had to be stamped out. They were killed after being photographed; machine-gunned into trenches that they themselves had dug, or sent into the Siberian waste to freeze to death. Time and again mankind goes through these moments of madness and all that is left is a mountainous pile of skulls. There is no upside to payback time, not even for the perpetrators.
I am sure some of you reading this article will ask: how can I raise the spectre of dehumanisation because of an isolated death? The answer is that dehumanisation is a greasy pole, and once you are on it you can slide down into the pit of mass murder very quickly.
I have a nasty feeling that the rhetoric in certain quarters is heading in this direction, the farmers in this country are at considerable risk and it only requires some spark somewhere for the fires to start raging. Hence, I am not over-reacting.
It is therefore absolutely imperative that the government here bans the use of any genocide-laden terminology from any quarter, and that anybody found guilty of using such language is sent to prison for a long time without any chance of appeal or parole. It should be considered one of the deadliest crimes that any citizen can commit. There should be no mercy shown to the culprits, just as they would show no mercy if they were in a position to carry out their vile rhetoric. Punishment must be quick and harsh to serve as a big deterrent.
Why am I so sure? Because South Africa does not need its moment of madness. Nelson Mandela put reconciliation at the top of his list. Don’t betray his glorious legacy. Stop the incipient tendency towards dehumanisation right now. All problems have to be resolved peacefully and sensitively. Otherwise hell beckons – for everybody. Go to Rwanda and see for yourself what the consequences are of demonising a section of the human race.
Will American treasuries become junk bonds?
America still has done nothing about its budget deficit, so this remains a valid question. Markets up till now have shrugged off the downgrading of US treasury bills by Standard & Poor’s. Indeed, the demand for an alternative escape in light of the Eurozone crisis has driven the interest rate on the US ten-year bond below 2%, a level hardly seen before. Investors are presuming that the President and Congress will jointly hatch a solution on the budget deficit, while the American economy will grow better than expected. Let’s hope this optimism proves correct.
Suppose you are a retailer. You have been losing money but you decide to continue to discount your prices in the hope that demand will pick up. It’s a bit of a gamble, isn’t it? If you add into the equation that you are up to your ears in debt already, it increases the risk.
Such is the case with the US government – or, more specifically, President Obama, when he announced that the tax cuts across all income groups in America would continue. At the moment, the US budget deficit is running at around 10% of GDP and national debt is heading towards 100% of GDP. In simple terms, government expenditure is outstripping government revenue and, unlike in the UK, no attempt has been made to cut expenditure. The losses will be financed by further borrowings.
In a sense you can let Obama off the hook because it was his predecessor, George W Bush, who instigated the tax cuts in the first place. Obama inherited an appalling financial position from Bush, partially due to the “Great Recession” and partially due to the fact that Republicans – despite their conservatism – are fiscally more irresponsible than Democrats. The last person to have a balanced budget in the US was Bill Clinton.
Now I know that some of you will say that a government is not a business because a government can print money, unlike a business. Moreover, it can issue bonds which carry a much lower risk rating than the private sector paper. Indeed, all the major ratings agencies give a Triple A rating to US bonds. So, as a government you can play games which are beyond the capability of companies listed on the stock exchange.
And play games they have, firstly issuing more treasury bills to raise more money and then getting the Federal Reserve Bank to buy them back to keep interest rates down while injecting new funds into the market. QEII – the second round of quantitative easing – will add some $600bn to the money supply.
However, a funny thing happened on Wall Street last week which suggests that all is not going the way of the US government. When President Obama announced that the tax cuts would continue across the board, the US government ten-year bond rate immediately jumped. This would imply that some investors are getting jittery about holding these bills at such a low rate of interest. They sold the bonds which drove the price down which pushed interest rates up.
It wasn’t a major incident and indeed the price of the US ten-year bond has to a certain extent recovered. But it does not need much of a movement in the interest rate upwards to cause a lot of problems in central banks around the world, which are stuffed full of US treasury bills as the safest paper around. The bond price is the reciprocal of the current interest rate. Hence if the interest rate were to rise from 2.5% to 4%, the price of the bond would fall by around 12%.
The question is whether central banks have to mark to market any losses on their investment holdings as commercial banks are compelled to do. If so, we could be in for some nasty surprises – particularly if the dollar has also devalued against the country’s domestic currency. In a sense this would be the central banks’ equivalent of the sub-prime mortgage fiasco except, obviously, the bonds would not lose quite so much value. But the losses could still be spectacular.
One must never forget that markets are built on trust and confidence. If these factors go out of the window because you are viewed to have taken irresponsible risks in the way you have structured your finances, it does not matter how big you are or that the dollar is a reserve currency. People will run a mile.
A key flag for a short-term double-dip in the markets is therefore the US ten-year bond yield. Providing it stays below 4%, everything is manageable. Should it breach that barrier and head further up, watch out!
Consequently, whenever I am watching CNBC Africa or Bloomberg, I go to the moving ticker at the bottom of the screen to check out the latest ten-year rate. That is what a foxy futurist does. It’s currently 3.34%.
Wicked Leaks? Not really
Obviously America has tightened up on its procedures whereby sensitive information is exchanged and shared in the diplomatic universe. Meanwhile, Julian Assange has almost completely disappeared from the public eye as he fights the charges brought against him by two women in Sweden.
When my mother died in England in 2009, she left some letters from her mother to her. I could not help reading some of them and they offered deliciously accurate portraits of some of my relations.
I feel the same way reading the leaked WikiLeak cables about rulers that were sent from various American diplomats. They offer a humorous and frank picture – with nice little tidbits – of all these people whom we normally only see talking pompously into a thicket of microphones about some easily forgettable global issue.
The only big thing to have come out was the fact that a certain Middle Eastern country was requesting America to conduct a strike on Iran’s nuclear facilities, which America has so far refused to do. I guess also the list of installations around the world that America considers key to its survival can be considered as a dangerous revelation, if that information is ever used by terrorists.
On the whole, though, I don’t think America has been seriously embarrassed by the leaks and life is going on pretty much as usual. However, it is the way America handles the situation now that is important. If they pursue Julian Assange, the founder of WikiLeaks, have him extradited to America, put him on trial and send him to jail, that would seriously dent their image as the superpower which espouses freedom and democracy around the world.
The Internet
