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Saturday, April 19, 2003

To the Debtor the Spoils of War

Niall Ferguson asks an interesting question: can a global hyperpower also be a global hyperdebtor? Looking at the scale of US obligations in the reconstruction of war-torn Iraq, and musing over the extent of US indebtedness due to the continuing current account deficit, he tries to reflect on just how long the de-facto paymasters - the Europeans and the Asians - will accept the role of political underdogs. On the way to doing this he cites Kenneth Rogoff (chief economist at the IMF) as saying that he would be "pretty concerned" about "a developing country that had gaping current account deficits year after year, as far as the eye can see, of 5 percent or more, with budget ink spinning from black into red." Or Balzac to the effect that if a debtor is big enough then this in fact gives power over creditors; the fatal thing is to be a small debtor. (Actually recent situations involving Russia and the IMF probably owe more to the "Balzac effect" than does the current US one, however it is interesting to note that too many creditors are in too deep with the US to idly sit back and allow anything 'really bad' to happen to the US economy, not without a fight at least.). While I suspect Ferguson is far too optimistic on the current European and Japanese positions, he does seem to deftly put his finger on some pretty delicate topics.

Can a global hyperpower also be a global hyperdebtor? Debates about the cost of occupying Iraq and reconstructing its burnt-out economy tend to duck this question. It is as if such costs were simply an item on the federal government's military budget. In reality, direct government spending on aid and reconstruction is unlikely to amount to much. Having won the war on a shoestring ($79 billion is less than 1 percent of the annual output of the American economy), the Bush administration apparently hopes that the reconstruction of Iraq will soon be paying for itself. A trifling $2.4 billion has been allocated to the postwar Office for Reconstruction and Humanitarian Assistance. Yet history strongly suggests that Iraq's reconstruction will require a kick-start of substantial foreign capital, particularly to modernize the antiquated oil industry.

Can the United States provide the necessary cash, even in the form of private-sector money? The answer is yes — so long as foreign countries are willing to lend it to the United States. For the fact is that America is not only the world's biggest economy. It is also the world's biggest borrower. Its muscular military power is underwritten by foreign capital.This is an unusual circumstance. In the prime of the European empires, when the British ran much of the Middle East, the dominant power was supposed to be a creditor, not a debtor, investing large chunks of its own savings in the economic development of its colonies. Hegemony also meant hegemoney. Britain, the world's banker before 1914, never had to worry about a run on the pound during its imperial heyday.

But today, as America overthrows "rogue regimes," first in Afghanistan and now in Iraq, it is the world's biggest debtor. This could make for a fragile Pax Americana if foreign investors decide to reduce their stakes in the American economy, possibly trading their dollars for the increasingly vigorous euro. Foreign investors now have claims on the United States amounting to about $8 trillion of its financial assets. That's the result of the ever-larger American balance-of-payments deficits — totaling nearly $3 trillion — since 1982. Last year, the balance-of-payments deficit, the gap between the amount of money that flows into the country and the amount that flows out, was about 5 percent of gross national product. This year it may be larger still. The Wall Street Journal recently asked: "Is the U.S. Hooked on Foreign Capital?" The answer is yes, and this applies to the government even more than the private sector. Foreign investors now hold about two-fifths of the federal debt in private hands — double the proportion they held 10 years ago, according to the Treasury Department.

Serving as an engine of global growth, aspiring to be a liberal empire and yet acting like an emerging market: it's quite a combination. Is it sustainable? ...............When the last great English-speaking empire bestrode the globe a hundred years ago, capital export was a foundation of its power. From 1870 to 1914, net capital flows out of London averaged from 4 to 5 percent of gross domestic product. On the eve of World War I, the capital flows reached an astonishing 9 percent. This was not only an extraordinary diversion of British savings overseas. It was also a remarkable attempt to transform the global economy by investing in commercial infrastructure — docks, railways and telegraph lines — in what we now call less developed countries.

From 1865 to 1914, nearly as large a proportion of total British savings went to Africa, Asia and Latin America as remained in Britain. Critics of colonialism may carp about the wickedness of empire, but the one undeniable benefit of British hegemony was that it encouraged investors to risk their money in poor countries. It also gave the British real leverage over the rest of the world. British rule in Egypt did not begin with military occupation in 1882. For years before, British investors had been building up their holdings of Egyptian assets (most famously the Suez Canal). This could prove a crucial difference between the days when Britain wielded power in the Middle East and today, when the United States aspires to recast the region. First, little in the current geographical distribution of American overseas investment suggests a natural predisposition to sink dollars into the desert. More than half of all American foreign direct investment is in Europe, compared with a paltry 1 percent in the Middle East. SECOND, there can be no guarantee that foreign investors will be willing indefinitely to put such a large chunk of their savings in American government bonds and other low-risk securities. Right now they seem to be content with the prospect of a third year of disappointing returns on Wall Street and the lowest yields in Treasury bonds since 1962. But will they stay content? Not so long ago, from 1984 to 1987, dollars were being dumped on the currency markets. Another crisis of confidence is not impossible to imagine, especially if all those foreign holders of bonds worry about the Bush administration's combination of increased military spending and decreased taxation.
Source: New York Times

Wednesday, April 16, 2003

China Shows Europe the Way

China's growth continues to confound all the negative sentiment. And internal consumer demand seems to be taking off. Nearly half a million cars in the first quarter.

The Chinese economy grew by more than 9 per cent in the first quarter of this year - its fastest quarterly expansion for six years - as the country reaped the benefits of joining the World Trade Organisation and runaway demand for cars and steel. The growth figures signal a shift in China in which the consumer has started to propel growth. For most of the past five years, that role has been played by centralised government spending.China's performance contrasts with that of the US and Europe. The US Federal Reserve said on Tuesday that US industrial output fell last month at the fastest pace this year. Germany's six leading economic institutes yesterday predicted that growth in 2003 would reach only 0.5 per cent and warned that the economy risked stagnating. Official Chinese sources, however, said the National Bureau of Statistics will announce a gross domestic product growth rate well in excess of 9 per cent on Wednesday.

One Chinese newspaper, Economic Observer, said the growth figure would be 9.9 per cent, but this could not be independently confirmed.The rapid rate of first-quarter growth compared with full year growth at 8 per cent last year, up from 7.3 per cent in 2001. The official government target in 2003 is "around 7 per cent", a conservative estimate that is in line with Beijing's overarching aim to quadruple GDP to over $4,000bn by 2020. But more important than the headline figure, which can be inflated by a number of one-off influences, was a growing sense that the quality of Chinese growth has improved. Despite domestic deflation, the government has previously boosted growth through a Keynesian programme of fiscal spending which has deepened the budget deficit. But now, there are several signs that domestic demand is becoming more self-sustaining and less state-driven.

Retail sales are expected to have risen in the first quarter from the 8.8 per cent growth recorded in 2002, and could near the 10.1 per cent rate posted in 2001.One of the main drivers of retail activity has been the frenetic desire to buy cars. Almost 440,000 cars rolled off mainland production lines in the first quarter of this year, as manufacturers raced to keep up with sales that expanded 56 per cent to 1.13m units last year. Steel sales also rose sharply, partly to feed the car sector. However, the firming steel prices that gave steel plants handsome profits have begun to ease in recent weeks and, according to some analysts, may soften considerably later this year.

To an extent, the surge in car sales has been precipitated by China's accession to the WTO, which legislated for a staggered decline in auto import tariffs year by year. As the price of imports has fallen, so domestic manufacturers have felt obliged to lower their product prices and make available enhanced services such as auto finance to spur sales. WTO accession has also propelled foreign direct investment, which rose to a record $52.7bn in 2002 and climbed 57 per cent to $13.1bn in the first quarter compared to the same period a year earlier. Much of this inflow has been lured by the partial liberalisation of investment regulations in various industries since Beijing joined the world trade body.
Source: Financial Times

China's Growth and SARS

Andy Xie, responding to widespread commentary, asks the question as to whether FDI in China is likely to be significantly affected by the SARS epidemic and offers us, barring the worst, worst case scenario, a resounding no. He does, of course, note that the weaknesses in China's political system, and its inability to handle critical information do mid-term pose a different kind of threat.

China maintained its economic momentum in the first quarter. GDP rose by nearly 10% from last year versus 8% for 2002. Exports increased by 33.5% compared to 22.1% last year. Foreign direct investment (FDI) rose by 29.4% versus 12.5% for 2002. China is clearly reaping the benefits of its position as the factory for the world.

As multinational corporations shift their capital expenditure to China, this stimulates growth in the country through increased total investment and exports. In turn, this creates more employment and, hence, increased consumption and bank deposits. The government is able to mobilize the extra liquidity within the banking system to build infrastructure.

We anticipated that China’s economic cycle would peak out in the first quarter due to a higher base but would bottom at a relatively high level. The virtuous cycle described above should continue even in a sluggish global economy. We recently stressed downside risk to our near term outlook (see Downgrading Our GDP Forecast for SARS, April 2, 2003). A significant reduction in tourism and delayed FDI would cut this year’s growth and shift some to next year.

The market is now questioning whether China will be able to sustain current FDI levels in the long term. It is argued that the SARS outbreak demonstrates the need for multinational corporations to diversify their supply sources; too much concentration would increase their vulnerability. While this argument sounds plausible, it is unlikely to work, in our view.

The exceptionally strong FDI flows into China reflect competitive necessity rather than competitive advantage, in our view. The electronics manufacturing services (EMS) sector, for example, reflects this reality. EMS is leading the global capex relocation to China, and deflation in this sector is particularly pronounced. Lower stock markets have decreased businesses’ willingness to pay for these products. Producers that take advantage of China’s low production costs have been gaining market share by cutting prices. As long as prices are set by cost levels in China, it does not make economic sense for these companies to build up capacity elsewhere unless they find locations that have a cost structure to match China’s.

China’s costs are determined by internal competition rather than that with other countries. Surplus labor and high savings rate drive China’s internal cost structure. The competitiveness gap between China and other countries is widening rather than narrowing. Strong economic growth so far has not led to a rise in China’s labor costs relative to other countries. In fact, they are probably declining.

For example, 2.2 million graduates are likely to leave China’s university and college system this year, one-third more than the number of graduates last year. The astonishing fact is that the starting salary for university graduates is declining in nominal terms for an economy that is growing at nearly double-digit rates. This demonstrates how much labor China can bring into the economy all along the quality curve.

Capital supply is rising even faster. In the first quarter of this year, household savings deposits rose by 54% YoY. The nominal value of the increase was $92.5 billion (or 7.5% of 2002 GDP). Capital is more plentiful in China than probably anywhere else in the world. China offers part of its savings to multinational companies to supplement their investment in the country. Semiconductor production, for example, is highly capital intensive. Only in China can multinational companies get bank loans at single digit interest rates for such projects. How can capacity elsewhere compete?

Low labor or capital costs are not the sum of China’s cost competitiveness. The ability to apply the low cost structure up the value chain magnifies China’s competitiveness. For example, developing countries are supposed to import capital goods and export labor-intensive goods. China is actually producing an increasing amount of capital goods for its use while simultaneously remaining competitive in labor-intensive goods.

China has completed the construction of 5,000 km of expressways along the national grid. In comparison, Japan has 8,000 km of such roads in total and the US has about 85,000. Virtually all of the value added in this construction came from local suppliers. China adds capacity of about 18 gigawatt/hour of electricity production every year. China can afford this because it mostly uses domestic equipment. Thus, when multinational companies pay for non-labor costs, these also reflect China’s low labor costs.

The third element in China’s competitiveness is that its size allows foreign companies to explore economies of scale beyond what has been seen before. In China, normal economies of scale are unable to erect sufficient entry barriers to protect profitability. A number of light industries have scaled to a degree that has not been seen before, and it is now virtually impossible to replicate such scales outside of China for these businesses. As more industries start to explore the limits to economies of scale in China, this should lead to more deflation and make capacity outside of China less profitable.

The competitiveness gap between China and other exporting economies is widening. Productivity is rising rapidly in China. Labor surpluses and high savings rate are keeping down prices of capital and labor. The massive development of education is pushing cheap labor up the quality curve, and in my view China’s share in global capex will likely continue to rise over time.

The SARS outbreak is certainly likely to delay many FDI projects, leading to a slower economy this year. More importantly, the outbreak has exposed another risk to doing business in China. Decisions in China must be made by the top guy, who is usually the party secretary at the local government level. Everyone below him tries to anticipate his preference and behave accordingly. This culture, in my view, severely undermines China’s ability to respond to crises like SARS.

If China does not learn a broad lesson from this crisis and doesn’t try to modify its bureaucratic culture, there is a danger that some unforeseen event could cause a bigger crisis in the future. On the flip side, however, China could learn and adapt accordingly as it has done many times before.
Source: Morgan Stanley Global Economic Forum

Monday, April 14, 2003

Japan: The Rush to Bonds Continues

While the floor continues to fall out of the equity markets, the queue to buy bonds lengthens. Consequence: the yield on ten year bonds hits another historic low, and deflation expectations become more entrenched than ever.

The yield on the benchmark 10-year Japanese government bond hit a historic low on Monday, as investors flocked to the safe haven of JGBs after the stock market closed at a new 20-year low.

The 10-year JGB was up 0.23 at 100.42, pushing the yield down 0.025 to 0.655 per cent, a record low. The key 10-year JGB futures contract was down 0.03 at 143.09. The yield on the 20-year JGB also fell to a record low of 0.995 per cent.

Japanese stocks plumbed a new 20-year low on Monday, as downward pressure was exacerbated by pension-fund selling. The benchmark Nikkei 225 average was off 0.8 per cent to 7,795.49, as shares continued their decline for a fifth straight session.

Investors are looking ahead to Thursday's Y800bn auction of 20-year JGBs, with an expected coupon of one per cent. Demand for the issue is expected to be robust, amid a dearth of other attractive investment opportunities.
Source: Financial Times

Japan: Nikkei Continues to Plumb the Depths

Another new twenty year low, and five straight sessions going down. Little Easter cheer from Japan.

Japanese stocks plumbed a new 20-year low on Monday, as worries regarding the global economy in the wake of the Iraq war ceased to abate. Downward pressure was exacerbated by pension-fund selling.

The benchmark Nikkei 225 average was off 0.8 per cent to 7,795.49, as shares continued their decline for a fifth straight session. The broader Topix index was off 0.9 per cent to 775.61.

On Friday, the Nikkei fell to a 20-year low, sparked by heavy selling by pension-funds, a trend that continued on Monday. Japanese pension funds are set to return a portion of their poorly-performing assets to the state later this year. Many trustees are opting to hand back cash, exerting a steady downward pressure on the market.

In a report entitled, "The Death of Equities?", strategist Masatoshi Kikuchi at Merrill Lynch in Tokyo said: "Japanese stocks have failed to rise, in spite of what looks like a quick end to the war in Iraq. We had expected the market to under-perform, but at the same time be aided to some extent by temporary rallies in the US market on indications of a coalition victory. It appears we were overly optimistic."
Source: Financial Times

Price Inflation: Trend or Blip?

Lest I be accused of only posting the news which suits my argument, and ignoring couter evidence, I am including today this piece about UK producer prices. They're on the rise. The difficulty is extracting the Iraq war blip from the trend. My own feeling is that this is a temporary phenomenon, and that come the autumn the trend will be clearly down again. Remember the output gap, and keep your eyes on consumption, productivity and personal income. Meanwhile, I am willing to be proved wrong. We'll see.

Rising petrol costs during the build-up to war in Iraq pushed up manufacturers' output prices at the fastest rate in more than two years, according to official figures on Monday.The Office for National Statistics said its output price index - which measures the cost of goods at the factory gate - rose 0.5 per cent in March, compared with the previous month. The annual rate of increase was 1.9 per cent, the highest since the end of 2000.The index was pushed up by a 2.7 per cent monthly rise in the cost of petroleum products, which were also up 12.3 per cent in the year to March.

However, the prices of raw materials used by manufacturers were unchanged between February and March, the ONS said, following large rises in the index in recent months. Analysts had predicted a slight drop, as oil prices fell back after the start of the ground war in Iraq.Crude oil prices fell 3.9 per cent between February and March, but were 24.9 per cent higher than in March 2002. But there were rises in the cost of other imported materials, imported chemicals and home produced food materials, the ONS said. Analysts said that was linked to recent falls in the value of sterling, which has also had an effect on the cost of imported raw materials - such as chemicals - used by manufacturers.The Bank of England has predicted inflation will stay above its 2.5 per cent target in the short term because of oil price pressures.In spite of Monday's rise in factory gate prices, manufacturers' margins remain under pressure, and it will be difficult for them to pass on oil price rises in an environment where global demand remains weak.
Source: Financial Times

Asian Economic Flu: We're All Sneezing

Stephen Roach is in the Financial Times today. The message is unchanged: a global economy which is unbalanced and in post-bubble shock is in dager of taking one hit too many.

War, uncertainty and disease are a tough combination for any economy. But for an unbalanced and vulnerable world, this combination of shocks hurts all the more. A global double dip may now be at hand.

The big economies of the developed world appear to have contracted in February and March. Not only has industrial sector activity in the US, Europe, and Japan been getting weaker but most important barometers of service sector activity in these countries are also flashing signs of weakness. At the same time, labour markets around the world are softening, higher energy prices are sapping consumer purchasing power and capital spending is being put on hold.

Now Asia has been hit hard by the outbreak of a virulent new disease - severe acute respiratory syndrome (Sars). Sars has brought tourism, travel, entertainment and other service activities such as retailing to a virtual standstill in this once-resilient region. Tourism alone represents about 3 to 4 per cent of gross domestic product in Asia, and Chinese tourists have accounted for an increasingly larger portion of the activity in recent years.

With the Chinese now reluctant to travel - not just overseas but also at home - and with Asian countries restricting the entry of visitors from affected areas, the Sars effect could easily escalate. Morgan Stanley has pared its 2003 estimate of growth in Asia (ex Japan) from 5 per cent to 4.5 per cent. This assumes a 60 per cent fall in tourism over the next three months and then a return to normal.

Unfortunately, the Sars effect is concentrated on Asia - the region of the world that we had counted on to keep the global economy afloat. With this source of global resilience now being undermined, the global economy has little left to support it. Had economic growth been more vigorous before the outbreak of Sars, this probably would not have made such a difference. Sadly, that is not the case. There is far more to the story of emerging global weakness than a Sars-related downturn in Asia. War, and the related uncertainties, are equally important factors. But Sars may be the tipping point.

An increasingly vulnerable world economy was ripe for a fall. Growth in the industrial world slowed appreciably in the final months of last year - well before war- and Sars-related jitters took hold. Annualised GDP growth in the fourth quarter of 2002 was only 1.4 per cent in the US, about 1 per cent in the eurozone and 2 per cent in Japan. The world economy was operating at "stall speed" - growing too slowly to withstand a big external shock.

As bad luck would have it, several such shocks have now hit. In the annals of the business cycle, the combination of stall speed and a shock is lethal - it almost always leads to a contraction in economic activity. There is little reason to believe that things will be different this time. Accordingly, Morgan Stanley now forecasts only 2.4 per cent growth in world GDP in 2003 - significantly below the International Monetary Fund's just-released estimate of 3.2 per cent. Anything below 2.5 per cent world GDP growth is usually viewed as a global recession. This suggests that the world has now lapsed back into recession territory for the second time in three years. It is a fractional breach of that threshold, to be sure. But my fear is that there could be more to come on the downside.
Source: Financial Times

Human Genome Sequence Completed: At Last

So we finally have it. The entire genome is sequenced without the previos problems. A string of three billion base units, and look ma, no holes. Now all we have to do is make good use of it!

This time it is the real thing, scientists promise - the complete sequence of human DNA, as perfectly rendered as it ever will be. Much publicity was given to the announcements of the draft human genome, and then its formal publication, but the final version will be officially launched on Monday in Washington DC."What we've got now is what we'll have for all eternity," says Francis Collins, director of the US National Human Genome Research Institute and the head of the consortium of 16 international institutions that collaborated to sequence the code.Now, there are no substantial holes left in the string of three billion base units that make up our chromosomes and determine our biology. There are still parts that are technically unsequenceable, says Collins, "but it's only about 1.5 per cent. That's what we called the finishing line when we began this enterprise, and now we've actually done it."

The largest single contributor to the project was the UK's Wellcome Trust Sanger Institute, which carried out nearly one-third of the work. Its director, Allan Bradley, says: "Completing the human genome is a vital step on a long road but the eventual health benefits could be phenomenal."Just one part of this work - the sequencing of chromosome 20 - has already accelerated the search for genes involved in diabetes, leukaemia and childhood eczema," he notes. Jane Rogers, head of sequencing at the Sanger Institute says: "The working draft allowed researchers to kick-start a multitude of biomedical projects. Now they have a highly polished end product, which will assist them even more. It's a bit like moving from a first-attempt demo music tape to a classic CD." The raw sequence is freely available on the web. But researchers will have to wait up to a year for the first analysis of it. "We're still discussing the timing on this," Collins says. A broad analysis could be published, or detailed chromosome-by-chromosome papers could be released. In a forward-looking article to be published in Nature on Thursday, Collins says that as analyses roll in of our genes and the proteins they produce, we need to avoid the patenting controversies that dogged the task of sequencing. "We may be headed for a re-run if we're not careful, and this time we need to be more pro-active" in pre-empting trouble, he says.
Source: New Scientist

Cannibalism and Mad Cows

Now here's some interesting information about our ancestors. Anyone who has ever read Herodotus already knew that the practice of eating the dead was pretty widespread even before people started to talk about kuru.

Human flesh may have been a fairly regular menu item for our prehistoric ancestors, according to researchers. They say it's the most likely explanation for their discovery that genes protecting against prion diseases -- which can be spread by eating contaminated flesh -- have long been widespread throughout the world. The genes, which are mutant versions of the prion protein gene, show key signs of having spread through populations as the result of natural selection, the researchers report in the journal Science, published by the American Association for the Advancement of Science. Such mutations, or "polymorphisms," could have provided prehistoric humans a better chance of surviving epidemics of prion diseases, similar to modern day diseases such as Creutzfeld Jacob disease, or kuru.

"What we're showing here is evidence that selection for these polymorphisms has been very widespread or happened very early in the evolution of modern humans, before human beings spread all over the planet," said study author John Collinge of University College London. "We can't say which of those it is; but the obvious implication is that prion disease has provided the selection pressure." Prion diseases are caused by misfolded versions of the prion protein, which cause other prion proteins to misfold and clump together in the brain. Kuru and Creutzfeld Jacob disease, in humans, as well as bovine spongiform encephalopathy, or BSE, in cows, cause brain degeneration and, ultimately, death.

In a previous study, Collinge and his colleagues determined that people with one normal copy and one mutated copy of the prion protein were somehow protected against Creutzfeld Jacob disease. The mutation consisted of a single amino acid substitution at a certain spot in the gene, and is known as "M129V." Among the Japanese and other populations in the Indian subcontinent and East Asia, a similar mutation called "E219K" has the same protective effect. This phenomenon, in which heterozygotes have a better chance of survival than homozygotes, is called "balancing selection." (A possible explanation in this case may be that the uniform prion proteins of homozygotes clump together more easily in the brain, increasing the chance of disease in contrast to those of heterozygotes.) "There are only a handful of examples of genes thought to be under balancing selection. They are thought to offer protection against infectious disease," Collinge said.

From approximately 1920 to 1950, a kuru epidemic devastated the Fore in the Highlands of Papua New Guinea. At mortuary feasts, kinship groups would consume deceased relatives, a practice that probably started around the end of the 19th Century, according to local oral history. The Australian authorities imposed a ban on cannibalism there in the mid-1950s. The same genetic variation in the prion protein that helps protect against Creutzfeld Jacob disease turned out to do the same for kuru. Studying Fore women who had participated in mortuary feasts, Collinge's group found that 23 out of the 30 women were heterozygous for the prion protein gene, possessing one normal copy and one with the M129V mutation. The researchers sequenced and analyzed the prion protein gene in more than 2000 chromosome samples from people selected to represent worldwide genetic diversity. They found either M129V or E219K in every population, with the prevalence decreasing in East Asia (except for the Fore, who have the highest frequency in the world).

Collinge's team also studied the diversity of sequence variations in a block of DNA containing the prion protein gene, in European, African, Japanese, and Fore populations. The prevalence of the M129V and E219K variations, even when the sequence at other spots was highly variable, indicated that the variations were ancient--more than 500,000 years old, according to authors' estimates. Finally, the researchers identified a telltale signature of balancing selection in the gene: a greater than average number of highly variable sites, and a smaller than average number of low-frequency variations. These findings are consistent with other lines of evidence indicating that prehistoric populations practiced cannibalism, such as cuts and burn marks on Neanderthal bones, and biochemical analysis of fossilized human feces. "There is extensive anthropological evidence that cannibalism is not just some rarity that happened in New Guinea," Collinge said.
Source: Science Daily News

Where the Serious Things Get Funny

Some of you will have noticed my little motto, and maybe I don't always live up to my claim. But today, from wired, there is a piece which certainly fits the bill. I don't know whether this is in good taste or not frankly, but it shows I am not the only person who feels that trying to be optimistic involves looking for the funny side of life. It makes me feel that when he goes, we could also suggest Wim Duisenberg would make a good talk-show host.

Iraq's irrepressible Information Minister is fast becoming a major cyber-celebrity on the Web, thanks to what fans see as his great sense of gallows humor. In the last few days, the official mouthpiece of the Iraqi regime, Mohammed Saeed al-Sahaf, has become the subject of fan sites, spoof weblogs, petitions to get him a TV show and merchandise like coffee mugs and T-Shirts. While most of the press took al-Sahaf semi-seriously, and a lot of the public dismissed him simply as a brazen liar, many American and U.K. Web surfers perceived something else in his words: a unique brand of black humor in the face of overwhelming defeat. Al-Sahaf's patently absurd claims about the course of the war, his florid insults against U.S.-led forces and the fact that he appeared to be about to bust out in laughter -- all have been recognized by many as signs that the minister was enjoying an outrageous private joke."I was just crying laughing," said Jim Jonas about al-Sahaf's daily press briefings from Baghdad. "It was incredible how he could keep a straight face through this stuff. He could come up with some incredible invective."

On Tuesday, Jonas helped launch the We Love The Iraqi Information Minister website, which has dubbed the minister "history's funniest straight man," and collects his best quotes.Jonas said it was obvious to him, and the four friends who helped create the site, that the minister was making fun of his own bleak situation. As U.S.-led troops stormed central Baghdad, al-Sahaf nearly burst out laughing as he made statements like, "Their infidels are committing suicide by the hundreds on the gates of Baghdad." "He's the Buddy Hackett of international diplomacy," Jonas said. "He was so over the top it was extremely comical to watch." In the last few days, the site has sold hundreds of coffee mugs and T-shirts emblazoned with the minister's insults through a CafePress store. One item, an apron, contains one of al-Sahaf's best lines: "God will roast their stomachs in hell." The five friends behind the site come from both ends of the political spectrum -- doves and hawks -- Jonas said. Jonas, a Web developer from Denver, is a former Republican political consultant, while another collaborator, Kieran Mulvaney, is a former Greenpeace activist living in Alaska.

Jonas said the site doesn't want to make light of the war, but he and his friends wanted to celebrate al-Sahaf's sense of humor. "We can only hope he's still alive and will turn up on a talk show somewhere," said DJ Lachapelle, another of the site's creators. "He's completely hilarious." Jonas said one of his favorite moments came as American soldiers stormed central Baghdad. Al-Safah dismissed the grenades and gunfire around him as a media con, referring to the 1997 movie, Wag the Dog, in which an American president manufactures a media war to deflect a scandal. The site collapsed on Thursday under the weight of visitor traffic. Jonas said the site was getting 4,000 hits a minute, and they were busy setting up mirror locations. Jonas said if al-Sahaf survives the war, he clearly has a future in PR. "He's exactly what the tobacco companies or Enron need right now," he said.
Source: Wired News

Easter Holidays

This week my blogging will be a bit erratic. I'm on holiday, as I hope many of you are. Things will get back to normal next week. For the curious of spirit, I'm in the Pyrenees near Girona, outside a small town called OLOT. In fact I am precisely here , staying with my good fiends Joan and Montse. The weather could be better, but in Spain we aren't exactly short of sun, so the grey days are a good opportunity to read, rest and walk. This morning we've come into town, my wife and daughter are in the local market while I quietly blog: talk about sexual stereotyping! Anyway, I would also like to take the opportunity to wish a happy easter to all my blog readers.