Saudis crackdown on adorned abayas

FT:

Saudi Arabia’s religious police have ordered shopkeepers in downtown Riyadh to get rid of all adorned abayas, the black robes worn by women in the kingdom, as shopping picks up ahead of the Eid religious holidays next week.

Salesmen in Al-Maagaliah market, just across the block from the headquarters of the religious police, or mutawa’a, this week were turning away frustrated shoppers who wanted abayas with a hint of colour or decoration, telling them that shopowners could face fines or prison.

In recent years, the signature flowing robe that covers Saudi women from head to toe started to show some form with trimmed sleeves, beads or colour, a sign of relaxation of the strict social norms in the conservative kingdom.
...
“They [the mutawa’a] want women to be faceless, nameless and shrouded in blackness,’’ said Samar Falan, a women’s rights activist and writer based in the city of Jeddah.
...
“They should focus on fighting vices, not women,’’ says Buthaina Nassr, another activist. “I do not understand why they force us to wear black in such a hot country while men can wear white.”

Here's an earlier post of mine on trends in abaya fashion.

Here's one of many blogs devoted to the abaya. Lots of pics.

Funny business in oil prices?

Econbrowser takes a look at the movement in oil prices on Monday of this week.

America out of gas

Some parts, that is. A lesson in how to do a good job of shooting yourself in the foot. That link was written September 22; the problem persists:

ASHEVILLE, N.C. (AP) — A gas shortage that's frustrating drivers in the Southeast has prompted a community college in North Carolina to cancel classes for the rest of the week.

Officials say an increasing number of the 25,000 commuter students at several campuses of Asheville-Buncombe Technical Community College aren't showing up.

A spokeswoman for the college in western North Carolina says even professors are calling to say they're stuck at home.

Drivers throughout much of the Southeast have been scrambling to find gas since Hurricane Ike shut down or reduced work at more than a dozen refineries on the Texas Gulf Coast. Some stations don't have gas to sell, while others report long lines.

Oh, my, the shortage is leading to fist fights, and could result in the cancellation of major college football games.

There's a solution: raise the price, but that's illegal due to state price gouging laws. It's amazing how journalists can't connect price controls as the cause of the shortages.

Are U.S. House Republicans just clueless?

Menzie Chinn wonders.

Greenspan calls Paulson plan the traditional approach

From a letter today signed by Greenspan, George Shultz and Robert Hall:

As a practical matter, at the current stage of the crisis, the only way that financial institutions can continue to function is for the government to provide financial support. The traditional form of that support calls for the government to buy assets from the institutions, swapping questionable assets for obligations of the government that are universally regarded as sound.
...
We are deeply concerned about instituting reforms for the longer run that will prevent similar crises in the future. .... But we do not believe that action to deal with the immediate crisis can wait until a comprehensive program for financial stability in the long run is developed and put in place.

How did the crisis come about?: This about sums it up

Although, it's only productive to note that some of McCain's advisers have been a bit too tight some of the evil doers as well.

Mankiw comes out in support of plan; some other economists remain skeptical

Others, as quoted by Bloomberg:

``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the [open]letter [to Congress]. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''
...
The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.
...
David I. Levine, a professor of economics at University of California-Berkeley, says the current plan being discussed has the wrong structure.

``The structure is designed for the Treasury to be the first line of defense,'' said Levine, who studies organizations and incentives. ``A whole lot of people made money supposedly by putting their capital at risk, and those are supposed to be the first line of defense, that's how capitalism works.''
...
``I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

Mankiw:

On the one hand, I share many of the concerns of the letter signers and other critics of the Treasury plan.

On the other hand, I know Ben Bernanke well. Ben is at least as smart as any of the economists who signed that letter or are complaining on their blogs or editorial pages about the proposed policy. Moreover, Ben is far better informed than the critics. The Fed staff includes some of the best policy economists around. In his capacity as Fed chair, Ben understands the situation, as well as the pros, cons, and feasibility of the alternative policy options, better than any professor sitting alone in his office possibly could.

If I were a member of Congress, I would sit down with Ben, privately, to get his candid view. If he thinks this is the right thing to do, I would put my qualms aside and follow his advice.

Remittances: down 15% per worker but up 15% in total

Emirates 24|7 quoting Jean Claude Farah, Regional Vice-President for the Middle East, Pakistan and Afghanistan at Western Union:

According to our assessment, expatriates in the GCC region were able to cover their living costs using only 20 per cent of their salaries and they could keep 80 per cent of it free for remittances to their families or for their savings and investments. Following the inflationary wave in the region, the cost of living surged sharply to about 45 per cent of the expatriates' income. This had a significant impact on remittances. The value of each remittance declined.

The other change in the industry was the increasing number of remittances from the region due to the enormous economic development, which attracted a large number of expatriate workers in different development projects in the GCC countries. The overall value of remittances from the Gulf increased with more people remitting money home thus increasing the number of transactions, but the monetary value of each remittance declined.

The UAE remittance market is estimated at $6.5 billion [Dh23.87bn] in 2008, while remittances ranged between $4.5bn and $5bn during the previous two years.

Brad DeLong has a change of heart

DeLong:

The Greenspanist retort to the Mussaites--a retort I would have said I believed 100% a year and a half ago, 90% a year ago, and 60% last March--is that creating unemployment and idle factories because you are scared of what might happen when irrational exuberance dies away and asset prices collapse is a crime; that modern central banks are powerful; that they can successfully manage whatever crisis is provoked when it happens; and that it is easier to sweep after the elephants have gone through than to try to stop them--especially when stopping them requires the destruction of millions of jobs.

I don't see how I can maintain my belief in Greenspanism today.

Words and images

Barack Obama says things will be different when he's president. He'll show respect to foreign nations. So why does his latest campaign ad start with the image of an Arab man in Saudi dress? It's an image he knows will trigger a response in those Americans who are have negative perceptions of Arabs. He's saying with a picture something he would call anyone on if they said it with words. Click to see what I mean.



Does McCain demonize Arabs? Maybe so; I don't know. But Obama is playing the Arab race card while claiming that he's the only one who doesn't.

Guess again: whose greed is to blame?

Lax mortgage standards. Where did they come from?

"Home mortgages have been a political piñata for many decades," writes Stan J. Liebowitz, economics professor at the University of Texas at Dallas, in a chapter of his forthcoming book, Housing America: Building out of a Crisis.

Liebowitz puts forward an explanation that he admits is "not consistent with the nasty-subprime-lender hypothesis currently considered to be the cause of the mortgage meltdown."

In a nutshell, Liebowitz contends that the federal government over the last 20 years pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal.

"In an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s," Liebowitz writes. "The decline in mortgage underwriting standards was universally praised as 'innovation' in mortgage lending by regulators, academic specialists, (government-sponsored enterprises) and housing activists."

He continues, "Although a seemingly noble goal, the tool chosen to achieve this goal was one that endangered the entire mortgage enterprise."
...
The Wall Street Journal quoted Congressman Barney Frank, D-Mass., in 2003 as criticizing Greg Mankiw "because he is worried about the tiny little matter of safety and soundness rather than 'concern about housing.'"

Frank, chairman of the House Financial Services Committee, rejected a Bush administration and Congressional Republican plan for regulating the mortgage industry in 2003, saying, "These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis." According to a New York Times article, Frank added, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

For the pointer thanks goes to Carpe Diem, always worth a daily visit and today is no exception -- go and scroll.

Addendum. Villainous Company has much more, including Senator Schumer's complicity and this nugget: "consider that the Bush administration called for reform of GSEs [Fannie and Freddie]no fewer than 17 times in 2008 alone." Thanks to John Palmer for the pointer.

Addendum 2. If you find video more convincing than words on a page check this out.

Addendum 3. In this vein, Greg Mankiw points out that the seeds of the mess cannot merely be laid at the feet of an "economic philosophy that deregulation is always bad" (quoting Obama). But there's also this statement by the SEC Chairman Christopher Cox from late Friday:

The last six months have made it abundantly clear that voluntary regulation does not work. When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns.

Because of the lack of explicit statutory authority for the Commission to require these investment bank holding companies to report their capital, maintain liquidity, or submit to leverage requirements, the Commission in 2004 created a voluntary program, the Consolidated Supervised Entities program, in an effort to fill this regulatory gap.

As I have reported to the Congress multiple times in recent months, the CSE program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate of the CSE program, and weakened its effectiveness.

Some say, though, the Cox was a strong proponent of voluntary supervision before he was an opponent.

Speaking of supervision, where were the private rating agencies?

``I view the ratings agencies as one of the key culprits,'' says Joseph Stiglitz, 65, the Nobel laureate economist at Columbia University in New York. ``They were the party that performed that alchemy that converted the securities from F- rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.''

Addendum 4. More reports on this angle from June and February.

Do we know too much? Or not enough?

I was musing last night about whether Bernanke and Paulson weren't caught off gaurd -- as so many of us assume -- but, due to improvements in information systems, are able to know things much more quickly than was true in the past. During earlier pre-recessionary periods were their predecessors even in a position to determine that a massive remedy might help avoid the costly calamity of a recession? After all, what they are arguing is that they've identified a tradeoff: spend $700,000,000,000 (much of which might be recovered) in exchange for lowering the chance of a recession.

This morning I was scanning my usual repast from my favorite blogs and was pointed to the new economics blog at the New York Times, Economix. (Thanks, Tyler Cowen.)

Scrolling the posts I found this post: Too Little Information, Then Too Much

[The NBER] has just put out a new paper called “The Panic of 2007,” by Gary B. Gorton of Yale, that tries to explain how we ended up in this financial mess. His basic theory: the mortgage-related securities that began to go bad last year were too complex, and shrouded, for many investors to understand; but the explosion of available information about Wall Street — like new indexes tracking the securities — allowed investors to learn very quickly that something was going wrong. That’s the recipe for a panic.

It's not what I was musing about, but it's related.

While we're on the subject of Bernanke and Paulson, I wanted to balance off some of my recent posts pointing to skepticism amongst economists about the $700 billion plan with some support for it here and here.

Sovereign wealth funds and the current financial environment

An article worth checking out at Gulf News. The chart ranking the largest funds is worth a look.

Economists write open letter of protest to US Congress

A great many noted economists have signed on to a letter urging Congress not to be rushed to a hasty decision about the current financial situation: "For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."

Addendum: Allan Meltzer says give them loans, don't buy their bad debt.

And if they're going to do something, then what they ought to do is make loans, which the financial institutions have to repay with interest. And if you think -- that's an idea which the Chileans have used in a bigger crisis than this for them in 1982, and it worked for them.

People paid back the loans. They weren't allowed to pay dividends until they repaid the loans. They weren't allowed to take bonuses until they repaid the loans. I think that's the way -- if we're going to do this, then that's the way we should do it.

Thanks to Greg Mankiw who used the same quote.

Addendum 2: Arnold Kling reaches for the plunger.

The heavy use of the plumbing metaphor almost makes one picture Paulson with his pants riding down a couple inches, leaning over a financial toilet bowl. It is clogged with unwanted securities backed by mortgages, supposedly because the sellers cannot find any buyers.

However, the market could be clogged because the prospects for a bailout are destroying the motivation to sell mortgage securities. If you sell this week and take a big loss, you will look pretty stupid if there is a bailout next week where comparable securities fetch much higher prices.

It could be that a Congressional rejection of the bailout proposal, rather than clogging the markets, will unclog them.
...
Ben Bernanke and Henry Paulson are asking Congress for a $700 billion stake to enter this business at a time of unprecedented difficulty in predicting home prices. If they were taking their plan to a venture capital firm to seek funding, they would be laughed out of the office. Their proposal is sketchy, with no financial projections included. Their qualifications for running the business are unimpressive-neither Bernanke nor Paulson has a background in mortgage default modeling. The business is sure to be encumbered with all sorts of political mandates and requirements from Congress, imposed by the same Congressional leaders who encouraged Freddie Mac and Fannie Mae to plunge into subprime mortgages.

The risks of enacting the plan are far worse than the risks of doing nothing.

Not so fast, Paulson

There's growing skepticism amongst economists about U.S. Treasury Secretary Paulson's plan to buy "toxic debt" off the balance sheets of financial institutions. And growing support for some alternative that would give the government an equity stake. Here's a list of places to check out these alternatives:

1. Luigi Zingales: Why Paulson Is Wrong

2. Arnold Kling: A Simpler Solution

3. Greg Mankiw provides links from Doug Elmendorf, Paul Krugman, and Sebastian Mallaby. Addendum: Mankiw provides six more links to commentary on the mess.

4. James Hamilton

The Democrats in Congress are also pushing for the legislation to include government equity stakes.

Megan McArdle makes sense of what happened last week that spooked the credit market.

Another addendum: Wall Street Journal, "The White House and Congress inched closer to agreement on a $700 billion plan to rescue troubled financial firms, with the Treasury making most of the concessions amid an increasing backlash from a range of economists and lawmakers."

Young and Arab in a land of mosque, bars, and opportunity

A very good article in the New York Times about life in Dubai for young Arab ex pats:

Dubai is, in some ways, a vision of what the rest of the Arab world could become — if it offered comparable economic opportunity, insistence on following the law and tolerance for cultural diversity. In this environment, religion is not something young men turn to because it fills a void or because they are bowing to a collective demand. That, in turn, creates an atmosphere that is open not only to those inclined to a less observant way of life, but also to those who are more religious. In Egypt, Jordan, Syria and Algeria, a man with a long beard is often treated as an Islamist — and sometimes denied work. Not here in Dubai.

But it's not all milk and honey. The personal stories are bittersweet.

Be sure to check out the 17 pictures with quotations. One:

Taj Maarafi, 24, is from Tunisia, and has lived in Dubai for almost two years. He works as a waiter. "I miss my life in Tunisia - but I'm not going back. I have an independence here that I wouldn't have even if I made more money back home. I'm making my own future. This is one thing in Dubai: you're not part of a family, or a group. You come here as an individual, and this is how people see you."

U.S. government principal sponsor of Manchester United

Abu Dhabi, owner of Manchester City Football Club, now has a crosstown rival: the U.S. government, principal sponsor of Manchester United. The former principal sponsor of United was, um, AIG.

Pictures and thanks for the pointer to Comic Common Tragedies.

An excellent primer on the U.S. financial crisis

By Doug Diamond and Anil Kashyap as posted at Freakonomics. I'm with Levitt: "As an economist, I am supposed to have something intelligent to say about the current financial crisis. To be honest, however, I haven’t got the foggiest idea what this all means." But with Diamond and Kashyap's help I'm a bit more conversant, and you will be, too.

It was written before news that the Fed is working on a plan to buy up distressed assets from banks:

"What we are working on now is an approach to deal with the systemic risk and the stresses in our capital markets," [Treasury Secretary] Paulson said. "As we've said for some time, the root cause of the stress in the capital markets is the real estate correction. So again we're coming together to work for an expeditious solution which is aimed right at the heart of this problem." And, that is bad debts_ or "illiquid assets" - on financial institutions' balance sheets, he said.

Where does the truth lie on Davidson's book?

Christopher Davidson claims his book was banned in the UAE.

I'd like to know what his reaction is to these statements:

The National Media Council denied last night that it had banned a study of Dubai written by a former professor at Abu Dhabi’s Zayed University and said approval for publication in the UAE had been granted.

There were claims in the British press that Dr Christopher Davidson’s book, Dubai: The Vulnerability of Success, had been banned due to its content.

But yesterday, the NMC confirmed it had already been approved for countrywide distribution, said Peter Hellyer, the council’s information adviser.
...
Mr Hellyer said that while there had never been a ban, the study contained “a plethora of errors”.

“There is a statement that there was no tarmac highway between Abu Dhabi and Dubai until the mid-1990s, and no all-weather road between Dubai and Fujairah until 2006,” Mr Hellyer said. “These are clearly completely wrong and it makes one doubt the quality and depth of his research.”

He also took issue, he said, with a section regarding the discovery of Dubai’s oil fields.

Mr Davidson “writes that in the mid-1960s, Sheikh Rashid bin Saeed, the Ruler of Dubai, created a company to operate Dubai’s on-shore oil fields,” Mr Hellyer said. “The only on-shore oil fields were not discovered until 1982.”

When I arrived in the UAE I drove the modern roads between Dubai and Fujairah. That's an odd error to make, really.

But the real questions are (1) does the book contain a "plethora" of errors, and simply a typical number of errors, and (2) what is the evidence that the book was banned?

Until I hear more, I'll go with the National Media Council's account. That said, it is worth noting that the UAE is not as open as some other societies. It has made the choice of having a National Media Council that reviews books, and can ban them from distribution. My guess is a strong majority of UAE citizens have no problem with that choice.

Thanks to samurai sam for the link.

I've ordered the book, and will evaluate it.

Addendum: Our second commenter (whose location was rather easy to determine) writes "guardian story here, more detail?!
http://www.guardian.co.uk/books/2008/sep/15/uae.denies.banned.book "

Here's some of what is in that Guardian article:

UAE booksellers, Davidson and his publisher Hurst said they had previously been told the book, published in May in the UK, was banned.

"We sent copies of the book out to the main bookshops in June," said the Hurst managing director, Michael Dwyer. "They said they had been contacted by ... [the National Media Council] telling them not to order it, that it was banned, and that if they had any copies to return them."

A query to the NMC from Mirna Mneimneh, a wholesale English non-fiction buyer in the region, met with a similar response.

"We sent a copy to the authorities," she said, "and they informed us that it has been banned."

But the UAE's National Media Council (NMC) denied it had ruled against the book, saying that no decision was made until yesterday.

"I think the distributor's agent probably got the wrong end of the stick because he was told it hadn't yet been approved, and he mistakenly took that to mean that the book was being banned," said information adviser Peter Hellyer. "He should, of course, have told the bookshops that no decision had yet been taken."

Hellyer said the NMC decided yesterday not to ban the book. "Whether or not it is distributed and sold is now entirely a matter for the distributor and the bookshops," he added.
...
Davidson welcomed the decision but queried the NMC's identification of errors, fearing that "they will produce a 200-plus list of errata which may be open to interpretation, that will greatly undermine me."

I will be surprised if the NMC produce an errata sheet. And, if it does, the audience for whom the book is intended will be able to do its own parsing and interpreting of the scholarship.

Addendum 2: See Peter Hellyer's comment. He says work on an errata sheet is going forward, and provides some examples.

Clear talk about AIG

You probably need to be living under a rock not to have heard about the U.S. government's nationalization of insurance giant AIG. Like me you may be frustrated by the lack of intelligent and accessible discussion of the mess in the media free of the empty buzzwords of the usual Wall Street talking heads (not to mention politicians, and government officials).

To the rescue comes Knowledge@Wharton in this interview with insurance professors Olivia Mitchell and Kent Smetters. It is an intelligent and accessible discussion of the mess. I highly recommend you give it the 30 minutes investment it takes to listen. Economics professors: this is something you may want to share with your students.

Smetters mentions "the Samaritan's dilemma" which in this case refers to the adverse effects that the expectation of a bailout has on a company's incentive to take mitigative action to avoid or minimize the chances of a financial catastrophe.

Cracking heavy oil

Oil Week:

It´s called the CAPRI system and it´s been designed to do the job of a refinery at the bottom of Petrobank´s patented THAI (toe-to-heel air injection) wells at the company´s pilot project near Christina Lake in northeastern Alberta. In the THAI system, an air pressure-driven combustion front loosens heavy oil as it slowly works its way forward, and the freed oil flows under gravity through slots in horizontal collector pipes, then is gas-lifted to surface processing systems.

For the CAPRI pilot, the horizontal pipes have been uniquely configured such that after passing through the slots, the hot crude will pass through a bed of catalyst and on through slots in a concentric inner pipe before being lifted.
...
The cracking to be achieved by CAPRI will be a step further in the upgrading process already occurring with THAI. With temperatures of over 600°C, THAI has achieved coking, raising 8°API oil to 13 or 14 degrees.

"It´s in situ coking," says Chris Bloomer, Petrobank´s vice-president, heavy oil. "If we look at it from a refiner´s perspective, you´re increasing the saturates content, slightly reducing the aromatics, but significantly reducing the asphaltene content and the resin content. You increase the volatile organics fairly substantially. It´s very encouraging."

There's more here, and allowing for hyperbole and wishful thinking, I still think there's some substance to this claim:

If the Capri/Thai processes are successful then Canada's oilsands, other oilsands and heavy oil deposits around the world will have higher recovery rates using a more economic process and the oil will be upgrading in the ground to a higher and more valuable quality. This would be the technology that would crush peak oil for several decades and allow an orderly transition to a post oil world. The processes would enable trillions of barrels of oil to be economically accessed.

One things is for sure: high prices bring out ingenuity. I'm not giving up on my conjecture that 20 years from now prices for a barrel of crude will be below $100.

Is tribalism alive and well in the UAE?

For an outsider living in the UAE it is very difficult to get an intimation of what goes on behind the scenes in local culture. And I'm not a social anthropologist, so I'm not skilled at teasing these things out. But a story in The National gives some insights:

Abu Dhabi TV takes tribes series off air
...
Abu Dhabi TV has taken the controversial Ramadan television miniseries Sadoun Al Awaji off the air by order of Sheikh Khalifa bin Zayed, the President of the UAE and Ruler of Abu Dhabi, after prominent Arab tribes portrayed in the show raised serious complaints about their depiction.

The 30-episode nightly drama about the historic figure Sheikh Sadoun Al Awaji was pulled following its Sunday night broadcast after Sheikh Khalifa received appeals from the Anazah and Shammar tribes. Abu Dhabi TV, which aired the show, is owned by Abu Dhabi Media Company, which also publishes The National.

Officials at Abu Dhabi TV declined to comment about the show’s cancellation, but sources at the station said they had received a number of calls about the fate of the soap. The Saudi press has reported that members of the two influential tribes had protested about the broadcasting of both series.
...
A second soap opera, Finjan al Dam, which was also due to air over the month of Ramadan on Saudi Arabia’s MBC channel, was cancelled last week as well. Set in the 19th century, the show’s plot revolves around tribal conflict and also features the old tribes.

Dr Ali al Matroushi, a historian and an expert on tribal lineage, said: “All of this proves that even after hundreds of years, the tribal traditions and their feuds are still strong.”

He said the story of Al Awaji was very popular, with many books written about it. But he added that portraying the story in a big-budget TV production during Ramadan, “when everyone is watching”, may have been too much.

“The descendants of the tribes pay close attention to every detail about their tribes,” he said.

Thanks to Memri for the pointer.

Addendum: Leo Americanus evidently knows much more than me about the tribes of the Arab peninsula. Thanks to him for this comment to my post:

The tribes in question here, the Shammar and Aniza, are found primarily in Saudi and Iraq, not UAE. I read elsewhere that it was actually Saudi officials who requested that Abu Dhabi cancel the series. The Saudi government's legitimation rests more squarely on tribal manipulation than does the UAE's, if only because Saudi is much larger and contains much larger (and maybe more troublesome) tribes. In any case, some tribesmen in the Shammar and Aniza may be moved to "thar" or feud by the series, but I've met a number of members of both tribes who are friends and laugh at the old tensions. It seems to me that it really depends on whether or not there is something else to fight over in certain, probably rural, areas.

Check out Leo Americanus' blog for more posts about the Arab world. I affiliate with Leo's self-description: "An American traveler of sorts, currently in the U.S. and looking forward to the next adventure."

Are the Gulf's sovereign wealth funds getting nervous?

This, is today's Wall Street Journal: Oil-Rich Sheikhs Run for Cover

The Gulf funds have lost their appetite for shares in distressed Western banks, and as oil prices plummet, there's growing pressure to sell down foreign investments to refocus on the huge cost of protecting and diversifying the region's oil-dependent economies.
...
One of the most recent big bank investments by a Middle East oil fund was the Kuwait Investment Authority's purchase early this year of a stake in Merrill Lynch, just sold for a song to Bank of America. Gulf funds are major holders of stock in Citigroup, Credit Suisse, HSBC, Standard Chartered and Barclays, all investments showing big paper losses. The Abu Dhabi Investment Authority had about two-thirds of its $900 billion hoard locked into U.S. assets at the start of the year.

Gulf states have $2.3 trillion worth of infrastructure projects either underway or in development, according to Middle East Economic Digest, much of which still has to be financed. If oil prices fall further below $100 a barrel, states will be hard-pressed to find that funding without tapping their cash reserves.

The short article goes on to note that confidence in markets at home is also weak: share prices on the Dubai Financial Market have fallen 32% since the start of the year. The Dow Jones is off 18% over the same period.

Fry driving

No, this isn't a story about driving a french fry. It's about the unleashing of human ingenuity when faced with taxes. The story dates from 2002:

A special police unit nicknamed the "frying squad" has been formed in a market town where hundreds of drivers are believed to be running their diesel cars on cooking oil.

Sniffing out unusually fragrant exhaust fumes, highway patrols have already collared several dozen offenders, who save more than 40p a litre by diverting oil from the kitchen cupboard to under the bonnet.
...
"It's a serious offence," said Bill O'Leary, spokesman for customs and excise, which levies tax on motor oil but not on the version used in saucepans. "By law, all cars on public roads must pay a tax on the fuel they use. Evasion carries a maximum seven-year jail term."

A closely related story here:

When, in September, just up the coast from Swansea, in Burry Port, near Llanelli, six more drivers were discovered apparently running their cars on cooking oil, the news quickly spread. "It was a media feeding frenzy," says Dai Davies of Dyfed and Powys police, whose officers were involved in the spot checks. "Everyone came down here, from the local BBC news to the New York Times." Within a couple of days, the story was in circulation of a crack team of law-enforcement officers swooping on south Wales motorists, of widespread tax fraud, of a hunt for the Mr Big of the cooking-oil scam. One report in a Canadian paper talked of round-the-clock stakeouts in the aisles of Asda that netted a couple buying 100 litres of oil at a time. A witty subeditor coined a nickname for the operation that immediately stuck: the Frying Squad.

"There wasn't a team as such," says Davies. "It was a multi-agency approach...."

Price of oil up, price of gas down

Oil is currently trading at around $96/barrel, the lowest price since February. At the same time the price of gasoline has risen 4 cents or more in many parts of the U.S.

It could be that these two facts are largely unrelated, and that the fall the price of crude is due to heightened fears of a world-wide economic downturn while the increase in gas prices is due to refinery disruptions due to Hurricane Ike.

But it's perfectly possible for a hurricane to be the cause of both. Refinery disruptions decrease the demand for crude and decrease the supply of gasoline.

Human activity making hurricanes worse

The TV images of the impact of Hurricane Ike on the Texas coast are dramatic. Instapundit has pictorial proof that man is making the impact of hurricanes worse.

See also, Cafe Hayek's explanation.

While we're on the subject of price controls, today's Wall Street Journal has two good articles. Who gets rent controlled apartments in New York? (If your guess is the poor, guess again.) Here's the other article.

Gallup's "Who speaks for Islam?"

During Ramadan the Gulf News is running a series of excerpts from "Who speaks for Islam?," a summary of conclusions from an opinion survey of the world's Muslims conducted by Gallup.

From today's excerpt:

In our data, the emphasis that those in substantially Muslim countries give to a new model of government — one that is democratic yet embraces religious values — helps to explain why majorities in most countries, with the exception of a handful of nations, want Sharia as at least "a" source of legislation.
...
Ironically, we don't have to look far from home to find a significant number of people who want religion as a source of law. In the United States, a 2006 Gallup Poll indicates that a majority of Americans want the Bible as a source of legislation.

Forty-six per cent of Americans say the Bible should be "a" source, and 9 per cent believe it should be the "only" source of legislation.

Perhaps even more surprising, 42 per cent of Americans want religious leaders to have a direct role in writing a constitution, while 55 per cent want them to play no role at all. These numbers are almost identical to those in Iran.

The series will appears in five parts. So far Part I and Part II are available.

UAE gold consumption

UAE is #6 in the world in gold consumption. I'm guessing that's not just domestic gold consumption, but purchases by tourists.

Thanks to Carpe Diem for the pointer.

Closing roads can lower price of anarchy

ars technica:

To gain a better theoretical understanding of the nature of POA in networks, the team applied their methodology to various types of idealized networks. They came to the conclusion that, to improve the Price of Anarchy, you must close off various roads—something known as Braess's paradox. In the network representing Boston, the researchers find six possible road closures that would reduce the delay in the suboptimal Nash (selfish) equilibrium. A similar analysis of the London and New York networks found that there were seven and twelve roads, respectively, that could be closed to improve the overall travel time.

While still theoretical, the work has the potential to aid future urban planning. Since the obvious solution of adding more roads may actually make the problem worse, an analysis of this sort could prove invaluable in determining real-world driving conditions.

Not that there are traffic problems in the UAE.

Mr. Davidson is back, and praising Sharjah

The Financial Times is praising the virtues of Sharjah:

Abu Dhabi may be building a local Louvre and Guggenheim, but Sharjah has 18 museums already. They include the Sharjah Art Museum, billed as the largest gallery in the Middle East, and the Museum of Islamic Civilisation, a spectacular collection of more than 5,000 artefacts, trinkets, manuscripts and coins from across the Muslim world, housed in a restored souk on the waterfront. The Sharjah Biennial (pictured above) is the largest art event in the Arab world.

“Dubai and Abu Dhabi only have a few museums, but we have lots,” says a local woman working at the art museum, which is displaying a collection of lithographs and paintings of Middle East scenes by David Roberts, the 19th-century Scottish painter.

In addition to the many museums and galleries, visitors to Sharjah can ramble through the carefully restored and maintained parts of the old city, replete with souks and built according to the traditional rules of Arabic architecture.

“I’m quite a fan of Sharjah – it’s massively underrated,” says a British expatriate based in nearby Dubai. “It has a lot to offer culturally, and when you go to Sharjah you actually feel like you’re in the Middle East for once.”

Sharjah’s dedication to its museums and heritage has led to its being nominated Unesco’s cultural capital of the Arab world.

And who should appear in the FT report as a witness for Sharjah but Christopher Davidson (whose book has been banned by the UAE; addendum: Not banned?):

In spite of its austere reputation, Sharjah has a thriving university life. Colleges teach everything from design and international relations to architecture, business studies and engineering.

“Sharjah really was the first to try and carve out this niche of being the educational and cultural capital of the UAE,” says Mr Davidson.

Tellingly, Sheikh Sultan, ruler of Sharjah, is the chairman of the board of trustees at the American University and pays for its utilities and maintenance of the campus. [He also paid for the infrastructure and buildings although maintenance of the building interiors is paid by AUS.]

Most observers attribute Sharjah’s focus on arts, culture and education to Sheikh Sultan, who was briefly the UAE’s minister of education in the 1970s.

While many Gulf rulers are educated abroad, Sheikh Sultan went one step further and took a PhD in history at England’s Exeter University in 1985.

His doctorate thesis was a “very well-written” revisionist account of the history of 19th-century Gulf piracy, according to Mr Davidson.

What about the stories of Wahabi influence?

In 2001 it passed a law (“decency and public conduct rules and objectives”) that outlaws immodest dress and the consorting of unmarried couples. The sale, consumption or even possession of alcohol is also banned in Sharjah.

This was a departure from the situation in the 1980s, when Sharjah was a regional tourism hub, for Soviet visitors in particular, according to Christopher Davidson, a Middle East expert at Durham University in England.

Some say the move to stricter observance is a result of strings attached to money thought to have been lent by Saudi Arabia in the late 1980s. The loans were either to pay for the museum and university construction or to bail out failing banks.

Sharjah has thus earned a prudish and austere image among many foreigners.

But the severity of Islamic law there may be overstated. Women walk the streets alone and with companions. Those who wear western clothing are nearly as prevalent as those in traditional Muslim abayas.

Apart from the lack of alcohol, there is little difference between Sharjah and the rest of the UAE, says Peter Heath, chancellor of the American University of Sharjah. “We wouldn’t have a co-ed university if Sharjah really was ‘Wahabi-strict’.”

The American University is the keystone in another notable feature of Sharjah – the education sector.

Sharjah still attracts un-prudish holidaymakers from Russia and former Soviet states. I assume they travel down to neighboring Ajman for a drink. [By the way, Ajman had a 10 page advertising spread in this Sunday's NYT Magazine.] And they sun at hotel pools. I one was at a business luncheon overlooking one such pool and got an eyeful of something I'd only seen at topless Barcelona beaches -- and never elsewhere in the UAE. Admittedly, it was a wardrobe malfunction.

There is one exception to the sale of alcohol in Sharjah. The Sharjah Wanderers Sports Club was grandfathered when the emirate went dry in the 80s. As far as a ban on consumption or possession I question whether it is enforced. Muslims and non-Muslims routinely buy alcohol at the quasi-official hole-in-the-wall in Ajman and bring it back into Sharjah without a hassle (although you do hear stories of exceptions). The point is do be prudent and respectful, don't be stupid.

Suffice it to say, Sharjah should not ever be confused with Saudi Arabia.

Abu Dhabiwood

Financial Times:

Abu Dhabi is seeking to usurp Dubai as the region’s leading media hub. The Islamic state remains wary of some western content, however, only agreeing to show edited versions of Syriana, the George Clooney film, because it feared that it would show the Gulf in a negative light.

Mr Borgerding, a former Walt Disney executive, said the first co-production partnerships would be announced within weeks. He would not comment on which Hollywood studios ADMC would work with, but highlighted its link with Warner Bros for video games development. It was also looking to work with film-makers in India, the UK and around the Middle East.

Coming out of the shadow of Dubai

The Times:

Abu Dhabi’s rulers realise that it will take more than one-off projects to secure their future. They know that it must be based on trade, financial services and tourism – and that there is a place for such a global centre to develop between the European and Asian time zones. THE fly in the ointment is that they have a rival, Dubai, a fellow member of the United Arab Emirates which is only 90 minutes away up the desert highway.

“The UAE is supposed to be one federal state but, crucially, when it was created in 1971 each of the emirates retained the right to keep its natural resources and therefore its own economic path,” explained Christopher Davidson, a Middle East expert at Durham University. “Now we are beginning to see different emirates drift away from each other more and more.”

For Dubai, the need to diversify is more pressing. It has less than 1% of the oil reserves of Abu Dhabi and the wells are projected to run dry in 20 years. This has led to the ruling Maktoum family sanctioning a development programme in Dubai the likes of which the world has never seen before. New islands have been built alongside the world’s deepest man-made port. The world’s biggest airport – bigger than Cardiff in area – and the 1km-high Al Burj tower are under construction. This is not to mention the 500 hotels being built. In total an estimated £500 billion has been spent on new infrastructure.

Abu Dhabi looks with slight disdain at Dubai’s rapid expansion. “It’s a well known joke that they built the city first and then thought about designing it,” said Martin Freeman, a British management consultant who has worked in Abu Dhabi for three years. “Abu Dhabi is a more considered place. Here they are designing the city and then building.”

Oh dear, there's that Christopher Davidson dude, again.

UAE book banning policy

The Gulf News has this story today saying few books are banned, and the ones that are are banned because they defame religion or are sexual in content.

No mention of this book, but I don't think it falls into either category.

Don't cry for Abu Dhabi

Brad Setser has a piece on year on year changes in oil revenue for Saudi Arabia which - refering to the recent dip in prices - he titles Don't Cry for Saudi Arabia. He goes on to discuss Abu Dhabi's revenues and what they're doing with them.

An appreciation for an alternative political model is banned

Addendum: Not banned?

There's no better way to get people interested in reading a book than for the government to ban it.

Christopher Davidson, author of Dubai: The Vulnerability of Success, said the ban was an own goal by a country that is at pains to present itself as an open society with aspirations for its higher education sector.

Dr Davidson, a lecturer at Durham University's School of Government and International Affairs, has previously worked in the UAE at Zayed University in Abu Dhabi. He has also acted as a consultant to the Dubai Government.

His book details the emirate's economic success and the problems it faces as oil reserves dwindle and its need for foreign investment pushes it towards socioeconomic reforms that could clash with the ideological, religious and cultural legitimacy of its monarchy.

It also analyses Dubai's awkward relationship with its federal partners in the UAE and its attractiveness as a free port to international criminal gangs and terrorists.

Dr Davidson said: "This is an academic book published by Columbia University Press, so it went through a rigorous peer-review process.

"Crucially, it is independent research, written by someone whose salary is not paid in the UAE, so there's none of the self-censorship that often prevents people who live there discussing anything beyond the bland and banal about the ruling families."
...
Dr Davidson said: "It makes it difficult for foreign academics to come to a country and try to do research when there is freedom on anything except the domestic matters of the country and the government. It's a mentality that is self-defeating for these countries, which are trying to become knowledge economies."
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Dr Davidson added: "Ironically, the book is neither a neoconservative essay on the need for Western democratic implants, nor is it particularly supportive of the current format of domestic opposition - although it does highlight their existence, which is something of a first. If anything, the overall flavour of the study is one of appreciation for an alternative political model rooted in history, culture and the principles of consultation."

This is a book I'll be ordering online and reading.

Thanks to samuraisam for the pointer to this story; you can read UAE community blog reaction to the book ban here.

Addendum: The intrepid nzm has located a solid review of the book.

More: Davidson was quoted (and the book mentioned) by The National on August 16 of this year in a story concerning fraud allegations at Nakheel:

But the challenge to the efforts underway [by Dubai authorities to root out corruption] will be in the follow-through. Though Mr Shahin’s arrest was disclosed in April, a trial has yet to begin. Authorities have given little information about their investigation into the corporate world. Christopher Davidson, a professor at Britain’s Durham University and author of Dubai: The Vulnerability of Success, said that “the weakness with this is it is a mystery how the authorities are operating”.

“Are there informants? The story never really comes out,” said Prof Davidson.

Cause and effect?

The pitfalls of ethnic selection

The UAE has a long way to go correct its "demographic imbalance" -- 50 percent of those living in the country are from India and Pakistan, more than 90 percent of the private sector workforce is foreign, more than 80 percent of the population is foreign, there is about one foreign household servant for every local living in the country, a disproportionate percentage of the foreign workforce is male. The demographic imbalance has bemoaned by locals, but most also are conscious that (1) the oil-fueled building boom in country would not be possible without the foreign workers, (2) few locals are willing to work menial jobs that predominate in the economy nor prepared for many of the few positions requiring specialized skills.

Gulf News today:

Advanced construction techniques that will call for a significantly fewer number of labourers and a scheme under which expatriate students are allowed to take up part-time jobs are among initiatives expected to better shape the demographic structure of the country, a top official said on Monday.

“His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, approved a number of policies submitted by the National Authority for Demographic Structure,” said Lieutenant General Shaikh Saif Bin Zayed Al Nahyan, Minister of Interior.

Under the new policies, expatriate students will be allowed to take up part-time jobs and a committee will be formed to moot new construction techniques to replace traditional, labour-intensive systems, Shaikh Saif said in a statement issued yesterday.

Shaikh Saif said the government is making serious efforts to address demographic issues and to strike a balance between requirements of development and the national interest and "our right to a safe and promising future which embodies the vision of our leadership and ambitions of the Cabinet."

The Economist is on target in its analysis:

Governments in the booming Gulf Arab states are becoming increasingly anxious at the erosion of their national cultures, as their growing economies suck in ever-larger numbers of expatriate workers. They are now devising a range of measures to limit the growth of segments of the expatriate population—in particular those at the less skilled end of the spectrum—while not impinging on the continued expansion of their economies. The concerns call into question the entire basis of the Gulf development model, entailing ambitious targets for economic growth and diversification, which cannot feasibly be achieved without a substantial increase in the expatriate population.

The problem is most clearly evident in the United Arab Emirates, where expatriates account for more than 90% of the private-sector labour force, and where the population is thought to have grown by almost one-third over the past three-four years. According to the most recent census, whose results were published in 2005, the UAE's population was 4.3m; it is now generally estimated to be about 6m. The UAE government announced in early September that it is setting up a national demographic agency that will be tasked with finding ways to slow down the growth of expatriate labour imports. Among the initial measures that have been proposed is a scheme to allow students who are enrolled in UAE universities and who are the children of foreign residents to take up part-time jobs. This measure appears to be targeted at children of long-term residents from other Arab countries, who have more cultural affinities with Emiratis than do Asian and European residents, who predominate in the expatriate community. The students would be expected to gravitate towards semi-skilled jobs in the services sector that tend to be performed by Asians.

The government is also considering the establishment of ethnic and cultural diversity quotas within companies, so as to prevent certain national groups predominating. Other ideas include changing building codes so as to reduce reliance on foreign construction workers and introducing much more automation into the services sector, for example at petrol filling stations.

However, these measures will have only a marginal impact on the overall size and make-up of the expatriate population. There is no sign of any let-up in the construction activity associated with investment in infrastructure, real estate, tourism, financial services and industry, which suggests that the current total of some 1.5m expatriate building workers is only likely to increase. Once this wave of construction is completed, there will be growing demand for imported services and factory workers to operate and maintain the new hotels, offices, apartment buildings, leisure and cultural centres, transport facilities and industrial plants. The businesses importing the labour are likely to continue to insist on their freedom to recruit from whatever market suits their needs best.

Elsewhere in the Gulf, Bahrain and Kuwait provide examples of the pitfalls of trying to impose ethnic selection in structuring the labour force.

Thanks to The EclectEcon for the pointer to The Economist.

Abu Dhabi's purchase of Manchester City

As seen by the New York Times

There is a game within a game going on. Before oil was discovered in the United Arab Emirates in 1958, the families ruling the kingdoms of Abu Dhabi and Dubai — the Nahyans and the Maktoums — amused themselves with competitive falconry. They still do falconry, and the families today are somewhat intermarried, but in recent years Abu Dhabi has felt overshadowed by the more entrepreneurial and flamboyant rulers of Dubai, who have turned it into a Middle Eastern mecca for global business.

Despite commanding more than 9 percent of the world’s oil supply, Abu Dhabi has sometimes seemed jealous of Dubai’s ability to draw attention to itself, in part by creating a hub in the Middle East for prestigious sporting events.

As the Emirates get richer, Western entrepreneurs who bought into the British soccer league on the expectation of making money are finding that they cannot keep up. That is why most experts in the field say that it is only a matter of time before the American sports entrepreneurs who control Liverpool, Tom Hicks, who owns the Texas Rangers, and George N. Gillett Jr., owner of the Montreal Canadiens of the National Hockey League, cut their losses and sell the club to the persistent bidders from Dubai.

As for Abu Dhabi, it accrues a yearly cash surplus exceeding $50 billion. Its sovereign economic fund, the Abu Dhabi United Group, is, by most outside estimates, worth a trillion dollars, and rising. It has a 7 percent stake in Citigroup. It invests in Ferrari and General Motors. And among its other projects is a new campus opening in 2010 that will become a branch of New York University and a $1 billion museum modeled on the Louvre in Paris.

It is debatable that none of those achieved the same global headlines as the takeover of Manchester City, and hours later the team’s signing of Robinho, a Brazilian world star from Real Madrid, for 32.5 million pounds ($58.6 million).