The cloak of invisibility

Andy Mukherjee



Harry Potter's invisibility cloak, the boy wizard's fashion accessory in many an adventure, seems to have left the Hogwarts campus for its new home in China.

Two separate reports last week - by Standard & Poor's and JPMorgan Chase - showed that large chunks of capital may be entering and exiting China hidden from public view.

S&P analyst Kim Eng Tan says a growing discrepancy in China's gross domestic product data may be an indication of unrecorded capital inflows.

The GDP, computed by adding up domestic consumption, investments and net exports, was 5.3 percent higher last year than the GDP measured as the sum of the value added in agriculture, manufacturing and services.

In other words, some US$139 billion (HK$1.08 trillion) more of Chinese-made goods got consumed last year worldwide than was produced in China. That is nothing short of magic.

While the two methods of calculating GDP never really produce identical results in any country, the divergence is large even when compared with China's own recent past.

According to my calculations, the difference between expenditure and production-side GDP averaged 0.2 percent from 1999 to 2004.

The gap began widening thereafter, in line with a spurt in China's trade surplus. The two may be connected.

"One way to explain the abrupt increase in China's trade surplus, and the associated increasing disparity in national income measures, is that exporters have been over-billing foreign sales to disguise capital inflows," Tan says.

Chinese exporters may be bringing speculative capital into the country by manipulating the transfer price at which they sell goods to related parties overseas.

"They have a number of reasons for doing this, the most obvious being that the renminbi is almost guaranteed to appreciate," Tan explains. "Chinese interest rates are also heading up to further boost their returns, while fast-rising asset prices in China also attract new investments."

This is not the first time an analyst has raised the possibility of serious over-invoicing of exports.

Stephen Green, a Standard Chartered economist in Shanghai, has estimated that as much as US$67 billion of capital may have come into China concealed as exports in 2005, making up a big part of the trade surplus that more than tripled that year.

Even if China's real trade surplus is not as high as reported in the official data, it does not mean the case for quicker yuan appreciation is weak.

The economic argument for yuan appreciation hinges on the potentially destabilizing impact of more-than- abundant liquidity on money supply and asset prices. It does not really matter whether the liquidity is introduced through genuine trade or through capital inflows disguised as exports.

The yuan needs to stop being a one- way bet. Until that happens, interest rates, which were again raised late last week, will not have much of a sobering effect on an economy growing at its fastest pace in 12 years.

Misclassified inflows are not the only problem. It seems even the money that is going out of China, being recycled into US Treasuries through official channels, is not showing up in the statistics. And that may mean the US dollar is even more vulnerable than traders anticipate.

A July 17 report showed foreign buying of US financial assets climbed to a record. Yet, Paul Meggyesi, a currency strategist at JPMorgan in London, finds it odd that only US$11 billion of the US$163 billion of purchases was attributed to central banks. The data show the People's Bank of China sold US Treasuries in May even as its reserves rose by US$46 billion.

Something does not quite add up in the US Treasury's International Capital System statistics, or TIC data.

Why, for instance, did British investors begin buying US securities just as the People's Bank of China started increasing its pace of reserve accumulation in 2004?

"Is this more than a coincidence? I believe it is," Meggyesi says. For the past three years, the reserve buildup in Russia, China and the rest of Asia has overshot the recorded official purchases of US securities.

And the growing difference between the two has moved in lockstep with the reported purchases by UK investors, "providing very strong evidence that much of this reserve accumulation is being channeled via the United Kingdom, and is in the process being incorrectly recorded in the TIC data as a private rather than official inflow," Meggyesi says.

The distinction may be important.

"That the US is seemingly still reliant on official financing suggests it is still struggling to compete for profit- maximizing private investors," the JPMorgan analyst says.

In fact, the invisibility cloak may not be an appropriate analogy for what is going on. Capital is moving into China looking like merchandise trade, and perhaps moving out of China and into US securities looking like British money.

Such temporary transformation of form, every Harry Potter fan knows, is very simple to achieve. All you need is a cauldron full of polyjuice potion.

BLOOMBERG

Cartoonist Gavin Coates is on holiday

The Passion of Goya's Ghosts

Javier Bardem in Milos Forman's Goya's Ghosts.

Phil Bray / Samuel Goldwyn Films

One night in a tavern Ines (Natalie Portman) decides not to eat the roast pork; it is not a dish she particularly cares for. The next thing she knows she is being tortured by the Inquisition on the grounds that her dietary preference is dictated not by taste but by a secret adherence to Judaism. She is then jailed (for 15 years), impregnated by her chief tormentor, Father Lorenzo (Javier Bardem) and driven mad, largely because her child is taken from her.

And what does that have to do with the eponymous Francisco de Goya (Stellan Skarsgard), that greatest of Spanish painters and precursor of modernism? Very little, as it turns out. He painted Ines, and her wealthy father was one of his patrons. But in Goya's Ghosts he is pretty much what he was in life — the politically temporizing foreground observer of Ines' anguish, which is symbolic, in its way, of Spain's anguish as the 18th Century turned into the 19th, its royal family deposed by the bloodily invading French, who were, in turn, defeated by the British. Mostly (and this is historically true) Goya wished to pursue his genius unhindered by political intrusion. If that meant painting portraits — many of them subtly touched by his loathing — of all his country's rulers, that was all right with Goya. Many of his greatest works, notably the etchings depicting man's inhumanity to man, either circulated anonymously or were not published until after his death.

In Milos Forman's film (which he co-wrote with Jean-Claude Carriere, the great French screenwriter, perhaps most famous for his collaborations with Luis Bunuel) Goya's escapist politics is another sign of his modernism. The great artists of the 20th Century sympathized with "progressive" causes, but rarely played a heroic role in them. But the entire film is less an exercise in historicism (though the portrait of the painter is accurate enough, as is the depiction of historical events, the story is pure fiction) than it is an elaborate analogy with our own times. This is quite understandable — Forman lost his parents to the Nazi concentration camps and came of age in Communist-ruled Czechoslovakia, and he has long needed to address the issues that shaped his life in a movie.

Goya's Ghosts is not entirely successful in doing so. Though it is made on a crowded an epic scale, it is going to seem remote to many viewers. It has structural problems — a jump in time of 15 years right at its center — and Portman makes an unfortunate, almost ludicrous, choice in her portrayal of the older, post-prison, Ines On the other hand, it has about it a kind of messy passion that is quite fascinating. It obviously means a great deal to its auteur, and that passion grants the film a felt and wayward life not usually granted historical epics.

That judgment applies particularly to Bardem's performance as the loathsome Lorenzo. In the beginning, as he volunteers to lead the newly revived Inquisition, he is all soft-voiced reason. He is polite to the point of obsequiousness, not only to his church superiors, but even to the people he torments. Creepy, well-met and utterly corrupt, and when the French invade he simply disappears — only to reappear later as, of all things, a Voltairian rationalist, married, with children, and growing rich as an enforcer for Spain's occupiers. He is, in his way, also a perfect modernist, blowing blandly and prosperously with the winds of change. As long as there is power and status to be had, he does not care who he must serve to obtain those boons. By analogy, Goya's Ghosts has much to say, largely through this character, about such current issues as torture, terror and the fact that some people can profit hugely by making up ideological justifications for the anarchy they loose upon the world. If you find yourself thinking about, say, Abu Ghraib while you're watching this movie, that's OK with Forman and Carriere.

What I found myself thinking about, curiously enough, was Les Miserables. Whether you steal some bread or casually decline a slice of pork, in certain situations terrible consequences can ensue from such seeming inconsequences — not to mention a narrative of epic proportions. I'm not saying that Goya's Ghosts is ever going to be regarded as a world-historical masterpiece. But it has grand scale and grand ambitions, and in the midst of our annual silly season at the movies I would like to suggest that, flawed as it is, the film does reward our serious attention.

The Simpsons Movie – The Times review

Our correspondent finds the big-screen debut for Homer and clan both hilarious and horrifyingly poignant. [Beware: spoilers]

(Matt Groening/20th Century Fox/AP)

Homer the hero in the big-screen Simpsons

James Bone in Springfield, Vermont

Homer Simpson, the oafish paterfamilias of America’s favourite dysfunctional family, emerges from his big-screen debut a bona fide Hollywood action hero.

At the start of The Simpsons Movie Homer’s dreams of glory are limited to helping his new pet pig to walk upside down on the ceiling while singing “Spiderpig, Spiderpig” to the Spider-Man theme song.

But when the adopted swine gets him into bigger trouble than even this celebrated screw-up has ever experienced before, he falls under the influence of a chesty Native American woman he calls “Boob Lady” and undergoes an uncharacteristic epiphany that galvanizes him into action for the good of his by-now estranged clan.

By the time the witty final credits roll, Homer outshines even Arnold Schwarzenegger, who has been elected president and ordered great harm done to Homer’s home town.

The Hollywood action theme helps the hit cartoon series, after 18 seasons on television, to land its death-defying leap to the big screen with panache. The result is a postmodern parable about an environmental scare that is at the same time hilarious and horrifyingly poignant. But thanks to an unexpected glimpse of Bart’s genitalia, this is a postmodern parable with a “pickle shot”.

The film boasts the same sly cultural references and flashes of brilliance that have earned the television series a following that ranges from tots to comparative literature PhDs. Despite its clownishness and childish graphics, it still offers searing insights into the pathetic human condition.

When the residents of Springfield learn that they are confronting catastrophe, for instance, the panicked occupants of the bar and the next-door church pour out into the street and change places — the drinkers taking solace in religion and the religious finding comfort in drink.

But the movie will be equally satisfying to those who just find it funny that Homer wants to kiss his pet pig — or laugh at Marge pondering the (literally) weighty issue of the pig’s “leavings”, or excrement.

Early on The Simpsons team shows their nerve by making Homer wonder out loud why anyone would pay to buy a cinema ticket to watch what they could see on TV free — the underlying question of the whole big-screen adaptation. In Homer’s view, anyone who pays for cinema tickets to watch a TV show is a sucker. Jabbing his finger at the audience, he declares: “Particularly you!”

What you get for your money is the Simpsons on an epic scale. The familiar, if geographically indeterminate, territory of Springfield is suddenly transformed into a cross between The Truman Show and Escape from New York, with a Big Brother government conspiring to keep all its unruly residents in line until it can be bombed into a “new Grand Canyon” tourist attraction.

The middle section, set in Alaska, lags because of the absence of the familiar props of the Simpsons’ home town. I found myself longing for Homer and his tribe to return to wreak more havoc on their neighbours, particularly the long-suffering Flanders.

But the film ends with a tense second-by-second countdown that fully exploits the bathos of that schlump Homer becoming an action star able save the world, or at least his little part of it. The conventions of the “disaster flick” allow The Simpsons’ left-leaning creator, Matt Groening, to indulge his politics with wry warnings of environmental doom without boring us out of our mustard-yellow skin.

Lisa, Homer and Marge’s swotty daughter, has become an ardent environmentalist who makes an Al Gore-style presentation entitled “An Irritating Truth” to the local populace.

In the same spirit, this film could have been subtitled: “An Inconvenient Cartoon”.

Horoscopes

Your birthday today: A sudden advancement in your chosen field of endeavor could come about quite unexpectedly for you. Your good luck could come through some unforeseen changes in circumstances that take place.

CANCER (June 21-July 22) A matter of great interest to you that has appeared to be going no place could suddenly find a home with a least expected person. He or she will see the genius of the idea and hop onboard.

LEO (July 23-Aug. 22) Although it usually isn't advised, don't hesitate to call upon someone you know socially to help you with a business situation. This person may actually welcome the opportunity.

VIRGO (Aug. 23-Sept. 22) Have definite objectives where your work or career is concerned, but keep an open mind regarding ways and means to achieve your goals. Leave lots of room for the unanticipated.

LIBRA (Sept. 23-Oct. 23) Everything is negotiable, so don't be uptight about things looking as if you've used all your alternatives. New cards may be dealt, offering new tricks that can be played.

SCORPIO (Oct. 24-Nov. 22) You'll be able to see a fresh perspective involving a condition that you've been anxious to change and that has had you stymied. You'll make practical use of this new insight.

SAGITTARIUS (Nov. 23-Dec. 21) In your drive for new experiences, you'll be open to doing things differently, especially with routines that involve your work. By doing so, new benefits will be exposed for all involved.

CAPRICORN (Dec. 22-Jan. 19) For restless reasons, you may seek out new friendships or associates you hope to find exciting and stimulating. They're apt to be with persons you don't normally mingle.

AQUARIUS (Jan. 20-Feb. 19) You can do very well for yourself in enterprises that you personally promote. If you have something of value to sell, pitch it now while there are good prospects for success.

PISCES (Feb. 20-March 20) Something you thought might be rather tedious to accomplish is apt to be achieved quite rapidly. If it takes turning the control over to another in order to do so, you shouldn't hesitate.

ARIES (March 21-April 19) If you are looking for a bright idea for ways to make additional income, get in touch with that clever friend who thinks uniquely. Collectively, you'll come up with something great.

TAURUS (April 20-May 20) If you believe you have something exceptionally good that your company might be interested in, go directly to the top guy or gal. It may surprise you how receptive the boss will be.

GEMINI (May 21-June 20) This is an especially good day for interaction with people, so don't pass up any invitations. A happy encounter could be in store for you with someone you'll like instantly.

GARBAGE: ABSOLUTE GARBAGE (WB)

***

A very welcome return for Shirley Manson and the Garbage boys, who are easing their way back into the limelight with this best-of compilation. It's nice to realise that so many of their tracks still stand up 10 or so years later, and the new material that's included here is equally fine.

MACBETH *

Sam Worthington in Macbeth

EVERYBODY wants to take a stab at Shakespeare.

Mel Gibson gave us his Hamlet. Kevin Kline revealed his Bottom (sorry) and even Mel Brooks uttered the immortal words: "To be or not to be." After 400 years, the Bard can withstand any kind of manhandling - even a dire new version of Macbeth.

Director Geoffrey Wright relocates the Scottish play to the gangland conflicts of contemporary Melbourne but retains an edited version of Shakespeare's words. The result is an awkward, unpersuasive hybrid that feels like the kind of fringe theatre production, where you sneak out the back door rather than suffer any longer.

Sam Worthington as Macbeth adopts the look and manner of a second-division rock star, with the three teenage witches coming on strong like randy groupies. The themes of betrayal, murder and fatal ambition remain the
same as Macbeth starts to cast an envious eye at the empire of crime boss Duncan (Gary Sweet) and feels an intense jealousy towards his son Malcolm (Matt Doran). Lady Macbeth (Victoria Hill) is a coke-snorting
minx who urges her husband on to his dark and bloody deeds.

None of the performers seem particularly at ease with the Shakespeare text, which may explain why Wright lavishes so much attention on the visual look of a movie that feels like a mixture of lurid Hammer horror and some demented
pop promo. There's enough flickering candles, billowing dry ice and impenetrable gloom on show here to serve an entire Meatloaf album.

There are some effective moments, mostly involving brutal violence and bloodshed but, essentially, this is a brave experiment that completely backfires. By the pricking of my thumbs something awful this way comes.

Actress Danes to star on Broadway

Claire Danes will also appear in the film Stardust late this year

Actress Claire Danes is to make her Broadway debut later this year as Eliza Doolittle in a revival of George Bernard Shaw's Pygmalion.

The 28-year-old will star opposite Tony Award-winning actor Jefferson Mays, who will play the part of Henry Higgins.

Pygmalion premiered on Broadway in 1914 and was later adapted into the musical My Fair Lady.

Danes, who won a Golden Globe in 1995, will tread the boards in October when the plays opens for a two-month run.

The show tells the story of Professor Higgins' bid to transform Doolittle, a poor and uneducated English girl, into a society lady.

Danes rose to fame in teen TV series My So-Called Life and her film credits include a starring role in the 1996 version of Romeo and Juliet alongside Leonardo DiCaprio.

She also appeared in Terminator 3 and The Rainmaker and will be seen in the big-budget fantasy drama Stardust later this year.

Universal cleared over race bias

2 Fast 2 Furious was a box office hit

Film studio Universal Pictures did not sack a black assistant director from the 2003 movie 2 Fast 2 Furious because of his race, a judge has ruled.

The US Equal Employment Opportunity Commission (EEOC) sued Universal four years ago on behalf of Frank Davis.

Davis said he was the victim of racial discrimination but Universal said he was fired because of poor job skills.

Davis settled his own claim for an undisclosed sum last month but the EEOC decided to continue with its action.

Judge Gary Allen Fees said the evidence "convincingly demonstrates that Davis lacked the background and experience" to serve as first assistant director.

'Complete vindication'

The Los Angeles federal judge said Davis' "inadequate performance, not race" persuaded Universal to replace him.

Universal president and chief operation officer Ron Meyer said he was "extremely pleased with the court's decision".

He described it as "a complete vindication for Universal and its employees".

Anna Park, an EEOC regional lawyer, said she was disappointed by the ruling but pleased Davis received a settlement.

"Despite today's decision, we hope individuals who feel discriminated against in Hollywood know that they can come forward to complain about discrimination," Ms Park said.

Dallas costumes sold at auction

Members of the Dallas cast reunited in Paris for the auction

Memorabilia from the iconic 1980s US TV series Dallas has fetched 12,500 euros (£8,500) at an auction in Paris.

A white Stetson hat worn by JR Ewing, played by Larry Hagman, was among the items that went under the hammer, selling for 1,300 euros (£880).

Hagman was at the Artcurial auction house along with other cast members including Linda Gray, Patrick Duffy, Steve Kanaly and Charlene Tilton.

Profits from the sale will go to French children's charity Hopital Sourire.

A pair of cowboy boots worn by Duffy's character Bobby Ewing fetched 200 euros (£135), while a necklace that belonged to Sue Ellen in the US soap sold for 700 euros (£475).

More than 300 people attended the auction.

The cast members were on a stop-over in Paris before their appearance at the 15th Country Music Festival of Mirande, in the Gers region.

The glossy TV series ran in prime time from 1978 to 1991 in the US and became a global hit.

HOW HARRY POTTER HAS AGED

Daniel Radcliffe was chosen to play Harry Potter in The Philosopher’s Stone when he was just 10 years old.

By the time the Chamber of Secrets was released, Radcliffe, 13, had grown used to the limelight.

Radcliffe was 15 when The Prisoner of Azkaban came out. Questions were asked about whether he was too old.

Following the Goblet of Fire, Radcliffe, then 16, signed up to play Potter in the remaining three films.

Radcliffe, who next appears in The Order of the Phoenix, is now 17 and has branched out into theatre.

Potter film breaks record in US

Actor Daniel Radcliffe denied he was too old to play Harry Potter

The new Harry Potter film, Harry Potter and the Order of the Phoenix, has taken a record-breaking $12m (£6m) at midnight screenings in the US.

The figure is the most made at the box office for a Wednesday opening midnight run, according to Daily Variety.

The previous record-holder was The Lord of the Rings: The Return of the King, which returned around $8m (£3.9m) in midnight ticket sales in 2003.

Harry Potter and The Order of the Phoenix opens in the UK on Thursday.

Its early takings were double that of Harry Potter and the Goblet of Fire, the previous film in the series, which took $6m (£2.9m) at US midnight screenings in 2005.

'Unique challenges'

Harry Potter star Daniel Radcliffe told US TV show Larry King Live that acting in the new movie was "some of the hardest stuff I've had to do to date".

"Each film presents its own very unique challenges so it's sort of like playing a different part every time you come back and do it," he said.