Pessimism fulfilled

by | Nov 21, 2008 | Global system

We may well see another dramatic weekend as the banking meltdown continues. It’s just a week since I wondered whether Citigroup might be the next bank to fail. It’s share price (already shredded) has halved again since then. 

Now it seems on the verge of testing the nostrum that it’s ‘too big to rescue’. Felix Salmon wonders about a Goldman-Citi hookup, but thinks that nationalisation is the more likely option:

A Citi-Goldman merger would give Citigroup much more credible management, assuming that the Goldman guys took over most of the top jobs, and would give Goldman a much-needed deposit base, not to mention huge distribution capacity through Smith Barney. An enormous number of Citigroup investment bankers would surely lose their jobs, but that is probably going to happen anyway. Meanwhile, Goldman’s investment bankers would suddenly see their deal pipeline fill up with the job of selling off all the bits of Citi they had no interest in keeping.

Possibly more likely is the idea that Citigroup will be nationalized this weekend, with shareholders being wiped out. John Hempton today sketches out what might happen if bondholders got wiped out at the same time; I’m reasonably confident that in the wake of the Lehman debacle there’s no way that Hank Paulson would let that happen.

In any case, with Citi shares trading at less than $4 apiece, somethingneeds to be done. That’s one of the problems with having a public listing: everybody can see when you’re in distress, even if you stop displaying the stock price on the screens in your offices. The market is essentiallly forcing the board’s hand here — not to mention that of policymakers. Citi’s managed to muddle through this week. But my guess is that there will be some kind of major announcement over the weekend.

Update: Somali pirates in discussions to acquire Citigroup…

Update II: Cue inspirational music: “Ambitions never sleep. Aspirations never sleep. Goals never sleep. Hopes never sleep. Opportunities never sleep. The world never sleeps. That’s why we work around the world. That’s why we work around the clock. To turn dreams in realities. That’s why Citi never sleeps.” Insert your own snark here.

New National Intelligence Council report on global trends to 2025

by | Nov 21, 2008 | Climate and resource scarcity, Cooperation and coherence

The US National Intelligence Council – which supports the Director of National Intelligence and is the centre for long-range analysis in the US intelligence community – has just published a major report on global trends to 2025 (pdf). 

The timing’s no accident: the report was deliberately scheduled to emerge after the election but before the inauguration, in order to set out a bipartisan, big picture view of the global context for the incoming President, and to be at the top of the in-tray of his National Security Advisor. In keeping with the increasingly open stance of the Office of the DNI (see David’s post on the DNI Open Source Conference, which he attended in DC earlier this year), the NIC report has been based on intensive engagement with external stakeholders around the world, including two Chatham House seminars.

Although most UK coverage focuses on the report’s key message of the ‘sun setting on US power’ (almost identical headlines in the Guardian and the Times), the other standout story here is the prominence given to scarcity issues. Energy, food and water constraints, together with climate change, are all mentioned in the very first paragraph of the report’s executive summary; by contrast, you need to search through the next four pages of the report before you’ll find any mention of the word ‘terrorism’. 

It’s a sobering analysis – and one that poses the question of whether US and international policymaking systems are up to the job.  David and I have an analysis piece in the Guardian this morning arguing that the answer to that is a resounding No.