World Bank’s Debt Ruins Developing Countries; Now Speculators’ $1 Billion Dollar Pay Might Just Bury Them


By J. Yanqui Zaza

The Perspective
Atlanta, Georgia
June 9, 2006


The Alpha magazine, published by Institutional Investor, reported that speculating or gambling corporations are now paying billions of dollars as annual compensations to chief executives. It would appear that currency speculation/gambling does not affect social programs such as education for a country that is far away from the US.

These are 4 of the 23 chief executives that made $130 million or more in 2005.

1) James Simons (Renaissance Technologies) $1.5 billion dollars
2) T. Boone Pickens Jr. (BP Capital Management) $1.4 billion dollars
3) George Soros (Soros Fund Management) $840 million dollars
4) Steven Cohen (SAC Capital Advisors $500 million dollars

The magazine reported these figures, which indicate that the two top executives trumped Edward S. Lampert’s $1 billion dollar compensation in 2004. Jenny Anderson also stated in the NY Times, dated May 26, 2006 that, twenty-three other CEOs made $130 million or more in 2005. For George Soros, this was not his first time. In 1992, according to the Financial Times of London, he wagered $10 billion dollars on the ups and downs of the British Pounds and made $1 billion dollar profits.

It is true that Liberia’s weak currency position is not attractive for traders/gamblers to speculate with. However, financial crises are not limited to a targeted country alone. Financial ruins might affect, for example, Firestone’s reserved funds, Liberian Petroleum Refining Corporation’s employee retirement funds. How? One possibility is that smart gamblers might sell overvalued currency or worthless bonds to a second gambler, which would be the brokerage firm that might receive and invest in the Firestone's reserved funds.

Another possibility is the global effect. According to numerous reports, financial crises generated by speculation have and continue to have ripple effects beyond geographic boundaries. For example, the trading or speculating of currency, interest rates, prices of commodities such as currency, interest rates, or oil in Mexico (1994), East Asia (1997-98), Russia (1998), Brazil (1999), Turkey (2000) and Argentina (2001) triggered financial crises. Institutional, as well as individual, investors incurred losses at stock exchange centers around the world during those financial crises.

By the way, why would Firestone’s employee retirement funds or Liberian Petroleum Refining Corporation’s reserves end up being part of the portfolios of Wall Street gamblers/ speculators? Profits. Currently, the demand for higher profits requires prudent managers to invest in risky portfolios. Additionally, specialists of retirement funds and analysts of Wall Street and the International Monetary Fund (IMF) usually recommend that excess/idle cash or long term investment be invested in risky portfolios. So George Soros and his fellow Wall Street gamblers do not have to scout hard for retirement funds of private and public employees of both developed and developing countries.

Searching for higher profits, speculators do not invest in the funds to create new products, discover new technologies, research life-saving medicine, or manage manufacturing corporations. They just bet on the ups and downs of currency, interest rates, etc and influence the movements. In a scenario of a currency speculation, they invest in a country’s currency and later influence the value of the currency to soar, and subsequently sell the investment to another gambler for super profits.

Heather Timmons, writing recently in the NY Times on May 18, 2006, described similar transactions about Iceland, a fishing island with a population of 300,000 residents. He said investors did borrow money in low rate environment like Japan and purchased higher yielding Icelandic bonds about five years ago. During subsequent years, Iceland was the best-performing stock market in the world and its housing market was hot, which attracted new buyers. Now the former investors are asserting that Iceland’s currency (Krona) is overvalued; meaning it is time to sell Icelandic bonds and search for a new target. Thomas concluded that the last investors and residents of Iceland are left with worthless bonds and a ruined economy.

So, according to The Wall Street Journal of April 16, 2006, just when leaders of developing countries thought that by paying off their debts the International Monetary Fund (IMF) would develop a state of “oblivion”, freeing leaders of its manipulation, new financial crises have emerged. Critics said the effects of the business of trading/speculating are not only devastating, but are worst than the effects of the failure by a country to pay its debt. They are also rapid and unpredictable, and the effects signal no warning. Global Policy Forum stated that, “speculation serves no real economic purposes. In general it further enriches institutions that think of investment in terms of short-term gain and not long-term stability,” including investing in education, roads, housing, etc.

Many poor countries, including Liberia, have and will continue to bear the burden of these gambling transactions. Therefore, our “Iron Lady” should join her colleagues and recommend regulations to avert any financial crises from the speculating and gambling institutions. Taxing the profits under the “Tobin Tax” as proposed by world leaders might not be enough to remedy the economic ruins as argued by William Hogan, professor of global energy policy at the Kennedy School of Government at Harvard. He frowned on how Enron manipulated the energy supplies in California by holding back electricity which forced the price of electricity to escalate. In concluding, he said the “Markets work only when they are carefully regulated, not controlled by private companies...”

Correction: In the article titled “Culprits of the 14-year civil war: Profiteers or Tribalists,” I erroneously mentioned Clarence Simpson, instead of Charles C. Dennis Jr. as one of the former Liberian government officials who were executed during the 1980 Coup only after the US Embassy in Monrovia denied him an asylum. In fact, Steven Solarce, a former US Representative from Brooklyn, New York and Chairman of the US House of Representative Subcommittee on African Affairs conducted a Hearing to determine why the US Embassy denied Charles C. Dennis Jr. an asylum.

© 2006 by The Perspective

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