Singapore: Indonesia’s Money Laundromat

March 26, 2019

By: John Berthelsen

https://www.asiasentinel.com/econ-business/singapore-indonesia-money-laundromat/

On March 18, Indonesia’s Finance Minister Sri Mulyani Indrawati announced that the country’s Directorate General of Taxation will go after Indonesian wealth parked overseas, saying data indicate Indonesians have illegally moved Rp1.3 quadrillion (US$91.3 billion) worth of assets outside of the country.

Sri Mulyani doesn’t have far to hunt, and multiple sources say her US$91 billion figure is a relatively paltry portion of the total. She can send her investigators to Singapore, an hour and 50 minutes away by any one of 35 flights a day, where, according to a 2014 Cornell University Southeast Asia Program study, at least 39,000 Indonesians worth US$4.1 million each were residing “semipermanently” and had stored non-home financial assets. The study put the total amount of Indonesian money in Singapore at a minimum of US$93 billion. According to one study, however, as much as an astonishing US$380 billion has been spirited out of Indonesia alone – 40 percent of Singapore’s total banking receipts.

Among the other dictators, crooks, strongmen and satraps who are believed to have deposits – or have had – in the Singaporean banking system are Zimbabwe’s 95-year-old former President Robert Mugabe, the late Philippine strongman Ferdinand Marcos, the jailed Taiwanese President Chen Shui Bian, the disgraced former French Budget Minister Jérôme Cahuzac, former Malaysian Prime Minister Najib Razak and many more.

On March 17, 2009 – a decade ago – this reporter was present when the Burmese junta leader Thein Sein, the head of what was then one of the world’s most repressive and poverty-stricken countries, flew into Singapore for a ceremony in which an orchid was named for him in the island republic’s magnificent botanical gardens. Another was named for Thein Sein’s wife. The common wisdom in Singapore is that the orchid honor was bestowed because of the amount of money Myanmar’s generals had laundered out of their benighted country and deposited in Singapore’s banks.

The volume of hot money that moves through Singapore’s banking system, unimpeded by the Monetary Authority of Singapore and protected by a comforting tangle of banking secrecy laws, seems at odds with the country’s public stance of incorruptibility. An attempt to fix a parking ticket would have the miscreant hauled off to jail.

The late Prime Minister Lee Kuan Yew, confronted in 1986 with corruption on the part of Housing Minister Teh Cheang Wan, who was integral in helping him transform the country from British colony, refused to look away. Teh committed suicide rather than face trial.

For decades, Indonesia has been in a half-hearted war to repatriate its money, at one point in 2007 blocking the delivery of Indonesian sand used to expand Singapore’s coastline in an effort to force the island nation to agree to an extradition treaty to get back bankers who stole US$13.5 billion from 48 ailing banks during the 1997-1998 Asian Financial Crisis and moved the money into Singaporean banks. They have never succeeded.

In the 2008 global financial meltdown, Indonesia’s Century bank failed, with US$1.5 billion allegedly stolen by the bank’s president, Robert Tantular, according to lawsuits filed in Singapore and Mauritius. The Indonesian Bank Deposit Insurance Corporation, which is designed to provide an insurance cover for failing banks, allegedly poured in another US$750 million. In the end, the bank was recapitalized and renamed twice more, with massive fund flows out of the country again to Singapore. Tantular was prosecuted for the theft, but inexplicably was freed in December 2018 with half his time served, provoking a new investigation by the country’s Corruption Eradication Commission.

With global watchdogs increasingly cracking down on Switzerland, Singapore has become known as the go-to bolt hole for money flowing in from Cyprus, Russia, Dubai and Qatar. It is an emerging destination for private wealth management – a code word for hidden money. Its banks are known as among the safest in the world. It has never had a bank failure, although it shut down two Swiss subsidiaries during the mess created by Malaysia’s huge 1Malaysia Development Bank scandal.

As authorities have put pressure on Swiss authorities to open the doors to the alpine nation’s bank records, Singapore has developed its banking secrecy laws to protect money flows, blocking regulations developed by the 36-country Organization for Economic Cooperation and Development on publication of bank customer information. According to a 2017 Boston Consulting Group report, these tight banking secrecy laws had attracted as much as US$1.1 trillion in foreign funds into the banking system.

The access by less-than-respectable money seems to have reached its apex with the long-running 1MDB scandal, during which now-deposed Malaysian Prime Minister Najib Razak and his confederate, Low Taek Jho, spirited billions of dollars through the Singaporean system. Najib famously moved US$681 million sent to him by Jho Low through the Kuala Lumpur-based Ambank in 2013, using part of the money to finance the successful 2013 election won by the Barisan Nasional, and then moved the remainder back out to subsidiaries of Swiss banks, both of which were suspended from doing business in Singapore.

The full story of the magnitude of theft from 1MDB and the money’s passage through Singaporean banks is told in two recent books, “The Billion-Dollar Whale by Wall Street Journal reporters Tom Wright and Bradley Hope, and The Inside Story of the 1MDB Expose by Clare Rewcastle Brown. Both books tell a ring-around-the-rosy story of billions of dollars that moved with impunity from a long string of shell companies set up in Caribbean hidey holes, zipping through the Singapore banking system without any problems until authorities in the United States and other jurisdictions started calling attention to the process.

As Brown writes, “Ironically, at a time when our ability to connect and communicate instantaneously should enable us through forensic accounting to track suspicious transactions and assure there is no hiding place for them, things have got worse, not better. As long as national legal systems are limited in their ability to monitor and supervise extra-territorial transactions, and as long as international cooperation remains ineffective and deficient, then sending money offshore will continue to deprive national treasuries of the revenues they need, leaving domestic populations worse off and in many cases impoverished,”

There is no better proof of that than the billions of dollars that have moved out of Indonesia, and the ease with which it has been hidden in Singapore or moved on to other obscure corners of the world.

 

EU and ASEAN: Advancing partnership for sustainability

February 16, 2016

By Francisco Fontan

https://www.khmertimeskh.com/50578204/eu-and-asean-advancing-partnership-for-sustainability/

 

The EU–ASEAN Foreign Ministers Meeting in Brussels on 21 January. Cooperation, solidarity and prosperity have long been the hallmark of the EU–ASEAN relationship.

As global stakeholders, the EU and ASEAN have the responsibility to advance the international rules-based order and preserve their ‘global commons’, writes Francisco Fontan.

In January I joined Federica Mogherini ( pic above), the EU’s High Representative for Foreign Affairs and Security Policy, in Brussels as she co-chaired the 22nd EU-ASEAN Ministerial Meeting. It was an impressive occasion, and the best attended such gathering anyone could remember, with almost all the ten ASEANan and twenty-eight EU member states represented by their Foreign Ministers. Brussels was preparing for its first big snowfall of the winter, but the reception we gave our ASEAN partners was a truly warm one.

The debate inside the room reflected the depth and breadth of our relations, from conflict in the Middle East, to the importance of the South China Sea and the Rohingya crisis, to promoting trade, investment, or higher education. Much was said but there was also a unity of purpose – a common desire to strengthen EU–ASEAN cooperation including in new areas such as combating unregulated fishing, or launching a new high level dialogue on environment and climate change, and an agreement in principle to upgrade our relations to a strategic partnership.

..

As Ms Mogherini said after the meeting, this was “a recognition of the strategic nature of the partnership we already have in many fields. It was an important signal showing that the two most advanced and most successful integration processes in the world stand firmly behind multilateralism and a rules-based global order.”

Or as her fellow co-chair Vivian Balakrishnan, Minister of Foreign Affairs of Singapore and ASEAN coordinator for EU relations put it “we take our partnership to a greater height, we will continue to explore new areas in which we can cooperate and learn from each other, such as cybersecurity, maritime security, connectivity and climate change.” A close and deep partnership between the EU and ASEAN is thus of strategic importance for both regional blocs.

We are certainly pivotal economic partners already. Our private sector is, by far, the first investor in ASEAN, holding a quarter of total stock in the region, and we are ASEAN’s second largest trading partner. The EU has concluded or is negotiating free trade and investment agreements with a number of Asean members, building blocks for an ambitious region-to-region trade and investment framework.

We are working hard to increase transport links and our overall connectivity. If – as I hope – we soon agree the first ever region-to-region Comprehensive Air Transport Agreement, millions of our citizens will benefit and the travel and tourism industry in particular stands to make great gains. We can build on this and establish a comprehensive EU–Asean Connectivity Partnership. While some question globalisation and are retreating into economic nationalism, it is important that ASEAN and the EU together seek to bolster global links, make them work for all and show their true value to our shared prosperity.

And as ASEAN says, we can leave no one behind.

..

The EU remains the largest donor to ASEAN, helping the organisation and your governments to reduce poverty and spread opportunity, with over 200 million euros ($225 million) in support of ASEAN regional integration and connectivity, on top of over 2 billion euros of bilateral assistance to ASEAN member states, and the direct efforts of our 28 EU member states. We will also continue to stand by you after each major natural disaster, from tsunamis to cyclones, putting victims’ needs above any other consideration.

Cooperation, solidarity and prosperity have long been the hallmarks of our relations. And while they remain so, the rapidly evolving international scene is leading us to focus more on key strategic issues. Our shared ambitions can only realise their full potential in a rules-based, peaceful and stable environment. This is what makes ASEAN so important for the EU in Asia – not just as a community of ten, but being also the core of the East Asia Summit, the ASEAN Regional Forum, or the ADMM+ process. And this is where ASEAN and the EU are already rightly expanding their security cooperation – from trafficking in persons to cyber-crime, from maritime security to transnational crime and counter-terrorism.

No one can achieve these goals alone. And thankfully that is something else we agree on – the Foreign Ministers spent more time talking about the environment, climate change and sustainable development than anything else. We agreed to deliver together on our United Nations Sustainable Development Goals, including on the Paris Agreement on Climate Change.

As global stakeholders, the EU and ASEAN have the responsibility to advance the international rules-based order and preserve our “global commons.” I have been immensely privileged, as the EU’s First Ambassador to ASEAN, to have seen our strategic relationship go from strength to strength. I am confident that it has even further to run and that, together, we will play a leading role in developing the global responses needed for the challenges of tomorrow.

Francisco Fontan is European Union Ambassador to ASEAN.

Everything You Know About Global Order Is Wrong

January 31, 2019

If Western elites understood how the postwar liberal system was created, they’d think twice about asking for its renewal.

By Adam Tooze

 

 

 

 

Klaus Schwab, impresario of the World Economic Forum, released a manifesto in the run-up to this year’s annual meeting at Davos, Switzerland, in which he called for a contemporary equivalent to the postwar conferences that established the liberal international order.

“After the Second World War, leaders from across the globe came together to design a new set of institutional structures to enable the post-war world to collaborate towards building a shared future,” he wrote. “The world has changed, and as a matter of urgency, we must undertake this process again.” Schwab went on to call for a new moment of collective design for globalization’s alleged fourth iteration (creatively labeled Globalization 4.0).

 

Schwab is not the first to make this kind of appeal. Since the financial crisis, there have been repeated calls for a “new Bretton Woods”—the conference in 1944 at which, in Schwab’s words, “leaders from across the globe came together to design” a financial system for the postwar era, establishing the International Monetary Fund (IMF) and the World Bank in the process. It was the moment at which U.S. hegemony proved its most comprehensive and enlightened by empowering economist-statesmen, foremost among them John Maynard Keynes, to lead the world out of the postwar ruins and the preceding decades of crisis. Under Washington’s wise leadership, even rancorous Europe moved toward peaceful and prosperous integration.

This is a story with wide support in places like Davos. It’s also one that deserves far more scrutiny. Its history of the founding of the postwar order is wrong; more important, its implicit theory about how international order emerges—through a collective design effort by world leaders coming together to reconcile their interests—is fundamentally mistaken. What history actually suggests is that order tends to emerge not from cooperation and deliberation but from a cruder calculus of power and material constraints.

 

Bretton Woods may have been a conference of experts and officials, but it was first and foremost a gathering of a wartime alliance engaged in the massive mobilization effort of total war. The conference met in July 1944 in the weeks following D-Day and the final Soviet breakthrough on the Eastern Front. As a wartime rather than a postwar meeting, disagreements were minimized. Though the conference was about the future order of the international economy and though the aim of the talks was to link national economies back together, the building blocks were centralized, state-controlled war economies. The Bretton Woods negotiators were government officials, not businessmen or bankers. As they had done since the collapse of the global financial system in the early 1930s, central bankers played second fiddle to treasury officials. The Americans who were bankrolling the Allied war effort called the shots.

The basic monetary vision of Bretton Woods was to create order by establishing fully convertible currencies at fixed exchange rates, with the dollar pegged to gold. But the tough conditions of the Bretton Woods monetary architecture set by the United States proved far too demanding for war-weakened European economies. When Britain, the least damaged economy in Europe, tried to implement free convertibility of pounds into dollars, its attempt collapsed at the first hurdle in 1947; the social democratic Labour Party government in London quickly moved to stop the subsequent drain of precious dollars by reimposing exchange controls and tightening import quotas. Meanwhile, the grand design for a free trade order embodied by the Havana Charter and the International Trade Organization fell afoul of the U.S. Congress and was thus stopped in its tracks. The General Agreement on Tariffs and Trade (GATT) was its cumbersome and slow-moving replacement.

The talk of a connection between the present and the Bretton Woods moment is legitimated perhaps above all by the claimed continuity of the IMF and the World Bank, which were duly set up in December 1945. But beyond institutional titles, this supposed continuity is largely false. Within a year of the founding of its key institutions, almost the entire global agenda of Bretton Woods was put on ice. Already in 1946 the Soviet Union absented itself from the formation of the IMF and the World Bank.

Milton Friedman

With the Cold War paralyzing the U.N. institutions that had originally been intended to frame Bretton Woods, what emerged under U.S. hegemony was a far narrower postwar order centered on the North Atlantic. The Marshall Plan of 1948 was not so much a complement to Bretton Woods as an acknowledgement of its failure. For true liberals in both the United States and Europe, who hankered after the golden age of globalization in the late 19th century, the resulting Cold War economic order was a profound disappointment. The U.S. Treasury and the first generation of neo-liberals in Europe fretted against the U.S. State Department and its interventionist economic tendencies. Mavericks such as the young Milton Friedman—true advocates of free markets in the way we take for granted today—demanded a bonfire of all regulations. They insisted that rather than exchange rates being fixed, currencies should be allowed to float with their value defined by competitive markets. In the 1950s, Friedman could be dismissed as eccentric.

The reality of the liberal order that supposedly came into existence in the postwar moment was the more or less haphazard continuation of wartime controls. It would take until 1958 before the Bretton Woods vision was finally implemented. Even then it was not a “liberal” order by the standard of the gilded age of the 19th century or in the sense that Davos understands it today. International mobility of capital for anything other than long-term investment was strictly limited. Liberalization of trade also made slow progress. The gradual abolition of exchange controls went hand in hand with the lifting of trade quotas. Only when these more elementary limitations on foreign trade were removed did tariff negotiations become relevant. GATT’s lumbering deliberations did not begin making major inroads until the Kennedy round of the 1960s, 20 years after the end of the war. And rising global trade was a mixed blessing. Huge German and Japanese trade surpluses put pressure on the Bretton Woods exchange rate system. This was compounded in the 1960s by the connivance of U.S. Treasury and U.K. authorities in enabling Wall Street to sidestep financial repression and launch the unregulated euro-dollar market, based in bank accounts in London.

By the late 1960s, barely more than 10 years old, Bretton Woods was already in terminal trouble. And when confronted with demands for deflation, U.S. President Richard Nixon reverted to economic nationalism. Between 1971 and 1973, he unhitched the dollar from gold and abandoned any effort to defend the exchange rate, sending the dollar plunging and helping to restore something closer to trade balance. If our own world has a historic birthplace, it was not in 1945 but in the early 1970s with the advent of fiat money and floating exchange rates. The unpalatable truth is that our world was born not out of wise collective agreement but out of chaos, unleashed by America’s unilateral refusal any longer to underwrite the global monetary order.

As the tensions built up in the 1960s exploded, foreign exchange instability contributed to a historically unprecedented surge in inflation across the Western world. We now know that this era of inflationary instability would be concluded by the market revolution and what Ben Bernanke dubbed the “great moderation.” But once again hindsight should not blind us to the depth of the crisis and uncertainty prevailing at the time. The first attempts to restore order were not by way of the market revolution but by the means of corporatism—direct negotiations among governments, trade unions, and employers with a view of limiting the vicious spiral of prices and wages. This promised a direct control of inflation by way of price setting. But its effect was to stoke an ever-greater politicization of the economy. With left-wing social theorists diagnosing a crisis of capitalist democracy, the trilateral commission warned of democratic ungovernability.

What broke the deadlock was not some inclusive conference of stakeholders. The stakeholders in the 1970s were obstreperous trade unions, and that kind of consultation was precisely the bad habit that the neoliberal revolutionaries set out to break. The solution, as U.S. Federal Reserve chair Paul Volcker’s recent memoirs make embarrassingly clear, was blunt force wielded by the Fed. Volcker’s unilateral interest rate hike, the sharp revaluation of the dollar, de- industrialization, and the crash of surging unemployment dealt a death blow to organized labor and tamed inflationary pressure. The Volcker shock established so-called independent central bankers as the true arbiters of the new dispensation.

 

They put paid to what Margaret Thatcher referred to as the “enemy within.” But the global victory of the liberal order required a more far-reaching struggle. The world of the market revolution of the 1980s was still divided between communism and capitalism, between first, second, and third worlds. The overcoming of those divisions was a matter of power politics first and foremost, negotiation second. The United States and its allies in Europe raised the pressure on the Soviet Union, and after a period of spectacularly heightened tension, Mikhail Gorbachev chose to de-escalate, unwittingly precipitating the union’s collapse.

The truth is that the postwar moment that the Davos crowd truly hankers after is not that of 1945 but the aftermath of the Cold War, the moment of Western triumph. It was finally in 1995 that the Bretton Woods vision of a comprehensive world trade organization was realized. A sanitized version of this moment would describe it as a third triumph of enlightened technocracy. After Bretton Woods and the defeat of inflation, this was the age of the Washington Consensus. But as in those previous moments, its underpinnings were power politics: at home the humbling of organized labor, abroad the collapse of Soviet challenge and the decision by the Beijing regime to embark on the incorporation of China into the world economy.

Since 2008, that new order has come under threat from its own internal dysfunction, oppositional domestic politics, and the geopolitical power shift engendered by truly widespread convergent growth. The crisis goes deep. It is not surprising that there should be calls for a new institutional design. But we should be careful what we wish for. If history is anything to go by, that new order will not emerge from an enlightened act of collective leadership. Ideas and leadership matter. But to think that they by themselves found international order is to put the cart before the horse. What will resolve the current tension is a power grab by a new stakeholder determined to have its way. And the central question of the current moment is whether the West is ready for that. If not, we should get comfortable with the new disorder.

Adam Tooze teaches history at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World. @adam_tooze

Everything You Know About Global Order Is Wrong

 

In Honor of John” Jack” BOGLE–The MAN who opened financial markets for ordinary people

January 26,2019

by Art Carey and Erin Arvedlund, Updated: January 16, 2019

DAVID SWANSON / Staff

John C. Bogle, 89, who revolutionized the way Americans save for the future, championed the interests of the small investor, and railed against corporate greed and the excesses of Wall Street, died of cancer Wednesday at his home in Bryn Mawr, his family confirmed.

 

Mr. Bogle, a chipper and unpretentious man who invited everyone to call him “Jack,” was founder and for many years chairman of the Vanguard Group, the Malvern-based mutual-fund company, where he pioneered low-cost, low-fee investing and mutual funds tied to stock-market indexes. These innovations, reviled and ridiculed at first, enabled millions of ordinary Americans to build wealth to buy a home, pay for college, and retire comfortably.

Along the way, Vanguard, which Mr. Bogle launched in 1974, became a titan in the financial-services industry, with 16,600 employees and over $5 trillion in assets by the end of 2018, and Mr. Bogle earned a reputation as not only an investing sage but a maverick whose integrity and old-fashioned values set an example that many admired and few could match.

 

“Jack could have been a multi-billionaire on a par with Gates and Buffett,” said William Bernstein, an Oregon investment manager and author of 12 books on finance and economic history. Instead, he turned his company into one owned by its mutual funds, and in turn their investors, “that exists to provide its customers the lowest price. He basically chose to forgo an enormous fortune to do something right for millions of people. I don’t know any other story like it in American business history.”

Mr. Bogle is the second financial titan from the region to die in the last three days. Raymond G. Perelman, the master deal-maker and philanthropist who gave away more than $300 million to the University of Pennsylvania and other causes, died Monday at his home in Philadelphia.

 

Like Perelman, Mr. Bogle carved a remarkable path. In 1999, Fortune named Mr. Bogle one of the investment industry’s four giants of the 20th century, and in 2004, Time listed him among the 100 most influential people in the world.

 

Motivated by a mix of pragmatism and idealism, Mr. Bogle was regarded by friends and foes alike as the conscience of the industry and the sheriff of Wall Street.

 

“He was like the last honorable man, a complete straight-shooter,” said Rick Stengel, former managing editor of Time and former president of the National Constitution Center, where he worked closely with Mr. Bogle, who then chaired the center’s board. He was fond of saying that “‘so-and-so is all hat and no cattle.’ Jack was all cattle and not very much hat.”

More than a successful businessman, Mr. Bogle was a capitalist with a soul.

 

MICHAEL S. WIRTZ / Inquirer File Photo

John Bogle, founder of the Vanguard Group Inc., was chairman of the board of the National Constitution Center in 2006 when he stood beside one of his favorite signers, Alexander Hamilton, far left.

“Whatever moral standards I may have developed over my long life, I have tried to invest my own soul and spirit in the character of the little firm that I founded all those years ago,” he wrote in his 2008 book, Enough: True Measures of Money, Business, and Life.

 

While Mr. Bogle was facile with numbers, he was much less interested in counting than in what counts, and his intellectual range was broad. He revered language, history, poetry, and classical wisdom, and frequently amazed and delighted people by reciting long passages of verse. He was the author of at least 10 books, mainly about investing — all of which he proudly wrote himself.

He was a social critic, civic leader, mentor, and philanthropist whose generosity to the institutions that shaped his character, notably Blair Academy and Princeton University, far outstripped his legendary frugality.

n his 70s, he displayed the energy of men half his age, and his pace and ambition were the more remarkable because of his lifelong battle with heart disease, the result of a congenital defect that affected the heart’s electrical current.

Mr. Bogle had his first heart attack in 1960, when he was only 30, and his heart stopped numerous times thereafter. When he was 37, his doctor advised him to retire. Mr. Bogle’s response was to switch doctors.

Mr. Bogle outlived three pacemakers, and kept a gym bag with a squash racket by his desk. In 1996, surgeons at Hahnemann University Hospital replaced his faulty heart with a strong one, ending a 128-day wait in the hospital. He reunited with his doctors years later. With his new pump, Mr. Bogle experienced an adolescent surge of vitality that left associates panting to keep up.

“Jack operated at only two speeds, as fast as is humanly possible and stop,” said Paul Miller, the late private investor and founding partner of Miller Anderson & Sherrerd, who was a close friend of Mr. Bogle’s for decades.

 

Bogle with Ed Rendell (left) and President Bill Clinton (right) in Philadelphia about 20 years ago. He said of the economy: “The disparity in income is deeply regrettable. I don’t know what we do about it exactly.”

 

“He was fiercely competitive when it counted, more intellectually alert than any person I’ve ever met, willing to face — indeed, almost court — controversy and criticism, stubborn but willing to compromise when absolutely necessary, and most importantly, loving, sentimental, kind, charitable, and courageous.”

 

 

His greatest accomplishment, Mr. Bogle often said, was “putting the ‘mutual’ back in mutual funds.” His most important innovation was the index fund.

Mr. Bogle had long argued that a mutual fund representing a broad range of businesses — for instance, the Standard & Poor’s 500, an index containing the stocks of 500 large publicly held U.S. companies — would not only match the market’s average return but also generally surpass the performance of actively managed funds.

 

“You want to be average and then win by virtue of your costs,” Mr. Bogle said. “Cost is a handicap on the horse. If the jockey carries a lot of extra pounds, it’s very tough for the horse to win the race.”

 

That philosophy attracted a following, including a group of grateful devotees who called themselves the Bogleheads, and convened annually to swap investment advice and pay homage to the man who had done so much to nourish their portfolios.

 

Bogleheads.org

Vanguard founder John “Jack” Bogle signed copies of his book at the 2017 Bogleheads conference, Desmond Hotel, Philadelphia.

 

 

“What impressed me most about Jack was his humility and approachability,” said Mel Lindauer, a leader of the Bogleheads and coauthor of The Bogleheads’ Guide to Investing. “His zeal for his mission of helping investors get a ‘fair shake’ was legendary. He worked tirelessly toward that goal, and his message never changed with the investing climate. The world won’t be the same without Jack. He was a true American hero.”

 

Mr. Bogle had hoped that the Vanguard model — “structurally correct, mathematically correct, and ethically correct” — would goad other investment firms to give customers a fairer shake. While index funds have become widely popular, Vanguard’s competitors often have been less than keen about following the company’s penny-pinching lead.

 

Nevertheless, Mr. Bogle, to use a pet phrase, “pressed on regardless.” After retiring as Vanguard’s chairman and CEO in 1996 and its senior chairman in 2000, he became president of the Bogle Financial Markets Research Center, quartered in the Victory Building on the Vanguard campus.

 

When he was not touting the advantages of the Vanguard mode of investing, Mr. Bogle, a self-proclaimed “battler by nature,” was lambasting his professional brethren for “rank speculation,” reckless assumption of debt, “obscene” multimillion-dollar paychecks, and golden parachutes, and saying they had abdicated their duty as stewards in favor of self-interested salesmanship.

 

Scott S. Hamrick / Inquirer File Photo

The life size statue of John Bogle, the founder of the Vanguard Group, is shown Oct. 20, 2005, at the headquarters in Malvern, Pennsylvania. Bogle, then 76, had written his fifth book, The Battle for the Soul of Capitalism.

Along the way, Mr. Bogle attracted his share of critics. He was called a communist, a Marxist, a Bolshevik, a Calvinist scold and zealot, a holier-than-thou traitor and subversive who was undermining the pillars of capitalism with un-American rants.

 

Mr. Bogle characterized his pugnacious relationship with the financial industry as “a lover’s quarrel.” His mission, he said, was simple: to return capitalism, finance, and fund management to their roots in stewardship.

“He held our industry to a higher standard than it held itself, and I think a lot of people took umbrage at that,” said Arthur Zeikel, a former Merrill Lynch & Co. CEO who knew Mr. Bogle for decades.

 

“He never failed to mention, in speech after speech and talk after talk, that money managers had failed miserably to earn their high fees,” said Miller, the investment manager and longtime friend. “That he was correct in calling them the ‘croupiers at the gambling table’ did not endear him to the profession.”

 

“Simply put, Jack cared,” said William Bernstein. “He cared enough about his clients to personally answer their letters; he cared enough about his employees to be on a first-name basis with thousands of them, and to pitch in at the phone banks when things got busy; and in the end, he cared enough about his country that he spent much of his last two decades away from home tirelessly crusading against an increasingly elephantine and dysfunctional financial system.”

 

File Photo

 

John C. Bogle, then chairman and president, Wellington Fund in 1974.

John Clifton Bogle early realized the value of a penny. His grandfather, a prosperous merchant, founded a company that became part of the American Can Co., and Mr. Bogle’s early years in Montclair, N.J., were affluent. But the Great Depression eventually erased the family fortune. Mr. Bogle’s father, an improvident charmer, was ill-equipped to cope. The Bogles lost their home and were forced to move in with relatives.

 

 

Mr. Bogle was proud of the many jobs he held in his youth — newspaper delivery boy, waiter, ticket seller, mail clerk, cub reporter, runner for a brokerage house, pinsetter in a bowling alley.

 

“I grew up in the best possible way,” Mr. Bogle said in 2008, “because we had social standing — I never thought I was inferior to anybody because we didn’t have any money — but I had to work for everything I got.”

 

Mr. Bogle attended Blair Academy in northwestern New Jersey, where he blossomed academically. From there, he went to Princeton, which offered him a full scholarship and a job waiting tables in the dining hall. At first, Mr. Bogle floundered, and his low grades in economics, his major, almost cost him his scholarship. But he applied himself and slowly mastered the demands.

 

In December 1949, while leafing through Fortune, he happened upon an article about the embryonic mutual-fund industry, and Mr. Bogle developed the topic for his senior thesis.

 

Mr. Bogle produced a scholarly opus that proved to be a blueprint for his career. “The principal function of mutual funds is the management of their investment portfolios,” Mr. Bogle wrote. “Everything else is incidental…. Future industry growth can be maximized by a reduction of sales loads and management fees.”

 

The thesis earned Mr. Bogle a top grade, and he graduated magna cum laude. After he sent a copy to Walter Morgan, Class of 1920 and founder of the Wellington Fund, based in Philadelphia, Morgan hired Mr. Bogle. In short order, Morgan became Mr. Bogle’s mentor. In early 1965, when Mr. Bogle was only 35, Morgan anointed him his successor.

 

Headstrong and impulsive, Mr. Bogle arranged a merger with high-flying investment managers in Boston. For six go-go years, the partnership flourished, but when stock prices plunged in 1974, Mr. Bogle was fired.

 

Refusing to surrender, Mr. Bogle persuaded the board of Wellington to split from the management company that canned him and appoint him to administer the funds at cost, thereby saving a bundle in fees.

 

Inspired by the 1798 Battle of the Nile, during which Lord Horatio Nelson sank the French fleet, snuffing Napoleon’s dream of world conquest, Mr. Bogle chose the name Vanguard after Nelson’s flagship.

 

“I wanted to send a message that our battle-hardened Vanguard Group would be victorious in the mutual fund wars,” Bogle wrote in Enough, “and that our ‘vanguard’ would be, as the dictionary says, ‘the leader in a new trend.’ ”

Now one of the world’s largest investment-management companies, Vanguard vies with BlackRock and Fidelity Investments for the title of biggest mutual-fund group.

 

INQUIRER ARCHIVES

John Bogle, Vanguard

 

If Vanguard runs a tight ship, it’s a direct reflection of its founder. When traveling, Mr. Bogle usually took the train or flew coach. From the station or airport, he walked to his destination rather than taking a cab, or hailed a cab rather than riding in a limo, even in his 70s.

 

When he was president of the Constitution Center, Stengel regularly met Mr. Bogle for power breakfasts at one of Mr. Bogle’s favorite eateries, Benny’s Place at Fourth and Chestnut Streets. There, Mr. Bogle ordered his customary breakfast of two eggs over easy, fried potatoes, two slices of rye toast and coffee, all of which he consumed, Stengel recalled, in an “incredibly systematic” way. Price: $3.60. Said Stengel: “I often felt compelled to leave an extra tip so the waitress wouldn’t feel shortchanged.”

 

Bill Falloon, an editor at John Wiley & Sons, remembers when Mr. Bogle visited the publisher’s Park Avenue office for a marketing strategy meeting about Mr. Bogle’s The Little Book of Common Sense Investing.

 

Weary from the train trip, Mr. Bogle asked where he could catnap. There was no bed or couch, he was informed. Not to worry, Mr. Bogle said. Just find me a room.

 

“So he walked into this little office and pushed a chair over so its back was on the floor,” Falloon recalls. “And then he stretched out and put his head on the back rest.”

Before nodding off, Mr. Bogle issued instructions: “If anybody wonders what I’m doing, tell them I’m dead.”

 

Mr. Bogle’s children recalled growing up in a drafty house in Haverford where the thermostat was set low in winter and they piled into their parents’ bedroom on steamy summer nights because it was the only spot with an air conditioner.

 

Inquirer archives

John Bogle, Vanguard chief inside the corporate office in Chesterbrook in 1989.

 

“He wore the same wool ties and suits forever,” said son Andrew Armstrong Bogle. “He had no desire to be ostentatious, and he didn’t hang out with just investment titans. He was just as comfortable, if not more so, with someone whose cab he happened to get into, talking to people in the subway or to a waiter at the Princeton Club. He genuinely liked talking to people and hearing their stories.”

 

While Mr. Bogle may have been cheap in the transactions of daily life, he was remarkably generous in a grand way. For more than 20 years, he donated half his annual income to philanthropic causes, particularly those institutions that helped develop his mind and form his character.

 

At Blair, Mr. Bogle chaired the board of trustees, chose the headmaster, and helped finance the construction of several buildings.

 

“He was like a surrogate father to me,” said former headmaster Chan Hardwick. “He told me the most important thing in a relationship is trust, and trust is based on honesty. After he hired me, he said, ‘You’re going to make mistakes. There will be things you’ll do that you’ll wish you hadn’t, and things you won’t do that you’ll wish you had. If you’re honest with me, I’ll support you fully.’ ”

 

At Blair and Princeton, Bogle endowed the Bogle Brothers Scholarships, which enabled scores of budding scholars to further their education. His twin brother David died in 1995.

 

“He took chances on people because someone took a chance on him,” said Stengel. “Much of his own altruism stems from the fact that he was a scholarship kid.”

 

“It will surprise no one who knew Jack that he directed his support to financial aid and promoting community service,” said former Princeton president Shirley Tilghman. “He served his university on many occasions — from leading the Class of 1951 at its 25th reunion to advising the Princeton University Investment Co.”

 

Mr. Bogle’s philanthropy reflected his belief that to whom much is given, much is expected.

 

Two of his children followed his example of service in an obvious way. His daughter Barbara Bogle Renninger served on the board of the Gesu School in North Philadelphia, where she was also a volunteer math tutor; his son Andrew was a patron of Robin Hood, a philanthropic organization established by investment bankers and hedge-fund managers to alleviate poverty in New York City.

 

“When we were growing up, we were told that we’re very fortunate in so many ways and that we were expected to give back,” Andrew Bogle recalled. “We could choose our own way of contributing, whether it be time or money or just our thoughts, but we knew that the default option is that you’re going to give back.”

 

Disengaging himself from guiding Vanguard and forging a new role for himself was challenging for Mr. Bogle, who was dismayed by the rift that developed between him and the man he had groomed to succeed him, John J. Brennan. Mr. Bogle was incapable of retirement.

 

Although he played no role in managing Vanguard after 2000, he continued to show up every weekday, usually in suit and tie and shined shoes, to discharge his duties as president of the Bogle Financial Markets Research Center. He wrote articles, speeches, and books, answered questions from investors, granted interviews to reporters, and continued to cultivate and encourage members of Vanguard’s “crew” while keeping a three-person staff busy.

 

“In a lot of ways, the last decade, an extra decade of my life, has been the happiest of my life,” Mr. Bogle said in 2008. “I’m contributing to society. I’m doing what I want to do. I’m writing what I want and saying what I want, and I think my name and reputation, for whatever that’s worth, have been enhanced.”

 

Mr. Bogle wasn’t afraid to criticize his own index fund creation — which he wrote may have grown too large. In an op-ed for the Wall Street Journal in 2018, he warned that the concentration of ownership created by indexing firms presented a threat to the markets.

 

Three index fund managers dominate the field with a collective 81 percent share of index fund assets: Vanguard has a 51 percent share; BlackRock 21 percent; and State Street Global 9 percent.

 

“Most observers expect that the share of corporate ownership by index funds will continue to grow over the next decade. It seems only a matter of time until index mutual funds cross the 50 percent mark. If that were to happen, the ‘Big Three’ might own 30 percent or more of the U.S. stock market — effective control. I do not believe that such concentration would serve the national interest,” he wrote.

 

Another institution that benefited tremendously from Mr. Bogle’s involvement was the Constitution Center, whose board he chaired from 1999 to 2007.

 

“Introducing the center to the nation with Mr. Bogle as chairman was a huge advantage,” said Joe Torsella, the center’s president at the time and now Pennsylvania treasurer. “It declared to the outside world that we were national and bipartisan, and aspired to the highest level of excellence.”

 

Mr. Bogle served on numerous boards during his career, including the board of governors of the Investment Company Institute, which he chaired in 1969 to 1970. He was also a fellow of the American Philosophical Society and the American Academy of Arts and Sciences. He received honorary degrees from a dozen universities, including his alma mater, which also bestowed on him its highest accolade, the Woodrow Wilson Award, for “distinguished achievement in the nation’s service.”

In addition to squash, Mr. Bogle enjoyed tennis and golf, sailing, and summering at Lake Placid, N.Y. He kept his wits sharp by daily attacking the New York Times crossword puzzle, which he was known to complete in less than 20 minutes.

 

Mr. Bogle especially loved to write. Most recently, he published Stay the Course: The Story of Vanguard and the Index Revolution” (Wiley, 2018).

 

“I don’t think there’s an author who spent greater care on the words he chose,” said Falloon, the Wiley editor who worked with Mr. Bogle. “When he did a book, he was so meticulous; he’d rewrite and rewrite. He always went the extra mile to make sure there wasn’t a single person who could not understand what he was saying.”

 

Despite the heavy demands on his time, Mr. Bogle put his family first. When his children were growing up, he was almost always home for dinner.

“This was our time to talk to each other and find out what was going on in each other’s lives,” Andrew Bogle recalled. “Looking back now, I find it remarkable that he was able to work as hard as he did but still say, ‘This is a priority and what I’m going to do — be home every night.’

”Another family rite revolved around the Fourth of July, a holiday that evoked Mr. Bogle’s strong sense of patriotism. Children and grandchildren gathered at the family camp on Lake Placid. They sang patriotic songs (Lee Greenwood’s “God Bless the USA” was a favorite), and Mr. Bogle raised a toast to the country of which he was so proud.

 

“My dad may have seemed like a hard-charging businessman, but underneath there was real emotion and care and concern and empathy,” said daughter Barbara. “Even as he became more prominent, he did not change within the family. He remained a man without pretense and pomposity.

<“When he had the heart transplant, it changed him dramatically. He became much more connected to the family. He was very emotional, and teared up easily over things. He was literally reborn, and he really appreciated the chance of having a second go at life.”

 

“It’s about being a good husband, a good father, a good colleague, a good member of the community. Everything else pales by comparison. The accumulation of material goods is a waste — you can’t take them with you, anyway — and the waste is typified by our financial system. The essential message is, stop focusing on self and start thinking about service to others.

 

In addition to his son and daughter, Mr. Bogle is survived by his wife, the former Eve Sherrerd, whom he married in 1956; children Jeanne Bogle England, Nancy Bogle St. John, Sandra Hipkins Bogle, and John C. Bogle Jr.; and at least 12 grandchildren.

A private service will be held next week.

 

FOCUS On POVERTY alleviation, not income creation for billionaires–Mahathir’s outdated policy prescriptions

January 16, 2019

FOCUS On POVERTY alleviation, not billionaires —Mahathir’s outdated policy prescriptions

by P. Gunasegaram

QUESTION TIME | When Prime Minister Dr Mahathir Mohamad sank low to say that wealth should be distributed equally among races, he indicated plainly that he has no solid plan to increase incomes and alleviate poverty for all Malays and Malaysians. His priorities are elsewhere.

Note that he talks about the distribution of wealth, not increasing incomes, which is more important because this is what will eventually result in a proper redistribution of wealth by valuing fairly everyone’s contribution  to wealth creation.

During his time as Prime Minister previously for a very long 22 years from 1981 to 2003 out of 46 years of independence at that time – nearly half the period of independence – he had plenty of opportunities, but squandered them.

He did not care for the common Malay, but was instead more focused on creating Malay billionaires overnight through the awarding of lucrative operations handled by the government or government companies previously, such as roads, power producers, telecommunications and others.

He depressed labour wages by bringing in millions of workers from Indonesia, and subsequently Bangladesh and the Philippines, to alter the religious balance in Sabah. A significant number of them became Malaysian citizens over the years, altering the overall racial and religious balance in the country.

By doing that he let his own race down, many of whom were workers and small entrepreneurs whose incomes were constrained by imported labour. Even now, Mahathir has not shown a great willingness to increase minimum wages, which will help many poor Malays and bumiputeras increase their incomes.

As Mahathir himself well knows, distribution is not an easy thing. Stakes held by others cannot be simply distributed, but they have to be sold, even if it is at depressed prices as it was under the New Economic Policy or NEP, when companies wanted to get listed.

Instant millionaires

There are not enough Malays rich enough to buy these stakes, but many of them in the Mahathir era and earlier, especially the connected elite, became rich by purchasing the 30 percent stakes for bumiputeras that had to be divested upon listing by taking bank loans.

By simply flipping the stakes on the market at a higher price after they were listed, they pocketed the difference and became instant millionaires.

It was Mahathir’s brother-in-law – the straight, honest and capable Ismail Ali – who was the architect behind the setting up of Permodalan Nasional Bhd or PNB to hold in trust for bumiputera stakes in major companies. PNB now has funds of some RM280 billion and has been enormously successful in this respect.

But Mahathir, with advice from Daim Zainuddin who became his Finance Minister, still cultivated selected bumiputera leaders, many of them Daim’s cronies, and gave them plum deals. A slew of them who were terribly over-leveraged got into trouble during the 1997-1998 financial crisis.

The government, often through Khazanah Nasional Bhd, had to rescue some of the biggest ones, resulting in Khazanah holding key stakes in many companies such as Axiata, CIMB, PLUS and so on. Recently, the government has been talking about, not surprisingly, selling these stakes to investors, accusing Khazanah of not developing bumiputera entrepreneurship, which was not anywhere in its original aims.

It becomes more obvious what Mahathir is talking about. Redistribution of wealth now will come out of the selling of government (Khazanah) and PNB stakes to individual Malay entrepreneurs to equalise wealth distribution among the races. To make it more palatable, some willing Indian entrepreneurs, too, may be found.

The modus operandi will be to sell the stakes when prices are depressed and perhaps even to offer a bulk discount to these so-called entrepreneurs who, of course, will not only be among the elite, but who are cronies. That will ensure a steady flow of funds into Bersatu in future from donations to help make it the premier party in the Pakatan Harapan coalition.

Mahathir knows full well that equal wealth distribution is impossible – it’s never been done anywhere before and makes wealth acquisition disproportionate to intelligent effort and hard work, a sure recipe for inefficiency, corruption and patronage. As eloquently argued by prominent political economy professor Terence Gomez, patronage is king in new Malaysia – if it was cash during Najib’s time.

Mahathir does not have the wherewithal to lead anymore, if he ever had it in the first place. Eight months after GE14, he is still bereft of a plan to increase incomes and improve livelihoods. He needs to recognise he does not have one and that he stays in power because of the strength of the other parties in the coalition.

Wrong direction

The only way to close the wealth gap is to increase future incomes across all races. Anything else is the expropriation of other people’s wealth. In the meantime, the holding of wealth in trust by state agencies is perfectly acceptable because the income comes back to the government.

This can be wisely used to improve the quality of education, get better quality investments, raise productivity and hence labour wages, and provide equal opportunities for growth and innovation among all communities. As so many people have said before me, you can equalise opportunities, but not outcomes.

So far, 61 years of UMNO-BN have not managed to equalise opportunities for all as the government education system is in shambles, among others. And eight months of Harapan is heading in the wrong direction under Mahathir.

Despite Bersatu being a party expressly formed to fight for Malay rights, Mahathir’s party had the lowest support from Malays of parties looking after Malay rights, including Umno, PAS, PKR and Amanah.

He is still stuck in a mode to widen his rather narrow and vulnerable power base (his Bersatu won only 13 seats of 52 contested, the worst win rate of any party in the coalition) unethically by attracting tarnished MPs from Umno into the Bersatu fold, in the process willing to break agreements with other coalition partners and doing/advocating things which are against the principles of a properly functioning democracy.

He has also said he will not honour some manifesto promises, saying that these were made when Harapan did not expect to win the elections – a rather lame excuse. He has not even made solid moves to undo repressive laws introduced by his predecessor Najib Abdul Razak.

Mahathir, obviously, has no intention plan to improve the livelihood of the common Malay and all Malaysians;  he is stuck in old-school forced distribution which is injurious to the economy, maybe even fatal in the long term.

 Malaysians don’t want the creation of Malay (or any other ) billionaires from government wealth.

---

Old wine in a new bottle is still sour. E-mail: t.p.guna@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

 

 

Trump vs. the Economy

 

December 30, 2018  by Nouriel Roubini

https://www.project-syndicate.org/commentary/trump-behavior-causes-stock-market-drop-by-nouriel-roubini-2018-12

Between publicly chastising US Federal Reserve Chair Jerome Powell and escalating his trade war with China, US President Donald Trump has finally rattled the markets. While investors were happy to look the other way during the first half of Trump’s term, the dangerous spectacle unfolding in the White House can no longer be ignored.

NEW YORK – Financial markets have finally awoken to the fact that Donald Trump is US president. Given that the world has endured two years of reckless tweets and public statements by the world’s most powerful man, the obvious question is, What took so long?

For one thing, until now, investors had bought into the argument that Trump is all bark and no bite. They were willing to give him the benefit of the doubt as long as he pursued tax cuts, deregulation, and other policies beneficial to the corporate sector and shareholders. And many trusted that, at the end of the day, the “adults in the room” would restrain Trump and ensure that the administration’s policies didn’t jump the guardrails of orthodoxy.

These assumptions were more or less vindicated during Trump’s first year in office, when economic growth and an expected increase in corporate profits – owing to forthcoming tax cuts and deregulation – resulted in strong stock-market performance. In 2017, US stock indices rose more than 20%.

But things changed radically in 2018, and especially in the last few months. Despite corporate earnings growing by over 20% (thanks to the tax cuts), US equity markets moved sideways for most of the year, and have now taken a sharp turn south. At this point, broad indices are in correction territory (meaning a 10% drop from the recent peak), and indices of tech stocks, such as the Nasdaq, are in bear-market territory (a drop of 20% or more).

Though financial markets’ higher volatility reflects concerns about China, Italy and other eurozone economies, and key emerging economies, most of the recent turmoil is due to Trump. The year started with the enactment of a reckless tax cut that pushed up long-term interest rates and created a sugar high in an economy already close to full employment. As early as February, growing concerns about inflation rising above the US Federal Reserve’s 2% target led to the year’s first risk-off.

Then came Trump’s trade wars with China and other key US trade partners. Market worries about the administration’s protectionist policies have waxed and waned throughout the year, but they are now reaching a new peak. The latest US actions against China seem to augur a broader trade, economic, and geopolitical cold war.

An additional worry is that Trump’s other policies will have stagflationary effects (reduced growth alongside higher inflation). After all, Trump is planning to limit inward foreign direct investment, and has already implemented broad restrictions on immigration, which will reduce labor-supply growth at a time when workforce aging and skills mismatches are already a growing problem.

Moreover, the administration has yet to propose an infrastructure plan to spur private-sector productivity or hasten the transition to a green economy. And on Twitter and elsewhere, Trump has continued to bash corporations for their hiring, production, investment, and pricing practices, singling out tech firms just when they are already facing a wider backlash and increased competition from their Chinese counterparts.

Emerging markets have also been shaken by US policies. Fiscal stimulus and monetary-policy tightening have pushed up short- and long-term interest rates and strengthened the US dollar. As a result, emerging economies have experienced capital flight and rising dollar-denominated debt. Those that rely heavily on exports have suffered the effects of lower commodity prices, and all that trade even indirectly with China have felt the effects of the trade war.

Even Trump’s oil policies have created volatility. After the resumption of US sanctions against Iran pushed up oil prices, the administration’s efforts to carve out exemptions and bully Saudi Arabia into increasing its own production led to a sharp price drop. Though US consumers benefit from lower oil prices, US energy firms’ stock prices do not. Besides, excessive oil-price volatility is bad for producers and consumers alike, because it hinders sensible investment and consumption decisions.

Making matters worse, it is now clear that the benefits of last year’s tax cuts have accrued almost entirely to the corporate sector, rather than to households in the form of higher real (inflation-adjusted) wages. That means household consumption could soon slow down, further undercutting the economy.

More than anything else, though, the sharp fall in US and global equities during the last quarter is a response to Trump’s own utterances and actions. Even worse than the heightened risk of a full-scale trade war with China (despite the recent “truce” agreed with Chinese President Xi Jinping) are Trump’s public attacks on the Fed, which began as early as the spring of 2018, when the US economy was growing at more than 4%.

Given these earlier attacks, markets were spooked this month when the Fed correctly decided to hike interest rates while also signaling a more gradual pace of rate increases in 2019. Most likely, the Fed’s relative hawkishness is a reaction to Trump’s threats against it. In the face of hostile presidential tweets, Fed Chair Jerome Powell needed to signal that the central bank remains politically independent.

But then came Trump’s decision to shut down large segments of the federal government over Congress’s refusal to fund his useless Mexican border wall. That sent markets into a near-panic, and the government shutdown was soon followed by reports that Trump wants to fire Powell – a move that could turn a correction into a crash. Just before the Christmas holiday, US Treasury secretary Steven Mnuchin was forced to issue a public statement to placate the markets. He announced that Trump was not planning to fire Powell after all, and that US banks’ finances are sound, effectively highlighting the question of whether they really are.

Recent changes within the administration that do not necessarily affect economic policy making are also rattling the markets. The impending departure of White House Chief of Staff John Kelly and Secretary of Defense James Mattis will leave the room devoid of adults. The coterie of economic nationalists and foreign-policy hawks who remain will cater to Trump’s every whim.

As matters stand, the risk of a full-scale geopolitical conflagration with China cannot be ruled out. A new cold war would effectively lead to de-globalization, disrupting supply chains everywhere, but particularly in the tech sector, as the recent ZTE and Huawei cases signal. At the same time, Trump seems to be hell-bent on undermining the cohesion of the European Union and NATO at a time when Europe is economically and politically fragile. And Special Counsel Robert Mueller’s investigation into Trump’s 2016 election campaign’s ties to Russia hangs like a Sword of Damocles over his presidency.

Trump is now the Dr. Strangelove of financial markets. Like the paranoid madman in Stanley Kubrick’s classic film, he is flirting with mutually assured economic destruction. Now that markets see the danger, the risk of a financial crisis and global recession has grown.

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.