-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Iraq Follies UN Iraq Inspectors Were Spying for U.S. Electronic penetration THE United Nations was in turmoil yesterday after claims that weapons inspectors in Iraq had been gathering intelligence information on President Saddam Hussein's personal security and on Iraqi military movements for the Americans. Although Richard Butler, the head of the UN Special Commission (Unscom), whose inspectors were monitoring Iraqi weapons sites until last month's Anglo-American bombing raids, denied the spying claims, there was a growing feeling at UN headquarters in New York that there was at least some truth to the reports. After several weeks of rumours in New York that Unscom had been used by American intelligence agencies to gather information on Saddam - as the Iraqi leader had frequently claimed - two American newspapers, the Washington Post and Boston Globe, reported detailed claims of the alleged spying. The Boston newspaper claimed that, last March, the Americans effectively took over the control of electronic surveillance being run by Unscom. Until then, British and Israeli intelligence agencies had been interpreting the data to help the inspectors search for chemical or biological weapons sites. Scott Ritter, who resigned from the inspection team in August, told the newspaper: "The US decided this system was too sensitive to be run by Unscom. They bullied their way in and took it over. Now, any data collected by this activity is not being assessed by Unscom - the US gained 100 per cent access and is not feeding any of it back." Quoting unnamed aides to Kofi Annan, the Washington Post said that the UN Secretary-General now had "convincing evidence" that US intelligence agents had used the eavesdropping to penetrate secret communications among military units responsible for Saddam's safety. The newspaper also quoted a White House source as saying: "We've already established that Saddam's personal security apparatus and the apparatus that conceals weapons of mass destruction are one and the same." Rattled by suggestions that his inspectorate had been used as a cover for American intelligence-gathering, Mr Butler said the reports were "simply not true". He insisted that any Unscom intelligence-gathering had been connected to the inspectors' job of trying to locate secret weapons sites and that he had never agreed to hand over control of it to the Americans. John Ruggie, an adviser to Mr Annan, said the UN Secretary General had been aware of the spying rumours for some time but said: "It is quite erroneous to say the Secretary General has convincing evidence. We have no convincing evidence." He said that if the claims did prove to be true, they would pose a "serious problem" for the UN and, particularly, for Unscom for operating outside its mandate. Joe Lockhart, President Clinton's spokesman, declined to discuss the claims yesterday, except to say that the inspection programme was "not the problem - Saddam Hussein and Iraq's unwillingness to live up to the commitments they made at the end of the Gulf war, to disarm and destroy their weapons of mass destruction, is the problem". The claims were a further unwelcome diversion for Mr Annan, who is in dispute with Iraq over the demand that 13 British and one American UN staff members be withdrawn because their safety could not be guaranteed after the air raids. Mr Annan yesterday rejected the request to evict the 14, relief workers involved in humanitarian programmes in Iraq, informing Baghdad that it was up to the UN, not Saddam, to determine which personnel were assigned where. The London Telegraph, Jan. 7, 1999 World Stocks Stock Markets Surge Worldwide "Japanese-style bubble valuations" World markets stepped up the pace of their new year rally yesterday with Wall Street heading into record territory in early trading and European bourses surging ahead. Takeover talk in the automotive and telecommunications sectors provided the immediate spur for the gains but there were signs that institutional investors were pushing money into blue-chip stocks, as they often do at the start of the calendar year. Just before 2pm in New York, the Dow Jones Industrial Average crossed the 9,500 level, up 198 points on the day. It was already in record territory earlier in the day when it passed 9,400. Enthusiasm for semiconductor and internet shares extended the Nasdaq composite's record-breaking run, with the technology-dominated index adding 2.6 per cent by early afternoon at 2,309.59. In Europe, London's FTSE 100 index gained 190.6 to 6,148.8, its third largest points rise although well down the scale in percentage terms. In Paris, the CAC 40 gained 2.2 per cent to be within 100 points of its all-time high while the DAX in Frankfurt gained 3.4 per cent. Earlier in the day, the Hang Seng index in Hong Kong had gained 3.5 per cent while the Singapore and Bangkok markets moved up 5.7 and 6.4 per cent respectively. While the recent wave of takeovers means that few investors want to be out of the equity market, for fear of missing the next big deal, the early strength of shares in 1999 also owes much to the lack of alternatives. Bond yields are low and there are expectations that interest rates will be cut further in Europe and the US. The successful launch of the euro has also prompted a wave of enthusiasm for Europe's prospects. January has traditionally been the best month for stock market performance, with the UK market rising by an average 2.5 per cent on the month over the 1919-96 period, according to the Schwartz Stock Market Handbook. One factor behind January's historical strength is a seasonal inflow of money into investment institutions. This seems to have been heightened this year by the decision of US equity mutual fund managers to reduce the cash levels which they built up when markets were falling in the autumn and to invest the proceeds in the stock market. The fund managers' cash level reached a two-year high of 6.3 per cent in September, compared with the average for the two-year period of 4-4.5 per cent. Some analysts think the rise in share prices has gone too far, with investors paying insufficient attention to the prospect of slower economic and corporate earnings growth. Albert Edwards, global strategist at Dresdner Kleinwort Benson, said: "A lot of people think that 10,000 on the Dow is sustainable. With the trailing price-earnings ratio on the US market around 38, we are approaching Japanese-style bubble valuations. At these levels, a deepening profits recession will eventually hurt the market." Arthur Hogan, chief market analyst at Jeffries & Co in Boston, said: "This is a completely liquidity-driven marketplace that's diverged from earnings fundamentals. "January is the time when everyone's sitting on a pile of cash and it will take a huge earnings warning from the likes of General Electric or Microsoft to stop people in their tracks." The Financial Times, Jan. 7, 1999 US Stocks Cracks in Wall Street And Time to Stop Lecturing Japan by Samuel Brittan The most worrying feature of the world economy is the future of a US boom stoked up by inflated share prices. The main economic query for 1999 does not concern the euro. It does not even concern the emerging economies or Japan. It concerns the US. Indeed it is time western policymakers stopped lecturing Japan on what to do. That country accounts for about a sixth of the output of the industrial world. Its exports amount to less than 9 per cent of its gross domestic product. Over the years, US hectoring of Japan has had a negative influence. Professor Ronald McKinnon has argued that: "American mercantile pressure on Japan from 1971 to 1995 to get the yen up, and fear that that pressure may return, is the root cause of Japan's current deflation and slump." * Whether or not it is "the root cause", the appreciation of the yen from Y300 to the dollar in 1971 to around Y100 in 1995, partly under US prodding, did indeed make an important contribution to Japan's current malaise. Prof McKinnon is, in any case, right to argue that the dollar exchange rate cannot be used as an "instrumental variable" for reducing the US current account deficit "which mainly reflects extremely low saving in the US itself". It would, in fact, be unfortunate if US savings behaviour were abruptly corrected. For what happens in the US is make-or-break for the world economy this year and next. The US economy is twice the size of Japan's. Like Japan, it is a continental economy. But the US has a much greater effect on the rest of the world. Wall Street's ups and downs, for instance, usually trigger large sympathetic movements in other stock exchanges. The US boom has been fed by a record rundown in the financial balance of the private sector. The deterioration has been in the entire private sector and not just in personal finances. The rundown has been sustained, up to now, by portfolio appreciation due to the rising level of stock prices. As Andrew Smithers has pointed out,** the large buyers of equities, who have been keeping the market up, have been US corporations buying their own stock or engaged in takeover operations. The US Federal Reserve now faces a classic dilemma. Should it tighten policy to let the air out of the Wall Street boom or should it loosen policy for fear that alarms about emerging markets and falling domestic confidence might already be sowing the seeds of recession? Most forecasting organisations expect US growth to slow from about 3 per cent in 1998 to 1 per cent in 1999. This is something with which the world can live. It would, indeed, be a healthy reaction to excessively rapid growth in the past. It is the fear that Wall Street prices are much too high, and could therefore snap, that produces the risk that the US could experience a serious downturn rather than a benign slowdown. The Organisation for Economic Co-operation and Development has studied many different estimates of the effects of Wall Street on the level of spending in the US. The remarkable consensus is that a 20 per cent fall in US equities could lead to a drop in consumption of about 0.7 per cent, accompanied by a larger proportionate impact on investment. So even without secondary or confidence effects, real GDP would be about 1 per cent lower than might otherwise be expected. If equities were to fall by 40 per cent, the US economy would almost certainly tip over into a serious recession. US equity prices are now much higher than in December 1996, when Alan Greenspan, chairman of the Fed, made his famous remark about "irrational exuberance". As always, there are two sides to the argument. The most sober case of the optimists has been presented by Goldman Sachs. Its economists avoid the trap of talking about the "new paradigm" which is supposed to give the US rapid, inflation-free growth forever. Instead, they put the emphasis on the new world of low or negligible inflation. This should reduce the nominal interest rate at which future dividends are discounted. They also believe that the level of risk will be lower in an environment of stable prices, thus justifying a lower risk premium. Nevertheless, the IMF, in its December Interim Assessment, did take into account lower interest rates when it asked what level of nominal equity earnings growth would justify recent equity price levels. Its estimate is 7 per cent a year. This is not very different from the average of the last four decades when inflation averaged more than 4 per cent. But it is scarcely credible that profits could grow at the required rate if inflation remains at its current level of just over 1 per cent. The most pessimistic case comes from Tim Congdon in the December Lombard Street Research Economic Review. He reminds us that measures of broad money and credit, so far from indicating any kind of crunch, have shown near double digit growth in the last few months. In his view this has been associated with large, although suppressed, overheating of the US economy. The overheating has not shown up in inflation partly because of the fall in commodity and oil prices, but also because much of the excess demand has gone into imports. On present trends, he projects that the US would have net overseas liabilities equal to 50 per cent of GDP by 2010. My own guess is that those who worry about Wall Street are near the truth; and I would expect a severe enough correction in US equities to have a spillover impact not only on the US but also on the world economy. But, unlike Mr Congdon, I would not put so much emphasis on the US balance of payments. Not only does such an emphasis play into the hands of protectionists, it overlooks the numerous ways in which the balance of payments takes care of itself in a world of floating exchange rates and free capital movements. It was this balance of payments obsession and distrust of self-correcting forces that explains, but does not excuse, the willingness of otherwise moderate and sensible British officials to draft the hideous idiocy of Operation Brutus, a fallback plan which would have imposed an almost Stalinist siege economy in Britain in the event of severe problems with sterling in 1968-69. This was a horror which the British establishment successfully concealed from us until the opening, at the end of last year, of the official papers for 1968 under the 30-year rule. For the time being the US is acting as world buyer of last resort; and it is quite rational for residents of countries with surplus savings, such as Japan, to lend to it. Obviously the US external debt ratio cannot rise indefinitely. A soaring US current account deficit will eventually hit the dollar. And if the dollar fell too quickly, even in an economy where trade accounts for only around one tenth of GDP, it would eventually affect the inflation outlook and cause monetary policy to be tighter than it would otherwise be. The Fed's best course - which is easier for Greenspan's born-again critics to recommend than to prescribe in detail - is to try to keep US nominal demand rising at a non-inflationary rate and not to fall back into the mercantilist trap of becoming obsessed with overseas trade returns. *Exchange Rate Co-ordination for Surmounting the East Asian Currency Crises, Economics Department Stanford **Piling Up Debt, Smithers and Co. Contact Samuel Brittan The Financial Times, Jan. 7, 1999 Impeached POTUS Senate Trial Takes Shape Nobody happy WASHINGTON - The Senate majority leader, Trent Lott, promised Wednesday that agreement on the outlines of an impeachment trial would be concluded Thursday, but he said the solution would not entirely please either President Bill Clinton or the House Republicans who impeached him. As the 106th Congress convened under a cloud of uncertainty, the Mississippi Republican told senators that the trial procedure would be one ''that neither the House nor the White House will just necessarily think is wonderful but will give all parties a fair chance to make the case and get to a conclusion that's an equitable one.'' Democrats both in the Senate and the White House expressed consternation that the historic process remained so murky on the eve of its formal opening, making it difficult to prepare a defense against the charges that Mr. Clinton perjured himself and obstructed justice to conceal his relationship with Monica Lewinsky. The Democratic leadership promised ''universal, unanimous'' opposition to calling witnesses. All that is certain is that at midday Thursday, the chief justice of the Supreme Court, William Rehnquist, is to be sworn in to preside over the impeachment trial, only the second of a U.S. president. He, in turn, is to swear in the 100 senators, who will sit as jurors during the proceeding. Senate Democrats have urgently called for an expedited trial, to be done with the matter in as little as four days. Speaking Wednesday on the Senate floor, the minority leader, Thomas Daschle of South Dakota, said: ''We must find a way to resolve this and move forward. We must find a way to end this lingering national torment.'' Mr. Lott had been working strenuously to craft a compromise approach for a truncated proceeding, but has encountered stern opposition from some House Republicans, who will argue the case against Mr. Clinton on the Senate floor, and from some Senate Republicans, who want a full trial. ''We will get that done hopefully in a relatively short period of time without limiting it to a day or three days or three weeks, for that matter,'' Mr. Lott said. ''It could very well take longer than that.'' Mr. Lott appeared to be battling a rising tide of anger and partisanship in the Senate. Sharp disagreement remained Wednesday on whether witnesses would be called, a question that could go far toward determining the length of a trial. ''We're not prepared to accept any witnesses,'' Mr. Daschle said, after a meeting with other Democratic senators. ''I think it's fair to say that there is universal, unanimous opposition to witnesses.'' Mr. Lott, however, appeared to be leaning toward allowing some witnesses. Representative Henry Hyde, chairman of the House Judiciary Committee, who will in effect serve as lead prosecutor in an impeachment trial, met with Mr. Lott and said later that the senator ''was not unreceptive'' to the case for calling witnesses. Democrats, however, have said that calling witnesses, probably including Ms. Lewinsky, the former White House intern, would guarantee a long and acrimonious trial. Speaking before Mr. Lott, Mr. Daschle said that an agreement on the outlines of a trial should be reached before it goes ahead, and that the witness question could derail such an accord. ''My advice to the White House,'' he said, ''would be as soon as the first witness is called, all bets are off with regard to agreeing on a procedure.'' White House aides, confident that they could win a quick vote in the Senate but concerned about what surprises a longer process might bring, expressed growing consternation Wednesday. The president's spokesman, Joe Lockhart, said lawyers and officials at the White House felt ''some obvious frustrations that we don't know what the procedures will be.'' Mr. Clinton, he said, ''is anxious to get this resolved quickly and fairly.'' The president's legal team, while hoping that the political risks of a messy trial might persuade Republicans to find a compromise solution, is said to be preparing for a proceeding of anywhere from two months to a half-year or more. Mr. Hyde agreed that the state of flux surrounding the historic matter was proving damaging. ''Everything is under negotiation,'' he said. ''All kinds of rumors are going around. Time is wasting.'' Several Democrats have bridled at public attempts by Mr. Hyde and other House ''managers'' to influence the conduct and organization of a Senate trial. With little precedent to guide them, some of the trial procedures will be determined by majority vote as the matter moves ahead. ''We didn't involve ourselves in their proceedings and it is very disturbing that they now seem to be intent on involving themselves in ours,'' Mr. Daschle said. House managers have said they would need two or three weeks to present their case. The House approved two articles of impeachment on Dec. 19, alleging that Mr. Clinton committed perjury and obstructed justice. Mr. Clinton's lawyers are expected to argue that he did not commit perjury in his sworn denials of an affair with Ms. Lewinsky, because he believed that he was telling the truth. They say there are innocent explanations for what House prosecutors portrayed as witness-tampering. Earlier, Mr. Lott said he could not predict the length of a trial. ''I can't give you a magic date,'' he told reporters, before a meeting with the other Republican senators. ''All kinds of variables are coming into play.'' He added: ''We may not know the absolute answer until we get started.'' Mr. Lott reportedly told Republican senators that after the largely ceremonial events on Thursday, he wants opening arguments presented Monday by representatives of the House and the White House. There were reports that he hopes to conclude the hearing by mid-February. Much else about the proceedings remained in doubt, but the mounting likelihood appeared to be of a trial of at least several weeks and possibly some months. The Washington Post, which interviewed more than 40 senators, found sentiment on the trial beginning to break down along party lines, with Democrats favoring an accelerated trial and censure, and Republicans generally in favor of a full-scale trial. A weekend poll found that more than 60 percent of Americans see no need for a full trial of Mr. Clinton. Nearly that many said a full trial would seriously harm the country, according to the CBS News survey. Senate Democrats, with 45 seats, are thought sure to be able to block the 55 Republicans from obtaining the 67 votes needed to remove Mr. Clinton from office. International Herald Tribune, Jan. 7, 1999 Impeached POTUS Danny Williams & Executive Order 12953 Federal Government Must Help Establish Danny's Paternity THE WHITE HOUSE Office of the Press Secretary ________________________________________________________________________ For Immediate Release February 27, 1995 EXECUTIVE ORDER 12953 - - - - - - - ACTIONS REQUIRED OF ALL EXECUTIVE AGENCIES TO FACILITATE PAYMENT OF CHILD SUPPORT Children need and deserve the emotional and financial support of both their parents. The Federal Government requires States and, through them, public and private employers to take actions necessary to ensure that monies in payment of child support obligations are withheld and transferred to the child's caretaker in an efficient and expeditious manner. The Federal Government, through its civilian employees and Uniformed Services members, is the Nation's largest single employer and as such should set an example of leadership and encouragement in ensuring that all children are properly supported. NOW, THEREFORE, by the authority vested in me as President by the Constitution and the laws of the United States of America, including section 301 of title 3, United States Code, it is hereby ordered as follows: Part I - PURPOSE Section 101. This executive order: (a) Establishes the executive branch of the Federal Government, through its civilian employees and Uniformed Services members, as a model employer in promoting and facilitating the establishment and enforcement of child support. (b) Requires all Federal agencies, including the Uniformed Services, to cooperate fully in efforts to establish paternity and child support orders and to enforce the collection of child and medical support in all situations where such actions may be required. (c) Requires each Federal agency, including the Uniformed Services, to provide information to its employees and members about actions that they should take and services that are available to ensure that their children are provided the support to which they are legally entitled. Part 2 - DEFINITIONS For purposes of this order: Sec. 201. "Federal agency" means any authority as defined at 5 U.S.C. 105, including the Uniformed Services, as defined in section 202 of this order. Sec. 202. "Uniformed Services" means the Army, Navy, Marine Corps, Air Force, Coast Guard, and the Commissioned Corps of the National Oceanic and Atmospheric Administration, and the Public Health Service. Sec. 203. "Child support enforcement" means any administrative or judicial action by a court or administrative entity of a State necessary to establish paternity or establish a child support order, including a medical support order, and any actions necessary to enforce a child support or medical support order. Child support actions may be brought under the civil or criminal laws of a State and are not limited to actions brought on behalf of the State or individual by State agencies providing services under title IV-D of the Social Security Act, 42 U.S.C. 651 et seq. Sec. 204. "State" means any of the fifty States, the District of Columbia, the territories, the possessions, and the Commonwealths of Puerto Rico and of the Mariana Islands. Part 3 - IMMEDIATE ACTIONS TO ENSURE CHILDREN ARE SUPPORTED BY THEIR PARENTS Sec. 301. Wage Withholding. (a) Within 60 days from the date of this order, every Federal agency shall review its procedures for wage withholding under 42 U.S.C. 659 and implementing regulations to ensure that it is in full compliance with the requirements of that section, and shall endeavor, to the extent feasible, to process wage withholding actions consistent with the requirements of 42 U.S.C. 666(b). (b) Beginning no later than July 1, 1995, the Director of the Office of Personnel Management (OPM) shall publish annually in the Federal Register the list of agents (and their addresses) designated to receive service of withholding notices for Federal employees. Sec. 302. Service of Legal Process. Every Federal agency shall assist in the service of legal process in civil actions pursuant to orders of courts of States to establish paternity and establish or enforce a support obligation by making Federal employees and members of the Uniformed Services stationed outside the United States available for the service of process. Each agency shall designate an official who shall be responsible for facilitating a Federal employee's or member's availability for service of process, regardless of the location of the employee's workplace or member's duty station. The OPM shall publish a list of these officials annually in the Federal Register, beginning no later than July 1, 1995. Sec. 303. Federal Parent Locator. Every Federal agency shall cooperate with the Federal Parent Locator Service, established under 42 U.S.C. 653, by providing complete, timely and accurate information that will assist in locating noncustodial parents and their employers. For the rest of this EO (mostly dealing with the Uniformed Services), click here WILLIAM J. CLINTON THE WHITE HOUSE, February 27, 1995. Single Currency Euro Unleashes Competition Among Payment Systems End-of-day netting The birth of the euro has launched a cutthroat competition in the payments market, not only between clearing banks but also between payments systems. At the systems level, each country in the European Union is obliged to have a real-time gross settlement system connecting to the European Central Bank's Target system. Many countries also operate end-of-day net payment systems, and at a transnational level the Euro Banking Association, which cleared Ecus, is running a net system that is expected to be a major contender. Estimating payment volumes in euros has been difficult, but, on the basis of national currency payments, a Boston Consulting Group study last year estimated traffic in the 11 euro-zone countries at around 322,000 high-value payments a day. The capacity added in anticipation of the new currency by Germany's EAF, the UK's Chaps Euro, France's TBF and the EBA system - just four of the biggest channels competing for euro transfers - could handle another 744,000 payments a day. Banks do not yet know which of these systems will end up as the dominant channels, so many of the larger clearers have signed up for half a dozen systems to cover their bets. This is costly, however, not so much in terms of membership fees and running costs as in the added difficulty of managing liquidity. Banks will soon want to narrow their choices. Each bank has to put up collateral, usually in the form of government securities, in each of the systems in which it is participating to cover its outgoing payments. Any glitches could result in a bank running short of liquidity in, say, EBA - and having to borrow to cover its needs - despite having surplus euros in its national RTGS system. While it is easy enough to switch cash around the continent through Target, it can be more complicated to move collateral. Some central banks are still dragging their feet over collateral transfer arrangements; there is a suspicion among some bankers this is a deliberate ploy designed to keep liquidity within their national money market. There are also far too many banks competing for payments business. The euro sharply reduces the need for large banks to maintain correspondents in different euro-zone countries and also opens the door for corporate clients to slash the number of banks they deal with. Since the D-Mark accounts for around half of all payments in the euro-zone, Deutsche Bank and possibly Commerzbank of Germany are expected to emerge as market leaders in terms of volumes cleared. But a number of US banks also appear well-placed. Broadcasts on the Swift interbank message system of Standard Settlement Instructions, in which banks and broker-dealers tell the market where to send any euro payments they are owed, suggest Chase Manhattan so far leads the field, featuring in 27 per cent of SSIs issued up to December 23. Deutsche follows with a 19 per cent share, and Citibank lies third with 6 per cent - although these figures indicate only numbers of banks issuing SSIs and not volumes of euros. The top 10 is rounded out by Dresdner, Commerzbank, Soci�t�G�n�rale, Bankers Trust - soon to be taken over by Deutsche - Bank of America, Midland and Barclays. Many who fail to make the top 10 face stark decisions over persevering. The Financial Times, Jan. 7, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. 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