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De-globalisation of finance looks here tostay

By Peter Thal LarsenThe author is a Reuters Breaking views columnist. The opinions expressed are his own.

The global financial system is becoming more national. Three years after Western taxpayerswere forced into a mass bailout of banks, Western lenders are in full retreat, encouraged byregulators and governments.

In the two decades leading up to the financial crisis, national borders became steadily lessimportant in finance. The crisis made it clear that nationality does matter, because domestictaxpayers ended up supporting banks, including their far-flung operations. The crisis alsoshowed that banks had too much leverage.

European banks are now leading a backwards charge. According to Barclays Capital, euro

zone lenders had $1.2 trillion of assets in emerging markets in mid-2011 double the amountjust seven years earlier. A significant chunk of those assets are supported by the parent bankscapital and funding. With capital scarce and funding costs high, retreat is the only option.

Europes banks are also pulling back on the business of lending in dollars, which were oftenborrowed from U.S. money market funds. After U.S. investors fled from Europe last year,that business looks too risky. Though the funds may be returning to the euro zone, banks arelikely to remain wary.

Post-crisis regulation is contributing to de-globalisation. Capital-short banks in Europe andelsewhere have sold foreign businesses. And the UK government has accepted therecommendation of its Independent Commission on Banking to ringfence domestic retail

banking operations, making foreign and investment banking units less appealing. The U.S.Federal Reserves latest stress tests effectively punished big U.S. lenders with extensiveEuropean operations by requiring them to be able to withstand a euro zone meltdown. AndCanada and Japan fear the U.S. Volcker rule, which bans proprietary trading, will forcelenders out of foreign sovereign debt markets.

At least the Basel Committees new bank capital regulations are designed to be implementedon a global basis. But other financial rules are less universal. For example, Europe is pushingahead with the Solvency II framework for insurers, even though the United States is showingno sign of following suit.

Governments also want financial institutions to concentrate their efforts at home. Politiciansno longer see any advantage in hosting global financial champions, but stress the value of

lending to local small businesses and consumers. Commerzbank declared last year that itwould stop lending outside Germany and Poland. Austrian banks are under orders to limittheir exposure to central and eastern Europe. Some European lenders are also under pressureto buy their home governments bonds.

Does this de-globalisation matter? The adjustment is clearly painful for countries that hadcome to rely on cheap capital from the West. The Institute for International Finance predictsthat net capital flows to emerging markets this year will drop by almost a fifth to $746 billion

only slightly above the post-credit crunch low of $643 billion. This will make credit moreexpensive, perhaps hindering economic growth.

But the financial fragmentation of the past three years should not be exaggerated. Capital can

still flow freely in and out of most developed countries. The worlds most ambitious cross-border financial experiment, the euro zone, is still just about intact. The only explicit national

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capital controls have been imposed by countries such as Brazil, which were worried aboutattracting too much hot foreign money not losing it. And cross-border trade has resumed itsupward trend, generating foreign exchange surpluses which China and others can still investaround the world.

In any case, some retreat was probably in order. The crisis showed the foundations of

international finance were less solid than previously thought. And financialinternationalisation does not always make sense. A recent study of seven western economies

the United States, Japan, Germany, UK, France, Italy and Spain by the consultancy OliverWyman showed that each is roughly in financial balance, and does not necessarily need toeither export capital or seek foreign financial support.

Nevertheless, the reversal is significant. For several decades, many Western governmentsembraced liberalisation and globalisation, in the belief that free markets would allocateresources efficiently and stimulate growth. That orthodoxy has been thoroughly discredited.But the cracks now appearing in the global financial system could lead to more undesirablefissures. A global outbreak of protectionism could be even more destructive than the financialcrisis.

Will Facebooks IPO cure our addiction or make it worse?

Tristan Stewart-Robertson Jan 31, 2012

Facebook is the easiest subject for news organisations were addicted.

Some readers have suggested thatFirstpostis obsessed with Facebook well, only in asmuch as everyone is obsessed. Its a mix of being a topic that 800 million people can relateto, and that is very easy to blab on about.

But it is occasionally newsworthy. If it goes public as expected, Facebook will become one of

the richest and most powerful businesses in the world even more than today. It holds somuch of our personal data and web choices that there are resulting questions we need to askabout what happens next to that data in a firm that will now be driven by a bottom line forshareholders. Its not like that drive for profits has ever gone bad, right?

Facebook and Google are the two giants competing to control information, evident just lastweek when Google merged all its subsidiary privacy policies into one giant one, which theycalled simple. It will allow a better analysis of everything an individual does online andtailor advertising to that person. Facebook wants to do exactly the same thing, by turningyour pictures, posts and shares into money.

If and when Facebook goes public, their bottom line will demand this even more. During the

weekend, the Sunday Postnewspaper in Scotland ran a front page story warning thatFacebook Addiction Disorder (the appropriately abbreviated FAD) was tearing familiesapart and demanded a government inquiry recognition of the problem by the NationalHealth Service.

Lawyers are citing Facebook as a reason for marital breakdown, according to the paper, withone solicitor quoted: Social media is increasingly becoming a big factor in divorce casesacross the UK, whether its due to one partner spending too much time on these websites orusing them to flirt with other users or cheat on their partners.

http://www.firstpost.com/author/robertsonhttp://www.firstpost.com/author/robertson

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With Facebook going public, needing to make profits for shareholders, the motivations forthe website's design might come under more scrutiny. AFP

A neuroscientist, Baroness Susan Greenfield, told the paper it was social media was makingordinary people feel global. . . giving them a feeling of huge power and status. She added:You can see why they would get addicted to it.

Addiction can manifest itself in various forms Facebook might indeed be an outlet likeany other: drugs (prescription or illegal), alcohol, gambling, sex, etc. All the businesses

behind such outlets have been held responsible at some point for hooking addicts and notdoing enough to offer assistance or resistance. But not Facebook. Social media has been

treated as a mere tool, a somewhat personalised website that is an outlet for thoughts andconversation.

So its not been held to the same standard as products such as alcohol or cigarettes whichhave a demonstrated physical harm resulting from addiction.

With Facebook going public, needing to make profits for shareholders, the motivations forthe websites design might come under more scrutiny.

The timeline feature is really designed to keep you on the site longer, allowing easieraccess to your own or anyone elses digital posts, providing endless hours of entertainmentand distraction. That makes Facebook money and will satisfy shareholders. But it might alsocause more harm resulting from addiction. That could result in more court cases and

headaches for shareholders.Is it impossible to imagine shareholders will push changes to Facebook to lessen privacy, orincrease the need we have for spending time on it?

There is another possibility. Facebook users do complain every time theres a change to thesite, and sometimes that gets action. Now, well be able to buy parts of the company. Mostwont be able to afford the likely high initial price of company stock, but in time, an OccupyFacebook campaign could wrest control away from billionaire and site chief MarkZuckerberg, and improve privacy and make Facebook more of the original communicationtool it was intended to be, rather than a tool of corporate addiction.

The Sunday Postarticle included comments by addiction specialist Mike Delaney. He stated:

Its like a drug. Its very difficult to stop doing. Addicts constantly want to know whatshappening. They convince themselves theyre missing out if theyre not logged in.

http://www.firstpost.com/wp-content/uploads/2012/01/fbaddict.jpg

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That doesnt just sound like some Facebook users it sounds like journalists. FacebooksIPO might have significant effects on how the site exploits or facilitates its users. Regardless,it wont cure the media well need a fix of this site till the day it goes offline for good.

Jan 30, 2012 1 Comment

Investors are anxiously awaiting news of Facebooks impending IPO, but is the hypedeserved? Has the shine gone off Facebook? And does its ad business really deserve avaluation of $100 bn?

2 comments

Post as Sandy Dheer

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Sandy Dheer2 hours ago

Facebook's addiction perhaps has nothing to do with its up coming IPO,..as

both are on different lateral matrix...obsession for Fb and social net

working is the fad and fetish of one such community who lives in virtual

connect, where investment bankers and market investors play on a

different platform

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