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Generational Dynamics Web Log for 15-Aug-2010
15-Aug-10 News -- Talk of a coup in Pakistan

Web Log - August, 2010

15-Aug-10 News -- Talk of a coup in Pakistan

Bond yields for Greece, Spain and Ireland once again at crisis levels

Pakistan floods become epic disaster

Saturday was the 63rd anniversary of Pakistan's Independence Day, but the celebrations were muted by the unfolding and growing catastrophe facing the country, with 20 million people were homeless from the floods, according to Pakistan's prime minister Yousaf Raza Gilani, and the torrential monsoon rains are continuing. Cholera is spreading, and many isolated groups of people are starving because the floods have destroyed food supplies.

U.N Secretary-General Ban Ki-moon is visiting Pakistan to see the devastation for himself. VOA quotes him as saying, "We will try to mobilize all necessary assistance. And remember that the whole world is behind the people of Pakistan in this time of trial."

The United Nations has appealed for $459-million to deal with the immediate aftermath of the floods, saying billions of dollars will be needed in the long term. However, aid organizations are surprised that financial aid has been very slow in coming.

In his Independence Day speech, Gilani compared the ongoing disaster to the huge genocidal war between Muslims and Hindus that followed the 1947 Partition that created Pakistan and India. Pakistan's Daily Times quotes him as saying, "The nation will confront the challenges as it did at time of Partition, with the blessings of Almighty Allah. This time too we shall succeed."

Little help from the international community

In the speech, Gilani appealed to the nations of the world to aid Pakistan, but little aid so far has been forthcoming.

This has been a shock to aid organizations, who compare the aid received from individuals for the Pakistan floods -- about $10 million -- to the hundreds of millions of dollars donated for the South Asia tsunami in 2004 or the Haiti earthquake earlier this year, according to the Telegraph.

At the governmental level, the United States has been leading the way with $80 million in aid, and the UK is in second place, but many other countries have contributed little or nothing. The Daily Times asks, "Are Saudis, Iranis not Pakistan's friends anymore?" Except for Kuwait, Turkey and the UAE, no Islamic country has donated a penny to help Pakistan.

Saudi Arabia, which has given nothing to its Pakistan ally, donated $50 million to aid for the Haiti earthquake, according to an analysis by the Hindustan Times. The article provides three reasons why aid has been slow in coming:

Pakistan's government appears to be incompetent in handling the relief efforts for the floods, and would only waste the aid money.

Corruption is a big problem in Pakistan's government. This is something I hear all the time on the BBC. The fear is that any aid money will simply go into politicians' pockets.

The media have not portrayed the disaster well.

Another reason is provided by the Daily Times article cited above. It seems that during the 2005 Kashmir earthquake, India offered $500 million in aid to Pakistan, but "the offer was refused by Pakistani authorities in the first place and whatever was allowed in was let to rot at security checkposts on the border." This snub would not be easily forgotten by the Indians.

I personally would add one more reason. In the past six months, the mood of the world has changed. At the time of the Haiti earthquake early this year, it was widely believed that the financial crisis was over, and that the economy would experience a "V-shaped recovery" in the Spring, with a surge in corporate hiring.

Today, that mood has almost reversed. Both consumers and corporations are holding on to cash for fear that business will collapse again or that joblessness will go up again. (See "12-Aug-10 News -- Wall Street turns pessimistic.")

This change in mood is one more reason for the reluctance to provide aid to Pakistan.

Will Pakistan's government survive?

As I reported a few days ago, a protestor threw shoes at Pakistan's President Asif Ali Zardari during a speech in Britain last week. Now I'm shocked to read in the Guardian that several Pakistan cable television stations have been shut down for trying to broadcast the story of the shoe-throwing. There are additional bans affecting news coverage of the relief efforts, and this is on top of violence being perpetrated against some journalists.

When a government resorts to this kind of newspaper censorship, it's a sign that the politicians believe that the government is in trouble.

A constant theme of public criticism in the past week has been that Pakistan President Asif Ali Zardari didn't cut short his trip to France and Britain when the floods became disastrous.

Zardari is an odd figure in Pakistan's government. He would never have become President, had it not been for the assassination of his wife, Benazir Bhutto. Zardari is a Shia Muslim, in a largely Sunni Muslim government, where most of the power is in the hands of the army and the intelligence services, both largely Sunni organizations. And, of course, the Taliban are Sunni extremists.

Pakistan has had a number of coups in the last few decades, so it's not surprising that a coup is being discussed now. Thus, the Karachi News says that there's talk of the Pakistan army 'plotting the overthrow' of the Zardari government.

So far, this is just talk and rumor. But there's no doubt that Zardari is less popular than ever, and it would not be surprising at all if he were forced out of office.

Additional links

Corporations are going on a "borrowing binge" by issuing high-risk "junk bonds" at very low interest rates. Even though the bonds are very risky, investors are snapping them up, hoping to recover money they've lost in the stock market. WSJ (Access)

Something similar is happening in Europe, as yields on German bonds are falling, while bond yields for Greece, Spain and Ireland are once again reaching crisis levels. Bloomberg

India has reimposed a curfew in Kashmir, after four more protestors were killed when security forces fired into the crowd. Reuters

Russia's Foreign Ministry has formally thanked the United States for help in fighting the wildfires. Ria Novosti

Ten reasons why a stock market crash may be coming. #1: P/E ratios are too high. #2 The Fed is getting nervous. #3: Too many people are bullish. #4: Deflation is already here. Wall Street Journal (Access)

(Comments: For reader comments, questions and discussion, see the 15-Aug-10 News -- Talk of a coup in Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (15-Aug-2010) Permanent Link
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