IMF or no IMF for the lucky few?

...That is the question

First of all, let us remind you why we are paying a great deal of attention to the health of the world economy. This is because the private security response needed to keep things stable is so far attainable, but probably not if the world economy spirals down to an unsuspected deeper bottom. This is also the reason why the G20 meeting this week, ordinarily the most expensive talking shop in the world together with Davos, is unusually important.

There are four important poles in the G20 debate. On the one hand, there are the countries that would like to spend more trillions on stimulus plans, mostly borrowing and printing money, and want the rest of the world to follow. The UK and the US lead the pack. The opposite pole is led by Germany, which believes that pumping more money into the world economy would result in a longer and more painful path to recovery. On the other hand, there are the countries that deem the tightening of financial regulation and dealing with offshore banking issues immediate priorities. The UK also leads this call. On the other side, we find those who argue that this is necessary (and a politically correct convenience), but a distraction for the time being. Off course all G20 governments also promise that they will not engage in protectionist policies.

Is there any hope an agreement will be reached at the G20 Summit? No. This is partly because people in the West keep arguing that the global financial crisis is about credit not flowing, hence a global credit crunch. However, to most of the world, including China, India, Brazil, and Mexico, credit is not the problem, but the contraction of their economies due to eroding demand for commodities and manufactures in the West.

In spite of disagreements, the G20 heads of state need to accept that the recovery of the US economy takes precedent, as the country is behind a great deal of the world’s consumption and the reserves of far too many countries are pegged to the US dollar. Further, the bond between consumption in the US and production in China, which greases the wheels of the world economy, is critical to sustain. This leads us to focus on the real sick patients.

It is perhaps time we fast forward the debate and start thinking about IMF programs to rescue the British, the Irish, the Spanish, and perhaps all the Eastern European economies. These countries are in need of resources beyond their means: they do not possess an industrial base and ownership of natural resources broad enough to sustain their growing levels of debt. Printing money (read ‘quantitative easing’) is not and has never been an option for these countries. The soonest these houses are put in right footings the earliest we can start dealing with the rest of the world, which holds the bulk of the natural and agricultural resources the world consumes. Otherwise, the debate will continue to drag on, with unrealistic expectation and a handful of countries disproportionately taking center stage.

If things are not turned around this year, the so-called credit crunch will spread to all the G20 countries and beyond. An uneven global revolution, with low-level violence in some parts and fully blown conflicts in the most deprived areas, looms. Hear this: there are not enough public and private forces available to deal with such multidimensional scenario responsibly.

Q&As: Failed Wall Street Boss Security

This is an answer to a question posted by an insisting reader.

He would like to know who provides security to the bank bosses behind the global financial downturn. However, we warn the reader that trying to link somehow financial wrongdoing on Wall Street and the City of London to Xe (the Private Military Company formerly known as Blackwater) is pathetic. We understand a young audience produces this type of queries. In this spirit, we would like to offer an answer.

The protection of VIPs is largely undertaken by the security industry. To be more specific, that applies when the surrounding environment is comparatively safe (e.g. cities in North American and Europe and emerging democracies such as Brazil, India, and Mexico). If the VIP security is to be provided in a dangerous zone, such as Iraq and Afghanistan, then the job is for PMCs.

The personnel hired by PMCs and security firms to provide security tend to be similar, i.e. former military or police officers. They are highly adaptable to the surrounding environment. In other words, the same team of security details could provide VIP security to Wall Street executives and officials from the Department of State in Iraq.

Many PMCs focus on both markets, but some do not.

However, as security deteriorates and public anger towards some of the probably 1000 bankers behind the global financial crisis is expressed physically, VIP security might devolve to the state. Why? It is in the public interest to protect innocent civilians: people angry for loosing their jobs and failed bank executives responsible for it deserve in the eyes of the law the same treatment.

This means that if violence towards bankers manifests, the state, ultimately the taxpayer, will have to pay for their security, which might indeed be subcontracted to the private sector.

It is not a matter of whether security details are sympathetic or not towards the VIPs they protect, it is their job. Just like you, they need to make a living.

Lastly, there are plenty of management vacancies in Afghanistan. We encourage those 1000 bankers behind the global financial crisis to apply for them. Swift (and successful) processing of their applications is likely.

And it begins

Today, the house of the former head of RBS (the one behind the collapse of the bank, thereafter rewarded with a multi-million pension) was vandalized. The people behind the attack have the profile of a bunch of aspiring anarchists about whom nothing is known. In France, workers at a 3M (the US corporation) plant have been holding its boss hostage since last night after dozens of workers were laid off. The same happened at a Sony factory some days earlier. The Czech Republic Prime Minister Mirek Topolanek referred to the US recovery plan as "a way to hell". At the same time, he announced he will resign tomorrow after loosing a no-confidence vote yesterday over his handling of the economic situation in his own country. Curiously, he is also the current rotating President of the European Union (EU), and will attend the G20 summit in London next week as such. Meanwhile, yesterday the British Prime Minister Gordon Brown delivered a very important speech on the way to tackle the global recession to a near empty EU Parliament. His strategy to print out money to help boost the British economy got some feedback from the market today, when an auction for ordinary government bonds undersold. The last time something like this happened was in 1995. President Barack Obama emulated the print-out-money strategy last week, but only by about $1 trillion (one trillion is one thousand billions, or $1,000,000,000,000). Bear in mind that nowadays it is not called printing money, but quantitative easing or expanding a balance sheet. This is a course of action that leading financial institutions, like the IMF, advised time and again developing governments not to do in the past. It is neither known if it would work nor its longer-term inflationary consequences, and so on.

Since January, we have written about a dozen posts that we decided in the end not to publish. They deal with rising levels of petty crime, low-level violence, and popular anger reaching a boiling point. The umbilical cord connecting government to people is disintegrating in many parts of the world. Ironically, and for those who can be within its reach, private security is suddenly becoming a blessing rather than a menace. There is something horrible brewing out there and we dare not to think the unthinkable. But the few words above give you an idea of what is at stake.

G20 security: Olympic security field practice

The UK is hosting the G20 Meeting, the so-called London Summit, on April 2, 2009. In light of the ongoing global financial downturn, there is no need to elaborate on the importance of this particular summit. Spirits are running high, not only among heads of state and finance ministers, but also among those of us who do not live on the state or profited from the burst financial bubble.

How big is the G20? Well, evidently the heads of state of the twenty largest economies have been invited to attend: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Netherlands, the Republic of Korea, Russia, Saudi Arabia, South Africa, Spain, Turkey, and the United States.

How tight are the security arrangements? Pretty tight, we expect. But given the anarchist groups these international gatherings attract, popular anger, and the many routes through which one can get into London, the Summit will become also a security test; an early benchmark against which to measure how bad things can get. We should not forget, for instance, that the Real IRA decided to show it is alive and kicking over the last few days.

As a preamble to the London Summit, the G20 Finance Ministers meeting takes place on 14 March. Details on the venue were leaked some time ago and printed by the news media; not a very good sign. The delegations from Argentina, Canada, Indonesia, Mexico, Russia, and Turkey might like to make further arrangements for their own security, as a leaked confidential document originating from the UK Foreign Office and obtained by the Financial Times reveals that they have been designated a secondary priority.

The G20 Summit and the Finance Ministers meeting are also early rehearsals, basic security tests, on how the UK is likely to run security during the 2012 London Olympics. Some commentators (and London residents) dread that the Olympics, and security measures attached, will paralyze London. Has the London Olympics Organizing Committee started to communicate with the relevant security industry professional associations? Whoops! is the answer. There are worse scenarios to contemplate, but there is no need to get carried away at this stage.

So let’s see how things unfold. If there is not going to be a breakthrough on the best way to deal with the fast deteriorating world economy, at least a peaceful gathering is hoped.

Luxembourg: reality check files

Luxembourg’s official name is the Grand Duchy of Luxembourg, a name that reflects its patrician origins. The country is one of the founding members of key international organizations such as the UN, NATO, and the European Union. Accordingly, it has its citizens well positioned in, for example, the IMF and the World Bank. It is a very prosperous country with a well-groomed multilingual population and one of the highest GDPs per capita in the world. Luxembourg’s Prime Minister, Jean-Claude Juncker, is currently the chairman of the group of countries that have the Euro as a currency. In this capacity, you will find his opinion on global finance quoted all over the papers -Google him. This week he has been telling all the major media outlets that Europeans are more concerned about the regulation of the global financial system than the US. He also likes to stress that regulation issues are more important than dealing with the immediate alleviation of the financial stress ordinary people are suffering, as the US, Japan, and emerging democracies rightly point out. Off course the security implications of the deteriorating global financial outlook do not figure in his analysis.

Reality check:
Luxembourg is a country in central Europe roughly two thirds the size of Rhode Island, the smallest US state. Its population is about the same as that living in Kansas City or Fresno. Its main industry is offshore banking, probably followed by the selling of souvenirs to American and Japanese tourists. Its security is guaranteed by NATO. I am sure the reader would agree that President Obama could do miracles with a country of that size. Yet Luxembourg (and other similar countries) plays a disproportionate role in the international scene making the rules of the game and dictating how the world needs to be run. Let’s remember the countries behind most of the world’s economic output: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Netherlands, the Republic of Korea, Russia, Saudi Arabia, South Africa, Spain, Turkey, and the United States; otherwise known as the G20. According to 2007 figures by the World Bank, Luxembourg ranks 63rd in the GDP ranking table, well behind countries such as Colombia, Pakistan, and Vietnam. Now that we are in the process of reinventing the world, perhaps it is time to correct imbalances like this.

Down the Zimbabwe Way

Who would have thought about it a few months back? Today, March 6, 2009 (please mark it in your calendar), the United Kingdom set the press rolling and started to print money to prop up its economy. Off course in the modern world new banknotes are not simply printed. It is done at the touch of a computer key, has fancy names such as ‘quantitative easing’, and it is used to purchase assets, primarily government bonds (called gilts in the UK). Do not worry; we are just talking about some $105 billions. Surely this will not decouple the UK from the real world economy, particularly if other governments follow the example –have you noted that other leading economies, the World Bank, and the IMF do not know yet how to react. Who needs real money from China and the Far East economies to buy government bonds when you can create your own to buy them yourself. Doh! Go and grab your Monopoly money and indulge yourself in a hardcore shopping spree; it might work. Clearly the UK is a G8 country and has a technological and professional base robust enough to bounce back, eventually. In other words, the Zimbabwe analogy is only a playful one. Nevertheless, it gets you thinking about alternative realities and future scenarios. Here we are thinking about the convergence of economic downturn and private security, but we are a sad bunch.

Warrant issued for the arrest of the president of Sudan

Today, the International Criminal Court (ICC) issued a warrant for the arrest of Hassan Ahmad Al Bashir, the president of Sudan. The ICC press release read:

“Pre-Trial Chamber I of the International Criminal Court issued a warrant for the arrest of Omar Hassan Ahmad Al Bashir, President of Sudan, for war crimes and crimes against humanity. He is suspected of being criminally responsible, as an indirect (co-) perpetrator, for intentionally directing attacks against an important part of the civilian population of Darfur, Sudan, murdering, exterminating, raping, torturing and forcibly transferring large numbers of civilians, and pillaging their property. This is the first warrant of arrest ever issued for a sitting Head of State by the ICC. …”

The ICC expects that, as if by magic, the government of Sudan will cooperate.

Sudan is not classified as a weak state. This is partly because the government of Sudan has successfully centralized the use of force, however wrongly it is used to perpetuate this corrupt leader in power. It thus follows that you do not issue a warrant for a sitting head of state, a popular one amongst large segments of the Sudanese population one must add, unless you are prepared to back such actions with force. Would the ICC issue warrants in the future for Presidents Robert Mugabe of Zimbabwe and Hugo Chavez of Venezuela?

Incidentally, President Obama will soon call for NATO fellow members to provide more troops for Afghanistan. I guess we already know the answer, which nonetheless will be adorned with beautiful rhetoric about an Atlantic alliance fighting for democracy and freedom. Sudan is further down the priorities of many NATO members other than on the conference circuit.

The only thing this headline-grabbing warrant has achieved is for the relief community to be expelled from Sudan. In the process, the only real help persecuted Sudanese at large were getting is being effectively shut down. Even if this happens partially or temporarily, innocent civilian will unnecessarily die.

The ICC, based at The Hague, The Netherlands, is not part of the UN. It is an independent international organization. This clearly shows, as there were no signs of preemptive coordination with the UN and the relief community before issuing the warrant.

Perhaps it is time to give serious consideration to plans by certain Private Military Companies to engage the Janjaweed. Considering the state of the world economy and the unwillingness of the international community of states to use force for the achievement of humanitarian endeavors, it would be more effective and cheaper.