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Wednesday, 30 April 2014

“And now that we stashed billions of dollars away from the American Internal Revenue Service, what are we going to do with it?!” Clueless American multinationals reveal their innovational and moral vacuum. Shareholders beware!

This morning, I was attracted by two different articles from the same printed, Dutch newspaper De Telegraaf ( And by coincidence, both articles were about gargantuous American corporations and they both represented the same problem of endless wealth-without-a-purpose.

Both articles could be summarized as follows:
  • It is one thing to legally(!) hide money from the American Internal Revenue Service;
  • However, it is another thing to find useful purposes for this “dead cash”, without having to move it to American soil administratively, where it would be subject to taxing after all. 

Besides telling something about the unscrupulousness of 21st century tax avoidance, the articles gave also valuable insights in the distorting effects of the continuous, extremely low interest rates, which have been maintained during the last 10 years.

These interest rates have had an enormous influence on the cash flows and profitability of large corporations. And now these corporations are holding such massive stockpiles of cash, that they really are clueless about what to do with it.

The following article came from the paper version of De Telegraaf. That is why there is no link available, unfortunately:

Apple cuts every corner, in order to not pay taxes for the many dozens of billions of dollars, that the company keeps outside the United States. At this moment, the company’s ‘war chest’ contains $150 billion, collected from past profits, of which $130 billion is stashed outside the US.

Repatriation of this money would mean that 35% of taxes should be paid for every billion that is taken home. Nevertheless, Apple – the world’s most valuable corporation – needs now billions of dollars to fund a vast stock buy-back program; these billions are borrowed currently. Last weekend, the word was spread that Apple is planning to deploy a series of bonds to the tune of $17 billion.

Last week, Apple announced that it is planning to buy back $90 billion in stock, instead of the earlier announced $60 billion.

And the next article in De Telegraaf was about the pharmaceutical behemoth Pfizer, which is planning to take over British/Swedish pharmaceutical company AstraZeneca for a ‘petty’ $100 billion.

The stock rates of giant pharmaceuticals in Stockholm, London, New York and Zurich have been jumping up and down, during the last few days. Investors are hooked on a game of Monopoly, which reminds the objective viewer of the merger and takeover frenzy of 2007. 

Central question: which company will get the best combination of blockbusters in hands during the coming years, now the money to finance mergers and takeovers is so amply available.

“We have an excellent track record, when it comes to takeovers”, according to financial executive Frank D’Amelio of Pfizer, yesterday during an unplanned conference call.

D’Amelio exhausted himself, while emphasizing which economies of scale the combination with the British/Swedish AstraZeneca would yield. The fact that hours earlier the Europeans politely, but resolutely showed him the door, will undoubtedly have helped with the decision to organize this conference call.

The rationale behind the takeover bid is simple: both companies are strong in cardiovascular diseases, which makes that economies of scale will be achievable. Further, AstraZeneca owns more and better drugs against diabetes and vaccines against a number of European diseases. 

Last, but not least, Pfizer has a stash of $70 billion in cash at (among others) the Cayman Islands, which would be taxed when being spent in the United States. Spending this money in Europe, to fund a takeover, will keep the money away from the US Internal Revenue Service.

The CEO of Pfizer, Ian Read, wants to split up the new company after the takeover, using an alternative division model. Old and familiar drugs would end up in one company, while auspicious – often biomedical – drugs and innovations would be stored in the other subsidiary. Both subsidiaries would be legally established under one, British holding, enabling the company to make use of the favorable tax regime.

To the objective reader both articles are merciless testimonies upon:
  • The massive stockpiles of ‘dead’ cash which are held by these large corporations nowadays;
  • The ruthless tax avoidance of the same corporations, revealing these companies as greedy ‘Scrooge-esque’ spongers, which do seemingly EVERYTHING to avoid paying a single dollar in taxes;
  • At the same time, the blatant cluelessness of these very corporations about what to do with their money. 

One of my first articles in 2011 contained a few snips about a nowadays more topical-than-ever subject, which cannot be seen lose from the aforementioned articles about Apple and Pfizer: to which country do the large, multinational corporations pledge their allegiance?

Peter Atwater, the eminent Professor of Minyanville and one of the brightest macro-economical analysts I know, wrote a very interesting article about it yesterday: Pledging Allegiance: Multinationals in an Increasingly Nationalist World.

The article discussed the fact that multinationals like Shell, Anheuser-Busch and General Electric cannot be “stateless” anymore, but have to choose very cautiously the passport they will be carrying. “It’s not what your country can do for you, but it’s what you can do for your country”. Those are words from arguably the most famous statesman, John F. Kennedy and almost those same words were used by President Obama lately, when addressing the multinationals.

Apple, an all-American corporation with strong Californian ties and countless US customers, rather borrows $17 billion through a bond deployment, than that it pays taxes for (parts of) the $130 billion in non-American money that the company already owns. 

Their message: “Yes, we make usage of the whole American financial, societal and physical infrastructure, but we don’t want to spend a single dime on taxes. Get the funk out of here!!!”

And for what purpose does Apple want to use this borrowed money?! For a not $60, but $90(!) billion stock buy-back program! Isn’t it fantastic?!

In my – not so humble – opinion, this is the clearest message that Apple’s innovation is caught in a vacuum of which it can’t escape anymore: perished after the unfortunate death of Steve Jobs.

I’m not a particular fan of companies, which pay out excess dividends to their shareholders or enter into vast stock buyback programs. That can’t be much of a surprise for regular readers of this blog.

While such buy-back events and excess dividend payments always seem moments of great happiness for the shareholders, I think that it is in reality an ‘early warning signal’ about the company that performs such actions.

Of course, there is little wrong with a one-off party for the shareholders. These were after all the people, who had the faith to invest in your company and who enabled it to grow to something great. As a company, it is good to show your gratitude to your shareholders every now and then.

However, too often it happens that large dividend payments and stock buy-back programs point at a blatant lack of smarter, better yielding investments and long-term goals within a company. And consequently, to a lack of long-term vision within the executive management of such a company.

This very behaviour of Apple leaves me no other conclusion, than that Apple seems doomed to become an investors nightmare: a cash cow that might soon turn into a dog!

Pfizer, the company mentioned in the second article, shows that it suffers from the same problem, although the symptoms differ considerably.

The company holds $70 billion in “dead cash” at one of the world’s most infamous tax havens, but it is too greedy [this is my opinion(!) - EL] to pay taxes for it in the United States. This, in spite of the fact that Pfizer is an all-American company, which again uses the whole US infrastructure to its own benefit.

This United States tax “mill stone” allegedly forces Pfizer to spend all their offshore money on AstraZeneca; not that they need this European company in order to survive, or ‘because they are worth it?!’. No, they don't! 

Many people know by heart that such mega-mergers seldomly yield the economies-of-scale, which were promised in advance and often rather bring the total opposite: billions in lost money on company and ICT restructuring and structurally worse results for both companies than before.

No, the reason is simply that Pfizer doesn’t know what else to do with the money stashed away, as ‘bringing it home’ is impossible in their narrow-minded thought process. Pfizer won't use their money to invent new antibiotics that the world so desperately needs nowadays, or to invent a new drug against malaria which could save millions of lives. These drugs will not be cash cows and therefore they are not worth investing in. 

Instead, Pfizer wants to buy AstraZeneca! Really! And afterwards, the whole future ‘Two companies & One holding’ structure of “PfizerAstra” seems to be established only to further avoid taxes. And this tax avoidance is enabled by the narrowminded European countries, which are involved in a ‘tax race to the bottom’. 

Shareholders, draw your conclusions about these two companies. Take the cash and “sell, Mortimer,sell!!!”

Monday, 28 April 2014

Rectification: Reaction to my previous article by Wilfred Nagel, Chief Risk Officer of ING Bank


Today I received a personal letter by Wilfred Nagel, Chief Risk Officer of ING Bank.

He challenged some of the conclusions that I made in my previous article “Wilfred Nagel, CRO of ING: “Small and Medium Enterprises should collect more equity money, instead of borrowing money at the banks” and he pointed me at the poor research that I did, before writing that article.

Nagel argued that a number of questions that I asked in my article, had already been answered in ING Groups annual report.

With this article, I want to rectify some of the unfounded statements in my previous article. Besides that, I want to apologize to him and to ING in general for the poor research that I did.

In the remainder of this article, I will print the questions that I asked in the aforementioned article and the answers that I received from Wilfred Nagel today.

My question: Are there very risky assets on the balance sheet or are most assets virtually risk-free?

Wilfred Nagel’s answer: The risk rating breakdowns can be found in the risk section of the annual report. The average risk rating is 13, which is 3 notches below investment grade.

My question: Are all assets indeed maintained at real market prices nowadays?

Nagel’s answer: An overview of the various accounting classes is also printed in the annual report.

 Loans are accounted against nominal value, minus provisions. Most bonds are accounted at AFS (available-for-sale) or Trading level: both levels mean om practice ‘marked to market’. 

The number of Level 3 assets [i.e. assets, measured by using 'valuation techniques that incorporate inputs, which are unobservable and which have a more than insignificant impact on the value of the instrument' - EL] is minimal. Besides that: the IFRS prescribes very exactly how these assets should be measured, and in practice this is subject to assessment by EY accountants.

My question:  Did the banks sufficiently write off on their previously overvalued assets, like residential and commercial real estate, sovereign bonds and mortgage backed securities?

Nagel’s answer: The policy, as well as the methodology and the numbers have been printed in the annual report. We follow the IFRS in this matter, by the way, and the DNB, aided by CBRE and BlackRock, have performed an investigation on our real estate, which did not deliver any problems. This has been printed in all newspapers.

Every quarter, we valuate all our problem loans, looking at the cash flow of the customer and at the fair value of available securities and pledges. Half of what we call NPL (non-performing-loans) does actually not have an arrears yet, but has a 50% risk of getting into problems within the next 12 months. In this matter, we are actually very conservative.

This is also applicable to our residential mortgages: we do not only count the mortgages which are 90+ days in arrears, but also the mortgages that have been in arrears, but are currently not anymore. This happens during a time frame of six months, after the arrears has been resolved.

The difference between this approach and the Basel definition (90+ days only) is approximately 0.7%. Hence, we are showing 1.9% of arrears, but according to the Basel approach – which is maintained by Rabobank and ABN Amro – it would only be 1.2%.

Last, but not least: you talk often about real estate on the bank balance sheets. We hardly own this: this is about loans that should be valuated. Some of these loans have real estate as a pledge. However, that is something totally different.

My question: Or are there still dead bodies everywhere?!

Nagel’s answer: The word ‘still’ is totally misplaced. And the answer is NO!

My question: How many loans to private and corporate customers run a risk of not being paid back?

Nagel’s answer: 2.8%. This is mentioned in the annual report, just as the size of the watch list.

My question: How many houses and office buildings, carrying a mortgage, are currently underwater?

Nagel’s answer: 33% of the housing mortgages are currently underwater. I don’t know the number for Commercial Real Estate by heart, but it is much lower. The average loan-to-value for CRE is 77%

My question: How many of their private and corporate mortgagers are in arrears these days?

Nagel’s answer: 1.9% of the residential mortgages and 10.7% of the Commercial Real Estate. 

I can only thank Wilfred Nagel of ING for this extensive answer to my questions and for the valuable insights that he gave me today.

Sunday, 27 April 2014

“Minding the funding gap”! Why private investment in Dutch SME companies through the capital markets is a very risky step, with an almost certainly unfavourable outcome. My reaction to Mathijs Bouman’s column in Het Financieele Dagblad.

Mathijs Bouman, the distinguished economist of RTLZ television and columnist of Het Financieele Dagblad, wrote this weekend a very interesting column: he advised owners of Small and Medium Enterprise (SME) companies to turn away from bank financing and turn to the capital markets for capital funding.

Here are the pertinent snips of Bouman’s column:

We have another transition to make, which is at least as complicated. The art of funding, for the Dutch SME companies, should go through a dramatic turnaround process.

Our SME companies are too much dependent upon bank credit. More than 80% of financing in The Netherlands is delivered by the banks. This percentage has continuously increased during decades. In the United States, on the other hand, only 30% of funding money for SME companies has come from the banks and 70% from the capital markets.

The capital markets, were money lenders can lend directly to companies or were they can even participate in auspicious companies, have been virtually taken out of the equasion in The Netherlands.

This is bad for The Netherlands, as an enormous congestion has emerged in particularly this bank funding. In a report concerning The Netherlands, which has been published last Thursday, 24 April, economists of the OECD sketch the dire situation of SME funding in The Netherlands.

Since the middle of last year, the credit supply from banks to Dutch companies has plummeted. These days, the credit supply is over €11 billion euros less. 

Over 31% of the credit applications from SME companies is refused by the banks. That is even more than in Greece. In Germany, the refusal percentage is less than 2.5%. The companies that still do receive credit, moreover pay an even higher interest rate than elsewhere. 

Summarizing: bank credit is expensive, the banks are very frugal with handing it out and the SME companies are too dependent upon it. This is a precarious situation for an economy that is yearning for growth.

The reasons for Mathijs Bouman’s plea are crystal clear and they are justified: the banks are undeniably much less generous with loans and credit to SME companies, at this very moment.

At the same time, the interest rates that the Dutch banks demand, seem to be at an substantially elevated level currently, when compared to the Euribor and Libor interest rates and even with the interest rates in other European countries. This does not seem fair at first glance.

The million dollar question remains, however: is it save to invest in SME capital and will one be able to make any profit on it?

Unfortunately, this question does not have an undividedly positive answer. 

During my long-term commitment at the Business Lending department of one of the leading banks in The Netherlands, I noticed the growing reluctance of this bank to lend money to SME companies. This reluctance was not out of misplaced shyness or exaggerated cautiousness, but based on genuine concerns about the creditworthiness of Dutch SME companies.

The spills caused by defaulted companies and the extra expenses as a consequence of the extensive risk research and evaluation, outweighed the profits coming from the loans and creditlines; even with the elevated interest rates that the bank was forced to charge to its customers.

If even this strong bank, with its extremely adequate risk department and an elevated pricing level, was not able to make a decent profit on business lending, how could the private / corporate investors at the capital markets – with their (enormous) information AND legal arrears – do this anyway?!

Wilfred Nagel, the Chief Risk Officer of ING, wrote an interesting and important article on ING’s corporate website, a few weeks ago.

Here are the pertinent snips from a reaction that I wrote upon this very article, with snippets from the original article included:

Nagel: This does not of course detract from banks, and certainly also ING, applying a prudent risk policy. Many factors determine the customers that a bank lends to within the scope of its balance sheet, including the nature and duration of the relationship with the customer, the risk profile of the proposed loan, the price the bank receives for taking on risk, the extent to which the loan contributes to the creation of concentration risk on the balance sheet and the requirements of the sustainability policy being pursued. The importance of proceeding carefully in this respect, is underlined by recent experiences with lending to SMEs. Dutch SMEs made up 5% of ING’s total credit portfolio in 2013 but contributed 22% of the total addition to the reserve for loan losses.

Against this background, the question is what actual public interest is served by loosening credit standards applied to SMEs? And how does this relate to the aim of safer banks? In fact, banks are now being told to stretch their approval criteria, which is the same as calling for more financing (often of losses) and expansion instead of reducing SMEs’ dependence on debt.

Ernst’s Comments: I fully agree with what Wilfred Nagel states here. Investing in and borrowing to SME companies is extremely risky business in the current economic conundrum and it is very hard to make this a profitable one, even for such professional and experienced organizations as banks.

No investor or customer of a bank should accept that his bank takes too much risk with his equity capital and with the money that the bank borrowed from its customers. Banks should lend to SME companies , when the risk/reward ratio and the opportunities for success are favourable; not because the politics and the general public ‘demand’ that they do so.

Nagel: On top of this, a further strengthening of the capital positions of large Dutch banks will not lead to more lending to SME’s as this only works if both the bank and potential providers of capital are convinced that the investment will be used for profitable economic activity. In other words, granting capital to creditworthy parties at a reasonable return. Gathering capital only to jeopardise it by lending to parties that do not meet the minimum requirements is not a very productive strategy.

Those calling for a relaxation of bank lending to SMEs are, therefore, promulgating a sort of industrial policy at the cost of banks’ savers and providers of capital. This is not appropriate to a market economy and is particularly unwise given the need to increase not debt but equity of SME’s.”

Ernst: Nagel is totally right with these paragraphs. It is useless for banks to increase the unweighed capital ratio, if they use it to squander money, by lending it to not creditworthy (SME) companies.

Politicians, the employer’s associations and the general public can of course say as often as they want, that the banks should borrow more money to SME companies; these people are all entitled to their opinions. Nevertheless, as long as the banks run a much more than average risk of not getting this lended money back in the end, they should not lend it at all.

At this moment, the main problem in The Netherlands is that the cautious economic growth in Europe (and beyond) is not divided evenly over the whole Dutch economy.

Especially the large corporations and export-oriented companies can really profit from this economic growth and – to a lesser degree – a number of midsize companies, which specialize in business-to-business (b2b) supplying; especially when they supply to export-oriented companies.

However, many small b2b companies and business-to-consumer (b2c) companies / retailers and stores (even the large ones) are yet hardly able to profit from this economic growth, due to consumption seriously lagging behind.

This lagging consumption is mainly caused by the fact, that many companies hardly raised wages during the last six years and some companies were even forced to drop wages, to keep their heads above water. The employees of these companies actually got poorer in purchasing power during these years.

On top of that, the Dutch  unemployment is still at elevated levels and the consumer confidence – although slightly  improving – is not yet translated in more consumption; and why would consumption rise, when the prospects at the Dutch labour market are yet unfavourable.

You could call this a ‘Catch 22’-situation:
  • For retailers and SME-companies to be more successful and profitable and the economy to grow harder, consumption and sales should dramatically increase;
  • For consumption and sales to increase, the wages of people should be raised dramatically and to accelerate this process, productivity should go up substantially;
  • For the wages of people to dramatically increase and for speeding up the process of innovation, in order to increase productivity, the Dutch economy should start to grow again. 

This is the conundrum that we are in currently in The Netherlands, and as long as nothing dramatical happens, this conundrum is here to stay. 

Although the Dutch export success helps to slightly improve this situation, it is not sufficient by a lightyear to lift the whole Dutch economy into substantial growth. In order for this to happen, the influence of the Dutch export on the Dutch economy is yet too small.

This brings me to Mathijs Bouman’s column.

Although I do sympathize with him and with his cause very much, I do not agree with him.

Financial success for the investors, is a prerequisite for lending through the capital markets: in the end they must earn more money than they invest. 

Like I stated earlier in this blog, I do not see why funding SME companies through the capital markets could and would be more successful for the investors, than it is for the banks nowadays. Banks, which have performed this kind of SME lending for years and years already:
  • The banks have the best information position, because of their vast research and risk assesment departments;
  • The banks have ample experience with creating, maintaining and preserving the conditions, legal documents, securities and pawns, which are necessary for lending money to companies;
    • Private and corporate lenders, who would operate as lenders through the capital markets, would have to reinvent the wheel with respect to this subject;
  • The banks have – in most cases – a very long and intimate relation with their customers, enabling them to have better judgment than the capital markets, which generally don’t know the companies, applying for funding, by heart;
  • The banks also have favourable legislation to their advance, which enables them to be the second creditor-in-line, only preceded by the Dutch Internal Revenue Service.
    • Private and corporate investors would never be able to gain a similar position, without turning into a bank themselves. 

One should realize that it is an awkward situation that we are in nowadays. 

Although funding SME companies is a ‘condition sine qua non’ for the Dutch banks, it is not a very profitable business at this moment: sad, but true!

Therefore I consider the chance, that it could actually become profitable for private and corporate lenders through the capital markets, very dim.

I want to finish this article, by making a small calculation, concerning a quite realistic model situation: 
  • A group of investors has €100 million to spare for investment in Small and Medium Enterprise companies;
  • They want to make an annual profit of 5% on their investments (i.e. €105 million);
  • They lend the money to 1000 SME companies, of which 10 default;
    • For reasons of simplicity, I consider this to be a loss of €1 million , although the loss could actually be much bigger.
  • I estimate that the necessary operation, for maintaining a financial relation with 1000 companies, requires at least 15-20 personnel members, including automation and an office;
  • I also believe that €1 million in legal expenses are incorporated in the process.

If we set the annual expenses for this to €2,5 million (for the operation) + € 1 million, this leads to the following calculation:

Calculation for this particular example
Table created by: Ernst's Economy
Click to enlarge
This small and simplified calculation shows, that to make this a profitable business for the investors, the required interest rate for the SME companies should already 9.5% per annum in average.

And this is in the (peculiar) situation that the lending money is ‘excess money’ and does not have to be borrowed from the banks, by the investors themselves. 

The 1% default loss, which I chose in this example, seems certainly not exaggerated in the current economic situation.

Already this simple example shows how hard it is to make SME lending, through the capital markets, a profitable business. 

I am sorry: I sympathize with Mathijs’ idea, but I simply don’t see it happen.

Saturday, 26 April 2014

Will Russia cause World War III?! Not probably! Nevertheless, the situation is very unpredictable and consequently dangerous!

If one thing becomes clear about the mounting conflict between Ukraine and Russia, it is that its unpredictability makes this conflict very dangerous indeed. 

While all parties involved – Russia, Ukraine, Europe, the NATO and the US – pay lip service to the concept of détante and diminishing the mounting instability and warmongering, all their actual actions show the total opposite.

Like in all international conflicts, all parties involved in the conflict seem to have hidden agendas. This given has as a logical consequence, that there is a massive amount of propaganda and lying involved from all sides. No political leader involved in this conundrum should be believed at face value.

Nevertheless, the build-up of the whole story runs through very familiar lines:
  • The Russians are the ‘bad guys’; they have eagerly fulfilled this role since the Second World War, so what else is new;
  • The European and the US leaders, as well as the NATO, are obviously ‘the good guys’;
  • The new Ukrainian leadership wants to hook up with the European leaders and the NATO, so hey… when we follow the principle that ‘the enemy of our enemy is our friend, they must be the good guys too! 

It is needless to deny that Russia indeed hijacked the Crimean region with a sneaky, covert operation. 

There is also little doubt that Russia has substantial involvement in the mounting unrest in East-Ukraine. On the other hand, it should not be ruled out that there are genuine worries of the ethnical Russian population behind it, spurred by the earlier Ukrainian attempts to outlaw the Russian language and limit the rights of the ethnical Russians.

From an economic point of view, one should not forget that Russia has to defend its gas supply through the Ukraine (its ‘GDP lifeline’) and that the country wants to stay the number one energy supplier for Europe. As the Russian manufacturing industries – and as a matter of fact, the Russian economy as a whole – still lead a languishing existence, the delivery of gas and oil to Europe (or China) is Russia's bedrock.   

On the other hand, there is the situation with Vladimir Putin in his familiar ‘Marlon Brando’ role, as an insulted ‘capo di tutti capi’: Putin feels that he is not really taken seriously anymore in the Western world. In order to punish this ‘disrespectful’ Western attitude, Putin wants to take revenge. He does so, by constantly changing his approach, while setting the situation in the Ukraine to his hand – with continuous success. On Putin’s behalf, Ukraine seems merely like a game of chicken with the West, instead of the country being an area that he wants to conquer.

However, also the motivations of the Western allies are not so honorable and straightforward, as they might seem to the uninquiring bystanders.

The leaders of the European council all have their own worries: some of them want to show to the Kremlin who is really the boss and also that Europe is not dependent on Russian gas anymore:  a.o. French president François Hollande and – presumably – British PM David Cameron.

Others, however, (a.o. German chancellor Angela Merkel and Dutch PM Mark Rutte) want to preserve their very lucrative exports to Russia: they bark a little and go through the motions, but they certainly don’t want to bite…!

The best example of this schizophrenic politics lately was Dutch Foreign Affairs' Minister Frans Timmermans, who reluctantly cancelled a state visit to Russia with an extensive Dutch trade delegation, but categorically denied that this was a sanction, although it looked, felt and smelt like it.

The European Commission feels that the future of the European Union is currently on the line. This is due to the rise of leftwing and rightwing populism in Europe, with their anti-EU stance and their growing numbers of grassroots. This populism shocked the ‘middle of the road’ politicians, who now feel forced to openly question the blessings and the influence of the EU, in order not to lose more votes to the populists.  

That is why the European Commission is so eager to welcome ‘lost sheep’ Ukraine in its flock, in spite of the monstrous financial/economic burdens that such a step could have for the EU itself. In fact, so eager that the EC assumed the ostrich position and totally ignored the vast strategic consequences of this step for Russia and for themselves. The Ukraine is a country that is openly happy about the European Union and happiness about the EU is something that the European Commission really likes and cherishes.

And the NATO?! 

This organization has turned from the most important peacekeeping operation in the Western world into ‘an organization without a cause’. The NATO is frantically looking for a raison d’etre to substantiate its enormous budgets and massive ranges of weaponry. Nothing helps better to achieve this goal, than mounting tensions in the heart of Europe. And who can you better turn to in this situation than the ‘mother of all cronies’ Vladimir Putin, who is more than willing to help.

President Obama and the United States, on their behalf, feel that there is something to gain in the current explosive situation. They have their considerable amounts of shale gas, that they can sell to a Europe, which is sick-and-tired of the Russians and their gas.

As the situation is relatively safe and far away for the US, Obama can scream and shout at Putin, without having to fear any serious consequences. Even a regional war in Europe would have a very limited contamination risk for the United States. 

Besides that, it could be Obama’s chance to prove that he is "tough on… something!" It might prevent him from being forgotten in the future, as a non-descript and rather weak president.

And the Ukraine itself?! 

In my opinion, one bunch of parasites and scavengers on society has been replaced by another bunch: the first bunch were Putin’s friends and the second bunch are ‘friends’ of the West. Of all the good intentions that many people at Maidan Square had during the protests, most have probably flooded down the drain, in the current atmosphere of ‘divide and conquer’ that is ruling Ukraine. 

The current government seems to be a mixture of oligarch business-men, ruthless, opportunistic politicians and ultra rightwing fanatics, with a dark past and (probably) a dark future.

The Ukraine wants to become a member of the European Union AND of the NATO at the shortest possible notice. They want to do so, in order to tap in on the large subsidy flows coming from the EU and to escape from the Russian economic and military influence: by itself this is a logical and defensible step for them.

Obviously, the new Ukrainian government wants to be seen as the sole victims of the whole situation with Russia. To achieve this, the country is constantly pointing at the mounting tensions between Russia and the Ukraine and at the stationing of armed forces at the Russian borders: everything that Ukraine did was good and defensible, while everything that Russia did was bad!

On top of that, the new Ukrainian government is also busy with calling the ethnical Russian protestors terrorists, in order to substantiate their deadly military approach against them: hence, the ATO (Anti Terror Operation). 

In my humble opinion, however, the ethnical Russian protestors (distinguished from genuine Russian military infiltrators) are obviously not terrorists, as these people in fact hardly terrorize anybody. Instead, they defend their position, by taking over Ukrainian government buildings. However, the Ukrainian government calling the Russian protestors ‘terrorists’ fits in the atmosphere of deliberately mounting tensions.

This is the explosive and dangerous mix, which is at play in the Ukraine.

And today – like business as usual – the Western newsmedia (read: mainly the Anglo-Saxon newsmedia) were once again eager to print the next verbal outburst by PM Arseniy Yatsenyuk of Ukraine. The following snippets come from NBC:

Russia "wants to start World War III" and Moscow's veiled threats of military action could start an armed conflict in Europe, Ukraine's prime minister said Friday,

Arseniy Yatsenyuk made the comments a day after Russia said it had been "forced" to start fresh military drills just over the border because of increased activity by NATO and the Ukrainian military.

"Attempts at military conflict in Ukraine will lead to a military conflict in Europe,'' Yatsenyuk told a cabinet meeting broadcast live and translated by Reuters. "The world has not yet forgotten World War II, but Russia already wants to start World War III."

Russian President Vladimir Putin said on Thursday that Ukrainian attempts to drive armed pro-Moscow separatists out of occupied buildings across the east of the country would be met with "consequences."

Ukraine's operation against the separatists - whom the West says are backed by Russia - turned deadly Thursday amid reports that five pro-Russian militiamen had been killed in the city of Slaviansk.

"There has been no suspension of the ATO in connection to the threat of invasion by Russia's armed forces," Interior Minister Arsen Avakov wrote on his Facebook page, translated by Reuters. "The ATO goes on. The terrorists should be on their guard around the clock. Civilians have nothing to fear."

As far as I’m concerned, the whole story of ‘Russia wanting to start World War III’ is needless and pointless fearmongering, only aimed at involving the NATO in Ukraine’s situation. This is something that the NATO should not do and should not desire at all. As a matter of fact, it shows the desperation of the current Ukrainian government. Probably the whole situation will blow over in a few months, when everybody comes to his senses again.

Nevertheless, in this situation, in which five different parties all have different goals and keep their cards firmly to their chest, the situation could run out of hand very easily, when all parties are calling each other’s bluff.

I don’t believe in World War III and I certainly don’t want this to happen. Neither want the US, the NATO, Russia and the European Union, when they are in their right minds. 

Still, in this particular case, which is currently creating its own dynamics, everything could happen, unfortunately.

Tuesday, 22 April 2014

London and the 200 skyscrapers; how architectural renewal could turn a classic city panorama into a monster of concrete, glass and steel.

A few months ago, the Mrs. and I had the pleasure of visiting two of the most impressive cities in Europe within a short period of time: London and Paris.

The last time when I visited London, had been around 1986: although many things and many famous objects remained virtually the same, I was nevertheless flabbergasted when I saw how London had evolved and through which changes the city had gone, in the meantime. 

What especially ‘shocked’ me, was how the area around the London Tower, the Tower Bridge and St-Paul’s Cathedral had morphed into a ‘skyscraper extravaganza’. It was impossible to ignore how these aforementioned famous historic buildings were visually overpowered by the newly-built high-rises, like a.o. the Gherkin. 

Even if you don’t know London by heart, you get the picture when you watch the following ‘night shots’, which I took from the Tower Bridge and Waterloo Bridge:
Skyscraper Extravaganza around the
London Tower and St-Paul's Cathedral
Picture copyright of: Ernst Labruyère
Click to enlarge

Skyscraper Extravaganza around the
London Tower and St-Paul's Cathedral
Picture copyright of: Ernst Labruyère
Click to enlarge
When I visited Paris a few weeks later, it struck me how much more this city had been able to separate the high-rise office buildings in its various business centres from the historical heart of the city around the Seine, the Eiffel Tower and the Elysée. Although time had not stood still in Paris either, the new office buildings blended in much better and never detonated in the heart of the city.

This feeling was emphasized, when I once again saw the leader for the wonderful, classic UK series ‘House of Cards’, which originated from 1990: a helicopter view on a London that has vanished into history.
I had to think about this, when I learned this morning that London planned to build 200 skyscrapers (of which 50 office buildings and 150 residential buildings) in the coming years. I don't know exactly where these high-rise buildings will emerge and if there are already high-rises in those areas.
I do hope, however, that the architects in London will have the discretion, the modesty and good taste to not further ruin the city panorama and leave the heart of London intact. And what a heart it is…
Nevertheless, when I take the current situation around St-Paul’s Cathedral into consideration, I have worries that the whole city panorama might soon turn into a monster of concrete, glass and steel and that London’s historic buildings will soon look like anachronistic pimples on a modern, emotionless face.
Of course, I do understand the need for more residential and office space in a city that grows so quickly and hosts so many people as London. However, this must happen with the utmost precision and with an understanding for the history of this beautiful city.
Now we still have the time to prevent historic architectural blunders from happening, but if we don't beware, the chance might be gone forever. 
So please, people in London: save your city from being ruined by architects with wild ideas and without a sense of historical understanding! Take the lead and say no against plans which are bad for your city!