The CEO Game

After Barack Obama attacked the banks, now it’s Brown’s turn.

Britain’s Prime Minister, Gordon Brown has called today all members of the G20 to place taxes on bank transactions worldwide. The revenue, according to him will go to fund social and environmental causes like fighting world poverty and dealing with climate changes.

Brown: Time to Tax the Banks

Brown made this announcement at the stage of the G20 summit which was held today in Scotland, two months after the Pittsburgh Summit in September. The G20 countries represent 90% of the world’s wealth, 80% of its trade, and approximately two thirds of the world population.

Brown’s words symbolize a change in Britain’s approach, which up till now opposed putting a “Tobin Tax” on foreign currency bank deals. The tax which is named after 1981 Nobel Prize winner for Economics, Professor James Tobin of Yale University, is intended to put a penalty on short-term speculation in currencies and in the same time raise funding for meaningful social projects. Nevertheless, the opposition both in the US and in Britain at the time has caused the idea to be put in the back of one’s mind.

“I think we all share a basic interest in trying to make sure we build a system where taxpayers aren’t exposed in the future and where the financiers are bearing the consequences of their mistakes – that they are responsible for the risks they take” he said. “We proposed in the United States a way to achieve that, by making sure that if … the government is exposed to any risk of loss, that we recoup that loss by assessing a fee on the liabilities of banks” he then added. He continued to justify his plan by saying that “it’s fair to the tax payer and it doesn’t put us in the position where retail investors and pension funds are the ones bearing the burdens of that cost”.

Brown went on to tackle obstacles in the way: “I do not in any way underestimate the enormous and difficult practical and technical issues that will need to be overcome that a globally cohesive system requires and raises”. He pointed out that any tax that will be decided on (if at all), should be worldwide and related to all the financial centers of the world- US, the European Union, Asia, the Middle East and Switzerland. Some G20 officials claimed that the tax that Brown referred to could be wider than a Tobin tax, and might include all financial transactions or even banks’ profits. Yet, the tax is supposed to be on a low level of 0.005% – only a tenth of the original Tobin Tax, when the profits will help prevent future crises in the banking sector.

Gordon Brown’s suggestion is expected to fuel rage among British economists and critics. Chairman of the FSA (Fellow of the Society of Antiquaries), Adair Turner, has already suggested the idea of a Tobin Tax in August and encountered severe criticism in London. Still, British charity organization Oxfam has blessed Brown for his idea- “The tax on the banks, might be a big step in the road to destroying the banks’ greed”. “The G20 is responsible to act. The money raised can really effect the day to day course of regular people”, an Oxfam official added. Among the fans of the Tobin Tax, you can find French President, Nicolas Sarkozy and German Chancellor, Angela Merkel who already tried to promote the idea in the Pittsburgh Summit. According to them, this kind of taxing will shrink the banks’ profits and by doing so decrease the bonuses which banks can hand out to veteran bankers.

Some G20 members, had already began taxing on their own, like Brazil which putted a tax on foreign investments in stocks and debentures, keeping in mind funding their 2016 Olympic Games in Rio. Experts proclaim a Tobin tax in the rate of 0.05% (the original Tobin Tax), can yield up to 700 billion dollars yearly almost equal to the entire financial bailout package introduced by Obama’s administration. In conclusion I must say, that it’s only a shame that Tobin who passed out in 2002, missed out on all the action and the publicity.

Omer Shachnai

The CEO Game.

The world standstills, dazed and confused as news break out about a new possible Chinese-Japanese alliance. China and Japan, long time sworn rivals began to seriously discuss their unification, one so strong according to experts, that it could make them the strongest financial force ever seen in the entire world. This comes as a shock, since Tokyo and Beijing’s main concerns over a century were fighting and humiliating each other over more than a couple of wars. Now they talk business and propose creating and joining both a wide “East Asian Community” instead of poking each other with sticks just for the kick of it.

A New East Asian Community?

Although the plans to build this East Asian Community are in their primordial stages, the result of this oriental holy matrimony may pose a threat to major economic powerhouses worldwide including the parallel European Union. Current talks revolve steps to reduce the suspicions and the contention between the two countries. Among this initial steps you can find measures such as canceling the long time obligatory entrance permit (thus, making traveling visa free) and cooperation on environmental issues and energy, as well as public health. If all goes well, the dual countries will be tackling more complex issues from regional agricultural understandings to politics and defense and military cooperation. Another hot issue, and what might be an attempt to strike at the European Union’s foundation stone the euro, is a possible East Asian common currency.

This change in decades long tensions, is possible due to the newly elected Japanese democratic party just a couple of months ago. It is believed that the Japanese PM was the one who started the talks, on his first meeting with Chinese President Hu Jintao in New York. The new Japanese prime minister, Yukio Hatoyama, who won by leading and recruiting brilliant campaign strategists, has brought the winds of change with him, and he focuses his energies at rebuilding the relationships with neighboring China and other countries too. These efforts were previously chopped down by rightist governments, and now they represent a backlash against Washington, some may even say a slap in the face of Japan’s most persistent ally since the Second World War, one that could threaten Obama’s foreign and economic policies.

The effects of an orient economic alliance would be humongous, with Japan and China being the world’s second and third largest economies appropriately. Media observations pointed out it was Japan’s will behind the wheel that revived the talks. However, why does Japan want the alliance so much? Like the old saying says “if you can’t beat them, join them”, the global economic crisis has shown Japan that it needs to aspire to garrison its economic strength, which China might soon surpass, by actually aligning with China and some newly emerging economies in the area. They also want to establish a powerful, influential Japanese leadership in East Asia, don’t forget this once was an Empire, and a shot at solving territorial issues such as who will hold significant areas of the East China Sea, which contain oil and natural gas.

It seems like if they do actually form this union that the West will suffer a blow. But, will the western world gain any profit from the alliance at all? The West could actually enjoy from a closer relationship between Japan and other surrounding Asian countries, which may help US interests in the region. The US administration also believes that more involvement from China’s side in the global stage would help world economics. However, many obstacles still lay ahead: to ease the tension that dates back to the first Sino-Japanese war in 1894, when Japan led an offensive campaign against China and destroyed it’s military under less than a year. There were more wars to follow, with the protruding World War II when 300 thousand Chinese innocent civilians were killed by the Japanese occupying troops. Over the years, the Japanese colonial rule became like a thorn in China’s side, pervading from relations to improve.

Furthermore, some polls show that two thirds of the Chinese are in favor of a wider Asian cooperation like the one being discussed for quite some time now, which will include more countries such as Indonesia, South Korea, Singapore, New Zealand and mighty India. Nevertheless, experts agree on communist China’s unwillingness to jump into a swift arrangement. Especially a wide agreement, that might include another one of China’s traditional rivals- India as mentioned above, with China already fearing the India-Japan space alliance; suspecting that the US is masterminding this regional space alliance, behind the curtains. But, according to the Chinese, they are still advocating and engaged at setting up an East Asian Community and its integration process. We suggest continuing following this hot topic, when talks resume on October 10 in Beijing.

Omer Shachnai

The CEO Game.

The stage at the United Nations General Assembly on Thursday night resembled nothing short of a fighting ring, as Israeli Prime Minister Benyamin Netanyahu shot accusations at Iranian President Mahmoud Ahmadinejad. After prior speeches given by Mahmoud Ahmadinejad and Libya’s four-decades-long leader Muammar Gaddafi came the Israeli Prime Minister’s turn to respond; Netanyahu began by taking Ahmadinejad to task for his ongoing Holocaust denial, he pointed out that “Yesterday the President of Iran stood at this very podium, spewing his latest anti-Semitic rants”. He then turned to blame and criticize those diplomatic counterparts who stayed and listened on the previous night to Ahmadinejad asking them, if they “have no shame, no decency”.

Banyaim Netanyahu - Israeli Prime Minister

The Israeli Prime Minister, who won a name for himself during his time in office as Israel’s Minister of Finance, continued on to discuss the symbiotic bond between Iran and the worldwide terrorism network. He claimed that Iran is behaving barbarically while aspiring to drag the world back to the Middle Ages. Furthermore, the Prime Minister proclaimed that if Iran places its hands on nuclear weaponry, history could repeat itself. He went on to question the audience if they think that the Iranian regime threatens only Israel, which he answered himself by saying that what might be Iran’s plans for Israel could “end up engulfing many others”. These words and what Netanyahu presents later on in his speech are clearly equivalent to a call forth to the United Nations to take more firm steps regarding Iran, by hardening the sanctions, meaning an onslaught on Iranian financial resources.

Iran’s regime is a one “fueled by an extreme fundamentalism”, in his words and is fighting for more than a decade to develop their own nuclear energy. He asks how “can the most primitive fanaticism acquire the most deadly weapons”. He goes on to discuss the possible consequences of this “marriage between religious fanaticism and the weapons of mass destruction“. His answer: another (unwelcomed of course) world war with plenty of bloodshed. While there was a time when it wasn’t clear to the global community and media, now it is quite clear that Iranian plans include efforts to harness the nuclear power for military purposes. The main issue is what would it be used for? Is it meant for the sake of the Islamic Republic’s power, that in time of the revolution they could use it or threaten some intimidating enemy? Or perhaps there is another purpose aside from the obvious one mentioned above: could this nuclear pursuit also lead to a new economic era for the once almighty historical Persian Empire?

Mahmoud Ahmadinejad

It is clear that certain achievements have already been accomplished by Iran’s quest for nuclear power, such as wisely placing Iran on the worldwide media’s agenda and establishing Iran as a leading major force in the Islamic world. Iran will completes the bomb, its power will increase a significantly. This amount of power can lead to diplomatic and financial extortion, as was demonstrated by Iraqi tyrant Saddam Hussein, who threatened the entire region, making pretentious demands and finally invading some surrounding provinces and countries. It can also lead to an arms race, as it inflames the entire area. While some say that peace is profitable and more beneficial than war, that isn’t exactly the case with countries with militaristic ambitions and ideology. For them, the constant fiddling in war and war readiness is a financial blessing, bolstering their economy which reliant on military and defenses industries. When most fear from hearing an explosion, some welcome the familiar sound of “Ka-ching”.

Furthermore, once you have this knowledge of nuclear power and weaponry, you immediately enter a limited circle of specific knowledge and technology trading. When you have this power, the flow of scientists, engineers, weapons specialists in and out of your country becomes rapid. There is another increase as well, as your science and technological industries, researches and products become more influential than ever. Take the United States and Israel for instance, both have strong militaries (proportionally to their sizes) and invest heavily in military development and innovation and as a result are considered among the most technologically and economically influential and advanced countries in the world. It’s no wonder that Netanyahu pointed this out “my country is at the forefront of these advances – by leading innovations in science and technology, medicine and biology, agriculture and water, energy and the environment”.

Last but not least, through his entire speech Netanyahu kept on blaming Iran for being patrons of terror in the world, claiming the Republic to be “the world’s most pernicious sponsors and practitioners of terrorism”. He addressed the assembly and said that not enough is being done against this link of Iran, Money and terror. Attacking this link is a smart move on his behalf, because ever since the 9/11 attacks on the World’s Trade Center; terror funding became a sensitive issue as Americans found out it was Wahhabi oil money that financed the attack. He then claimed that Iran is also the patron of Gaza which is an “Iranian backed terror base fifty miles from Tel Aviv“, the financial capital of Israel. Terror is also a profitable power, because marketing terror is easy: terror is easy to spread around, can have light costs and mega influences and one photograph can raise a lot of public and media support. The more support and the more hearts supporting the cause, the more money raised.

In conclusion, these days, modern warfare isn’t what it used to be. No one goes to war just to conquer the next hill; the modern war is first and foremost a financial one. It is a tradeoff actually; no nation begins a major offensive campaign without knowing what’s at stake and what’s to gain and the question always is whether it is cost-effective to fight? Only a fool will go ahead with no strong financial support. All we can hope is that the solution to this Middle East crisis will come as soon as possible and may it be a non-violent one backed up and led by the United Nations, instead of one-sided actions that can lead to regional instability and chaos.

Nimrod Ellias & Omer Shachnai

The CEO Game.

G20 - Pittsburg Summit 2009

Now it is happening, all eyes are on Pittsburgh, Pennsylvania the host of the two-day long, tens of millions of dollars staging costs ,G-20 Summit; With President Obama chairing the event and welcoming the guests, nothing less is expected than a mega media fiasco. Leaders and important personal will come a-knocking from countries all around the world that constitute together eighty five percent of the world’s economy. At the summit, all aspects of the progress made since the Washington and London Summits will be reviewed and the leaders will discuss more actions regarding sustaining the ongoing recovery from the global economic and financial crisis. This article looks at what should we expect.

The central debate is going to revolve around reforming the way the world economy is governed and the obvious follow-up question: who should run the global economy. Furthermore, another main issue to be discussed by the G-20 members is placing limits on bankers’ bonuses worldwide. But what is the G-20 actually? The G-20, The Group of Twenty, to give it its full title, was formally set up in 1999 as a result of the Asian financial crisis, in order to bring together major finance ministers and bankers from industrialized and developing economies to discuss the hot issues in the world economy. Among the desirable members you can find: Australia, China, France, Germany, India, Saudi Arabia ,Russia, the United Kingdom, the USA as well as the European Union itself and more, and they are usually joined by representatives from widely renowned institutions such as the World Bank, World Trade Organization and the International Monetary Fund.

Last year, the frightening ongoing recession pushed G-20 officials to hold the first summit that had primary heads of state as guests in the Washington summit, when the leaders agreed on an action plan that included issues such as promoting integrity in the markets, strengthening worldwide cooperation, reforming international economic institutions and more. The theme in the April 2009 summit in London was similar: dealing with the crisis. In London the leaders continued to work on the previously made resolutions and agreed upon six pledges centering on restoring confidence, repairing the financial system, restoring financial regulation, preventing future crises by building up international institutions, promoting global trade and building a stable, green recovery. Altogether, the counterparts pledged they would spend an astronomical five trillion dollars on efforts to salvage their economies and another trillion dollars to help out struggling nations. In London the leaders also requested another convention to be held before the end of the year; Obama enthusiastically agreed to entertain and chose Pittsburgh for the setting.

Thus, why Pittsburgh? Officials like to say the city of bridges was chosen because of the remarkable transformation it made from a grimy old steel industry to high-tech innovation including green and clean development over the years, a positive change that Obama surely wants to showcase. “Pittsburgh stands as a bold example of how to create new jobs and industries while transitioning to a 21st century economy” he has said. Pittsburgh is a perfect spot to show off local green achievements made this year such as the revival of “East Penn Manufacturing”, the city’s medical laboratories, and transformed industrial plants that went hybrid. Yet the proximity to New York is kind of comfy since many of the attendees must attend the UN General Assembly as well and the fact that, well let’s face it, Pittsburgh is important for the second cadence also must be taken into account. A great deal of thought was also made in selecting the convention center itself, the David L. Lawrence center, the world’s first green convention center.

Another question to be asked is did they do what they promised? At this time, the picture isn’t clear enough to say, but much of the dough promised to struggling countries has been transferred to them. However, there still remains a lot of work ahead with complex issues like who is going to be running the global economy and regulation of banks and hedge funds as mentioned before.

More importantly, what should we expect from the Pittsburgh Summit? Since many prime economies are slowly recovering from the recession, there is no need (nor could it be fulfilled) for another round of big spending pledges, instead the summit will concentrate on the ones its members already committed to. The center stage will focus on regulation and reform, with the topic of the day being dealing with banker’s bonuses; there is a good chance to see an agreement on that.  Another hot item, is making sure that all countries are on the same page and don’t mess around with staggering companies. Will India and China be presented better in the International Monetary Fund? The IMF, The UN’s agency that facilitates international commerce and aids developing countries, will also be under discussion. Obama also claimed that we must stay clear of the asset bubbles by setting up a path for “sustainable growth while steering clear of the imbalances of the past”. Hence that’s going to be a key part of the agenda as well. Although the recovery is in progress, the fact that many people are still unemployed, should and probably will be a noticeable subject.

In conclusion, as financial crises fear no international boundaries, these meetings offer an opportunity to discuss economic problems and maybe even agree on the appropriate actions that need to be taken in response. As the conductors of the world’s largest economies, these leaders have a responsibility to work together in order to insure this kind of crisis won’t happen again. “The Pittsburgh Summit is an important opportunity to continue the hard work that we have done in confronting the global economic crisis, and renewing prosperity for our people”, said Obama on the eve of the summit’s jumpstart. Prior to Obama’s election, critics said that after the campaign ends, Obama will be tested by major-hard-to-cope-with events and by his reactions to them. Now it’s up to him and his administration to deal with the crisis in order to prove themselves. Now is the time to see whether the Pittsburgh Summit will be remembered as an important milestone or a complete disaster in terms of financial pace making and use of the tax payer’s cash. Will it be a prestigious achievement, one that may prove that Obama’s administration is better than his predecessor’s Or will the summit be just another brick in the wall of history?

Omer Shachnai

The CEO Game.