Private equity firms have been squirming in the limelight. Paying less tax than your cleaning lady when you take home millions was never a strategy for scoring opprobrium from the great unwashed. Bad press was ever a problem.
Private equiteers indeed need better PR. But they have had a few trumps to play. For a start, there's a decent case to be made for the economic gains private equity firms make: they are drivers of corporate efficiency. They often invest for the long term. And rarely, are they the asset-stripping vultures Britain's union leaders would have them to be.
But hedge funds...
According to an article in the Guardian, Hedge funds deserve far more scorn than private equiteers. The top 25 hedge fund managers, as Alpha magazine points out, took home an average of $570 million dollars last year. Ergo, implies Julia Finch, they are the real bad guys.
Stopping short of a Marxian critique of capitalism itself, I'm pretty sure the Guardian are wrong on this one. Hedgies may well earn the real mega bucks, but the reason why private equity chiefs are deserving of more scorn (if any) is the fact that private equity has a far more direct impact upon employment and the welfare of a great many workers (one in five in the UK).
Private equity firms have (admittedly rarely) destroyed pension funds and aggressively cut jobs - and for those reasons they bare scrutiny. But the only identifiable crime of the hedge fund manager seems to be that they earn lots. Finch makes no effort to deploy a more sophisticated argument -- as she may well have done -- about the threat unregulated and maverick fund managers play to financial stability. Instead it just boils down to bashing the rich.
Tuesday, June 26, 2007
Passing through the eye of a needle
Tuesday, June 12, 2007
Infamy, infamy, they've all got it in for me!
"I've made this speech after much hesitation. I know it will be rubbished in certain quarters," he told the crowd.
And so it has been. Quite why Blair chose to target the Indy, why he singled out the lobby press and why he lambasted an "impact agenda" is beyond me. Firstly, there are surely more deserving targets. He gives merely a nod to his own administration's impact on political reporting. The courting of the Murdoch press recieves no attention, nor his fawning over the tabloids in the early years of power. The handling of the David Kelly affair and the shameful bullying of the BBC is likewise, a galling elision.Secondly, has not is always been so? "News is rarely news unless it generates heat as much as or more than light" is no more true of the media in Blair's Britain than it has been of Fleet street for the past century. And this year alone what of the light shed by the Sunday Times and cash for honours? Or the Guardian and BAE bribary? Light and heat go hand in hard, Mr. Blair, and you should certainly be feeling hot under the collar.
"Right sermon, wrong preacher," editorialized the Guardian. They're right. A lot of what Blair said bares careful scrutiny.
"A problem is 'a crisis'. A setback is a policy 'in tatters'. A criticism, 'a savage attack'," said Blair. Today, read about the UN's damning verdict, or bonds soaring and plunging or MP's scorching private equiteers.
Sometimes the words are proportionate, other times not. Political journalism suffers for its art in this respect. It's tricky to convey the impact of what's being said, off the record, on the QT and very hush-hush when you've got a ten minute slot to fill. Nick Robinson's news on the BBC is ten minutes of his well-informed opinion; not ten minutes of hard news. Of course, Nick Robinson often hits the mark, but Blair does nonetheless have a point in identifying a shift in political coverage. What Nick Robinsons says is the news. The medium has become the message.
It's a shame that the media's reaction to Blair's comments hasnt been as carefully couched as his speech was.
"This speech is not a complaint. It is an argument," said Blair.
Simon Kellner hasnt been so prudent. Instead, he has used the front page of the Independent to respond to Blair's remarks. Kellner seems completely oblivious to the fact that his actions are the clearest valedation yet that the Independent is "avowedly a viewspaper." His broadside is territorial, narrow and hot-blooded. "we feel our readers today want more: a diverse range of commentary, colourful debate, provocative front pages and, yes, the views behind the news." Well quelle horreur, Mr. Kellner, that's exactly what Mr. Blair said.
This blog is, of course, just as guilty of being a part of the creeping commentariat. But it is worrying that a national newspaper should feel that it knows what opinion's it's readers "want to hear" - even more so for the eponymous Independent.
Blair, for all his mendacity, got one thing right. "The way that people get their news may be changing; but the thirst for the news being real news is not." Read More......
Wednesday, June 06, 2007
What the Gord giveth...
...The Gord taketh away. Brown's announced he intends to close the 10% tax loophole for private equity firms.
We've got the brains, we've got the brawn
"Good reporters," once said Lord Beaverbrook, "can make the announcement 'Lord Jones is dead' and make it interesting to people who never knew Lord Jones was alive."
The same it seems, is true of private equity funds, which have sprung into the public imagination as the very model of all that is wrong with the money-grabbing, credit-toting, bonus-bagging financial world. We're living in unusual times, and there's indeed a whiff of that heady recklessness that characterised the loadsa dosh generation of the 80s. With brains, brawn and money, private equity pulls no punches.
You might guess that politicians --tout le monde -- are edging closer to heavier regulation. Heiligendamm has private equiteers and hedge funds on the agenda, Merkel and Sarkozy have both called for regulation through the EU, and even Ben Bernanke is "concerned". But actually, I think most of the fears over private equity - and most of the hype - is not being driven by uneducated and inexperienced politicians.
Most candidates for the Labour party's deputy leadership had pretty nuanced views on the subject in yesterday's Evening Standard. All made it plain the industry was a leading light in the UK financial community, and was an invaluable part of the economy. Jon Cruddas - vilified by some as a radical left winger - made his support for the industry known. None of the politicians wanted to scare Privateers away. What they wanted was a more equitable tax system that reflected economic reality. Most of the City is with them on this. Even private equiteers themselves know it. The Wall Street Journal too.
In fact, it was only professional patsy and ueber Blairite Hazel Blears, who thought the current tax regime was fair for Private Equity firms.
If politicians arent guilty of imbalance, the media almost certainly has been. Alluding to the dotcom bubble and the 1980's makes good copy. It plays on a whole host of perceptions about billionaire bankers with ridiculous bonuses. The predatory private equity firm -- secretive, mysterious, capable of taking over anyone it sets its sights upon -- is a pacy hook not lost on editors.
The debate needs to be more balanced. Private equity firms do need to be looked at again by lawmakers. Tax loopholes should be closed. And it is indeed obscene that the doyens of private equity pay less tax than their cleaning ladys. However, private equity firms also do a lot of good for the economy. They are a sign of an efficient and mature market. They are not merely the 'predators' the press paints them out to be.
It's poor journalism for the media to jump on the bandwagon and beat their drum as loud as they can.
The biggest funds? Banks.
I've only just had a chance to have a read through Friday's Economist. Buttonwood reckons investors in private equity firms and hedgefunds are being strung along. Point in case: pension funds, who on the one hand are suffering in aggressive private equity buyouts and on the other, are paying high premiums to invest in the very private equity industry which so damages them.
Pension funds are suffering. Though not, I suspect, as much as others may do in the future. The real patsies in this game of liar's poker, are going to be the banks. At the moment banks are sitting comfortably - even though they have lost out in the primary loan market, the fees which come from dealing with hedge funds are very lucrative.
But banks are losing touch...
The division between banks and hedge funds is becoming artificial. Look at Alpha magazine's list of the top six funds. As the NYT Dealbook points out, the biggest are banks. Traditionally, of course, it's the hedge funds that provide so much liquidity in the market. They're risk takers: creative, flexible and willing to swallow the market's more toxic products to spin a quick buck. Should banks be doing the same?
For are start, the banks are not as good at it as the funds are.
But more worrying still, the banks are the ones loosening covenants and introducing more risk into the market, convincing themselves that they wont be holding any of it anyway. And yet their involvement in secondary markets is huge, try as they do to ape the funds. Imitation may well be the sincerest form of flattery, but the banks seem blind to what they're exposing themselves to. That, or they just don't care.
Banks have survived financial crises in the past for one good reason: their market positions were small enough to be quickly liquidated when trouble hit one of the big funds. They could get out, while the funds were trapped by their own huge bets. That obviously wouldnt be the case anymore...
Monday, June 04, 2007
Hilary's dilemma
Below, an extract from the opening paras of a leading story on GuardianUnlimited, by David Hencke - Westminster correspondent.
"...Hilary Benn, the international development secretary, promised to scrap trade union red tape through new laws. She also promised a regular dialogue to replace the current one-off Warwick agreement on change..."
A subbing error? Not good for Hilary or the Grauniad to think Benn's a gurlie. I wonder how often this happens to Mr. Benn?
Actually, I just wanted an excuse to post this picture...
Thursday, May 31, 2007
Resilient fragility
ICMA conference Berlin
I'm at the ICMA annual conference today and tomorrow in Berlin, so expect some really exciting posts. The scheduled talks for these things rarely throw up anything controversial, but often there's a fair bit of gossip to be had from delegates.
The programme this year seems to be very regulation heavy - not suprising given the noises coming from some EU governments recently. It's also worth noting that just after the weekend G8 leaders are going to be meeting down the road in Heiligendamm, where --alongside climate change, the African AIDS crisis and peace in the Middle East-- the assembled ministers will be tackling hedge funds and systemic risk. Woop!
Tuesday, May 29, 2007
Snap! Cov-lites and subprime mortgages
The FT's special report on derivatives yesterday (in FTfm) had some interesting points to make. Paul J Davies's article about CDOs in particular:
In the last quarter, demand for sub-investment grade loans has soared in the secondary market. It's all because spreads are getting tighter and tighter. With demand this high, there is a sense the market could diversify further. There clearly is a demand for more risk which isn't yet being met, and certainly isnt being reflected in spreads. I guess two things could happen. Firstly, the market could suffer a correction, in which case, liquidity will dry up and spreads on risky loans will widen. Secondly, if the bull run continues, I wouldnt be suprised to see new, higher risk loan products syndicated by banks. Cov-lites already carry slightly higher yields, and with CDOs diversifying and spreading risk so much, I think the loan market has a way to go before it finds it subprime mortgage equivalent.
Read More......Not waving, but drowning
An interesting article by Hamish McRae in the Sindy suggests that national banks will need to face up to the new problem of globalised inflation.
Sound bitten
“When say I want ‘zero tolerance of disruptive pupils’, it is not some sound-bite – it is a call to action backed by specific measures,” says Cameron in the Mail on Sunday. But what is a good sound-bite other than a glib “call to action” backed by measures, specific only in their specificity? Cameron promises to “shake up the system” and establish “motors of aspiration for the brightest kids from the poorest homes.” Apparently, the devil is in the detail.
Those things Cameron does elaborate on are classic Tory policies. The grammar school furore is not a divorce from traditional Conservative policies at all. If anything, it’s spinning them afresh.
Cameron advocates zero-tolerance for disruptive pupils. He plans to “shake-up” and “turn around” the failing system that deals with them. By getting rid of it. In its place, “social enterprises” such as the Amelia Farm Trust in Wales or the Lighthouse Group in Bradford will be able to “do the job properly” with state funding. This is all penned straight from a very familiar Conservative song sheet.
What makes Cameron different is that rather than define his conservative principles in the cast-iron terms that Thatcher did, he is defining them by what they’re not and by the society he wants to exist around them. He’s painting a picture of the mould rather than the statue, and so far it seems to work. Rather than shout about what the state can’t do, Cameron’s shouting about what others can.
Killing off the safety-net of the state and fostering a creative “social enterprise” are, for Cameron, two sides of the same Tory coin. In place of the state, not Thatcher’s anti-society of families and individuals alone, but a flourishing polity of “voluntary organisations led by parents, charities, social enterprises, churches and private schools.”
This philanthropic Thatcherism is a clever ruse: It’s a deft parry against the tarnish of the ‘nasty party’ and recasts the agenda not as budget-cutting and safety-net slashing, but as civic pride and charitable enterprise. And it cuts to the core of New Labour’s failure as a target-setting behemoth.
The problem, of course, is that philanthropic Thatcherism is hardly the business of government. It’s stargazy madness to suggest that social enterprise and charity will flourish to replace the state. Taking away welfare safety nets is classic Thatcherism. It’s pure artifice and spin to suggest otherwise.
Who will regulate these outreach projects? Who will ensure parity of care from area to area? How could you possibly ensure fairness? These are questions which neither the electorate nor Cameron want or need to answer. For now, the sound-bites sound good, and until the Tory’s win power, there won’t be any need to test their substance.
Sunday, May 27, 2007
Barking mad
Yesterday the BNP delivered some flowers to Margaret Hodge.
A fitting thank you, perhaps, since as cllr. Barnbrook (BNP) says, Hodge's comments in the Observer last week were "an absolute gift for us".
It has been an absolute PR coup for the far-right nationalists, the video above testament to this. Hodge overstepped the mark and the fact that she continues to defend her poor judgement is risable. I don't think she's been racist - as some of her colleagues in the party are insinuating - but she is pandering to racists.
Friday, May 25, 2007
Banking on uncertainty
It doesn't really surprise me that banks are using credit derivatives as speculative levers to ratchet up their profits - as reported by the FT. It's something the industry has been doing since the market took off in the 1970s - from the liar's poker of the Solomon bond desks through to the calculated hubris of LTCM (and their starry-eyed bankers) in the 1990s.
Trading for CDS contracts has indeed been bullish, and I suspect it will only get more so with the launch of the LCDX - an index of loan credit default swaps - this week. The launch of the Index has been on the cards for some time - details were fleshed out at the LSTA conference in London mid March. It all points to even higher-liquidity levels in the secondary market.
However, the banks' growing participation in the CDS market could have more to do with the syndication process than it does with speculation. 92% of all European CDOs (the main buyers of syndicated debt) use synthetic structures - whereby the banks use CDS to transfer the risks but not the actual paper to the CDO portfolios. Thus as the syndicated market grows, so too does demand for CDS contracts.
I suspect most of the speculation being done by the banks is in arbitraging between inefficient prices in all these new instruments.
Merton - for all his skillful evasion about LTCM in the recent FT interview - was right when he said: "Derivatives are like anti-lock brake systems in a way - there is no question that they can make things safer, but only if people choose to use them that way. Often they don't - they might choose, for example, to drive faster in worse weather. Often we have chosen to use these tools not to decrease risks but to increase the benefits of taking the same risks."
The buck stops where?
Some of the hysteria around the current mergers boom is making headway in the national press. Since Anthony Bolton's speech a couple of weeks ago, there's suddenly been a lot of interest in covenant-lite loans.
But I think a lot of the coverage has done them a disservice. For a start, it won't be the banks that suffer if a default occurs, contrary to what the business pages are saying. Most covenant-lite loans are syndicated - sold on - by the banks in lucrative deals that allow for arbitrage. "We don’t hold onto any of ours. Of the deals done so far? 100%, they’re all syndicated,” I was told by the head of loan syndication at one of the big US banks.
The buyers of this loan debt aren't exactly unaware of the risks, however. They're hedge funds, CDOs, pensions funds and the like, who actively seek out risks to make money from the high-yields. As yield spreads go down, they're looking for new areas to invest in.
Covenant-lite loans are senior debt anyway, which means in relative terms they're less risky that a lot of the debt products out there that have been available for a long time. From senior debt you can expect an average 78% return of your investment in the event of a bankruptcy. If you'd invested in second-lien loans, bonds, mezzanine debt or equity, you could expect between 0-30%.
Sure covenant-lite loans are risky, but I don't think they're the "iconic catchphase for the peak, or near-peak, of an over-exuberant buy-out boom" the FT says they are.
The real problem with all of this, is that the banks' own desks are getting too involved in the secondary market themselves. Through their hedge-funds, they're making a lot of money, but they're also exposing themselves to the risks they're supposed to have diced up and safely resold on their syndication desks. It's all got the ring of systemic failure to it. Like the reinsurance crisis that brought down Lloyds, I wonder whether the banks are being a little too naive about the state of risk in the market at the moment. Someone has to be holding it.
Where'd all the risk go?
An article i wrote recently... quite generalistic, but it gives a good impression of the way debt markets seem to be behaving at the moment.
SAID Ralph Emerson, “in skating over thin ice our safety is in our speed.”
Global debt markets are indeed, skating at speed. M&A deals topped $3600 billion in volume last year, fuelling the debt free-for-all. The takeoff of complex credit derivative instruments over the past few years has created a staggering global market.
Buying into risky loans, repackaging them and farming out the risk in new and innovative asset classes has been the golden goose since the unnerving effects of the technology bubble in 2000.
Yet something is awry. Bankers talk as if the risk is all but gone, so hedged are their investments. Complexities, however, don’t help with clarity. With debt levels so high, a few lone voices have been cutting an angry and ever more voguish path in the US media. Financial Armageddon, they say, is just around the corner. The outlook from most mainstream analysts, however, is rosy.
The big question between both camps - the elephant in the room that few seem willing to acknowledge - is: where has all the risk gone?
Banking with Ben
Debt, of course, is not necessarily a bad thing and despite leveraged debt levels at the highest they’ve ever been, and rising, most bankers are confident that companies can support their loans.
The US Federal Reserve is confident too. Ben Bernanke once piqued critics when he said that a “helicopter drop of money” from the Fed would be enough to shrug off any sharp deflationary trend.
Helicopter Ben, as his detractors know him, has bigger fish to fry at the moment. Inflation continues to dog him. Debt and risk, for the time being, are thus not pressing issues.
Despite warnings to the worse, the subprime crisis has hardly triggered the broader debt-market panic some thought it would either. Instead, in its wake, institutional investors feel confirmed in their beliefs that the market has the power to weather such storms.
But all this overconfidence might not be such a good thing.
A fistful of dollars…
With all this in the air, doomsayers are quick to jump onto regulators warnings and cast a pall over the market.
Rating agencies predict defaults to rise and the IMF’s stability report points to “fragility” in the face of heavy debt. Leveraged finance is “approaching the limits of prudence” says the UK’s Financial Services Authority, with warnings of a “hard correction” in 2007.
But jeremiahs are indeed overplaying the danger the markets face. Risk has seemed to evaporate from most investors’ minds precisely because in most cases, it has been cut up and sold off so effectively, through complex derivative packages.
Nonetheless, it has not disappeared.
Credit derivatives are no silver bullet – and the doom crew are right in one respect: the market is certainly giddy with its own success.
The market, faced with problems, is not adjusting itself to suit them, but speeding up to outpace them.
According to the FSA, “effective defaults where companies are starting to have difficulty meeting their commitments are being masked by ‘involuntary refinancings’ which are being undertaken when a default is imminent.”
In other words, the rules are being bent to stay ahead of the risk. The IMF’s latest financial stability report also points to a worrying “weakening of loan covenants and credit discipline.” Due diligence is becoming less of an issue too, the fund warns.
Companies are farming out their risk, and their responsibility to boot.
So where has the risk gone? Nowhere, it seems to just be lagging behind. As long as the market stays one step ahead; ever more innovative and ever wilier; the threat of correction is staved off. In the meantime, a lot of money is made.
The cost is that, like the skater on thin ice, there is no option but to go ever faster. An external event; a China market crash, for example, would bring things sharply to a halt. What then?
Through a glass, darkly
What has happened overnight? The government seems to have decided that the citizens of Great Britain should wake up on this sunny May morning to a smeary cavalcade of shit. John Reid, now with added inhumanity, is too idiotic to be true. Derogate from the ECHR? I don't think even the Daily Mail has ever gone that far. (Well ok, maybe they have) Add to this the fact that Goldsmith is considering ditching contempt laws and it's all a bit grim.
How could any government possibly be proud of all this rubbish? They really do seem to be just chasing the headlines. They make a huge mess of control orders, three people run off, and the response is to declare a national state of emergency and suspend the peoples' right to liberty. It does seem just a little bit disproportionate.
Friday, March 02, 2007
Conservapedia
Conservapedia grabbed my attention after it was given some coverage online in GuardianUnlimited.
In general, it’s a pretty muddle-headed idea.
‘Conservapedia’ scores a pretty spectacular own goal in the justification for its existence, namely that Wikipedia is run by a censorious cabal of loony liberalistas and thus a new direction is needed… enter Conservapedia. Unfortunately, by wielding a pretty hefty black marker themselves, actively proclaiming a political bias in their very name and arguing, among other things, that dinosaurs are only 6,000 years old they make whatever good points they had pretty redundant.
Wikipedia is a great resource. Its whole premise is openness and democratic editing. If some disgruntled neocons were angry about wiki’s coverage then they should have edited it online – or tried to.
I’m willing to accept that wikipedia may have a built in ‘liberal bias’ – I do so because…
1. The idea of a democratically edited encyclopedia, open to interpretation by all is a pretty ‘liberal’ approach to information by definition.
2. Most of the wiki editors are clued up amateurs who spend a lot of time online – their demographic isn’t exactly republican/conservative.
No matter what your political perspective however, a ‘liberal’ approach to sharing and editing information is surely a good thing. By comparison, conservapedia is difficult to sign up to, restricted by rules prescribing ‘conservative’ content, and specifically tailored for a niche political in-group. It is not interested in debate, but spin. In short, conservapedia is Stalinist.
Apparently, wikipedia is also too ‘Anglophile’. Spelling is lambasted (Labour/Labor) as are ‘obscure’ english phenomena such as ‘first class degrees’ or ‘baronets’. The example chosen by the conservapedians is the wiki entry for Henry Liddell.
In summary, the article is bad because it contains English spellings, and obscure English monarchial titles and epithets, such as Lord or degree. Here, for conservapedians is a quick explainer:
1. Baronet and Lord are forms of peership. Holders of these titles sit in the House of Lords, the upper chamber of the UK’s Parliament. They are much like your senators, except that God chose their families many centuries ago to rule over us.
2. A degree is a qualification people get when they go to university. Clever Americans get them too. A double first degree is a first class degree – the best you can get.
3. A vice-chancellor of a university is the same as what you may know as the President of a university.
Now I have some complaints of my own. I have some concerns about the wiki entry for Edward Everett – a contemporary of Lidell’s as the President of Harvard University. Frankly his entry is waaaay to Americanophile and contains terms I couldn’t possibly understand like ‘United States Senate’ or ‘Congressman’. The article is full of American political jargon and obscure terms.
Basically, conservapedians are concerned with one thing, ensuring that content of online encyclopedia’s published in America’s name conforms with American nationalism; an American worldview both insular and historically grotesque.
Conservapedia would be a pretty damning indictment of the land of the free if I didnt remind myself that it was Americans that created wikipedia too.
Nil points to terrorvision
Israel's new 'song for europe' - 'Push the Button'
It's a little known fact that 'Push the Button' by the Sugababes was also inspired by terrorism. If you look at the lyrics you'll see it's actually a Koranic ode to Abu Qatada,
"If you're ready for me boy
You'd better push the button and let me know
Before I get the wrong idea and go
You're gonna miss the freak that I control
I'm busy showing him what he's been missing
I'm kind of showing off for his full attention
My sexy ass has got him in the new dimension
I'm ready to do something to relieve this mission"
I think the Express best summed my feelings up on tuesday, 'Why cant we kick out this evil man.' Although the Sun's 'Ta-ta Qatada' also tickled my fancy. Anyone who inspires lyrics for the Sugababes has no right to be in this country.
On a more serious note, what a crazy misjudgement on Israel's part. Eurovision is as apolitical as Black Forest Gateaux. At least to us Brits I suppose. Personally I'm eagerly awaiting a Wogan take on things.
Friday, January 19, 2007
Upcoming: Gambling
Dispatches and the Adam Smith Institute are both set to condemn the government's gambling plans this Monday. A leaked report from the ASI i've got hold of says the gambling commission 'isn't fit for purpose'. The right wing think tank's main criticism seems to be that the commission is spending too much, it's budget having soared from £3m to £15.4m pa. To be honest, I'm more interested in hearing what dispatches has to say - I remain pretty unconvinced by the government's case, even though I don't have any moral objection's to gambling myself (and to be honest, I think there are far worse social ills which need to be tackled). The ASI is pretty scathing of the gambling commission's power in dealing with online gaming outlets however, the majority of which will remain incorporated offshore and unregulated.
Read More......In it to Winner it
Michael Winner isn't going to die. In fact, he's not even going to lose his leg. Or at least that's what I've heard through people on the Sunday Times who spoke to his secretary a few minutes ago. Apparently it was an adverse reaction to anti-biotics he took while he was holidaying (or living?) in the Caribbean. He's even managed to submit his column for this week's ST. I don't think he's keen for people to know he's not that ill though. Calm down, dear, it’s only a commercial.
Read More......Forbidden Starbucks, Hidden Dragon
FAO: Xing Ba Ke, 1 Dragon Pavement, Hall of Supreme and Heavenly Harmony, Forbidden City, Middle Kingdom.
The Emperors of China - mediators between the Sky and Earth - were, for the most part, keen on inventions. Marco Polo's horological prowess gave him pretty good access to the son of Heaven. Clocks were cool. Had the emperor had access to a Starbuck's coffee frother, I think he might have been just as impressed. Too bad the inimitable Seattle baristas are a few centuries too late.
Rui Chenggang, the blogger behind Why Starbucks needs to get out of the Forbidden City has sparked off the controversy in China - and now more than half a million have signed his petitition. He makes a pretty good case for getting rid of Amex from China's cultural heritage too: "The introduction to every site says: 'Made possible by American Express.' It is as if the Mona Lisa had a label saying: 'Made possible by the People's Bank of China.'"
Admittedly, the Forbidden City - all 178 acres of it - hosting millions of Western visitors a year, could do with a Western coffee shop. Yet the problem, of course, in having a Starbucks in Beijing's Forbidden City goes way beyond the practical.
"But please don't interpret this as an act of nationalism," says Rui, "It is just about we Chinese people respecting ourselves. I actually like drinking Starbucks coffee. I am just against having one in the Forbidden City."
On the issue of Starbucks I think Rui has a point, but there is an emerging trend in China - a trend worryingly mirrored in countries such as Russia - namely, a growing and powerful sense of national infallibility. National belief.
While I was editor of the student paper at the LSE it was something I came across time and time again from Chinese students. In response to an article we printed exposing the Chinese government for threatening the school authorities (after a talk by two 'defectors' to the students' union) I recieved countless letters berating my shamelessness and slander against China - I was even labelled a racist for giving an 'anti-chinese' platform to these 'defectors', who, I was told, were no doubt funded by the Falun Gong. The same happened again this year after the paper published a comment article on Chinese human rights abuses.
Will Hutton's op-ed in the Guardian yesterday I think misses the mark. "The lesson Deng drew - that the party can remain in Leninist control of a market economy that needs no democratic institutions -was as wrong as Mao's." In fact, through fostering a powerful and spirited sense of nationalism, the communist party can and has retained easy control over peoples lives - even in a rapidly modernising market environment. Nationalism has proved a far more powerful solvent than freedom and you wont find liberty in a latte.
Vertrauen ist gut, Kontrolle ist besser
Brigitte Zypries, the German Minister of Justice announced plans to crimilise holocaust denial across Europe - a plan the Bundesrepublik hopes to fasttrack through during its sixth month EU presidency. I don't think the laws have much chance in being passed (the UK for one has indicated its reluctance)
Zypries is invoking quite a heady historicism to her plans- “This historical experience puts Germany under a permanent obligation to combat systematically every form of racism, anti-semitism and xenophobia. And we should not wait until it comes to deeds. We must act already against the intellectual pathbreakers of the crime."
For me, the interesting point is not so much the hype about whether this will pass into law, or even the pertinent debate over censorship/offence etc. The question is rather, over what comes first, the word or the deed? Banning words and symbols won't, I think, halt the rise of extremist movements - and it's a lesson which Zypries would do well to learn from the history of National Socialism. The Justice minister seems to belong to the school of thought that teaches German guilt through absolute complicity - the Daniel Goldhagen school of shoah atonement. I don't think the story is so simple. German's didn't exterminate the Jews because they were all vicious anti-semites (i choose this phrase carefully, clearly most card-carrying nazis were) - instead its a complex pattern of guilt, willed ignorance and utopian delusion.
The road to Auschwitz was not paved with anti-semitic hate - but all the more tragically, with the mundane and petty pieces of ordinary people's lives - people who looked away because everything was just swell for them. People who hated because it was easier too. The path to the holocaust was the path of least resistance.