Category: Travel

Leaving Israel, August 11, 2006

This is the re-posting of an earlier note:

Hi from Home

Sorry for two notes so close together, but travel conditions today warrant an update after British authorities arrested 24 terrorists who planned to blow up 10 planes over the Atlantic yesterday. I left Israel this morning on Lufthansa with the Governor of the PMA heading for Washington DC. We assumed that we were on the same flights all the way. Thus in Frankfurt I followed him to his gate. After one hour of extra security procedures we arrived at the gate to discover that we were on different flights and I was in the wrong terminal. Thus I passed through another security check point in the correct area and boarded my flight. To my disappointment the plane lacked the sleeper seats I was expecting. I am afraid that I grumbled about it to the steward. Half an hour later my name was called along with 5 other first class passengers and informed that we were being moved to another flight using a 747 with proper seats. The steward whispered that it was because of my complaint. This, however, meant that we had to go through the original security check point yet again. This time they took away my toothpaste and other similar items from my PC bag. They were not impressed when I told them that all of these items had passed through there three hours earlier. Go figure. Anyway, I am home safe (except for the security warning about demonstrations in Washington against US support of Israel’s war against Lebanon).

I would like to share with you the experience last week of one of my fellow advisors at the Palestine Monetary Authority (PMA). He was leaving Gaza, where the PMA has a branch, to return to Ramallah where I was working when he and his driver come under fire from an Israeli tank. This occurred at the Palestinian side check point of the border crossing from Gaza into Israel (the only way to get to the other part of Palestine in the West Bank). The gun fire lasted three hours during which he spoke by phone from the floor of his car to the Governor of the PMA and the U.S. Embassy. He is a fellow American and was born and raised in Virginia. You will be shocked, as he and I were, at what the American Embassy said to him. The woman on the phone said that his name, Akram Baker, sounded Arabic and asked if he was of Palestinian decent. He said yes. She asked what he was doing in Gaza and informed him that the Israeli government does not want American’s of Palestinian decent in Gaza and that the U.S. government would not help him. Israel basically keeps Palestinians living in Gaza prisoners within Gaza and makes it very difficult for Palestinians to enter and leave Gaza. The PMA Governor contacted the Palestinian President Abbas who got the Israelis to call off their tank. We seem to have a new second class American citizen.

The day before this incident one of the PMA employees in Gaza and her daughter were killed by an overhead Israeli helicopter. Akram asked me how I would define terrorism and answered his own question by saying the UN defines it as terrorizing (intimidating, frightening, even murdering) civilians in order to promote some political or ideological goal. Doesn’t that describe, Akram asked, Israel’s continued use of collective guilt and pressure against Palestinians to pressure their government to control terrorists in their own midst. For example, placing dozens and dozens of check points throughout the West Bank to make it difficult for Palestinians to travel around their own homeland (I had to go through two permanent check points every morning and again every afternoon between East Jerusalem and Ramallah—all in the West Bank—plus the occasional impromptu ones). Or closing the border to Palestinian day workers in Israel whenever a suicide bomber blows himself up in Israel? Or by arresting Palestinians legally and fairly elected to the Palestine National Authority (PNA) Parliament for simply being members of the Hamas political party because some terrorists affiliated with some members of Hamas held an Israeli solder. Or by destroying vast parts of Lebanon’s infrastructure and killing over a thousand of its men, women, and children to punish them (Christians included) for not being tougher against Hezbollah fighters in their midst (before the current war, a majority of Lebanese opposed Hezbollah and now a majority support them). Or, killing the PMA employee and her daughter as they walked down the street because they “tolerated” Palestinian terrorists in their midst who held an Israeli solder hostage.

For Palestinians, Akram said, Israeli solders are terrorists. That is why Palestinian children sometimes throw stones at the Israeli solders as they drive through their neighborhoods. It is the only weapon they have. A few become suicide bombers.

But what is Israel to do to defend itself when so many of its neighbors do not accept its right to exist. Become a better neighbor perhaps? But what does it mean that many Arabs do not accept Israel’s “right to exist?” This is a sanitized reference to the desire of many Palestinians to drive Israelis back off the land they took from Palestinians in 1948 and 1967. Hamas, Islamic Jihad, and other Palestinian terrorists are the small minority that cannot get over that historical fact and move on. Most Palestinians—everyone I have ever met—have moved on and would just like the Israelis to withdraw from the territories the UN demands them return (West Bank and Gaza) so that they can get on with their lives. In fact, like almost all political movements anywhere, Hamas really simply wants to govern like any other political party and has separated itself from its militant wing (sounds like the IRA of old). It is in Israel’s interest to make normal political participation more rewarding for Hamas than terrorism—to let Hamas or any other elected government succeed or fail on their merits and to hold them accountable for their performance. Israel and the rest of us should do all possible to help the Palestinian government succeed. A successful Palestine would be a safer neighbor for Israel. Instead, Israel has stopped transferring the taxes it collects for the Palestine government on imports through Israel, proliferated walls and checkpoints throughout the West Bank and made proper administration by the Palestinian government impossible. Now the failure of the PNA will be blamed on the U.S. and Israel. When will they ever learn,… when will they ever learn.

Jerusalem in August 2006

This note was written in August 2006 following the earlier (October 2005) posting of a brief history of the Israeli Palestinian conflict: “The View from the West Bank – a history of the conflict”

Hi from Jerusalem (East Jerusalem for those of you in the know),

After leading the IMF technical assistance teams that helped establish the Palestine Monetary Authority in 1995 and 96, I returned a year ago to prepare a blue print for the steps needed for the PMA to introduce its own currency some time in the (ever more) distant future. People in the West Bank and Gaze largely use the Israeli shekel and to a lesser extent the Jordanian dinar for payments and contracts. Keeping the notes in good condition and clearing checks in shekel requires arrangements with Israeli banks. These banks recently notified the PMA that they intend to end these arrangements soon. I have returned to help the PMA figure out what to do.

The political situation in and around Israel has gone from bad to worse, to much worse. You may substitute Iraq for Israel in the previous sentence as well. When Palestinians democratically elected representatives of Hamas in enough numbers to take over the government of the West Bank and Gaze (the Palestine National Authority) from the ineffective and corrupt government of Al-Fatah (Arafat’s party), political life for Israel and the West became more complicated. The military wing of Hamas is on the U.S. list of terrorist organizations, as is Hezbollah, the Lebanese terrorist group sponsored by Iran and Syria. Hezbollah also has democratically elected representatives in the Lebanese Parliament.

Israel is now at war with Hezbollah and more or less with Hamas. At least one well-known American commentator argued that Israel has a moral right to defend its borders and thus to attack Lebanon (its bombs have fallen on far more than its Hezbollah enemy). This totally and tragically misses the point. Israel is again acting against its own interests, which in the case of Hezbollah is to help build a strong Lebanese government and army that can disarm Hezbollah (as demanded by the UN) and enforce a peaceful and secure border with Israel.

I shudder at those who argue that (if you are strong enough) you just need to smash your enemies. Be tough. They don’t seem to live in the same world I do. Can the Shi’a Muslim Iraqis who now dominate the Iraqi government really wipe out all Sunni Muslim terrorists in Iraq or can the Sunni and Christian Lebanese and the Jewish Israeli’s really wipe out the Shi’a Hezbollah terrorists in Lebanon? Walid Jumblatt, the leader of Lebanon’s Druze community and a harsh critic of Hezbollah stated Saturday that “We have to acknowledge that they [Hezbollah] have defeated the Israelis….” Being tough and launching war on Hezbollah/Lebanon has greatly weakened Israel (militarily, economically, and politically), just as the miscalculated U.S. attack on Iraq has weakened America (militarily, economically, and politically). These acts of war have weakened the security of both of our countries, not strengthened it.

Wars between tribes and religious factions can only be “won” diplomatically. The infamous Hatfields and McCoys ended their vicious cycle of feuding only when they mutually came to accept that they would never succeed in totally exterminating the other. There would always be a son, or a relative, or a friend of a son left somewhere to carry on the hatred and revenge. The famous feud ended only when a combination of carrots and sticks and harsh experience led both sides to accept a credible truce as the best that they could do. Read or watch again Shakespeare’s Romeo and Juliet and weep.

A few weeks ago I watched a TV reality show called “The Nanny” (please done ask me why). In the show the well-meaning and conscientious parents of three little monsters were sinking into despair as their spoiled and confused kids walked all over them. The parents were not dumb, but they were failing as parents. My first reaction was that the Third Geneva Convention (on the Treatment of Prisoners of War) should be suspended for these awful brats. Where is George W when we could really use him? The British Nanny brought in to save this family, was wise indeed. She found as many ways to pull out and encourage the cooperation of the children (carrots) as she did to establish clearer and more consistent rules and punishments for violating them (sticks). In short, she found the right balance of incentives that encouraged these children to redirect their considerable energies into positive and pleasant behavior that became a joy to be around. It was brilliant. It is what societies need as well—values and rules under which everyone can get along. I am sure that you have seen perfectly behaved but regimented and dull children and laud, rude and out of control ones and said to yourself, please don’t make me have to be around either.

My boss in Baghdad emailed me last week: “Please don’t go to Jerusalem.  I don’t think that you will be safe there.  Come back to Baghdad.” She has quit a sense of humor. The security situation in Iraq has finally degenerated beyond my comfort level and I have not returned to Baghdad since December despite many requests to do so. I have been highly critical of that war, when we should be fighting Al-Quaeda in Afghanistan and elsewhere (they didn’t exist in Iraq until we attacked it). And I have been even more critical of our ineffective follow-on efforts to establish a stable democracy there. However, there is one aspect of our conduct of that war I am proud of.

Every war has produced atrocities (torture, rape, murder, etc). It is a tragic and unavoidable part of war. We are again seeing examples of this ugly fact with the revelations of the killing of 24 Iraqis, mainly women and children, by American Marines in Haditha in the heat of war. The rape of an Iraqi girl and murder of her family by an American solder (Steven D. Green) in Mahmoudiya was purely criminal. Four of his U.S. Army buddies have also been arrested in connection with those crimes. Iraqis are not surprised that Americans have done these things (in very limited quantities). But they are surprised at the openness with which we expose and punish them. We can be very proud of that. It gives credence to our belief that we try to live by high principles.

Our principles of government revere openness and honesty—what more recently has come to be known as “transparency.” We can thank our free press for making that principle meaningful. While the most professional, well-trained, and well armed military in the history of mankind protects our freedom from attacks from abroad, the most professional and dedicated press in the world protects us from attacks on your freedom at home. Our practice of transparency is the ultimate check and balance on government (or corporate or labor) abuse. When combined with the high standards that guide our military leaders, transparency has helped contain the abuses of power that exist in every military, police force, and government. Three cheers for our free press.

I hope that all is well with you.

Warren

A story of travels to Kabul and a suitcase

Starting in January 2002 my flights into and out of Kabul where on the United Nations Humanitarian Air Service (UNHAS) charter planes between Dubai or Islamabad and Kabul. I would land in Dubai or Islamabad on a commercial flight, pick up my bag and check into a hotel with my other IMF colleagues for the UNHAS flight the next day. In Islamabad we stayed in the Marriott (since blown up by terrorists) and in Dubai we stayed in any number of first class hotels.

Departure the next day was from a remote part of the airport in Dubai or Islamabad to a remote part of the airport in Kabul. The idea of checking my bag through to Kabul for the convenience of not having to go through immigration to pick it up and recheck it (I was almost always in a rush to get there with no time to stop over anywhere) was a number of years off.

With the advent of commercial flights into Kabul and the ending of the UNHAS flights three or so years ago, our Dubai departures (we had given up on Islamabad after the bombing of the Marriott) moved from the small old Terminal 2 to the big modern Terminal 1 (I always found this numbering confusing). However, it was still not possible to check our bags through to Kabul. We had to wait in the immigration line, then wait while the generally unsmiling Arab immigration officer examined, then stamped, our passports, go pick up our bags, and re check them with Safi Airways, re-emigrate and fly on. The immigration officers, by the way, where just about the only Arabs I encountered in the UAE in a working capacity. Cab drivers, porters, hotel clerks, restaurant waiters and virtually everyone else who serviced us in any way were Filipinos, Indians, Pakistanis and sometimes Bangladeshis.

More recently, agreements were struck with United, BA and other airlines and Safi Airways that make it possible to check our bags through from Washington to Kabul. Thus in Dubai I could go directly from my arriving flight to the departure lounge of Safi without immigrating (i.e. transit). Shoppers will enjoy the massive collection of shops and goods in Dubai’s mammoth airport, but I am not one of them. Most of our IMF team choose to hang out in the airport for the 4 or 5 hours between flights rather than enjoy the sterile splendor of modern Dubai. Some of my colleagues worried about the risk of losing their bags if they checked them all the way through, but I preferred to take the risk in exchange for the convenience and never had a problem until the day before yesterday.

For some reason that I do not understand the check through arrangement does not seem to work in reverse. It is not yet possible to check my bag from Kabul to D.C., though there is some confusion about this. My return home from Kabul yesterday illustrates this point.

After a year of difficult and inconclusive negotiations with the authorities, our IMF team finally agreed with the authorities on a program that we thought our Executive Board could support. The measures that had been taken and were agreed to be taken to resolve the failure of Kabul Bank (potentially the largest bank fraud per capital in history) had been the main stumbling block. The amazing and shocking history of Kabul Bank is set out in detail in: http://www.uspolicyinabigworld.com/2011/09/21/the-kabul-bank-scandal-and-the-crisis-that-followed/.

As the prospect of an agreement became clear, our short five-day visit to Kabul was coming to a close, so we delayed our early Thursday morning departure until Thursday evening. To add an extra hour and a half to the time available to us (my colleagues had gone with only a few hours sleep for the last three days as it was), the Finance Minister (our negotiating counterpart) arranged for our boarding cards to be issued and bags to be checked in the VIP lounge before we left for the airport. One of his aids collected our passports and bags and my hopeful instruction to check my bag through to Washington. When he returned to the IMF guesthouse with our boarding cards and baggage claims, he also had a bill for me for $85 for the check through arrangement. It was worth it to me not to have to recheck my bag in Dubai.

We successfully concluded the negotiations, held a donor briefing (World Bank, USAID, DFID, ADB, ISAF, UN, and others), issued a press release from Washington, http://www.imf.org/external/np/sec/pr/2011/pr11358.htm, and headed for the airport. I must say that it almost made flying enjoyable again to be driven through security up to the VIP lounge (rather than having to drag our bags from a remote parking lot), skipping all the security, emigration, and check-in lines. We boarded soon there after and three hours later deplaned in Dubai.

As we entered the terminal, I was expecting to immigrate and head to the local Hilton for a good night’s sleep. But just inside the door stood someone holding up the unexpected and unwanted sign: “Coats, Jr. Warren L.  Why was I being stopped, I asked? “Follow me please.” To make a confusing story short, a reception service had been engaged to take me passed the long immigration lines to the baggage carousel and arrange for my transportation to the Hilton. As this was not what I had paid for nor wanted (though skipping long immigration lines is always appreciated), and the young lady escorting me around had her own instructions, considerable confusion ensued as we walked from one place to another until it became VERY clear that I would not be able to recheck and leave my bag there until I returned in the morning. So be it. I had a good sleep at the Hilton with my bag at my side and lugged it back to the airport in the morning and was soon on my way to London and home.

I use to hate going through London’s Heathrow airport, but with the addition of BA’s Terminal 5, I rather like it. So my three and a half hour lay over in Terminal 5 passed pleasantly (the BA wi-fi pass word for the day was “Singapore”). On the nine-hour flight from London to DC, I watched one movie, and slept the rest of the way, skipping dinner.

My suitcase drama had one more chapter. When I arrived in DC, it didn’t.  In addition, the BA office at Dulles was closed (typical British service) and its mix of automated and live human telephone service was unpleasant. Nonetheless, my bag was delivered to my door one day later (last night), in time for a quick repack and departure for Grand Cayman this morning for this quarter’s meeting of the Cayman Financial Review’s Editorial Board meeting.

Remembering 9/11– Bratislava, Slovakia

As my generation did for many years following the assassination of JFK, we today remember where we were and what we were doing on the day ten years ago that 19 Middle Eastern terrorists hijacked and crashed four American passenger planes into the twin towers of the World Trade Center, the Pentagon, and a field in rural Pennsylvania.

On September 11, 2001 I was in Bratislava, Slovakia (the former Czechoslovakia’s eastern half). I had combined an IMF technical assistance visit to Slovakia’s central bank with a meeting of the Mont Pelerin Society, the free market group established over 50 years earlier by Friedrich Hayek and Milton Friedman. I returned to my hotel room around 3:00 pm (9:00 am in New York and Washington, DC) to an email from IMF security announcing that a plane had crashed into one of the World Trade Center towers. I turned on the television and watched in shock and disbelief as a second plane crashed into the other tower. Then a third plane crashed into the Pentagon, and I wondered if this was the beginning or the end of the attacks.

I called my Icelandic friend Hannes Gissurarson, a member of the board of Iceland’s central bank, who was also attending the MPS meetings. “Hannes, you will not believe what has happened. I don’t want to watch this alone. Please come.”  For the next few hours we sat in front of the television emptying the liquor from my refrigerator and then his. We watched in real-time as the two towers collapsed. I remember thinking that they fell so perfectly straight down that it looked like a Hollywood stunt. I was hoping disparately that it was. We did not see any of the people who jumped or fell to their deaths from the towers, which were not visible or shown at that time (thank God).

Michael Novak, a fellow MPS member, called a meeting to meditate together on these events. Michael has a comforting way of talking about difficult things and the gathering was helpful. Many other friends were there, including Richard Rahn and Marian Tupy.

Later in the evening Hannes and I decided to take a walk. As we walked through the lobby of our hotel, the hotel clerks expressed their heart-felt sympathy. We walked the seven or eight blocks to the American Embassy where we saw people placing flowers and small American flags outside of the Embassy. I was very touched by these displays of sympathy and friendship but felt dazed.

Three days later I was finally able to get a flight home, which was a few blocks from the Pentagon. The hole in western side of the five sided building made by American Airlines flight 77 seemed small considering that it had been made by a very large Boeing 757. It  dramatized just how huge the Pentagon is. Barbara Olson, the wife of the United States Solicitor General at the time (and currently a defender of Marriage Equality in the California appeal of Proposition 8), was one of the 64 people on that plane who died when it crashed into the Pentagon killing an additional 125 people in the building.

The positive side of this tragedy was the outpouring of sympathy and support around the word and the strengthened unity among all Americans. As Ronald Reagan had put it: America is a beacon on a hill. We have created a government that is meant to service us, not the other way around. We have established a society in which very diverse people with very diverse personal beliefs and ambitions live peacefully together (most of the time) because our constitution and our beliefs provide considerable space for such diversity. We require that others respect our property and our space in turn for which we respect theirs. To a large extent we can prosper on the basis of our efforts and the extent to which they satisfy the needs and wants of others in the market place.

The world respected and envied American society. The idea, circulated by a few Neanderthals, that Al Qaeda attacked us because they resented our freedoms, was a silly lie. They resented our troops on their soil (Saudi Arabia) and our intrusions into their countries and affairs. If our leaders had understood that correctly, and fashioned policies accordingly, perhaps we would have retained the respect of the rest of the world over the next ten years after 9/11.

Instead, we have lost thousands of American lives and Afghanistan and Iraq have lost  multiples of that. We have weakened our economic strength and thus our military strength by squandering several trillion dollars in Afghanistan, Iraq and elsewhere. We have traded off more of our liberties and way of life in the name of security (the infamous “War on Terror”) than we should have. We have lost the respect and support of much of the world.

A poll taken in the U.S. near the end of August found that: “Six in ten Americans believe that the U.S. weakened its economy by overspending in its responses to the 9/11 attacks. In particular, respondents felt this was especially true of the U.S. mission in Iraq. Two out of three Americans perceive that over the decade since 9/11, U.S. power and influence in the world has declined. This view is highly correlated with the belief that the U.S. overspent in its post-9/11 response efforts — the wars in Iraq and Afghanistan.”

The “Patriot Act” and the “Department of Homeland Security” are names that could have been proposed by “Big Brother” in Orwell’s 1984. How could our government have chosen such names and more importantly how could we have let it. The constant announcements at airports to be on the alert—the flashing signs along the main streets of Washington, DC to report any suspicious activities to XXXXX, are right out of 1984 and Huxley’s Brave New World. Former Vice President Cheney writes without embarrassment that we were right to torture terrorists. I get extremely uncomfortable sitting in the same room with Paul Wolfowitz at AEI. Hopefully I would get up and leave if John Bolton walked in. What has happened to us?

Big Brother/Big Government, however well-meaning, are dangerous to what made us great. They create self-interests that work night and day to direct government spending and policies to their benefit rather than to the nations benefit. That is just how governments work and why our founding fathers were so concerned to limit its scope as much as possible. Governments work best to serve the broad social (national) interest when they provide impartial enforcement of private agreements (courts) and property rights (police and army) and the basic infrastructure of commerce (roads, water, sewage disposal).

Though with every nibble and further intrusion into what was once the private sector Leviathan grows stronger and more dangerous, we don’t have to lose the principles that made us great and made us the envy of the world. We can again be the beacon on the hill that cares about each and every person and thus mankind and sets an example of respect for our fellow-man that others will want to emulate.

But we cannot each have everything in the social sphere exactly the way we each want it. We must live together in cooperation in the pubic sphere. This requires compromises whenever the government is involved (there are not enough desert islands for each of us to each have everything our own way). Thus the broadly accepted need to eliminate our government’s deficit in the future and bring its cumulative debt down to lower levels relative to our economic output over the coming decade or two can only be achieved if each side compromises a few things in order to reach a common agreement on how to do it (what to cut and what taxes to adjust). The President’s largely ignored Debt Commission set out a good basis for such compromises last year. I hope that we can come together again to find an agreement and again become a nation we can be proud of and that is again respected by our neighbors around the world.

Short Travel Notes

At my final breakfast at Afex camp this morning two of my colleagues were laughing at some of the silly things people do on the Internet, such as feeding fish and growing crops etc. When I returned to the table with another cup of coffee, they were both staring intently at (I thought) the Nile next to us. Adam noted that, “they are moving at different rates.” Richard replied “and moving in opposite directions. I wonder how they will pass each other?” Adam suggested, “let’s bet on which group goes over the other.” I strained to see what it was they were talking about and could see only the usual uprooted plants floating down the river, all in the same direction.

What are you talking about, I asked. The ants on the string, they replied. Just next to us in the open air dinning hall was a string fence to prevent people from taking a short cut through the garden. Two long lines of ants were walking along the top of the string in opposite directions. Maybe feeding fish on the Internet is not so wacko after all.

On my flight a few hours later from Juba to Nairobi I came across a quote in The Standard (a Nairobi newspaper) that I can’t resist sharing:  “Tanzania’s culture of skepticism and mistrust of Kenya has been going on for over four decades. The late Julius Nyerere, the founding President of Tanzania, once described the capitalist-aligned and aggressive Kenya as a ‘Man eat man society’. [Kenyan] Attorney General Charles Njonjo retorted by terming the then socialist Tanzania a ‘Man eat nothing society.’”

Travel notes from Juba, South Sudan

 

Amsterdam

Ito and I ended our Italian/French/Netherland vacation (see https://wcoats.wordpress.com/2011/07/23/travels-in-italy-and-france/) in Amsterdam visiting friends (Bill Wirt, Dolph Westerbos, and René van Hell). While there, we enjoyed the usual sights and the coldest July day in the Netherlands (July 24) since 1903! Then Ito took the plane home to Washington DC while I headed on to South Sudan.

While Amsterdam was having its coldest day, Washington was suffering one of its hottest days in history. The same weekend had the only two consecutive days with lows above 84 decrees ever recorded. The high temperature of 105° at 3:52 pm on July 22 at Washington Dulles was a new all-time record, beating the old record for July 22 of 98° in 1998 by 7°. By the 24th Dulles had “cooled” down to a high of 94° (97° at Reagan National).

The average global high may well have been perfectly normal (I couldn’t find such data if it exists), demonstrating that distribution does matter.

Juba, The Republic of South Sudan

I left Southern Sudan on June 21 and returned on July 27th to the newly independent Republic of South Sudan (on July 9). The introduction of the new South Sudanese Pound (SSP), which our Deloitte team has been helping the local authorities prepare to issue for over a year, had started on July 18th.  The replacement of SDG (Sudanese Pounds) with the new SSP is targeted to be completed by the end of this month (August—a 45 day period).

The establishment of the new Central Bank of South Sudan, though inheriting most of the staff and buildings of the Bank of Southern Sudan (a branch of the Central Bank of Sudan headquartered in the North), is being seriously hampered by the failure so far of the President of the Republic to appoint its new Governor and Board.

The big success on this visit was the launch of foreign exchange auctions after the new central bank law wiped out all of the exchange controls imposed by North Sudan when Southern Sudan was part of it. The Central Bank of Sudan (the central bank for the whole country before the South spit off) was running out of foreign exchange reserves (foreign currency owned by the central bank that it could sell to the market to influence the exchange rate of its currency). It wanted to keep its exchange rate to the U.S. dollar and other foreign currency low so that those holding its currency could buy dollars more cheaply (a so-called “strong” currency). But to do that it had so sell dollars from its foreign currency reserves. When it was running out of dollars, it could no longer support the exchange rate it wanted. So it imposed restrictions on the purposes for which people could buy dollars with the Sudanese Pound (restricting demand) in order to support it’s artificially low (strong) exchange rate. As a result, a spread of up to 1½ percentage points opened up between the official rate and the street (black market) rate.

South Sudan has removed those restrictions and introduced twice weekly auctions of U.S. dollars to the highest bidders. There have been three auctions so far and they are working well as the market gets used to them. The spread between the official and street rate (no longer illegal) has already narrowed to about 25 basis points (a quarter of a percentage point). Today we hit a big bump in the process and the acting governor, responding to political pressure capped the exchange rate for the next auction below the rate of the last one. We expect the announcement of a permanent Governor very soon.

After independence, the Bank of Southern Sudan became the Central Bank of South Sudan (CBSS). The Bank has a fairly large courtyard in the middle where people gather to chat or smoke cigarettes and where the Governor holds large staff meetings. You can see it in the attached picture. I stepped out of my office on to the far edge of the courtyard the other day and was standing next to one of the Bank officials. He was on his cell phone and obviously expecting to meet someone: “Where are you? … You are standing under a tree? … What tree? We have a lot of them.” Every now and then a fairly large monkey drops out of one of them, which always gives me a start.

There seems to be more life around the Bank than before. After all, there is a lot going on (introducing a new currency and starting new foreign currency auctions). Yet the halls of the Bank are still cluttered with employees that are half asleep. I am not really sure what their duties are. Work habits are not very good here. Many of the African Sudanese in the South cling to the habits of the African lion, which lies around and sleeps most of the day, while his lionesses round-up the food and do the dishes so to speak. The entrepreneur spirit is in rather low supply. Many of the businessmen and shopkeepers are Kenyans or Ugandans.

The traditional pastoral and often nomadic lives of many Africans roaming the plains of Sub-Saharan African are not all bad, by any means. You can’t listen to them sing without hearing some happiness there. But it is too easy for those of us not living it day after day to overly romanticize it.

Life at the Afex Riverside Residence at the edge of the Nile remains the same. I continue to be impressed with the timeliness of Deloitte’s team for the morning and after lunch departures of its six cars. In the few minutes before 8:00 am every day except Sunday, thirty or so consultants converge on the car park from several paths and at 8:00 am sharp the cars start pulling out for the drive to the various Ministries (and in my case the Central Bank) at which they work. Often the departure, especially after the lunch break, is virtually simultaneous with all six cars departing from the camp one right behind the other in a caravan. It is an impressive sight.

On irregular trips, the drivers are required to provide a radio report to Base on who is with them and where they are going so that Base knows were every one is. It goes something like this: “Alpha to Base. Alpha to Base…  This is Base.  Leaving Charlie, Charlie, with Bravo D-4 (or whoever) and with, with, and with one “unassigned.”  I am the “unassigned” because I talked Base into not having to carry a bulky two-way radio around, because I almost always travel with colleagues who have one.

A few days back, while eating dinner in the Afex dinning hall—a very pleasant open air facility along the edge of the Nile—a strong gust came up that caused a heavy shower of little black things that covered the dinning room tables, floor, and my plate. I assumed that it was the carcasses of the hundreds of thousands of zapped insects that had given up their lives to the several electric bug killers overhead. I was greatly relieved when I learned that they were little mango seeds that had collected on the canvas roof and were dislodged by the brisk wind.

At dinner this evening our British security officer and another Englishman where telling war stories across the table from me. I was only half listening, but the other Brit’s story about their first-rate French interpreter (they must have been in a French-speaking African country as he is not old enough to be talking about WWII) ended with something like: “he eventually went native on us, drinking red wine and such.” I learn something new every day.

I have been away from home for over a month and need a haircut. My barber for the last 35 years gets very upset if anyone else cuts my hair. During my two month stay in Baghdad in 2004 I was forced to get several and Mike complained for the next two months that it was taking that long to get it back into proper shape. Tuffs of hair now tickle my ears occasionally leading me to fear that a malaria-carrying mosquito has landed there.

Our morning drive from Afex Camp to the Central Bank usually passes a lot of kids on their way to school. The girls and boys dressed in school uniforms is a lovely sight. There is little that is as encouraging and hopeful as seeing young kids smiling on their way to school, especially in a largely illiterate country. So there is hope. There is also little as heart breaking is the face of a child, usually a hungry child, with no hope. The expressionless, unfocused stare of such a child is more than I can bear.

I think that we take hope in American (especially) so for granted that it is hard to imagine a people who have little of it. A great deal of our existence, especially our younger years are filled with the hope that we can build decent enjoyable lives for our selves and our loved ones. What would our youth have been without it? There seems to be a lot of hope in South Sudan now. I hope that it is justified and that it can be sustained.

Travels in Italy and France

Between a delightful gathering at Robert Mundell’s home at Santa Columbo outside of Siena, Italy (July 7-11), and my return to Juba in newly independent South Sudan, Ito and I have been hanging out in Italy, France.

Mundell’s annual gathering of about 40 economists discussed the reform of the international monetary system. Participants included: Edmond Alphandéry, Domingo Cavallo, Jacob Frenkel, Steve Hanke, Nicolas Krul, Ronald McKinnon, Bill Middendorf II, Aleksei Mozhin, Robert Pringle, to name a few. Christine Lagarde was still on the participant list but didn’t attend having just taken up her duties as the new Managing Director of the IMF, but Rodrigo de Rato, former Managing Director of the IMF and former Vice President for Economic Affairs and Minister of Economy of Spain, was there, as was Min Zhu from China whose appointment as a Deputy Managing Director of the IMF was announced a few days later.

During the two days of discussion, I summarized the paper I had presented earlier at the G-20 High Level Seminar on the Reform of the International Monetary System in Nanjing, China; the Astana Forum, in Astana, Kazakhstan; and the Central Bank of Argentina in Buenos Aires, Argentine on a Real SDR World Currency Board: http://works.bepress.com/warren_coats/23/

From Siena we traveled by train to Milan for two days during which we saw Verdi’s Attila at the world-famous opera house, la Scala (see picture). The opera is not one of Verdi’s best but the la Scala production (co produced with the San Fransisco Opera Company) was outstanding. We had not been to la Scala since its renovation a few years ago: http://en.wikipedia.org/wiki/La_Scala

We traveled on by train to Lyon, France, via Geneva Switzerland to visit Scot Thompson and Louie Pangilinan. Scot has swapped his beautifully compound in Bali with a family with places near Lyon and Paris for the month of July. The house near Lyon is about ten miles north along the Saône River in Cailloux sur Fontaines. The French weather was too cool to use the swimming pool at that house, but Scot and Louie took us on several day trips to some wonderful spots.

The first was to the Château de Fléchères about 20 miles further north. The Château was built from 1606 to 1625. If you are interested you can learn more of its history and see pictures here: http://www.chateaudeflecheres.com/en

In a more easterly direction we visited the medieval village of Perouge, which developed in the 14th and 15th century: http://www.francethisway.com/places/perouges.php

On Monday (July 18) we took the train from Lyon to Avignon in Provence where we were met by Nicolas Krul. He drove us to his beautiful estate in Ménerbes about an hour’s drive southeast of Avignon. Nicolas and I continued the economics discussion we had started during Mundell’s gathering in Siena, and enjoyed two lovely bottles of Sauvignon blanc and a wonderful lunch prepared by his charming wife Meher.

On Tuesday (July 19) Scott and Louie drove us to the other house they had the use of in a southern suburb of Paris. On the way we visited the Basilique de Vézelay and amazing medieval village and cathedral built between the 9th and 13th centuries and from which the 2nd and 3rd Crusades were launched: http://www.burgundytoday.com/historic-places/abbeys-churches/basilique-ste-madeleine.htm

The next day was spent at the Palace and gardens of Versailles, for which no words are adequate: http://en.chateauversailles.fr/homepage. The next three days we explored the usual sights of Paris.

France has changed a lot since I visited it the first time in 1960, over fifty years ago. 1960 was only fifteen years after the end of WWII, which to me at the time seemed centuries earlier. In fact, fifteen years is less than the time from the collapse of the Soviet Union and now, which seems to me like yesterday. Among the pleasant surprises are English (as well as French, of course) announcements on trains and the number of French who can speak English. Even the information booths in rather out-of-the-way places were staffed with people who could speak English and they were very friendly and helpful. At the odd hour of 3:00 pm (between lunch and dinner) we wanted to eat before taking the train from Versailles and Paris. The Brasserie was no longer able to prepare pizza or make a sandwich (out of bread), but happily prepared us a salad with chicken, wanted to know if we were British or American and whether we enjoyed our lunch.

Even Parisians are often friendlier, but not always. Our train from the Eiffel Tower to Saint Michel ended at Invalides because of repairs and we were told that we would need to complete the trip by a bus waiting upstairs. We wandered around underground for a while trying to figure out how and where to go up to the street level. We asked at another Information booth. The lady insisted that we must go “up, UP!” All and all, however, it has been a very nice trip.

We travel to Amsterdam for three days today (Saturday) before Ito returns home and I return to work in Juba, South Sudan. Hopefully I can lose there some of the weight that I gained here.

The Astana Economic Forum

Hi from Astana, the capital of Kazakhstan.

I am here for the IV Astana Economic Forum at the invitation of Robert Mundell, the Reinventing Bretton Woods Committee, and the Eurasia Economic Club of Scientists. Formally I was invited by Nursultan Nazarbayev, President of the Republic of Kazakhstan, but I sure that he doesn’t know about it, though he will open the meetings. I will continue my year of talking about the IMF’s Special Drawing Right (SDR), which started in Paris in December and continued in Nanjing in March. I will explain my proposal for a global real SDR issued by an international currency board.

My fellow presenters include a number of Nobel Prize winners: Roger Kornberg (Chemistry), Sir James Mirrlees (Economics), John Nash (Economics and who looks nothing like Russell Crowe) and of course Bob Mundell. Other distinguished speakers include Jacob Frenkel, Chairman, JPMorgan Chase International (and my former IMF colleague), Hernando de Soto, economics author and former governor of Peru’s Central Reserve Bank, Richard Cooper, Professor of Economics, Harvard University, and Domingo Cavallo, Former Minister of Economy of Argentina. I am participating with the latter two in a Press Conference on Wednesday.

It is a long way to go for a two-day conference but it should be interesting.

Notes from Nanjing

French President Nicolas Sarkozy chairs the G-20 this year and has focused on the reform of the international monetary system. I was invited by the French Finance Minister and the central bank Governor to join the High Level G-20 Seminar in Nanjing March 31 on that subject as one of the lead speakers (of which there were quite a few). The G-20 is the group of industrial and emerging market countries that has replaced the G-7 industrial countries as the lead forum for global economic policy coordination. This meeting was attended by the Finance Ministers and Central Bank Governors of the G-20 countries or their deputies, heads of international financial organizations (like the IMF), and some academics like me.

The Nanjing meeting was opened by Vice Premier of the Peoples Republic of China (PRC), Wang Qishan, and French President Sarkozy. For this opening session I was seated next to a Germany delegate who was kind enough to explain to me who various people around us were and what was going on. The opening was delayed for an hour waiting for President Sarkozy to arrive. The President was grandstanding the Deputy Governor explained to me. “Don’t you find it strange,” he asked, “that the Vice Premier rather than the Premier is opening the meeting and doing so in front of the French and EU flags with no PRC flag?” “Well, yes, that is very strange.” I replied. “This is because,” he continued, “the Chinese government didn’t really want such a meeting in China. The issue of the exchange rate of the Chinese currency would have to come up. It was agreed, however, that the China Center for International Economic Exchanges (CCIEE) would host the seminar on behalf of the PRC. So no Chinese Premier and no Chinese flag.” I should always be lucky enough to sit next to a German.

After the long wait, President Sarkozy delivered an excellent opening speech. He is an impressive performer. His several references to “my friend Tim,” while nodding to U.S. Treasury Secretary, Timothy Geithner, sitting in the front row, seemed perfectly natural and effective.

Nanjing is famous as the capital of the Ming and several other Dynasties and for its food. The food of each region of China is distinct. I can’t really explain the differences but the food here in Nanjing is very good. During the Seminar luncheon I sat next to the Finance Minister of Japan, who complimented me on my chopstick skills. I explained that I had been using them from childhood. On the rare occasions that my parents could afford to take us out for dinner, we went to a Chinese restaurant (they were cheaper). Thus Chinese restaurants were very special in my mind and like all kids I was eager to learn all that I could, including how to use chopsticks.

My own session was chaired by Christian Noyer, Governor of the Bank of France, and moderated by George Osborne, Minister of Finance of the U.K (Chancellor of the Exchequer as they call it in the U.K.). Following strict instructions from Ito and Ken Weisbrode, I informed Mr. Osborne that his wife’s novels were much enjoyed by some of my friends, though I had never read one myself. He was pleased and informed me that her next one would be out soon. During our session Minister Osborne replied to a procedural question with the remark that “As is often the case, the British are operating under the instructions of the French.” Delicious.

My presentation on the SDR, the International Monetary Fund’s reserve asset, was made sitting directly across the table from Dominique Strauss-Kahn, the Managing Director of the IMF and Robert Mundell, a friend and a Nobel prize winner in economics. I could not have wished for a better audience for my three-minute summary of my radical suggestions, which you can find here: http://global-currencies.org/smi/gb/home.php.

I was sitting next to Kevin Warsh, a Governor on the Board of Governors of the Federal Reserve System (the U.S. central bank), and while waiting for our session to get underway I could not resist telling him about a dinner I had with my friend Randy Kroszner, who was also a Governor on the Fed’s Board of Governors at the time.  I met Randy at a Belgian restaurant on MacArthur Boulevard in Washington that he wanted to try Tuesday evening September 16, 2008 after his meeting with the Federal Open Market Committee. Lehman Brothers had declared bankruptcy the day before and I was eager to talk to Randy about it. Around 9:00 pm I received a CNN news alert on my Blackberry that the Federal Reserve had saved AIG that day with a $85 billion injection that gave the Fed an 80% equity interest. My jaw dropped. “Randy,” I asked, “how could you sit there all evening and not say a word about this.” He looked uncomfortable and said, “I am afraid that I still can’t comment because I don’t know if CNN is reporting from a Fed Press Release or a leak.” If ever anyone was leak proof it is Randy.

Despite the 12 hour time difference, I was wide awake until the afternoon session on surveillance (no offense Ted Truman, your presentation was very good). The next day, April 1, we were taken sightseeing. We climbed the 391 steps to the Mausoleum of Sun Yet-sen to see his tomb. Each step represented one million Chinese of the population as it was at the time of his death (obviously some time ago). I noticed that our police escort car was a Buick (probably made in China).

The food here in Nanjing is excellent as are our rooms and conference facilities outside the city in the Purple Palace Hotel at the foot of the Purple Mountains. The roads are equally modern and beautifully designed and built. From a distance I can see the modern skyscrapers of the city surrounded by a 600 hundred old 25 kilometer long stone wall. The city was founded 2,500 years ago. Most of the villages, which is where the majority of Chinese still live, remain very poor. But increasingly the hundreds of millions of Chinese in the major cities live in surprisingly modern and vibrant housing and surroundings. Most people visiting china are shocked.

China

I arrived today in Nanjing China for a “High-Level Seminar on the International Monetary System” organized by the G-20. The one-day seminar tomorrow will be opened by Vice Premier of the People’s Republic of China Wang Qishan and French President Nicolas Sarkozy. As one of the (relatively large number of) “lead speakers” I will discuss an enhanced role for the IMF’s SDR in the International Monetary System. The session I will speak in is:

Global liquidity management issues (including global financial safety nets and the role of the SDR):

Chair: Christian Noyer (Governor of the Bank of France)

Moderator: George Osborne (Minister of Finance of the United Kingdom)

Lead speakers: Alexei Kudrin (Minister of Finance of Russia), Yung Chul-Park (Seoul University), Olli Rehn (European Commissioner for Economic and Monetary Affairs), Hélène Rey (London Business School), Elena Salgado (Minister of Finance of Spain), Wang Jianye (Exim Bank chief economist), Kim Choong-Soo (Governor of the Bank of Korea), Jim O’Neill (Chairman of Goldman Sachs Asset Management), Obaid Al Tayer (Minister of State for Financial Affairs of UAE), Volker Wieland (Goethe University Frankfurt), Martin Crisanto EBE MBA (Minister of Finance of Equatorial Guinea), Warren Coats (Chicago economist and former IMF official).

Other speakers during the day include Dominique Strauss-Kahn, the Managing Director of the IMF, Timothy Geithner (US Secretary of the Treasury), Robert Mundell (Columbia University), Jean-Claude Trichet (President of the ECB—European Central Bank). I will try hard to sleep tonight in my new time zone and to stay awake tomorrow.

China is amazing. Nanjing is only the third Chinese city I have visited and I will not really see it until after the conference which is being held at a lake resort in the countryside outside of Nanjing (The Purple Palace). It was the capital of the Ming and several other Dynasties and with many interesting things to see. Driving through Nanjing this evening I could have been in LA on the freeway system or in Boston in the long tunnels under the city (though the quality of construction is better here in China). The skyline is beautiful with every effective use of lighting. They even apply capitalist pricing to the highways (toll roads), which are magnificent. Beijing, which I have seen more fully, is typical of a number of major cities in China, of which Shanghai is the most famous, in their impressive, modern buildings and infrastructure. I have described Beijing as what New York City might look like if it were modern (i.e., not old and run down). To be fair to NYC, its charm and attraction is not (any longer) its buildings but its vibrant and very diverse cultural life. I am not able top judge that aspect of life in China’s major cities.

Walking through Beijing Capital International airport for my connecting flight to Nanjing, it was like any other modern international airport (Terminal 5 of Heathrow, Dubai International, etc). Well organized, efficient, clean and full of familiar shops. Very unlike the old, deteriorating, and unattractive terminals at JFK.

Chinese people strike me as more like us than most any other people (including Europeans) I have met. And who do I mean by “us?” I don’t mean Anglo Saxons like myself. I mean the hard working, innovative, entrepreneur types who are creating most of the wealth in this country like Google founders, Larry Page (American born Jew) and Sergey Brin (Russian born Jew), or Steve Jobs, who was born in San Francisco to a Syrian father and German-American mother, and, of course, also includes many Anglo Saxons like myself.

China’s dramatic growth over the past 30 years resulted from the Chinese government gradually freeing the economy from the bottom up, starting with agriculture. The state got out of the way and let individuals make profits if they could. And the Chinese proved to be very entrepreneurial. They are willing to work very hard and innovatively to make money. China’s real output has grown more than 10 percent per year on average since these reforms began and it came almost totally from the rapid growth of the private sector, largely individuals and very small firms that grew larger in the space the government allowed. What the government has done is provide the infrastructure (road, power, etc) that has allowed private entrepreneurs to get their products to market efficiently. They excel in every society they live in.

The Chinese (English language) newspaper given to me on the plane earlier today had an amazing article about problems with illegal immigrants coming to China from Africa, the Middle East and elsewhere for better jobs and pay and more opportunity than then can get at home. I found that amazing. The good thing about people working hard to get ahead is that it is not a zero sum game. They add to overall wealth and everyone gains.