Chuck Klosterman is bloody brilliant

For example

“…you’d have to manufacture war after war to keep the economy alive.”

Fascinating!

Since the 1970s, this impoverished and remote remnant of the British Empire has positioned itself as a discount-soldier surplus store. Its best customer has been the United Nations’ peacekeeping operations. Today, on the post-Sept. 11 battlefield, Fiji is marketing for hire its 3,500 active soldiers, 15,000 reservists and more than 20,000 unemployed former troops.

…

Fiji, which has undergone four coups in the past 19 years, has the biggest military force among Pacific island nations and sends officers to study at war colleges abroad, including China, Malaysia and South Korea.

“We made a conscious decision to create an army bigger than we need to generate foreign currency,” said Lieutenant Colonel Mosese Tikoitoga, 46, senior officer and private army sales liaison in the junta led by Commodore Voreqe Bainimarama, a former UN peacekeeper.

“Our economy has no choice but to build armies, and it’s a good business. There are few other foreign investments. If we didn’t do this, our people would be in the street creating havoc.”

This story also contributes to our sensese of humour, with the likes of

Doug Brooks, president of the Washington-based International Peace Operations Association, a lobbying group for security companies that employ mercenaries, said, “Fiji is a vital part of the industry” – which he prefers to brand as “the peace and stability operations industry.”

War is, of course, a peace and stability operation (so, I might add, is genocide. Ratko Mladic was in the peace and stability operations industry). Also:

Sitiveni Ratuva, a sociologist at the University of the South Pacific in Suva, is waiting for Fiji’s lock-and-load economy to backfire.

“It’s unsustainable,” Ratuva said. “Their training is geared for engagement on the battlefield. Normal economies don’t facilitate jobs that require mercenaries. Otherwise you’d have to manufacture war after war to keep the economy alive.”

I’d like to have explained to me how Fiji is any different from some other countries. Jimmy Carter was the first president not to have/go to a war – and look what happened to his second term.

There is some bizarre, wonderful common sense to what Fiji has done. Other islands/countries have done similar things. Nauru, for example, ruinously rented itself out for financial shenanigans, and now houses an Australian detention centre (not for Australians, of course – we’d never do that to ourselves. Brown-skinned asylum-seekers, hell yes). Is prostitution better than being a mercenary?

If this isn’t an industry already, explain this one to me:

Raivoce, a 58-year-old decorated veteran of numerous UN peacekeeping campaigns, is no snake-oil hustler. He can ship a special forces-trained Fijian soldier to a private army like Blackwater USA in Moyock, North Carolina, or the London-based Global Strategies Group for a salary of about $1,700 a month. That’s about 3 percent of the $50,000 a month those same companies will pay for a retired and similarly seasoned U.S. or British combat trooper.

As U.S. lawmakers continue to investigate the Sept. 16 shooting incident in Iraq involving the State Department security contractor Blackwater that left at least 11 people dead, Raivoce says he doesn’t turn out “cowboys.”

“My boys know when to shoot and who to shoot,” he said of the men available to security consulting companies like as Killology Research Group in Jonesboro, Arkansas, and Instinctive Shooting International in Israel.

The UN’s Department of Peacekeeping Operations, the multinational force with an annual budget of $5.5 billion and about 100,000 personnel serving in 18 security actions globally, has 243 Fijian troops deployed in the Middle East, Africa and Southeast Asia. It sees Fijian soldiers as a cut-rate blessing. Eight Fijians have been killed in Iraq.

“Peacekeepers cost $1,030 per head per month,” said a UN spokesman, Nick Birnback. “That’s cheaper than fielding a NATO soldier.”

Fiji has observed that they need only other, greater, economies to manufacture wars (to keep their economies alive?), and they can do quite well. Particularly in this modern era of, with apologies to Gary Larson, inviting wars to which nobody wants to come. The simple fact is (Eco 1 students, this relates to labour as a factor of production) that wages, like prices, are determined at the margins in their own markets. One’s value as a Fijian is higher in the war-fighting market than in, say, the sugar-cane growing market. To some extent it relates to skills, but not so much. A Cuban man is not automatically worth more in baseball than on his village’s farm – but one who can hit home-runs certainly will be.

I can see the objection that some of us have, but it is, ultimately, only a sadness at the cynicism of a country attending to an industry such as war – but Fiji didn’t start that industry. It doesn’t start those wars. We should save our hand-wringing for our own countries, as they do start the wars, while raising poor people to face the military as their only source of health care or college educations. We could just as easily spend that trillion-odd dollars building and re-building shit all over the world, stabilising economies – and we could hire Fijian workers for that, too.

Alternatively, write an article about why people willingly work in factories that build weapons – goods, manufactured on an industrial scale, whose only possible use it to kill and maim. Or about why so many such factories are even in existence.

Iron ore, the little commodity with no market

Today’s story is BHP’s breaking from the peloton of iron ore producers, to push for a market.

BHP Billiton has broken with its iron ore rivals Rio Tinto and Brazil’s CVRD, calling for the commodity to be traded in a more transparent market like that seen for thermal coal rather than in the “outdated” benchmark pricing system.

During an analyst tour of BHP’s Pilbara iron ore operations this week, the carbon steel materials marketing head, Peter Toth, indicated his company was unlikely to gain a so-called freight premium from its customers next year.

Mr Toth said his company’s new strategy was to move its expiring contracts onto an “iron ore index”, with forward deliveries and financial swaps that better reflected the spot market than the “outdated” annual benchmark pricing system.

But to make the switch it is likely that BHP – the smallest of the top three iron ore producers – will need to convince Rio and CVRD to join its push.

A Rio spokesman yesterday said his company supported the current benchmark system and felt it was flexible enough to accommodate various pricing issues being discussed.

One can see their argument (BHP’s): during a commodities boom, one would like appreciating spot prices. It means profit. This bench-marking system, though, works thus (more or less):

1. Japanese or European steel makers strike a new price with ore suppliers in annual negotiations
2. That becomes the bench-mark price

Australian producers have typically been upset by this because, given their proximity to Asia (source of said commodities boom), they can transport ore more cheaply – and would like a premium price for that. This is still the stated concern (Brazil, though, mines ore of a higher quality – so retaliation is not off the cards).

On the side of the purchaser, however, there is the risk of large re-sets. China, for example, was very vocal last year, after a 19% increase followed a 71.5% increase the year before. The bench-mark is inefficient (a) because it presents annual, potentially very large, increases, rather than randomly-walking spot price, and (b) because, like China, you’re basically hosed by prices that land on you like a tonne of, well, iron ore.

There is an excellent interview, actually, between Alan Koehler and Jose Carlos Martins (from big Brazilian firm CVRD), concerning the process.

ALAN KOHLER: One of the more curious rituals in commodity markets is the annual negotiation of iron ore prices. Each year BHP Billiton, Rio Tinto and the biggest iron ore producer, Brazil’s CVRD, sit down separately with the key steel makers across the world and hammer out new prices. And remarkably, they come up with the same price. Last year it was 71.5 per cent increase across the board. This year it’s 19 per cent. I spoke to the head of CVRD’s iron ore division, Jose Carlos Martins, after a speech to the Melbourne Mining Club this week. Jose Carlos Martins, we have three dominant producers in the world of iron ore. Is it like OPEC now?

JOSE CARLOS MARTINS, EXECUTIVE DIRECTOR OF FERROUS MINERALS, CVRD: Far from it. OPEC is something built by governments. We are market – have nothing to do with governments.

ALAN KOHLER: It seems to be a cartel?

JOSE CARLOS MARTINS: Far from it. There is a lot of competition in the market, a lot of players.

ALAN KOHLER: So how come it’s exactly the same price rise for all the producers each year?

JOSE CARLOS MARTINS: It’s because there is a system in place which is called the benchmark system. Normally one player fix a price with one customer and this price spreads all over the market. It’s a way a lot of other products’ prices is established. Even in the steel industry, the price is established rather in this way.

ALAN KOHLER: But if there’s competition between the iron ore producers, why is there no price competition? Why don’t you undercut BHP and Rio Tinto?

JOSE CARLOS MARTINS: You have costs to cover. Mining is a very complicated industry. When you increase production, for instance, price goes up. This is an industry where you don’t have economies of scale. Nowdays, for instance, to increase production to supply customers, we are operating with higher costs. It’s a completely different system than other industries.

ALAN KOHLER: Do you have meetings with your competitors?

JOSE CARLOS MARTINS: No.

ALAN KOHLER: So how is the benchmark price conveyed to them?

JOSE CARLOS MARTINS: I don’t know. I don’t know. You have to ask them. What I think – it’s the benchmark price conveyed to our customers. We set the price with our customers. Our customers accept the price. Our competitors – I don’t care. It’s their decision. What is important for us is our customer accept our price. The consequence of it is a marketing decision that our competitors have to take a decision for themselves.

He will forgive me if, after only having just taught Oligopolies to my students, I am not easily convinced. Markets with few sellers just don’t work that way. Of course you care what your competitors do – it affects your revenue directly.

With regards to China it/herself, M. Martins had this to offer:

ALAN KOHLER: Obviously this time around, unlike the Japanese and European and Korean steel makers, the Chinese don’t think that the 19 per cent increase is good for them. To what extent has that to do with the Chinese Government or the steel mills in China?

JOSE CARLOS MARTINS: I think China is in a process of learning. They are becoming a market-oriented economy and the learning process is a very difficult process. They have been accepting the system. We sell to China several years so they have been accepting the benchmark system all of this year. This year, they would like to be the price setters but the process is very dynamic. We have six, seven people all over the world negotiating with various customers. I never know with whom the price will be fixed and the system in China was a little bit not so fast. They had to caucus between them several times, the Chinese steel makers, each one have a different situation.

ALAN KOHLER: Do you think they’ll ever get to the point where they’ll be big enough to be the price setters in China?

JOSE CARLOS MARTINS: Yes, I think they deserve it by the size they have. I think they deserve. I think they will, but they need to be faster in their decision making process.

ALAN KOHLER: Will that be next year, do you think?

JOSE CARLOS MARTINS: Maybe. But one thing is for sure, they need to be more… Their perception has to be more related to the world market because iron ore is a global market, it’s not only China, it’s global. So they have to adapt their perception, not only to the Chinese market, but the whole market and they have to be faster in their decision making process. Will you be looking for another price rise next year? I don’t know. It’s too early to say. I don’t know. It’s too early to say. Too early to say.

Only slightly obnoxiously paternalistic, but an excellent example of the hill, up which BHP is now attempting to battle. Martins seems honestly (or at least consistently publicly) to believe his market is competitive, and that China just doesn’t get it (although they’ve had some success). At the end of the day, producers get their money. That 71.5% increase, for example, was only partly made up of costs for the coming year: part was also getting back profits lost through the previous year, as the previous benchmark was left behind by other inflationary factors.

One can see the appeal, for companies. One belt of negotiation, and then stable prices for a year. If you negotiated a bad price, you build some indemnity into next year’s price.

The same will happen this year, and then people will be laid off, ‘things’ (cars, houses, buildings) will cost a lot more, inflation in the US will still, magically, only be 2% or so (I don’t know how they do it!).

There is, naturally, the other hand. Specifically, BHP’s plan. Having access to a spot price is only part of it:

Mr Toth said his company’s new strategy was to move its expiring contracts onto an “iron ore index”, with forward deliveries and financial swaps that better reflected the spot market than the “outdated” annual benchmark pricing system.

…

With regard to a new iron ore pricing mechanism, Mr Toth noted the success of the globalCOAL energy coal index, which connects big coal producers, such as BHP, Rio and Xstrata, with buyers.

A globalCOAL spokesman said his company had so far traded more than 67 million tonnes of physical and financial thermal coal on short- and long-term contracts since the start of the year.

The globalCOAL spot price of coal from Newcastle is $US76.95 a tonne, well above this year’s contract price of about $US52 a tonne, thanks to the loading constraints at the port.

The spot iron price in China is higher than $US150 a tonne – about twice the price of Australian iron ore including shipping to China.

A UBS analyst, Glyn Lawcock, said: “Perhaps over time, depending on the price indices chosen, [it] would be a step in the right direction towards achieving the freight equalisation.”

BHP has already threatened to sell some of its expanded iron ore production on the spot market in the absence of a freight premium.

The iron ore market is said to be tighter than it was before a 71.5 per cent price rise in 2005, and some analysts are predicting a benchmark price rise of at least 50 per cent.

So BHP is interested in more than just the price it can get for its ore: it is interested also in the prices that can be affixed to the contracts it has, to supply ore. That is another dimension. One can also see where resistance comes in: Non-Asian factories (or countries) and Brazil will not be able to participate in this so easily (the distance thing). Moreover, as we’ve seen with oil, big buyers of iron ore don’t want their prices to appreciate (or become volatile) on the backs of dickhead speculators, their leveraging and their carry trades (they sold off their orchestras).

If BHP is selling the contracts, of course, it will benefit from that. So, too, will other Australian companies but, being bigger than BHP, they are also less likely to go off messing about with a model that has served them very well for a long time. Which gets back to Jose Carlos Martins’ interview: non-competitive markets (e.g. oligopolies), especially those that are thus thanks to control over natural resources, do not much go in for the introduction of competitive market mechanisms.

If you have a market, with only a few players, and you let them play in that market for long enough, they’ll work out something that serves their interest best. Odds are, that’s what they have right now, and they won’t want to give it up.

India should speak to Nancy Reagan

Or at least, say, her skeleton.

The news is three-fold, and ever-entertaining. You guessed it: it also includes one or the other of Bernanke or Paulson.

Crude oil price likely to hit peak

Crude oil prices appear increasingly likely to hit a record in real terms reached during the second oil crisis in 1979, as nominal prices on Monday continued rising well above $90 a barrel.

…

The price leap came after Mexico said it was shutting about 600,000 barrels a day of oil output, or 20 per cent of its total, due to bad weather in the Gulf of Mexico. Authorities hope to restore output in the near term as the cold weather front moves away from the production and terminal areas.

Supply is down, price is up; peak is at. The US dollar is shit (and failing fast). Bad earnings continue to come in (assuming they aren’t delayed). Housing inventory is up; building jobs are down. One would expect ‘the market’ to react accordingly, right? That thing about fundamentals.

Wall St higher on rate cut hopes

Wall Street shares opened higher on Monday, with investors focused on an expected cut from the Federal Reserve later this week.

Oil prices set a new record high as the dollar plumbed fresh depths, while bond yields were higher in early New York trade.

…

“We look for the Fed to cut the Fed funds rate by 25 basis points to 4.50 per cent, while noting that economic conditions have deteriorated as inflation expectations receded,” said David Rosenberg, economist at Merrill Lynch.

Fundamentals indeed. Perhaps if they just began pumping Adderall straight in via the air-conditioning? One can only wonder. All the news points to one simple reminder: the people in charge of the money are doing exactly that. They are worried about money: keeping it and making it. They are not worried about the economy, or the fact that money and the economy are barely even within hailing distance of one another, anymore.

Meanwhile, our parade of idiot-Svengali “leaders” continues with Paprika-like non-abation. Specifically:

Paulson hails new era of India-US ties

Hank Paulson on Monday hailed what he called “a new era of cooperation” between India and the US while urging New Delhi to pick up the pace of financial and economic reforms and to resist curbs on capital flows.

…

“As recent experience in the region has shown, administrative restrictions of capital flows are blunt instruments and can have unintended consequences. They tend to inhibit efficiency and lose their effectiveness over time. I encourage India to continue liberalising such restrictions,” Mr Paulson said.

He said in the longer term, India should scrap other rules, such as those forcing banks to hold large amounts of government debt, as well as reduce requirements for banks to lend to certain sectors, such as agriculture, and remove caps on foreign investment in the financial sector.

“Limits on debt and equity financing and asset allocation restrictions on financial institutions are impediments to putting resources to their most productive use,” Mr Paulson said.

I wonder what mad-man Paulson’s audience thought had meandered into their midst.

Just imagine (if you will) the effect of anyone, anyone at all, attending to the US in such a manner. Or if Russia’s Secretary of State (equivalent) copied Rice, and showed up here to give support to anti-government groups while hectoring the Bush administration. Indeed.

Meanwhile, oil prices, the dollar and inflation remain anathema to ordinary newspapers.

Oil price ‘grounds’ N Korea fleet. Or, will we please start caring, now?

From the BBC, via worldnews:

Oil price ‘grounds’ N Korea fleet

North Korea has been forced to ground a fleet of Soviet-era military planes because of the high oil price, South Korea’s Yonhap news agency reported.

Fuel is being diverted for other training flights, Yonhap quoted a military source as saying.

The Antonov An-2 biplanes – of which North Korea’s air force is thought to have about 300 – are able to drop special forces behind enemy lines.

The planes, which can cruise below radar, carry some 12 soldiers.

North Korea’s impoverished economy has suffered from energy shortages for years, and rising oil prices have made the situation worse.

I don’t want to rain on their crazy parade, but it almost sounds as though I could bring those down by throwing some of the land-mines along their border at them (South Korea also being back in the land-mine business, as of a year or so ago*), as they flew overhead.

More to the point – it doesn’t sound, from the information we have – that they’re diverting the fuel to any sensible purpose. I was discussing this with a colleague, the other day. He had known someone (military) who had once commented upon never seeing a starving person in North Korea. Same with Guy Delisle. Our belief is that (i) the gaunt, famine-look crowd are off in the centre or to the north, or (ii – worse) are simply killed on the spot. ”Sorry chap, but you can’t work and we can’t feed you – here.” Would you be surprised? Because I wouldn’t.

So my colleague’s thought, with which I agree, is that one day, when we stop dicking around and just move in, we’ll be taught a whole new lesson in mass graves. I’m sure there’ll be a lot of hand-wringing and finger-pointing when it happens – why else would we have idiot Congressional members and cable news? It isn’t as though the signs were never clearly posted, though: we just had better world leaders to fry. We should just trade with China, explicitly. They can play in the UN and WTO, etc., just like the rest of us. We’ll help them with their unemployment, and they leave us the hell alone while we de-mine the North-South Korean border, move in and take their leaders to the Hague.

Just a thought.

*So here’s something that blows my mind. The list of countries producing land-mines is hard to pin down – only 133 countries signed the treaty (I think it’s like 151, now?), and few (sub-Saharan African) are used them anyway. The US has been making new ones – but they’re always easy to spot (the US and China are at least relatively unapologetic about it). What blows my mind, though, is how they get people to make these things?

I can see in China some weird nationalism – people in rural/remote areas may be manufacturing component parts without even realising it. But in the US, this goes beyond the fantasy of deterrence that we may (stress may) allow people building mini-nukes and ICBMs. A landmine is guaranteed to blow people in half, possibly leaving one of those halves alive, and is going to do it indiscriminately. What the hell?

”At least 36 states will face water shortages within five years.”

From the Associated Press, via Huffington Post:

The government projects that at least 36 states will face water shortages within five years because of a combination of rising temperatures, drought, population growth, urban sprawl, waste and excess.

“Is it a crisis? If we don’t do some decent water planning, it could be,” said Jack Hoffbuhr, executive director of the Denver-based American Water Works Association.

…

“We’ve hit a remarkable moment,” said Barry Nelson, a senior policy analyst with the Natural Resources Defense Council. “The last century was the century of water engineering. The next century is going to have to be the century of water efficiency.”

The price tag for ensuring a reliable water supply could be staggering. Experts estimate that just upgrading pipes to handle new supplies could cost the nation $300 billion over 30 years.

“Unfortunately, there’s just not going to be any more cheap water,” said Randy Brown, Pompano Beach’s utilities director.

I vote that we call it Peak Water – there is still freshwater to be had, but the cheap and easy stuff is pretty well gone, and to get the rest we need (recycling, desalination) will cost a shed-load of money.

In this, as per a conversation with a colleague yesterday, it would seem that Australia has (had?) the opportunity to take their drought and make lemonade (water-less lemonade). Rather than just, say, moaning about Ethanol mandates, squabbling over river allocation/referral powers or cooking up publicly-underwritten boondoggle projects.

We’re like the drought New York: if you can make it there, you can make it anywhere. A decent Apollo-type project, with the likes of the CSIRO and anybody else who wanted to join in, could have pursued every good idea for getting freshwater to keep up with the population (including agriculture).

In the US, the government could chop the legs off of all those idiot farm subsidies and fund quite a bit of such research – benefitting farmers greatly, at the other end. Desalination is a phenomenally expensive – and energy-intensive – ’solution’. It would behove the US, who has some 280 million more people than Australia anyway, to work now on that ounce of prevention, because there really are no cures for running out of water (particularly where agriculture and eco-systems are concerned).

Just beware – the first thing the government will (usually) try to do is privatise anything that doesn’t run away on sight. This is not a problem that any government gets to pretend it isn’t supposed to be solving. It is exactly the sort of problem that a government is supposed to be solving.

Ecuador: Ronald Coase, super-sized

No, seriously. I just noticed this over at China Dialogue (I haven’t read it, in a while):

Oil has been pumped from here for almost four decades and the result, say environmentalists, is 1,700 square miles (4,400 square kilometers) of industrial contamination, with rivers poisoned, wildlife wiped out and humans falling sick.

But now, mindful of the environmental and political cost, the state has made a startling proposal: if wealthy nations pay Ecuador $350 million a year – half of the estimated revenue from extraction – it will leave the oil in the ground.

Supporters say it is an idea whose time has come, a logical step forward from carbon offsetting, in which rich polluters in developed countries compensate for environmental damage caused by their consumer habits.

I have mentioned this problem, vis. carbon off-setting: so-called cap-and-trade works precisely because both “cap” and “trade” are in play. Voluntary carbon-offsetting markets stand to make some money from the “trade” but, without the “cap”, creating a new market for a service is, by and large, as much as we may reasonably expect to achieve (this is not to suggest that such enterprises do nothing: they just won’t do enough).

Hence, the brilliance of the Ecuadorian plan. Rather than, say, making small ’saves’ of bits of Amazonian rainforest, one of the big causes of deforestation (at least in this region) could be halted (next: McDonald’s lettuce!). The price we pay is less oil (marginally: amongst other things, Ecuador isn’t exactly home to any super-fields), and what we get is less of the damage that oil does – the question then is, does the world value the reduction in the reduction of the Amazonian rainforest enough to pay the USD350bn?

The flip-side, via CNN:

… critics wonder if the politically unstable Ecuador, which relies on oil for nearly half of its export revenues, can keep this promise to the international community or whether authorities are trying to have their cake and eat it, too.

…

The proposal’s detractors say Ecuador cannot ensure the park’s sanctity given political turmoil that has at times halted oil operations and has made Correa the eighth president in 10 years.

“Correa is asking the international community to dive in to see if there is water in the pool,” said Daniel Erikson, an analyst with the Inter-American Dialogue, a Washington-based think tank.

Bloody interesting idea. Hell, even if it is just a scam by the Ecuadorian President to nick a few cheeky billion from the rest of us, it’s still a cool way to try it.

David Corn and Bloggingheads.tv

David Corn has (again, finally) featured in half of a recent episode of bloggingheads.tv, with a fellow by the name of James Pinkerton. If nothing else, it’s a reminder of how debate, dialogue and discourse are supposed to work. Also David Corn is freaking awesome.

Episodes highlights/contents:

Who does Christendom exclude? (05:37)

Is Turkey starting the next Middle Eastern war? (07:25)

Will one of these Republican losers win in ‘08? (09:46)

God doesn’t play dice. She plays baseball (12:50)

Spitzer’s immigration problem (13:17)

Does Christendom need defending against Islam? (16:21)

Saudi king tries to grow modern ideas in desert

Bloody interesting.

King Abdullah of Saudi Arabia is staking $12.5 billion on a gargantuan bid to catch up with the West in science and technology.

Between an oil refinery and the sea, the monarch is building from scratch a graduate research institution that will have one of the 10 largest endowments in the world, worth more than $10 billion.

Its planners say men and women will study side by side in an enclave walled off from the rest of Saudi society, the country’s notorious religious police will be barred and all religious and ethnic groups will be welcome in a push for academic freedom and international collaboration sure to test the kingdom’s cultural and religious limits.

…

For the new institution, the king has cut his own education ministry out the loop, hiring the state-owned oil giant Saudi Aramco to build the campus, create its curriculum and attract foreigners.

It all sounds vaguely Syriana-ish – not to mention wonderful! I’d work there. If only they had some medieaval art for my (Jewish) wife to study. So…

Upon completion, the energy-efficient campus will house 20,000 faculty and staff members, students and their families. Social rules will be more relaxed, as they are in the compounds where foreign oil workers live; women will be allowed to drive, for example. But the kingdom’s laws will still apply: Israelis, barred by law from visiting Saudi Arabia, will not be able to collaborate with the university. And one staple of campus life worldwide will be missing: alcohol.

The university president will be a foreigner, and the faculty members and graduate students at first will be overwhelmingly foreign as well. Generous scholarships will finance the 2,000 graduate students; planners expect the Saudi share of the student body to increase over the years as scholarships aimed at promising current undergraduates help groom them for graduate studies at the new university.

The university’s entire model is built around partnerships with other international universities, and faculty members are expected to have permanent bases at other research institutions abroad.

The university will also rely on a new free-market model. The faculty members will not have tenure, and almost all of them will have joint appointments. While the university will initially be awash in money, its faculty and graduate students will still have to compete with top international institutions for the limited pool of private money that underwrites most graduate research.

Very impressive.

“Perhaps the new Copernican revolution is the discovery that the world economy does not orbit the US.”

Nice line.

Which leads to the challenge of picking the odd one out: Warren Buffett, Hu Jintao, Don Argus, Peter Costello.

According to Buffett, the subprime wash-up will hurt for up to two years, but the US economy overall will move forward. (The Sage of Omaha is in South Korea inspecting the local subsidiary of the Israeli industrial tools company he bought last year – just another little bit of globalisation.)

According to Argus, commodity demand and prices are staying high despite US weakness. The chairman told the BHP AGM in London overnight that Chinese growth is continuing and India is following it, 10 or 15 years behind.

According to Hu, well, according to the Chinese government, September quarter growth printed at an annualised rate of 11.5 per cent, down a fraction from the June quarter, but the same as the annualised rate for the first nine months of the year. China’s about to overtake Germany as the world’s third biggest economy.

And Prophet Pete Costello is predicting extreme difficulty ahead which will turn into Armageddon if Labor wins the election and he’s not given the chance to be prime minister.

The line of the day goes to Macquarie Bank international economist Mark Tierney: “Perhaps the new Copernican revolution is the discovery that the world economy does not orbit the US.”

Lovely.