Not Important! Think Again
Money Laundry Special
17 July 2002
Banana Republicans
The United States is in the process of creating a national network of informers. Thus, in imitation of some of the
nastier regimes around the world, including those against which the US waged the Cold War, the Bush regime is in the
process of recruiting people to spy on their fellow citizens. If you doubt this read the following. Only an ostrich
could fail to see what this means.
Financial Laundromat International Plc. (FLIP)
It is not just in the United States that odd things have been and are going on. Take the United Kingdom, for instance.
Here a firm called Mapeley Plc has been awarded a Private Finance Initiative Contract that in effect transfers to it
fixed assets belonging to the government on a sale leaseback basis. The taxpayer loses equity and gets to pay an annuity
to the new owners, who happen to be offshore companies. Hmmm… Mapeley’s web site was curiously uninformative about all
this. The rationale given repeatedly by contractors is that they offer a way to get over the “hassle” of real estate
ownership. And who owns Mapeley? Soros Real Estate Partners, which speaks for itself, we think. Other investors are
Fortress Investment Group and Delancey Estates. It is telling that this activity is financed through the issuance of
debt, something that would have been far more difficult if not impossible in an environment other than the heady and
speculative binge of the late 90s and early noughts. Note that none of these firms are publicly traded.
The Private Finance Initiative: Cui bono?
The indispensable George Monbiot sets out several of the problems associated with PFI. Our favourite is the risk
“comparator” that sounds like a senior male body servant but is in fact a dodge that makes it impossible for the public
sector to compete with the private sector for the operation of PFI projects. Average public sector hospital cost
overruns are on the order of 7% but private bidders are allowed to claim a 12.5% risk adjustment, while the NHS is not
allowed to claim one at all. One is reminded of American accounting practice: Halliburton, Vice President Cheney’s firm,
recognised anticipated (i.e. hypothetical future) cost overruns as current income. Are PFI private contractors in
Britain doing the same? Britain’s experience with the national railway privatisation is sad, demonstrating as it does
the hollowness of the claims for PFI. It also demonstrates where real power in Britain lies, and that it is more
interested in speculation than in running a railway. As Monbiot points out, some of the best-informed and trenchant
criticism of PFI came from Labour in opposition. Indeed, it was Alastair Darling, now transport minister, who delivered
it. Now he is about to deliver the London Underground to the private sector.
Indeed, that is precisely the problem. This is so transparently a transfer of public assets to private hands that it is
embarrassing.
If the royals can do it, why not the private sector?
Really, if the Monarchy is able to tap the taxpayers year in and year out for expenses when it has piled up a surplus of
£35 million of taxpayer money thanks to the fall in interest rates over the last twenty years, then why shouldn’t
private industry be allowed a place at the trough? I know, these things are completely unrelated, are they not?
Doug is not so Daft
Coca Cola (KO NYSE) has announced that heretofore it will treat the cost of employee stock options as a current expense.
Unfortunately named CEO Douglas Daft, in doing so, breaks ranks with the rest of corporate American in a move that is
sure to increase the pressure on the rest of industry to do the same. This is a move that is at least twenty years
overdue and a sign of the times. Quite apart from the increased transparency that this will give to corporate profit
forecasts, it will be interesting to see how Coke trades versus the rest of the market. Intriguingly, on the first day
of trading after the news broke, it closed up and the market closed down. Our bet is that transparency and honesty will
trump fraud.
Bush Administration Disintegration Watch
Now Vice President Cheney and officials of Halliburton and Arthur Andersen are being sued by Judicial Watch and
shareholders of Halliburton in a suit alleging massive fraud. Ari Fleischer, Bush administration press secretary, and
noted legal expert (his note, not ours) has dismissed the suit as “without merit.” Although we would be the first to
admit that the people at Judicial Watch sometimes come across as a bunch of Nancies, Fleischer is an unapologetic master
of the US government tradition of accusing others of one’s own faults. One suspects that it is Fleischer who is “without
merit.” The odds that Bush will only last one term, and that Cheney won’t last even that long are rising.
British Fiscal Discipline Disintegration Watch
Last but not least, the Labour Government is in the enviable position of doing Washington’s bidding and spending a lot
of money at the same time. Since the Tories, and for that matter the Liberal Democrats do not challenge the basic
premise of British politics, there is little likelihood of serious debate. That basic premise is the American alliance
and the floating fiat reserve currency system that it is based on. Since the US is inflating, Britain will inflate.
Tough luck for the Tories, they aren’t in Downing Street. Tough luck for the rest of us, we have to pay for it.
Just a little extortion between friends?
After reading the following article from the Jerusalem post, you may well wonder why the United States would want to
have a peace deal between Israel and the Palestinians. We aren’t the only ones to read this and think that it represents
extortion on the part of the Israelis. Bringing Israel under the US nuclear umbrella? Giving them legal access to the
most advanced US military technologies? All to get them to do something that is in their long-term interests anyway? As
one discerning analyst points out, the deal described in the JP article implies that Arafat was thinking in terms of an
eastern border along the Jordan River, which in turn implies rights to water from the upper Jordan and Galilee, now
pre-empted by Israel. Did Israel agree to this? Water, so important to the whole issue, continues to be off the table
for public discussion.
Something to think about, isn’t it?
And finally, more money laundering
They make money on the way up and they make money on the way down, all thanks to your 401-K.
ENDS