Musings of a modern guy

China has been suffering from some serious bad press over an extended period due to low quality of some of its exports. This continued reporting of quality problems has started to affect the company’s reputation, and this latest report by the WHO over deliberate delays in reporting of the melamine in milk scandal would only aggravate issues. Given that the melamine content is far higher than the tolerable level, and was deliberately added to mislead testing about the protein levels, and that complaints about these issues were received as far ago as December of 2007, one can sense that at some point, the Chinese Government will suddenly start to take very harsh action (in the past, they have executed the head of an inspection agency for some previous issue like this one):

China, embroiled in a tainted milk scandal that led to the deaths of four babies and sickened 53,000, suffered from a “deliberate failure” to report the contamination, the World Health Organization said today. “This incident was aggravated by delays in reporting at a number of sources,” Hans Troedsson, WHO’s China representative, told reporters in Beijing today. “These delays were probably a combination of ignorance and deliberate failure to report.”
The melamine-milk crisis has revived concerns about Chinese food-safety controls after previous scares over seafood, dumplings and pet food. The European Union yesterday proposed banning some Chinese dairy products, joining restrictions in more than 20 countries and markets after 22 mainland companies were found to have sold contaminated products. “Controls in China need to be reinforced,” EU Trade Commissioner Peter Mandelson said today in Beijing. “Above all, we expect responsibility from producers and managers in all companies involved in food production.’

This scandal is pushing beyond just milk, with products that use milk also getting affected. Chocolates, candies, yoghurt, ice cream, etc, are all under investigation in countries around the world. In some cases, melamine has been found in many of these products, and they have been pulled from the shelves. As a result, companies around the world have pulled China origin dairy products from stores in their countries, and many questions have been raised on the level of quality inspections in China. Coming soon after the Olympics gave a positive thumbs-up to China’s image, such a major scandal, that too affecting a food item, exposes the lack of quality control in the country’s industries, and has an immense potential to harm China’s exporting image.

At the border with Afghanistan actually. There is an under-current of simmering tension between the United States and Pakistan, and this firing incident between the forces may be a grave portent for what may happen in the future as well. What actually happened ? It depends on whom you believe, but there were 2 US helicopters near the border between Afghanistan and Pakistan (over it and in Pakistan, if you believe the Pakistani side). Pakistani troops shot at the helicopters (shot at them with flares in order to tell them that they were over the border, as per Asif Zardari, the President of Pakistan). These helicopters were actually covering a troop of US and Afghanistani forces that were patrolling the border, and these troops then fired at the Pakistani side in retaliation, who then fired back. It was supposedly over in 5 minutes, but you can be sure that the repercussions of this incident will not be over in 5 minutes:

Pakistan’s President Asif Ali Zardari lashed out at the United States after their troops traded gunfire sparked by claims Pakistan forces shot at two US helicopters for alleged violation of airspace on the border with Afghanistan. “Just as we will not let Pakistani’s territory to be used by terrorists for attacks against our people and our neighbors, we cannot allow our territory and our sovereignty to be violated by our friends,” he said without citing the United States or the border flareup. “Unilateral actions of great powers should not inflame the passion of allies,” he further said, cautioning that any cross border raids could be counterproductive.
But a State Department spokesman earlier said Washington wanted an explanation from Pakistan, commenting that “the Taliban are not flying helicopters.” “We have been in touch with the Pakistanis about this and we certainly want to have an explanation,” the spokesman said.
A US official told AFP recently that Washington was frustrated with “delays and sometimes non-answers” from Islamabad regarding “actionable intelligence” on militant movements in the tribal areas in Pakistan along the border with Afghanistan, where Al-Qaeda and Taliban militants were believed to be hiding.

This is a natural step up in the series of incidents that have been escalating over the past few months, tremendously fraying the relationship between the United States and Pakistan. It has been an open secret that sections of the Pakistani military have been supporting the Taleban, and the previous Pakistani administration of Musharraf and the military were unwilling to do all they can to get rid of the support to the Taleban from their side (even if these same elements caused much trouble to them inside Pakistan). Reports started appearing in the US media about how the Bush administration is having second thoughts about whether Pakistan really wants to get rid of the terrorism within its borders, and then when the bombing of the Indian embassy in Kabul happened, the press was all over about how the US wants Pakistan to weed out the elements of the ISI that support terrorism and is no longer willing to believe everything that Islamabad says.
The Pakistanis, under US pressure, have been letting drones into Pakistani territory and attack suspected terrorist hide-outs over there through missiles launched from these drones. However, when President Bush decided in July that rules have changed, and that the US will even attack inside Pakistani territory, this rattled Pakistan. After all, how can a Government allow its sovereign territory to be invaded by foreign forces without permission, and the Government cannot even think about being able to justify this internally. Already there is wide-spread anti-American feeling inside Pakistan. It would seem that General Kiyani, the Pakistani Army is fully behind the push to make sure that American forces cannot come inside Pakistan. Of course, since he is perceived to be not favoring President Zardari, what better way to embarrass him than to create an incident when Zardari is visiting the US and will not be able to explain things.
What the Pakistani Government (including the Army Chief) may not have fully accounted for is the feelings that remain regarding September 11th. No US Government can afford to not be taking action when there are elements of terrorism at large and have been behind the past major attack. With the US being a country where a lot of the pressure happens through the media, there is an incredible amount of push towards making sure that Pakistan cleans up the terrorism in its backyard and gives up the policy of being state sponsors of terrorism. It has already been mentioned in the US campaign as well, and another such incident of firing could quickly escalate the political heat (currently the politicians are pre-occupied in scoring political points with respect to saving the economy). In addition, the Pakistani military gets a good source of funding from the US, and Congress is likely to put more pressure on linking that to showing a determination to get rid of terrorism.

The North Koreans must be the one set of negotiators who have caused the Bush Administration the maximum problems. When the Bush Administration came to power 8 long years ago, they heavily criticized the deal that the Clinton administration made with the North Koreans where the North Koreans agreed to cap their nuclear activities in exchange for more facilities and guarantees of energy. When the Bush Administration came to power, they announced that the world has changed, states that stand against the US will not be treated lightly, and they will be the one that bring the North Koreans to heel. And then 9/11 happened; the Bush administration got rid of the Afghan Taleban and Saddam Hussein in Iraq, but North Korea still remains as unpredictable as ever.
As per North Korea, the current situation has arisen because the previous agreement where North Korea will be taken off the list of nations that support terrorism has not been followed, and hence it is reverting back to having an ongoing nuclear program:

North Korea has made another move toward possibly restarting its suspended nuclear program, the U.N. nuclear agency reports. At the reclusive nation’s request, the International Atomic Energy Agency has removed surveillance equipment and seals from the Yongbyon nuclear facility, agency spokeswoman Melissa Fleming said. The move clears the way for North Korea to reintroduce nuclear material to the facility. The North has told the IAEA that it will do that in a week or so.
Last week, a South Korean news agency reported that North Korea was restoring a reactor at Yongbyon nuclear complex and no longer wanted to be removed from a U.S. list of countries that sponsor terrorism. But a senior U.S. diplomat has said the announcement could simply be a bargaining ploy in the long-running negotiations. The U.S. had seen no indications North Korea was actually rebuilding its reactor, the diplomat said. North Korea had agreed to disable the Yongbyon nuclear complex by October in exchange for a pledge from the U.S. to lift some sanctions and remove North Korea from a list of countries that sponsor terrorism.

When dealing with the North Koreans, it sometimes seems that the Bush Administration is all at sea. In the midst of the attempts by the Bush Administration (and the 6 nation effort) to try to cap the North Korean nuclear efforts, the North Koreans blew a hole into this effort and tested a nuclear bomb, becoming a declared nuclear bomb. One can only wonder what the North Koreans will do next, especially when it is not clear who the current leadership of North Korea actually is.

Ever since President Thabo Mbeki took over from the much more famous Nelson Mandela in 1999, he has always seemed firmly in command. He maintained a normal Government with no radical policies, unlike many of the other Governments nearby that had thrown off a colonial yoke (in the case of South Africa, it was the overthrowing of the apartheid regime). Even when he was bitterly criticized for his absolutely anti-science AIDS position and a few other policies that seemed a bit out of whack, he never seemed fallible. And yet, in a matter of a few months, he has fallen so hard that his career seems all over, destroyed from within the party. It was only last year that he lost the leadership of his party, losing the position to ANC President Jacob Zuma:

Eleven South African ministers have resigned as President Thabo Mbeki prepares to leave office, the government announced Tuesday. Mbeki’s successor — most likely African National Congress deputy president, Kgalema Motlanthe — will be sworn into office on Thursday. Three deputy ministers have also tendered their resignations, a government statement said.
Earlier this month, the ANC asked Mbeki to step down after a judge threw out the corruption, fraud and racketeering case against Zuma, calling it invalid and accusing Mbeki’s government of political interference in the case. Critics of Mbeki alleged he pushed for the corruption charges against Zuma. The case against Zuma — who replaced Mbeki as ANC president last year — was thrown out in September 2006, but the National Prosecuting Authority recharged him.

However, inspite of all the polite words, the parting has been bitter. The ANC, the party to which President Mbeki belonged to, itself asked him to step down; in effect accusing him of pushing the case (and influencing) against the ANC President Zuma. The only consolation for President Mbeki is that his supporters are with him, and are resigning.

It has been decades now that Wall Street has been run by big investment banks. The exact names may keep changing as some of the smaller firms became bigger, and some of the bigger firms fall (and of course, names keep on changing with mergers and acquisitions), but the basic structure of large investment firms that handled investments for individual depositors as well as large institutions (as distinct from banks who depend on deposits for their cheap source of capital) has more or remained constant for so long that most people do not know of any other mechanism on Wall Street. And then suddenly, in the space of an year, Poof!, it all disappears. It started late last year when reports started coming in of problems in the category of non-collateral high-risk loans known as sub-prime. And these loans were in turn converted by financial magic into a range of investment instruments (explaining at more this level of detail will make this a highly technical discussion !) that were traded by a variety of financial institutions including banks and investment firms. When these sub-prime loans started collapsing, the sheer extent of these loans the subsequent losses caused huge losses for those holding these instruments.
Once people sensed that these investment firms were in danger, further credit to them was slow in coming, people started withdrawing their investments, and then the credit rating agencies started declaring them as various shades of high-risk, junk status. Once this happened, for all practical purposes, these institutions were finished, with the actual spiral of destruction collapsing very fast. And, now with the Administration and Federal Bank of the USA very worried, they have taken steps to prevent some of the more huge ones:

Federal regulators converted Wall Street’s remaining stand-alone investment banks - Goldman Sachs and Morgan Stanley - into bank holding companies Sunday night. The move allows Goldman and Morgan to scoop up retail banks and to streamline their borrowing from the Federal Reserve. But it also puts Goldman and Morgan under the Fed’s supervision, increasing the agency’s regulatory oversight and possibly forcing them to raise additional capital. As banks, Morgan and Goldman will be forced to take less risk, which will mean fewer profits.
And it brings to a close the era of the Wall Street investment bank, a storied institution that traded stocks and bonds, advised mergers and showered lavish bonuses on its executives. In the past eight days, the federal government announced a $700 billion plan to rescue the financial sector by buying up troubled mortgage assets and an $85 billion emergency loan to insurance titan American International Group. Also, Lehman filed for bankruptcy and Bank of America took over Merrill Lynch.

So, even though both these huge huge firms were not in immediate financial danger, they were sensing that they were in grave danger of running afoul of sentiment. In a scenario where investment banks were automatically assumed to be in danger, neither of these firms would have wanted to be the next company picked up for speculation; once in the target of negative public sentiment, even a profitable investment bank could quickly reach the edge of collapse.
This action goes against the normal distance that the US Government would like to maintain from the private market, but politicians of all shades have realized the extreme danger to the economy, and are willing to run with this. Making these investment firms as companies that will act like normal banks will give far more stability.

Islamabad is the capital city of Pakistan, and the home to its political leaders and a military garrison as well. One would expect that the city has many layers of security, especially since there is an open conflict between the Pakistani Government (under incredible pressure by the US Government), and the Pakistan Taleban and Al-Qaeda (both of whom oppose the policies of the Pakistani Government). There have been attacks in Islamabad (and other Pakistani cities) before, but the latest truck bombing of the Marriott takes the situation to a new level. The very scale of the attack, which has almost destroyed the hotel and led to a huge number of casualties shows an escalation of the attack on the Pakistani state from the terrorists within. The Marriott is very close to the Parliament building, and in an ironic note, the Pakistani President had just given a speech in which he had promised to combat terrorism. The Marriott is also a symbol, being a favorite gathering point for foreigners and for the elite within Pakistan; and has been attacked before (the last time a security guard died when the suicide bomber he managed to prevent from entering blew himself up):

Officials said they were worried the building, which burned through night after after the blast ruptured a gas pipeline, would collapse. A security official said many people leapt to their deaths from upper floors. The bombing came shortly after new President Asif Ali Zardari, who faces a desperate struggle against Al-Qaeda and Taliban militants, delivered his inaugural address to parliament only a few hundred metres away.
The attack appeared to be timed to cause the maximum number of casualties, coming as the hotel was thronged with families holding their evening meal to break the daily Ramadan fast. Eyewitness Mohammad Jamil said the truck exploded just outside the heavily-secured hotel’s gates. He said the force of the blast sent the truck flying into the air, and knocked him over onto the street.

This attack, in a zone that is supposed to be security intense, was all the more shocking for the sheer scale and enormity of the damage (the bomb blew a crater 40 feet deep in front of the hotel, and caused a fire inside the hotel). It is also an intelligence failure of the highest order, given that the Government had no warning that such an attack was imminent, and will also lead to speculation about the involvement of the intelligence agencies in such an attack. Further, there were some US intelligence agents visiting Islamabad at around the same time, and there is speculation that the attack could have been aimed at these visitors as well.
Pakistan is confronted with grave choices - It has to decide whether it wants to cave into these terrorists or to prevent the country from slipping into their hands. It has tried to make peace with them, but that does not work since the Pakistani Taleban believe that they are in the right and their ideology and practices have to prevail. It also makes the rest of the world suspicious about whether Pakistan really wants to fight these terrorists or not.