have been filed in relation to the spill and are now slowly making their way through the court system.

The spill may have ended for the companies involved in the Deepwater Horizon oil rig disaster, but the legal battles have only just begun.

By The Casual Truth

Photo – US Attorney General Eric Holder

The world will be watching as South Sudan votes

admin — Sun, 19 Dec 2010 11:58:00 -0700

Tensions are high in Sudan with less than a month to go before a landmark referendum that will determine whether Southern Sudan will become a new country.

Many fear that a weak international presence for the January 9 vote combined with a build-up of opposing armed forces on the north-south border could result in chaos.

Why a referendum?

The referendum is the result of a process started in 2005 called the Comprehensive Peace Agreement (or CPA) which ended 40 years of a civil war between the country’s mostly Muslim, Arab north and Christian, African south.

The north (which wants to remain as a single nation) agreed to let the south vote on whether to split and form its own country.

The international community hailed the 2005 CPA as a great achievement, and had high hopes that a lasting peace would be made.

But the core issues of inequality between north and south have not been addressed. And critics argue that the international community has done little to support the CPA, including not honouring its financial pledges for the referendum process.

What if the south votes for independence?

It is almost certain that the vast majority of South Sudanese will vote for independence from the north. The question is what will happen afterwards.

The main dispute between north and south can be summarised by one word: oil.

The majority of Sudan’s oil is in the south but oil revenues represent a whopping 80% of the central government’s budget, which is in the north.

Furthermore, the north has the pipelines to transport the oil for export. Consequently, both sides will need a deal on sharing the oil revenues if they want genuine peace, much less a viable oil industry.

Another issue is determining the borders. There is currently no agreement on where the border between north and south is located.

A sub-question is the status of Abyei, a region caught between north and south and populated by nomads.

Abyei was due to have its own referendum on January 9 to allow its residents to decide if they want to join an independent South Sudan, or remain part of the north. But due to security fears, this has been postponed.

The uncertainty surrounding the oil and borders means there is growing distrust between the governments of north and south. Border clashes have been frequent over the past few months, with both armies accusing the other of starting them.

Ethnic tensions have also been growing in the north, with rising anger from the Arab northerners towards the 2.5 million African South Sudanese who live there.

Many fear a violent backlash from Northerners if the South chooses independence. This could lead to a mass exodus of Southerners from the north, which the government of South Sudan would be ill equipped to handle.

The south also has its own internal ethnic problems. Land and cattle disputes between tribes are frequent and often leave hundreds of people dead. The South Sudan government has done little to resolve this.

A vote for more of the same?

In the lead up to the January 9 vote, everyone’s attention has been focused on organising the referendum, both in South Sudan and at the international level.

The referendum, however, will not resolve existing problems and will likely exacerbate them as the south will have to rely on its own economy to survive without the north.

These problems include the sharing of oil revenues, high levels of poverty, a lack of infrastructure in the south, and ethnic tensions.

As the date for the referendum approaches, fears are high that the north will either try to rig the outcome or not accept the results based on technicalities if the south votes for independence.

This could lead to one or both sides interpreting it as an end of the peace process and opting for a return to war.

Local leaders have warned the international community that such an outcome is possible if they don’t get more UN troops on the ground, more funding in place and more election observers to monitor the referendum.

Action after war breaks out, they say, is hopeless and a lot more costly.

Even so, the referendum will be a first for Africa. None of the borders of any African country have been changed since their independence from colonial powers during the 20th century.

The independence of South Sudan could potentially open the door for many minorities in Africa’s 53 countries to demand more autonomy or their own country.

For this reason, not just the international community but many African governments will be watching Sudan in January with interest and anxiety.

By Zoe Dugal

Photo – Omar al-Bashir, the president of the Sudanese government in the north

Around the world in 60 seconds - 17 December 2010

admin — Thu, 16 Dec 2010 11:58:00 -0700

• Asylum seekers die while trying to land on Christmas Island
• Botched terrorist attack in Sweden
• Bernie Madoff’s son hangs himself on anniversary
• Facebook founder named Time Magazine’s Person of the Year

Asylum seekers die while trying to land on Christmas Island

A boat from Indonesia carrying Iranian and Iraqi asylum seekers crashed onto rocks as it was trying to land on Christmas Island in the Indian Ocean – the location of an Australian immigration detention centre.

At least 30 people, including women, children and babies were killed when huge waves overcame them or threw them onto the jaggered rocks. Dozens more remain missing.

42 people were rescued after grabbing onto life-jackets thrown into the water by residents or after they managed to swim away from the rocks towards two Australian Navy boats.

Onlookers watched helplessly from on top of the cliff as the asylum seekers grabbed onto bits of floating debris and struggled to stay afloat.

Botched terrorist attack in Sweden

An Iraqi-born British man Taimour Abdulwahab al-Abdaly attempted to blow up a busy Swedish shopping district in central Stockholm on Saturday in what was the country’s fist suicide bombing.

Al-Abdaly blew himself up just after his car exploded a few blocks away. He was the only person killed from the two blasts but two others were injured.

In an email sent to a Swedish news agency 15 minutes before the first explosion, he claimed to have targeted Sweden because of its military involvement in Afghanistan and its supposed acceptance of the famous Danish cartoon drawing mocking the prophet Mohammed.

Despite the reasoning given, Sweden is seen as very tolerant country that takes in a large number of immigrants and refugees (the largest number of Iraqis of any Western country) and gives very generously in aid.

Bernie Madoff’s son hangs himself on anniversary

Mark Madoff, the eldest son of American Bernie Madoff who is serving a 150-year sentence for defrauding investors of US$18 billion in an elaborate Ponzi scheme, is believed to have committed suicide on the second anniversary of his father’s arrest.

The 46 year-old was found by his father-in-law hanging from a dog leash in his Manhattan apartment on Saturday after he had earlier sent an email asking his vacationing wife to check on their two-year old son who was sleeping in the next room.

Mark Madoff had reported his father to the authorities, and despite being included in several pending lawsuits for benefitting from the proceeds, was not believed to have been involved in the scheme.

Facebook founder named Time Magazine’s Person of the Year

America’s Time magazine has named Facebook founder Mark Zuckerburg its ‘Person of the Year’.

The decision is based on the person deemed to have had the most influence on world events that year.

In the magazine’s poll, readers voted Wikileaks founder Julian Assange as their winner. However, Time’s editors chose Zuckerburg instead, with America’s Tea Party movement second and Assange third.

They said the social networking service, which now has over 500 million users, was “transforming the way we live our lives every day.”

Zuckerburg has a net worth of US$6.9 billion and is the world’s second youngest billionaire (behind his co-founder Dustin Moskovitz who is a week younger).

He recently signed on to Warren Buffett’s and Bill and Melinda Gates’ Giving Pledge, a campaign where American billionaires are pledging to give away at least half their wealth before they die.

Photo – Mark Zuckerburg