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11/28/14

Oil Prices: Are U.S., Saudi Arabia conspiring on oil prices? - Joshua Keating

There are a number of factors behind the continuing global slide in oil prices, including North American production, increased energy efficiency, Europe’s economic stagnation, and China’s slowing growth. But a big one is Saudi Arabia, which, to the dismay of fellow oil-producing nations, has resisted pressure to cut production in order to stabilize prices.

Ahead of an OPEC meeting in Vienna this week, there are some contradictory theories about why Saudi Arabia is content to keep oil cheap for the time being. One is that the Saudis want to nip the U.S. oil boom in the bud. American shale oil is more expensive to produce and needs high prices to remain competitive. As one analyst put it when the kingdom cut prices for U.S. customers earlier this month, “the Saudis have basically declared war on the U.S. oil producers.”

But there’s a competing narrative, or “conspiracy theory” if you prefer, that the Saudis are waging war in cooperation with the United States, against their mutual enemies Russia and Iran. “Saudi Arabia, which intends to manage OPEC, serves the interests of the G20 group,” a former Iranian oil minister told Reuters. Venezuelan President Nicolas Maduro, whose government is collateral damage in this war, also aired this view recently, saying, “What is the reason for the United States and some U.S. allies wanting to drive down the price of oil? To harm Russia.”

The U.S.-Saudi oil alliance is basically taken as a given in the Iranian and Russian media, and the idea got a recent endorsement from New York Times columnist Thomas Friedman as well. Saudi Arabia may indeed want to punish Russia for its support of Bashar Assad’s government, and will take any leverage it can get over regional archrival Iran. The U.S., meanwhile, wants to punish Russia for its actions in Ukraine and to pressure Iran into agreeing to a nuclear deal.

To be clear, there’s no proof of any deal, and Saudi Arabia denies its policies are motivated by geopolitical interests. Moreover, U.S.-Saudi relations aren’t at their best at the moment, and the kingdom is extremely skeptical of America’s latest opening to Iran. But even if there isn’t explicit collusion going on, Saudi Arabia’s move certainly benefits some key U.S. foreign policy interests, if not the bank accounts of North Dakota oil drillers.

For the sake of argument, let’s assume that the conspiracy theory is real, and that there is an agreement in place between the U.S. and Saudi Arabia to keep oil prices down. Is it working?

Low oil prices are having an impact on both the Russian and Iranian economies. In Russia’s case, that impact is probably greater than that of the recently imposed Western sanctions. But as Dan Drezner points out in The Washington Post, if economic performance were a reliable guide to the future prospects of authoritarian governments, Zimbabwe’s Robert Mugabe and North Korea’s Kim family would have been deposed by angry mobs decades ago. For now, the dire state of the Russian economy doesn’t appear to be having much of an effect on Vladimir Putin’s popularity, and actions that anger the West only seem to make his position stronger at home.

Note EU-Digest: but as the saying goes - "where there is smoke there is fire. "

Read more: Are U.S., Saudi Arabia conspiring on oil prices? - The Japan News

A Sovereign Wealth Fund For The Eurozone? - by Henning Meyer

Social Europe Journal has just published its latest Research Essay “Public Capital in the 21st Century” by Giacomo Corneo. The main argument of the paper is that the state should become a kind of investment state in order to make sure that high returns on capital do not further increase inequality but benefit the wider public. To achieve this, Corneo argues that governments should set up sovereign wealth funds to manage their investments and take advantage of low interest rates on sovereign bonds as investments should be debt-financed.

Having read the paper I was wondering whether this would also be an option to create the much-touted fiscal capacity for the Eurozone. Such a mechanism wouldn’t need Eurozone taxes or tax harmonisation (although both would be desirable) and does not require an open-ended commitment to joint debt. Here is how it could work: Let’s assume a Eurozone debt instrument backed by all governments can borrow for 1.5% in financial markets.

 For the sake of it let’s assume an annual return of 6% on a globally diversified portfolio, which is a realistic scenario. 25% of the return would be required to service the debt and Corneo argues that the rest should be used to pay back the principal so the debt incurred will be repaid in 15 years or so. I would argue that the remaining 75% of the return should be split between repaying the principal and increasing the size of the fund. So an alternative split of the return could look like this: 50% repayment of debt, 25% debt service, 25% increasing the size of the fund.

The key points are that the initial debt will be fully repaid after a defined period of time (so there is no open-ended commitment to joint debt) and that such a sovereign wealth fund could create a significant amount of revenue that could be the income source for a Eurozone budget. The budget would be administered by a Eurozone group in the European Parliament and could be used to help stabilise the currency area.

Apart from the need to complement this pro-cyclical instrument with counter-cyclical measures (issuing debt for current spending rather than investment that would also be repaid with priority?) that should kick in if there is a general crisis, I cannot see a reason for why this wouldn’t work, especially given that a budget of about 2% of GDP is regarded as big enough to effectively counterbalance asymmetric shocks.

Read more : A Sovereign Wealth Fund For The Eurozone?

11/27/14

Is Google Too Big? Google should be broken up, say European MPs

The European Parliament has voted in favour of breaking Google up, as a solution to complaints that it favours is own services in search results.
Politicians have no power to enforce a break-up, but the landmark vote sends a clear message to European regulators to get tough on the net giant.

US politicians and trade bodies have voiced their dismay at the vote.

The ultimate decision will rest with EU competition commissioner Margrethe Vestager.

She has inherited the anti-competitive case lodged by Google's rivals in 2010.
Google has around 90% market share for search in Europe and rivals asked the commission to investigate four areas:
  • The manner in which Google displays its own vertical search services compared with other, competing products
  • How Google copies content from other websites - such as restaurant reviews - to include within its own services
  • The exclusivity Google has to sell advertising around the search terms people use
  • Restrictions on advertisers from moving their online ad campaigns to rival search engines
Predecessor Joaquin Almunia tried and failed to settle the case. A series of concessions made by Google were rejected, leading Mr Almunia to suggest that the only option was a fine. This could be up to $5bn.

The EU Commission has never before ordered the break-up of any company, and many believe it is unlikely to do so now.

Note EU-Digest: but the EU Commission better do something to give smaller European search engines and similar companies as Google at least a fair chance to succeed.  Right now Google certainly has become a "Big Untouchable Brother" collecting a lot of private and personal date and selling this information to companies which not always have the best interest in mind for the well-being of private European citizens.

Read more: BBC News - Google should be broken up, say European MPs

Thanksgiving Day 2014: This is why the US holiday has a Google Doodle today - Antonia Molloy

Google has celebrated Thanksgiving Day with a bouncing turkey Doodle on its US homepage.

The festive, cheery-looking bird replaces a letter “o” in Google, with the rest of the word spelled out in autumn leaves.

You might think a bird destined for the dinner table would have little to celebrate – but perhaps this one has been spared by President Barack Obama.

The presidential turkey pardon is a quirky annual tradition at Thanksgiving and this year saw a pair of turkeys named Mac and Cheese saved from the slaughterhouse.

The national holiday, which is celebrated on the fourth Thursday of November, can be traced back to the pilgrims arriving in America during the 17th century. The festival was originally held to give thanks to God for a good harvest.

These days it is more often seen as a day on which to count one’s blessings – and is celebrated by Christians and non-Christians alike.

Families and friends come together for a special meal featuring turkey, roast potatoes, vegetables and pumpkin pie.

Most government offices, businesses, schools and other organisations are closed and many employees enjoy a long, four-day weekend.

Meanwhile, many cities celebrate with large-scale events including the famous Macy’s Parade in New York City.

Note EU-Digest: to all our US readers a happy and blessed Thanksgiving  Day !

Read more: Thanksgiving Day 2014: This is why the US holiday has a Google Doodle today - Americas - World - The Independent

11/26/14

OPEC: Gulf OPEC producers agree not to cut output:

OPEC Gulf oil producers have reached a consensus not to cut oil output when OPEC meets on Thursday in Vienna, a Gulf OPEC delegate told Reuters.

Separately, Saudi Arabian Oil Minister Ali al-Naimi confirmed the Gulf states had reached a unified decision, but did not specify what the consensus was. Naimi said he believed the oil market "will stabilize itself eventually," increasing speculation that the Organization of the Petroleum Exporting Countries' largest producer and exporter, would not support an output cut at its Thursday meeting.

Other oil minister comments indicated a similar outlook to Naimi.

"The market will fix itself ultimately," United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui told Reuters in an interview.

The OPEC meeting will be one of its most crucial in recent years, with oil having tumbled to below $78 a barrel due to the U.S. shale boom and slower economic growth in China and Europe.

Read more: Gulf OPEC producers agree not to cut output: Rpt

US Economy: Consumer Confidence drops sharply in November

US consumer confidence unexpectedly fell sharply in November.

The Conference Board's latest consumer confidence reading came in at 88.7, down sharply from October.
Expectations were for the reading to come in at 96, up from 94.5 last month.

The reading's expectations component also fell sharply, to 87.0 from 93.8 in October.
October's 94.5 was a seven-year high for the index.

Polish jobless rate falls to 11.3 percent in October, below forecast- by Michal Janusz

Poland's registered unemployment rate fell to 11.3 percent in October from 11.5 percent a month earlier, the state statistics office data showed on Tuesday.

Analysts polled by Reuters had expected the rate at 11.4 percent.

The data also showed the unemployment rate as measured by the Labour Force Survey (BAEL) stood at 8.2 percent in the third quarter, down from 9.1 percent in the second quarter.


Read more: Polish jobless rate falls to 11.3 percent in October, below forecast | Reuters

Turkey accuses Dutch government of racism, Dutch papers say

The Dutch government is acting in an aggressive and racist way towards the Dutch Turkish community, Dutch media quote Turkey’s foreign minister as saying on Wednesday. The claim is reportedly made in a letter which has been sent by the Turkish foreign ministry to the Dutch parliament and is quoted in Turkish newspaper Hürriyet. In the letter, the minister says the initiatives and statements made by the Dutch government could damage bilateral relations between the two countries.

Read more at DutchNews.nl: Turkey accuses Dutch government of racism, Dutch papers say http://www.dutchnews.nl/news/archives/2014/11/turkey-accuses-dutch-government-of-racism-dutch-papers-say.php/
The Dutch government is acting in an aggressive and racist way towards the Dutch Turkish community, Dutch media quote Turkey’s foreign minister as saying on Wednesday. The claim is reportedly made in a letter which has been sent by the Turkish foreign ministry to the Dutch parliament and is quoted in Turkish newspaper Hürriyet. In the letter, the minister says the initiatives and statements made by the Dutch government could damage bilateral relations between the two countries.

The letter follows the publication of a Dutch government report which paints a negative picture of Turkish organisations in the Netherlands, the Telegraaf says. That report led social affairs minister Lodewijk Asscher to call for close monitoring of four Turkish organisations in the Netherlands which he said may be hindering integration. In addition, Turkey is angry about a report which said 80% of Turkish youngsters in the Netherlands support jihadist movements.

That report has since been heavily criticised by experts. According to Hürriyet, the letter states that ‘aggressive and racist accusations against Turks who are part of Dutch society and against a friendly ally are unacceptable.’ ‘We do not understand why these racist attacks… have recently appeared on the agenda.’

Vice PM Asscher used Twitter to brand the comments, if accurate, as ‘uninformed, inaccurate and inappropriate.’ ‘Integration policy is focused on participation and involvement, and that means everyone in the Netherlands,’ the minister said.

Read more: Turkey accuses Dutch government of racism, Dutch papers say - DutchNews.nl

Organic foods: Millennials Like 'Organic'—Even if They Have No Idea What It Means - Joe Pinsker

To be labeled "organic" in the U.S., a product must comply with a set of environmentally-friendly standards laid out by the United States Department of Agriculture. For the purposes of a consumer, it's easiest to define organic produce by what it isn't: genetically engineered, grown in synthetic soil or with certain pesticides, or allowed to be in contact with "sewage sludge." Organic livestock adheres to similar guidelines, with the additional provision that antibiotics and growth hormones weren't given to the animals.

But, going beyond those basic restrictions, the term "organic" has developed a remarkably benevolent aura in the mind of the consumer. After surveying 300 shoppers who were, for the most part, under the age of 35, the consultancy BFG recently found that 70 percent purchased organic foods, even though only 20 percent actually had any confidence that they could define organic. More than half were "concerned, but confused" about the words used to classify their groceries. BFG's CEO, Kevin Meany, described these young shoppers to Fast Company thusly: "They desire honesty. They want to believe."

300 respondents may seem like a small sample size, but the behavior-knowledge rift is large, and it's backed up by previous research. Some Canadians surveyed in a 2013 study thought that "local" and "organic" denoted the same thing, which suggests that meanings of these two terms have mushed together into a nebulous notion of goodness. That goodness, apparently, suffuses products with the right label. Participants in a study published last year estimated cookies to have 24 percent fewer calories when they were labeled organic. "Organic" cookies were also perceived to be more nutritious. (In reality, organic foods aren't any healthier than other foods in a nutritional sense—it's just that their lack of chemicals is probably healthier in the long run.)

Once a food is cast in the glow of the word organic, consumers will be more willing to pay a premium for it. Those cookies that were estimated to have fewer calories were also valued at a higher price than unlabeled cookies. Potato chips, another food examined in that study, took on a 23 percent premium when labeled "organic." Another study, this one from 2007, indicated that the more affordable an organic product was, the less likely it was to be perceived as nutritious. When people are shopping for organic foods, they apparently take high price tags as evidence that something's worth purchasing.

Read more: Millennials Like 'Organic'—Even if They Have No Idea What It Means - The Atlantic