http://www.zerohedge.com/news/paul-brodsky-state-play-statists-play
Submitted by Tyler Durden on 04/20/2012 15:00 -0400
Submitted by Tyler Durden on 04/20/2012 17:02 -0400
Paul Brodsky On The State of Play: Statists At Play
On April 16, Argentine president Cristina Fernandez de Kirchner announced that her Argentine government would expropriate and re-nationalize YPF, an energy company operating mostly in Argentina founded by its government in the 1920s and de-nationalized in the 1990s. Repsol, a Spanish company that owns (owned) 57% of YPF called the act “illegal and unjustified” and vowed to sue. Repsol’s president implied he had higher bids for its share of YPF, notably from China (Sinopac), and further asserted that prior to the announcement the Argentine government had deliberately depressed the stock price ahead of expropriation. Spain and its allies in the EU immediately renounced YPF’s re-nationalization and threatened retaliation. Too late: the deal is done and Argentina’s political calculus seems to pass economic scrutiny in a commercial age dictated by political economics. By the time this matter is likely resolved in an international tribunal YPF’s existing energy reserves should be mostly depleted.
Fernandez de Kirchner’s timing was brilliant, reminiscent of Robert Rubin currency interventions when he was running the US Treasury who would strike when FX positions were vulnerable. To re-nationalize the Spanish-controlled energy company when Spain’s economy and funding are teetering means the Spanish government and businesses domiciled there lack the clout to make demands of Euro confederates. FdeK’s declaration that the action is a “recovery of sovereignty and control” should further remind observers and investors that those in power ultimately rely on maintaining and obtaining access to natural resources.
In times past such expropriation would surely be an act of war. Recall Argentine scrap metal merchants raising an Argentine flag over the Falkland Islands in 1982 was enough to prompt Margaret Thatcher to launch the Royal Navy. (Five British firms are currently looking for oil around the Falklands.) The Spanish armada is unlikely to set sail this time. This particular act of state piracy performed by an independent sovereign nation is notable in that its victims are not members of another society but shareholders neither sovereign serves directly. The Spanish government is busy trying to appease foreign creditors and Repsol’s energy production served shareholders first, not necessarily Spanish energy demands.
The Bigger Implication
The political calculus among leaders of sovereign governments reduces to short-term domestic political benefits vs. threats of economic or military retaliation. When it comes to natural resources the points of tension are not sovereign governments vs. private domestic interests but sovereign government vs. sovereign government. It would seem China joined global trade in 1978 because its mandarins realized domestic production could not satisfy the Chinese people’s insatiable appetite for basic resources. Perhaps Russian Glasnost and Perestroika sprung in the latter half of the eighties so that Russia could profit by feeding emerging markets like China its bountiful natural resources? And it would seem reasonable that the formation of US free trade agreements and the EU, (in spite of political partisans who would otherwise killed such measures because they threatened domestic employment), were forced by Western mandarins looking to aggregate global natural resources and control its channel of distribution? And the really difficult question: could the unprovoked invasions of Iraq and Libya (and Iran?) have something to do with increasing control over global energy?
The paper bets representing global production and resources that we call “capital markets” is in jeopardy of becoming a sideshow. Baseless paper money, fractional banking, revenue shuffling, financial returns, ever-increasing debts, unwarranted confidence building, nominal output growth and politicians posing as policy makers cannot sustain the most basic needs of societies. The G7 remains strong economically not only because we have established infrastructures and markets, we are law-abiding and because Apple is innovative. We remain powerful because ultimately our militaries ensure access to resources. Thankfully, our soldiers remain willing to take fiat with unknown future purchasing power in exchange for their labor and the shareholders of defense contractors remain willing to have their investments denominated in such paper. (Of course, the same was true of shareholders in Repsol YPF.)
Price Management
The governments of G7 economies have been able to control global resource pricing because they have been able to control the perception of global currencies in which resources are priced.Few in the private sector have seemed to mind government control over pricing because resources in developed economies have remained affordable. Policy management over the general price level (GPL) has been generally considered to be successful and in the public good. GPL management starts with the manner in which we arrive at prices. Central bank-issued paper currencies and electronic credits used to exchange global value among goods, services, labor and assets is, for lack of a better way to phrase it, generally agreed upon. This has been possible because the spigot through which the exchange of value and wealth flow and may be quantified is fairly narrow, coordinated among global treasury ministries and central banks.Legal tender laws and compulsory government tax obligations in specific currencies further ensure that only acceptable currencies are used as media of exchange in the private sector.
From time to time, official currency boards of major exporting nations intervene or threaten to intervene into foreign exchange markets so they may devalue their currency vis-à-vis another, with the economic impact of helping their nations’ exporting businesses. They do this by notionally selling their currencies and buying the other, driving the exchange rate to a level that makes it cheaper for importers to buy their nations goods and services. Currency boards that abuse this privilege or do not play ball at all are labeled “currency manipulators”. (A “currency manipulator” is ironically a currency board that does not manipulate its currency in line with the currency manipulations of the broader group.) Nevertheless, laborers and businesses have not minded official currency management because it has tended to be pro-cyclical -- supported by the best overall interests of domestic commercial trade, employment and consumer affordability.
As President Fernandez de Kirchner just demonstrated, currency is not property and intervening to confiscate privately-held property does not require “acceptable currency”. Intellectual property may also be easily copied without exchanging “acceptable currencies”, same for factories, goods and manufacturing processes. At the end of the day, if China and India need food, energy and materials, and if Russia, South America and Africa have too much to consume domestically, then nothing is prohibiting them from agreeing to barter or to use a currency that developed countries might deem “unacceptable”. Very few economies have all the natural resources needed to support their populations. Access to abundant resources can only be accomplished by exchanging them for other resources or for credible markers/money/stores of purchasing power. Do the $3 trillion-plus in US dollar reserves that China holds qualify as a credible marker for future purchasing power when everyone knows dollars and all other currencies priced relative to them are being diluted?
Tick, tock.
and.....
NSA Whistleblower Speaks Live: "The Government Is Lying To You"
Just a month ago we raised more than a proverbial eyebrow when we noted the creation of the NSA's Utah Data Center (codename Stellar Wind) and William Binney's formidable statement that "we are this far from a turnkey totalitarian state". Democracy Now has the former National Security Agency technical director whistleblower's first TV interview in which he discusses the NSA's massive power to spy on Americans and why the FBI raided his home. Since retiring from the NSA in 2001, he has warned that the NSA’s data-mining program has become so vast that it could "create an Orwellian state." Today marks the first time Binney has spoken on national TV about NSA surveillance.Starting with his pre-9-11 identification of the world-wide-web as a voluminous problem since the NSA was 'falling behind the rate-of-change', his success in creating a system (codenamed Thin-Thread) for 'grabbing' all the data and the critical 'lawful' anonymization of that data (according to mandate at the time) which as soon as 9-11 occurred went out of the window as all domestic and foreign communications was now stored (starting with AT&T's forking over their data). This direct violation of the constitutional rights of everybody in the country was why Binney decided he could not stay (leaving one month after 9-11) along with the violation of almost every privacy and intelligence act as near-bottomless databases store all forms of communication collected by the agency, including private emails, cell phone calls, Google searches and other personal data.
There was a time when Americans still cared about matters such as personal privacy. Luckily, they now have iGadgets to keep them distracted as they hand over their last pieces of individuality to the Tzar of conformity.
Part 1 - Exclusive: National Security Agency Whistleblower William Binney on Growing State Surveillance
William Binney's shocking facts start at around 15:00...
Part 2 - Detained in the U.S.: Filmmaker Laura Poitras Held, Questioned Some 40 Times at U.S. Airports
The Academy Award-nominated filmmaker Laura Poitras discusses how she has been repeatedly detained and questioned by federal agents whenever she enters the United States. Poitras said the interrogations began after she began working on her documentary, "My Country, My Country," about post-invasion Iraq. Her most recent film, "The Oath," was about Yemen and Guantánamo and follows the lives of two past associates of Osama bin Laden. She estimates she has been detained approximately 40 times and has had her laptop, cell phone and personal belongings repeatedly searched.
Part 3 - "We Don’t Live in a Free Country": Jacob Appelbaum on Being Target of Widespread Gov’t Surveillance
We speak with Jacob Appelbaum, a computer researcher who has faced a stream of interrogations and electronic surveillance since he volunteered with the whistleblowing website, WikiLeaks. He describes being detained more than a dozen times at the airport and interrogated by federal agents who asked about his political views and confiscated his cell phone and laptop. When asked why he cannot talk about what happened after he was questioned, Appelbaum says, "Because we don’t live in a free country. And if I did, I guess I could tell you about it." A federal judge ordered Twitter to hand over information about Appelbaum’s account. Meanwhile, he continues to work on the Tor Project, an anonymity network that ensures every person has the right to browse the internet without restriction and the right to speak freely.
Part 4 - Whistleblower: The NSA is Lying–U.S. Government Has Copies of Most of Your Emails
National Security Agency whistleblower
William Binney reveals he believes domestic surveillance has become more expansive under President Obama than President George W. Bush. He estimates the NSA has assembled 20 trillion "transactions" — phone calls, emails and other forms of data — from Americans. This likely includes copies of almost all of the emails sent and received from most people living in the United States. Binney talks about Section 215 of the USA PATRIOT Act and challenges NSA Director Keith Alexander’s assertion that the NSA is not intercepting information about U.S. Citizens.
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