"New Orleans : Payday on the levee"
Stoneleigh: Renewable energy has become a topic of increasing interest in recent years, as fossil fuel prices have been volatile and the focus on climate change has sharpened. Governments in many jurisdictions have been instituting policies to increase the installation of renewable energy capacity, as the techologies involved are not generally able to compete on price with conventional generation.
The reason this is necessary, as we have pointed out before, is that the inherent fossil-fuel dependence of renewable generation leads to a case of receding horizons. We do not make wind turbines with wind power or solar panels with solar power. As the cost of fossil fuel rises, the production cost of renewable energy infrastructure also rises, so that renewables remain just out of reach.
Renewable energy is most often in the form of electricity, hence subsidies have typically been provided through the power system. Capital grants are available in some locations, but it is more common for generators to be offered a higher than market price for the electricity they produce over the life of the project. Some jurisdictions have introduced a bidding system for a set amount of capacity, where the quantity requested is fixed (RFP) and the lowest bids chosen.
Others have introduced Feed-In Tariff (FIT) programmes, where a long-term fixed price is offered essentially to any project willing to accept it. Tariffs vary with technology and project size (and sometimes inversely with resource intensity) with the intention of providing the same rate of return to all projects. FIT programmes have been much more successful in bringing capacity online, especially small-scale capacity, as the rate of return is higher and the participation process much less burdensome than the RFP alternative. Under an RFP system accepted bids often do not lead to construction as the margin is too low.
The FIT approach has been quite widely adopted in Europe and elsewhere over the last decade, and has led to a great deal of capacity construction in early-adopter countries such as Germany, Spain and Denmark. In Canada, Ontario was the first north American jurisdiction to introduce a similar programme in 2009. (I was involved in negotiating its parameters at the time.)
Renewable energy subsidies are becoming increasingly controversial, however, especially where they are very large. The most controversial are those for solar photovoltaics, which are typically very much higher than for any other technology. In a number of countries, solar tariffs are high enough to have produced a bubble, with a great deal of investment being poured into infrastructure production and capacity installation. Many of the countries that had introduced FIT regimes are now backing away from them for fear of the cost the subsidies could add to power prices if large amounts of capacity are added.
As Tara Patel wrote recently for Bloomberg:
EDF's Solar 'Time Bomb' Will Tick On After France Pops Bubble:To end what it has called a "speculative bubble," France on Dec. 10 imposed a three-month freeze on solar projects to devise rules that could include caps on development and lowering the so-called feed-in tariffs that pay the higher rate for renewable power. The tariffs were cut twice in 2010.
"We just didn’t see it coming," French lawmaker Francois- Michel Gonnot said of the boom. "What’s in the pipeline this year is unimaginable. Farmers were being told they could put panels on hangars and get rid of their cows."....
....EDF received 3,000 applications a day to connect panels to the grid at the end of last year, compared with about 7,100 connections in all of 2008, according to the government and EDF.
Stoneleigh: The policy of generous FIT subsidies seems to be coming to an end, with cuts proposed in many places, including where the programmes had been most successful. The optimism that FIT programmes would drive a wholesale conversion to renewable energy is taking a significant hit in many places, leaving the future of renewable energy penetration in doubt in the new era of austerity:
Germany:Half of the 13 billion euro ($17.54 billion) reallocation charges pursuant to Germany’s renewable energy act was put into solar PV last year. The sector produced about 7 GW of electricity, surpassing the 5-GW estimate. The government deemed the industry boom as counterproductive, pushing it to reduce subsidies and narrow the market.
The Czech Republic:In an attempt to get hold of what could be a runaway solar subsidy market, the Senate approved an amendment April 21 that will allow the Energy Regulatory Office (ERÚ) to lower solar energy prices well below the current annual limit of 5 percent cuts. At the start of 2011, the state will now be able to decrease solar energy prices up to 25 percent - if President Klaus signs the amendment into law. Even with a quarter cut, the government's subsidies for feed-in tariffs remain so high that solar energy remains an attractive investment.
France:The Ministry of Sustainable Development is expected to cut the country's generous feed-in tariffs by 12 percent beginning September 1 in an effort to rein in demand and curb spending, according to analysts and news reports from France.
Italy:Incentives for big photovoltaic (PV) installations with a capacity of more than 5 megawatts (MW) will be slashed every four months by a total of up to 30 percent next year, said Gianni Chianetta, chairman of the Assosolare industry body. Incentives for smaller PV installations will be gradually cut by up to 20 percent next year. One-off 6 percent annual cuts are set for 2012 and 2013 under the new plan, the industry source said.
The UK:The U.K. government signaled it may cut the prices paid for electricity from renewable energy sources, saying it began a "comprehensive review" of feed-in tariffs introduced last year. Evidence that larger-scale solar farms may "soak up" money meant for roof-top solar panels, small wind turbines and smaller hydropower facilities prompted the study, the Department of Energy and Climate Change said today in an statement. A review was originally planned to start next year.
The move will allow the government to change the above- market prices paid for wind and solar electricity by more than already planned when the new prices come into force in April 2012. The department said it will speed up an analysis of solar projects bigger than 50 kilowatts and that new tariffs may be mandated "as soon as practical." "This is going to put the jitters into some market segments," Dave Sowden, chief executive officer of the Solihull, England-based trade group Micropower Council, said today in a phone interview.
Portugal:The Portuguese government has announced that it will review the existing feed-in tariff mechanism following calls that the subsidies are excessive and contribute to the increase of electricity prices to final consumers.
OntarioInitial enthusiasm among ratepayers for the scheme is flagging in the wake of perceived links between the FiT and increased energy prices. The FiT passed into law in May 2009 as part of the Green Energy Act, which aims to promote the development of wind and solar generation in the province. With provincial elections slated for 6 October next year, the opposition Progressive Conservative Party is threatening to substantially revise and possibly even scrap the FiT should it win. Even if it the subsidy scheme were to be revoked, the legal implications of rescinding the over 1500MW in existing FiT contracts would be highly problematic.
Stoneleigh: Spain is the example everyone wishes to avoid. The rapid growth in the renewable energy sector paralleled the bubble-era growth of the rest of Spain’s economy. The tariffs offered under their FIT programme now come under the heading of ‘promises that cannot be kept’, like so many other government commitments made in an era of unbridled optimism. Those tariffs are now being cut, and not just for new projects, but for older ones with an existing contract. People typically believe that promises already made are sacrosanct, and that legal committments will not be broken, but we are moving into a time when rules can, and will, be changed retroactively when the money runs out. Legal niceties will have little meaning when reality dictates a new paradigm.
Spain:Spain's struggling solar-power sector has announced it will sue the government over two royal decrees that will reduce tariffs retroactively, claiming they will cause huge losses for the industry. In a statement, leading trade body ASIF said its 500 members endorsed filing the suit before the Spanish high court and the European Commission. They will allege that royal decrees 156/10 and RD-L 14/10 run against Spanish and European law. The former prevents solar producers from receiving subsidized tariffs after a project's 28th year while the latter slashes the entire industry's subsidized tariffs by 10% and 30% for existing projects until 2014. Both bills are "retroactive, discriminatory and very damaging" to the sector. They will dent the profits of those companies that invested under the previous Spanish regulatory framework, ASIF argued.
Austerity bites:The government announced soon after that it would introduce retroactive cuts in the feed-in tariff program for the photovoltaic (PV) industry in the context of the austerity measures the country is currently undergoing. According to this plan, existing photovoltaic plants would have their subsidies cut by 30%, a figure that would go up to 45% for any new large scale plants. Smaller scale roof installations would lose 25% of their existing subsidy, while installations with a generating capacity of less than 20 KW would have 5% taken from their tariff.
Spain is to big to fail and too big to bail out:Spain has been forced to cut back on solar subsidies because of the impact on ratepayers. But Spain's overall economy is in much worse shape and the subsidies for feed in tariff are threatening to push the country into bailout territory or, at lease, worsen the situation should a bailout be needed.
FIT and Debt:The strain on government revenue is in part due to the way Spain has designed its feed-in tariff system. Usually, this type of subsidy is paid for by utilities charging more for the electricity they sell to consumers, to cover the cost of buying renewable energy at above-market prices. Therefore no money is actually paid out of government revenues: consumers bear the cost directly by paying higher electricity bills.
In Spain, however, the price of electricity has been kept artificially low since 2000. The burden has been shouldered by utilities, which have been operating at a loss on the basis of a government guarantee to eventually pay them back. The sum of this so-called ‘tariff deficit’ has accumulated to over €16 billion (US$ 20 billion) since 2000. For comparison, Spain’s deficit in 2009 was around €90 billion (US$ 116 billion) in 2009 and its accumulated debt around €508 billion (US$ 653 billion).
Stoneleigh: Ontario threatens to take the Spanish route by instituting retroactive measures after the next election. For a province with a long history of political interference in energy markets, further regulatory uncertainty constitutes a major risk of frightening off any kind of investment in the energy sector. Considering that 85% of Ontario’s generation capacity reaches the end of its design life within 15 years, and that Ontario has a huge public debt problem, alienating investment is arguably a risky decision. FIT programmes clearly sow the seeds of their own destruction. They are an artifact of good economic times that do not transition to hard times when promises are broken.
OntarioThe outcome of an autumn election in Ontario could stunt a budding renewable energy industry in the Canadian province just as it is becoming one of the world's hot investment destinations. If the opposition Progressive Conservatives win power on Oct. 6, the party has promised to scrap generous rates for renewable energy producers just two years after their launch by the Liberal government. That could threaten a program that has lured billions of dollars in investment and created thousands of jobs.
The Conservatives, who are leading in the polls, have yet to release an official energy manifesto. Even so, the industry is privately voicing concern, especially after the party said it would scrutinize contracts already awarded under Ontario's feed-in tariff (FIT) program. "They are going to go through the economic viability of the energies and review all of the past contracts ... I think that is going to cause a lot of delays, a lot of problems and a lot of risk to Ontario," said Marin Katusa, chief energy analyst at Casey Research, an investor research service.
George Monbiot, writing for The Guardian in the UK, provides an insightful critique of FIT programmes in general:The real net cost of the solar PV installed in Germany between 2000 and 2008 was €35bn. The paper estimates a further real cost of €18bn in 2009 and 2010: a total of €53bn in ten years. These investments make wonderful sense for the lucky householders who could afford to install the panels, as lucrative returns are guaranteed by taxing the rest of Germany's electricity users. But what has this astonishing spending achieved? By 2008 solar PV was producing a grand total of 0.6% of Germany's electricity. 0.6% for €35bn. Hands up all those who think this is a good investment....
....As for stimulating innovation, which is the main argument Jeremy [Leggett] makes in their favour, the report shows that Germany's feed-in tariffs have done just the opposite. Like the UK's scheme, Germany's is degressive – it goes down in steps over time. What this means is that the earlier you adopt the technology, the higher the tariff you receive. If you waited until 2009 to install your solar panel, you'll be paid 43c/kWh (or its inflation-proofed equivalent) for 20 years, rather than the 51c you get if you installed in 2000.
This encourages people to buy existing technology and deploy it right away, rather than to hold out for something better. In fact, the paper shows the scheme has stimulated massive demand for old, clunky solar cells at the expense of better models beginning to come onto the market. It argues that a far swifter means of stimulating innovation is for governments to invest in research and development. But the money has gone in the wrong direction: while Germany has spent some €53bn on deploying old technologies over ten years, in 2007 the government spent only €211m on renewables R&D.
In principle, tens of thousands of jobs have been created in the German PV industry, but this is gross jobs, not net jobs: had the money been used for other purposes, it could have employed far more people. The paper estimates that the subsidy for every solar PV job in Germany is €175,000: in other words the subsidy is far higher than the money the workers are likely to earn. This is a wildly perverse outcome. Moreover, most of these people are medium or highly skilled workers, who are in short supply there. They have simply been drawn out of other industries.
Stoneleigh: Widespread installed renewable electricity capacity would be a very good resource to have available in an era of financial austerity at the peak of global oil production, but the mechanisms that have been chosen to achieve this are clearly problematic. They plug into, and depend on, a growth model that not longer functions. If we are going to work towards a future with greater reliance on renewable energy, there are a number of factors we must consider. These are not typically addressed in the simplistic subsidy programmes that are now running into trouble worldwide.
We have power systems built on a central station model, which assumes that we should build large power station distant from demand, on the grounds of economic efficiency, which favours large-scale installations. This really does not fit with the potential that renewable power offers. The central station model introduces a grid-dependence that renewable power should be able to avoid, revealing an often acute disparity between resource intensity, demand and grid capacity. Renewable power (used in the small-scale decentralized manner it is best suited for) should decrease grid dependence, but we employ it in such a way as to increase our vulnerability to socioeconomic complexity.
Renewable energy is best used in situ, adjacent to demand. It is best used in conjunction with a storage component which would insulate consumers from supply disruption, but FIT programmes typically prohibit this explicitly. Generators are expected to sell all their production to the grid and buy back their own demand. This leaves them every bit as vulnerable to supply disruption as anyone who does not have their own generation capacity. This turns renewable generation into a personal money generating machine with critical vulnerabilities. It is no longer about the energy, which should be the focus of any pubicly funded energy programme.
FIT programmes typically remunerate a wealthy few who install renewables in private applications for their own benefit, and who may well have done so in the absence of public subsidies. If renewables are to do anything at all to help run our societies in the future, we need to move from publicly-funded private applications towards public applications benefitting the collective. We do not have an established model for this at present, and we do not have time to waste. Maximizing renewable energy penetration takes a lot of time and a lot of money, both of which will be in short supply in the near future. The inevtable global austerity measures are not going to make this task any easier.
We also need to consider counter-cyclical investment. In Ontario, for instance, power prices have been falling on falling demand and increased conventional supply, and are now very low. In fact, the pool price for power is often negative at night, as demand is less than baseload capacity. Under such circumstances it is difficult to develop a political mandate for constructing additional generation, when the spending commitment would have to be born by the current regime and the political benefits would accrue to another, due to the long construction time for large plants.
Politicians are allergic to situations like that, but if they do not make investments in additional generation capacity soon, most of Ontario's capacity could end up being retired unreplaced. Large, non-intermittent, plants capable of load following are necessary to run a modern power system. These cannot be built overnight.
Many jurisdictions are going to have to build capacity (in the face of falling prices in an era of deflation) if they are to avoid a supply crunch down the line. Given how dependent our societies are on our electrified life-support systems, this could be a make or break decision. The risk is that we wait too long, lose all freedom of action and are then forced to take a much larger step backwards than might other wise have been the case.
Europe's existing installed renewable capacity should stand it in good stead when push comes to shove, even though it was bought at a high price. Other locations, such as Ontario, really came too late to the party for their FIT initiatives to do any good. Those who have not built replacement capacity, especially load-following plants and renewables with no fuel cost going forward, could be very vulnerable in the future. They will be buffeted first by financial crisis and then by energy crisis, and there may be precious little they can do about either one.
Here's a little song for Ilargi's birthday today. Send him a present!
Geithner’s Gamble
by Simon Johnson - Baseline Scenario
In a recent interview, United States Treasury Secretary Tim Geithner laid out his view of the nature of world economic growth and the role of the US financial sector. It is a deeply disturbing vision, one that amounts to a huge, uninformed gamble with the future of the American economy – and that suggests that Geithner remains the senior public official worldwide who is most in thrall to the self-serving ideology of big banks.
Geithner argues that the world will now experience a major "financial deepening," owing to growing demand in emerging markets for financial products and services. He is thinking, of course, of "middle-income" countries like India, China, and Brazil. And he is right to emphasize that all have made terrific progress and now offer great opportunities for the rising middle class, which wants to accumulate savings, borrow more easily (for productive investment, home purchases, education, etc), and, more generally, smooth out consumption.
But then Geithner takes a leap. He wants US banks to take the lead in these countries’ financial development. His words are worth quoting at length:"I don’t have any enthusiasm for…trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world…It’s the same thing for Microsoft or anything else. We want US firms to benefit from that…Now, financial firms are different because of the risk, but you can contain that through regulation."
There are three serious problems with this view. First, Geithner ignores everything that we know about the pattern of financial development around the world. It is very rare for financial systems to develop without major crises. In fact, experience in recent decades confirms what should have been obvious from previous centuries: as countries grow and accumulate savings, they become increasingly prone to financial collapse. Given Geithner’s extensive international crisis-fighting experience at the US Treasury, the International Monetary Fund, and the New York Federal Reserve, his current naiveté on this point is simply stunning.
Second, Geithner assumes that risks at the largest US firms can be contained through regulation, when all our knowledge points directly to the contrary. Even the strongest supporters of the Dodd-Frank reform legislation emphasize that it only went part way towards reducing the incentives for major financial institutions to take big risks. Looking at the combined effect of the new law, plus the weak additional capital requirements agreed under Basel III and the hands-off approach already signaled by the Financial Stability Oversight Council (which Mr. Geithner chairs), it is hard to believe that anything has really improved.
In fact, given that our largest banks are now undoubtedly too big to fail, they have even more incentive to increase their debt levels relative to their equity. Higher leverage increases their payoffs when times are good – as executives and traders are paid based on their "return on equity." And when times are bad, for example in a crisis episode, losses are transferred to creditors. If those creditor losses are large and spread so as to undermine the broader financial system, pressure for a government bailout will mount. Bankers get the upside and taxpayers (and people laid off as credit is disrupted) get the downside.
The US financial sector went mad for high-risk loans to emerging markets during 1970s – arguing that this was the new frontier. This loan portfolio blew up in the debt crisis of 1982. A version of same thoughtless cross-border lending is again underway, extolled by leading financial sector executives (e.g., Jamie Dimon from JP Morgan Chase) – who have apparently persuaded Mr. Geithner to tag along intellectually.
And third, Geithner completely overlooks what has brought significant parts of Europe to its economic knees. He should spend more time with the authorities in Iceland or Ireland or Switzerland, countries where "financial globalization" allowed banks to become big relative to the economy.
In Iceland, the three largest banks built global balance sheets that were between 11 and 13 times the size of the economy. And then they collapsed.
In Ireland, the three largest banks went crazy for commercial real estate – financed by large-scale borrowing from other eurozone countries (including Germany). The politicians looked the other way – or were paid off, some claim – while these banks built balance sheets valued at two times Irish GDP. And then they collapsed, causing enormous damage to the government’s own solvency.
In Switzerland, the two largest banks (UBS and Credit Suisse) had a combined balance sheet in fall 2008 of around 8 times Swiss GDP – mostly based on their global activities. Mortgage traders in London – not many of whom were Swiss – took on enormous risks that almost brought down UBS. The Swiss government could afford the bailout, just. And now the Swiss National Bank is moving in the exact opposite direction to Geithner – they are pushing these big banks to become smaller and to finance more of their activities with equity, rather than debt.
Geithner is a very smart and experienced public servant. His views concerning the future of finance will help shape what happens. And that is why we are headed for trouble.
Fannie Mae, Freddie Mac Seek Another $3.1 Billion in Aid Amid Improved Earnings
by Lorraine Woellert - Bloomberg
Freddie Mac and Fannie Mae, the mortgage-finance companies operating under U.S. conservatorship, requested another $3.1 billion in Treasury Department aid as they reported quarterly earnings reflecting improving health.
Fannie Mae reported net income of $73 million for the three-month period that ended Dec. 31, the Washington-based company’s first positive results in three years. McLean, Virginia-based Freddie Mac’s quarterly loss narrowed to $113 million from $6.5 billion in the same period a year earlier. Both companies reported net-worth deficits attributable largely to the quarterly dividend payments they make to the Treasury Department, which has owned more than 79 percent of both companies since they were seized and placed under U.S. conservatorship during the credit crisis in 2008.
The government-sponsored enterprises, which own or guarantee more than half of U.S. mortgages, have been sustained by $154 billion in Treasury funds since the takeover. More than $20 billion of that money has been paid back to taxpayers in the form of a 10 percent dividend on the shares owned by Treasury.
The Treasury yesterday released an accounting showing that the companies’ cost to taxpayers is declining as their dividend payments grow. The two companies paid a combined $3.8 billion in the fourth quarter, reducing the net cost to taxpayers to $133.7 billion, The Treasury said.
Freddie Mac reported a net-worth deficit of $401 million in its fourth-quarter filing with the Securities and Exchange Commission, attributing it partly to the $1.6 billion dividend payment owed to Treasury. The company requested $500 million to eliminate that deficit. Fannie Mae sought $2.6 billion from Treasury to help eliminate its $2.5 billion net-worth deficit. Like smaller rival Freddie Mac, the firm cited the dividend obligation -- $2.2 billion in Fannie Mae’s case -- as part of the reason for the shortfall.
A 2012 budget estimates predicted that taxpayer aid to Fannie Mae and Freddie Mac could total $224 billion by the end of 2012, of which $55 billion will be returned in dividends. Washington policy makers are working on a plan to wind down the companies and rebuild the U.S. housing system.
The Wisconsin Lie Exposed – Taxpayers Actually Contribute Nothing To Public Employee Pensions
by Rick Ungar - Forbes
Pulitzer Prize winning tax reporter, David Cay Johnston, has written a brilliant piece for tax.com exposing the truth about who really pays for the pension and benefits for public employees in Wisconsin.Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers.
Via tax.com
How can this be possible?Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.
Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete. As a means of allowing their ball club to have enough money to operate, lowering their own tax obligations and for other benefits, ball players often defer payment of money they are to be paid to a later date. In the meantime, that money is invested for the ball player’s benefit and then paid over at the time and in the manner agreed to in the contract between the parties.
Does anyone believe that, in the case of the ball player, the deferred money belongs to the club owner rather than the ball player? Is the owner simply providing this money to the athlete as some sort of gift? Of course not. The money is salary to be paid to the ball player, deferred for receipt at a later date.
A review of the state’s collective bargaining agreements – many of which are available for review at the Wisconsin Office of State Employees web site - bears out that it is no different for state employees. The numbers are just lower.
Check out section 13 of the Wisconsin Association of State Prosecutors collective bargaining agreement – “For the duration of this Agreement, the Employer will contribute on behalf of the employee five percent (5%) of the employee’s earnings paid by the State. ”
Johnston goes on to point out that Governor Walker has gotten away with this false narrative because journalists have failed to look closely at how employee pension plans work and have simply accepted the Governor’s word for it. Because of this, those who wish the unions ill have been able to seize on that narrative to score points by running ads and spreading the word that state employees pay next to nothing for their pensions and that it is all a big taxpayer give-away.
If it is true that pension and benefit money is money that already belongs to state workers, you might ask why state employees would not just take the cash as direct compensation and do their own investing for their retirement through their own individual retirement plans.
Again, simple.
Mr. Johnston continues:
Expecting individuals to be experts at investing their retirement money in defined contribution plans — instead of pooling the money so professional investors can manage the money as is done in defined benefit plans — is not sound economics. The concept, at its most basic, is buying wholesale instead of retail. Wholesale is cheaper for the buyers. That is, it saves taxpayers money. The Wisconsin State Investment Board manages about $74.5 billion for an all-in cost of $224 million. That is a cost of about 30-cents per $100, which is good but not great. However it is far less than many defined contribution plans, where costs are often $1 or more per $100."
If the Wisconsin governor and state legislature were to be honest, they would correctly frame this issue. They are not, in fact, asking state employees to make a larger contribution to their pension and benefits programs as that would not be possible- the employees are already paying 100% of the contributions.What they are actually asking is that the employees take a pay cut.
That may or may not be an appropriate request depending on your point of view – but the argument that the taxpayers are providing state workers with some gift is as false as the argument that state workers are paid better than employees with comparable education and skills in private industry.
Maybe state workers need to take pay cut along with so many of their fellow Americans. But let’s, at the least, recognize this sacrifice for what it is rather than pretending they’ve been getting away with some sweet deal that now must be brought to an end.
UPDATE: Since this post was published earlier today, many commenters have made the point that, while it is true that it is state employees’ own money that funds the pension plan, when the pension plan comes up short it is up to the taxpayer to make up the difference.
There is some truth in this – but not as much as many seem to think. Because the pension plan is a defined benefit plan – requiring the state to pay the agreed benefit for however long the employee may live in retirement- if the employee lives longer than the actuarial plan anticipated, the taxpayer is on the hook for the pay-outs during the longer life.
But is this the fault of the state employees? The pension agreements are the result of collective bargaining. That means that the state has every opportunity to properly calculate the anticipated lifespan and then add on some margin for error. What’s more, the losses taken by the pension funds over the past few years can hardly be blamed on the employees.
Take a look at what Sue Urahn, an expert on the subject at the Pew Center on the States, has to say about this when describing the $1 trillion gap that existed between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.at the end of 2008-
To a significant degree, the $1 trillion reflects states’ own policy choices and lack of discipline:Via Pew Center on the States
- failing to make annual payments for pension systems at the levels recommended by their own actuaries;
- expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and
- providing retiree health care without adequately funding it
That is the point. While the governor of Wisconsin is busy trying to shift the blame to the workers in an effort to put an end to collective bargaining, the reality is that it was the state who punted on this – not the employees.
Further, by the state employee unions agreeing to the deal proposed by Walker on their benefits (as they have despite Walker’s refusal to accept it) they are taking on much - and possibly all – of the obligation out of their own pockets.
As a result, the taxpayers do not contribute to the public employee pension programs so much as serve as insurers. If their elected officials have been sloppy , the taxpayers must stand behind it. But if the market continues to perform as it has been performing this past year, don’t be surprised if the funding crisis begins to recede. If it does, what will you say then?
What Governor Walker Won't Tell You
by Stanley Kutler - Huffington Post
There is a kernel of truth in Wisconsin Gov. Scott Walker's claim of a "budget shortfall" of $137 million. But Walker, a Republican, failed to tell the state that less than two weeks into his term as governor, he, with his swollen Republican majorities in the Wisconsin legislature, pushed through $117 million in tax breaks for business allies of the GOP. There is your crisis.
The state Legislature's Legislative Fiscal Bureau -- Wisconsin's equivalent of the Congressional Budget Office and a refuge for professional expertise and nonpartisanship -- warned Walker and the legislature that the measure would create a budget gap. There is your shortfall -- and not one resulting from established public employee benefits. Before the tax giveaways, the fiscal agency predicted a surplus for the state.
Now the governor has offered a proposal simple and clear in its intent, and patently dishonest. Walker wants state workers to contribute to their pension fund and is calling for an increase in their payments for medical insurance. Make no mistake: The governor's "budget repair bill" has little to do with a budget shortfall and everything to do with breaking unions, starting with public employees and then perhaps moving on to others as well.
During his run for governor, Walker had substantial financial support from the Koch brothers, billionaire industrialists who have funded various anti-Obama, anti-science, and anti-national government movements. In short, they are opposed to anyone and anything that might diminish their exorbitant profits. And for the Kochs, destroying labor unions is in the top tier of their to-get-rid-of list.
Walker's own hostility to labor unions is a touchstone of his prior political experience. He is out to realize his every long-held political fantasy, with the help of such allies as the National Association of Manufacturers; Wisconsin Manufacturers and Commerce; and the Chamber of Commerce. Ever since the 1930s, when national law recognized the right of workers to organize and bargain collectively, that gain has been under assault from right-wing ideologues and much of the business community.
Public employees in Wisconsin, as elsewhere, do not have a recognized "right to strike." But they have a right to a union, with the power to negotiate wages and the conditions of work. That is Walker's real target, and after he deals with it perhaps he can move to make Wisconsin a "right-to-work" state, devoid of any protections for labor unions, just like Mississippi. Now we can understand Walker's mantra: "Wisconsin is open for business." What a "popular," appealing position! Everyone likes to complain about bureaucrats and teachers -- lazy, incompetent and, withal, overpaid. Never mind that studies portray a public work force earning 8 to 15 percent less than similarly situated private sector employees, with the spread even wider among more educated workers.
The governor and his allies like to frame their goal as one that would destroy the special privileges of public employees -- as if a Cadillac class of public workers exists in the state. In truth, many public employees secured increased benefits in the 1970s, a time which saw the notion of a "budget crunch" come into play, and the state bargained its way out of salary increases (incidentally, during a time of rising inflation) in exchange for increased employee benefits.
The "February Thaw" brought out an estimated 50,000 or more public employees, teachers, ordinary citizens and students to demonstrate against Walker's budget repair bill. Montesquieu, the 18th century French political philosopher, wrote about the impact of environment on human and societal behavior. Cold, icy climates, he said, generally dampened human passions, thus lessening chances of "public disorder." Walker should have offered his legislation during the first three weeks of January, when temperatures hovered just above zero.
Confronting the protests, Walker has framed the issue in stark, simple terms. It is, he said, a battle between "protesters" and "taxpayers." That followed the obligatory remarks about outside agitators -- shades of Mississippi governors in the 1960s. Indeed, the media obliged him by making the increasingly marginalized Jesse Jackson the centerpiece of the protests, thus seeming to confirm Walker's contention about outside agitators.
After three days of protests, the largest union offered to concede the pension and health insurance payments in exchange for continued recognition of the right to negotiate wage and working conditions. The governor bluntly replied that the time for negotiations had passed, but the truth is that at no time did he offer any negotiation on these matters. If your ideological baggage has no room for workers' rights, then you will rule by dictate and fiat. Walker's baggage overflows with hostility for workers.
Walker insists that the budget shortfall requires that state workers, like everyone else in society, must carry their fair share of the burden. But the governor is causing pain to no one else to remedy the situation. Michigan's Republican Gov. Rick Snyder offered a $45 billion cost-cutting budget, but he said he would take only $1 in salary as part of the "shared sacrifice." Meanwhile, Snyder, unlike Walker, has begun negotiations with public employees unions to increase workers' shares of pension and health care costs.
Wisconsin state revenues are down as statewide unemployment largely reflects the national picture. Furthermore, there is justifiable despair among the unemployed that their jobs may never return. And if they are over 50, there is only a small chance that they ever will have any job comparable to those they held prior to 2007. Little do they understand that companies continue to enjoy swollen revenues, income that inflates the profit side of their ledgers as they reap benefits from "restructuring" -- today's fashionable euphemism for dropping jobs and employees. The business community now sits on the sidelines, hoarding capital, and workers have little work.
The governor claims he has traveled around the state talking to factory workers and others who say they support him because they must spend 25 to 50 percent of their income on health insurance. Well, if that is the case, and such folks are his supporters, perhaps it is time for Walker to rise to their defense and rein in the gouging health insurers.
Budgets are a mysterious maze. Legislators -- let alone a citizenry dependent on a largely incompetent, ill-informed media -- rarely know the intricacies of a budget and how it may cause a seismic change in public policy. Walker himself precipitated the "budget crisis," necessitating a "repair bill" that gave him and his allies what they really wanted. The governor pursues an agenda backed by the tea party's financial angels. Public employees and other workers down the line will pay the freight for such folly. The governor lies.
Arizona Bill Would Void Foreclosures Without Full Title History
by Prashant Gopal - Bloomberg
Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.
The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.
Lawmakers in states including New York, Oregon and Virginia also have proposed legislation to address concerns among consumer advocates that lenders or mortgage servicers are using incomplete or false paperwork to repossess properties in default. The attorneys general of all 50 states are jointly investigating how the mortgage-servicing industry operates.
"If you foreclose on somebody you should have to tell them who owns the property," Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. "People have the right in this country to face their accusers." The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.
The bill is opposed by the Arizona Bankers Association; the Arizona Trustees Association, which represents the trustees that conduct foreclosure auctions on behalf of lenders; and Merscorp Inc., an industry-owned company that operates a database with more than half of all U.S. mortgages. Matthew Benson, a spokesman for Arizona Governor Jan Brewer, a Republican, said she doesn’t comment on legislation until it reaches her desk.
Names, Addresses
The bill would require lenders to provide a document attached to the notice of foreclosure sale with the name and address of every beneficial owner of the deed of trust in chronological order, along with the date, recordation number and a description of the instrument that "conveyed the interest of each beneficiary."
Anyone with an interest in the property could file an action to void the sale for failure to comply and be entitled to an award of attorney fees and damages, according to the bill, which wouldn’t affect past foreclosures. "If Arizona passes this, it will be the only state in the union that will require a production of chain of title," said Paul Hickman, chief executive officer of the Arizona Bankers Association in Phoenix. "States that pass these types of laws will be riskier environments to lend in and more difficult environments to get a loan in."
Foreclosure Crisis
Arizona had a foreclosure filing rate of one in 175 households in January, the second-highest among states, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data. Nationally, a record share of mortgages were in the foreclosure process at the end of 2010 as lenders such as Bank of America Corp. and JPMorgan Chase & Co. temporarily delayed seizures to review allegedly improper documents. The state attorneys general and federal regulators are investigating the practice of using assembly lines of employees to sign thousands of affidavits and other documents without reading them, a practice known as robo-signing.
The Arizona proposal was suggested to Reagan by her attorney, Beth Findsen, who said she also helped write the bill. Reagan and her husband, David Gulino, were sued by their servicer, Fort Worth, Texas-based Colonial Savings FA, after they told the bank in a July 2009 letter that they were rescinding the loan because it failed to disclose certain fees and that its underwriter inflated their income by 12 percent in violation of the federal Truth in Lending Act.
Suit, Countersuit
Colonial Savings asked the court to declare that the couple isn’t entitled to revoke the loan. Reagan and Gulino filed their own suit, arguing that they were steered to an adjustable-rate mortgage they didn’t need and that Colonial Savings won’t tell them who owns their loan. Janet Walter, a spokeswoman for Colonial Savings, declined to comment. "It makes Michele mad that the bank servicers will not disclose to a borrower the true noteholders," Findsen said. "She was taken aback that such basic information was not readily available."
Reagan’s bill has both technical and conceptual problems, and could add to uncertainty over title in the state, said Richard Chambliss, president of the Arizona Trustees Association in Phoenix. Lenders that don’t file mortgage assignments with county recorders offices could face borrower challenges if the bill passes, even though the assignments weren’t required by state law, Chambliss said. Banks using Reston, Virginia-based Merscorp’s database typically don’t file assignments because the ownership information is supposed be tracked electronically.
Proposed Amendment
The trustees association has suggested an amendment to the bill that would instead require the owner to certify to the trustee that it has the legal right to foreclose. Under the amendment, which wasn’t taken up by the Senate, the lender could face perjury charges if the certification is found to be false. "Is this bill intended to punish the lenders and screw up the process or address the problem that needs to be solved?" Chambliss said. "What is it accomplishing by requiring that the history from the birth of the deed of trust to 20 assignments down the road have to be fully identified?"
About two thirds of mortgages originated in the previous decade were bundled into securitized trusts and sold to investors. Loans were typically sold at least three times, and often many more, before reaching the trust.
Loan Modifications
The Arizona legislation would make it easier for borrowers to negotiate loan workouts, said Walter E. Moak, a bankruptcy attorney in Chandler, Arizona. Servicers often reject modification requests because the borrower doesn’t meet investor guidelines, even as they refuse to identify the investors, Moak said. "The person who has decision-making power is not the servicer, it’s the investors," he said.
Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City, said the legislation will test the completeness and accuracy of bank records. The law could also have the unintended consequence of pushing more lenders to modify loans rather than face a voided sale. "I like it because it forces the financial institution into providing information about who owns loans and rebuild transparency," Peterson said. "It makes it significantly more difficult to foreclose if they don’t have good records of the history of ownership of the loan."
World’s Biggest Pension Fund 'Will Likely' Sell Japan Bonds
by Anna Kitanaka and Hideki Sagiike - Bloomberg
Japan’s public pension fund, the world’s largest, said it may become a net seller of bonds to cover payments in the world’s most rapidly aging society.
The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. Sales may be less than that in the year starting April as bonds reach maturity, said Takahiro Mitani, president of the fund, known as GPIF.
"We will likely be a net seller in the market," Mitani, a former executive director at the Bank of Japan, said in an interview in Tokyo yesterday. "We certainly have to come up with an adequate amount" to pay pensions, he said, declining to elaborate on the amount.
Sales by the fund, which helps oversee public pension funds for Japan’s 37 million retirees, come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments. In the year ended March 2010, GPIF raised 720 billion yen in part through selling assets to fund the payouts. Almost 40 percent of Japan’s population will be older than retirement age in 2050, according to the statistics office.
The GPIF, historically one of the biggest buyers of Japanese debt, held 82.4 trillion yen in domestic bonds, or 70 percent of its assets, as of September, according to the fund’s latest quarterly financial statement. That compares with 12.6 trillion yen in Japanese stocks, or 10.7 percent, 9.6 trillion yen, or 8.2 percent, in foreign bonds and 11.5 trillion yen, or 9.7 percent, in overseas stocks, the report shows.
'Need to Sell'
GPIF is the biggest pension fund in the world by assets under management, according to the Towers Watson Global 300 survey in September, followed by Norway’s government pension fund. The fund, which set out a five-year investment plan last March, said it will continue to allocate about two-thirds of its assets to domestic bonds, 11 percent to Japanese stocks, 8 percent to foreign bonds, 9 percent to overseas equities and 5 percent to short-term assets until March 2015.
"They need to sell, otherwise it’s not enough," said Takahiro Tsuchiya, a strategist at Daiwa Institute of Research Ltd. "Because their allocation is already decided, they’ll probably sell the asset classes that have increased in price." GPIF doesn’t plan to start investing in so-called alternative assets such as commodities, real estate, infrastructure, private equity or hedge funds because the risks don’t suit its strategy, Mitani said.
"It’s too early to get into alternative investments now," Mitani said. "Japanese investors are conservative and it’s hard to justify to the public investing in asset classes such as commodities, real estate and hedge funds." After two years of losses following the onset of the global financial crisis, the fund returned to profit in the business year ended March 2010, as equity markets recovered globally, Mitani said in the fund’s latest annual report.
The total return for the last fiscal year was 7.9 percent. Japan’s 10-year bonds declined for the first time in four days today. The benchmark 10-year yield rose 1.5 basis points to 1.235 percent as of 9:21 a.m. at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due December 2020 lost 0.131 yen to 99.693 yen. A basis point is 0.01 percentage point.
Aging Society
Japan’s 10-year bond yield is the lowest in the world, data compiled by Bloomberg show. Japan’s gross domestic product shrank an annualized 1.1 percent in the three months ended Dec. 31, the Cabinet Office said on Feb. 14, and China’s economy overtook Japan’s as the world’s second largest for 2010.
People aged 65 or older will account for 29 percent of the country’s population in 2020 and almost 40 percent in 2050, according to the statistics bureau. They accounted for 23 percent population at the end of 2010, the highest among the Group of Seven countries, data compiled by Bloomberg show. That compares with 12 percent in 1990.
About 8 million people, or 6 percent of the population, were born between 1947 and 1949, regarded as the baby-boomer generation in Japan, government data show. The number of pensioners in Japan was 37 million in 2009, an increase of 3.1 percent on the previous year, according to the Ministry of Health, Labor and Welfare.
Pension fund payouts, which grew 2.8 percent from the previous year, totaled 50.26 trillion yen in the year ended March 2010, according to the health ministry. Of that, GPIF paid 3.76 trillion yen, or 7.5 percent, according to Yoshihiro Yumiba, a director at the health ministry’s pension bureau. Japanese pension funds posted the lowest annualized growth among 12 countries between 2004 and 2009, at 2 percent in U.S. dollar terms and unchanged in yen terms, according to the survey. Brazil reported the highest growth, 24 percent in dollars, the report showed.
In terms of growth by assets among the top-20 funds in the world between 2004 and 2009, Japan also came in last, increasing 3.5 percent, compared with China in first place at 40.6 percent.
Big US Banks Expect Penalties From Foreclosure Probe
by Shahien Nasiripour - Huffington Post.
Three of the nation's largest banks said Friday that they expect to be sanctioned by the U.S. government for their foreclosure practices, securities filings show. The disclosures come on the heels of reports federal regulators are nearing a multi-billion dollar deal to settle allegations that the biggest banks abused borrowers and illegally foreclosed on homes.
The months-long federal probe found significant and widespread deficiencies in how firms service home loans, which involves collecting payments, modifying delinquent loans, and foreclosing on borrowers upon default. A "small number" of foreclosures should not have occurred, a top bank regulator told a Senate committee last week after his agency surveyed less than 3,000 loan files. The filings are the first acknowledgment by the targeted banks that they're likely to face significant penalties arising from the investigations.
Wells Fargo & Co., the fourth-largest bank by assets, said it is "likely" at least one government agency "will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties." The firm added that its litigation expenses could reach $1.2 billion beyond what it's already set aside for lawsuits and investigations, according to its filing with the Securities and Exchange Commission. Wells Fargo handles $1.8 trillion in home loans, second-most in the U.S., according to Inside Mortgage Finance, a trade publication and data provider.
Taxpayer-owned Ally Financial Inc., the nation's fifth-largest handler of home mortgages, said in its annual report that it expects it "will become subject to fines, penalties, sanctions or other adverse actions." "Any of these potential actions could have a material adverse impact on us," the firm noted in its filing with the SEC.
SunTrust Banks Inc., the eighth-largest mortgage servicer, said it expects regulators to fine the firm for its alleged abuses, according to its filing. The nation's 15th-largest lender by assets also outlined a settlement agreement it expects to adhere to based on demands from regulators. SunTrust, along with other large firms, will likely have to acknowledge they improperly handled documents when trying to foreclose on homeowners; failed to devote sufficient resources when handling mortgages; and failed to develop systems to prevent such problems, the bank said in its filing.
"We expect that such a consent order will require us to implement substantial additional operational processes and reviews within a certain time frame," the firm said. "We also expect that such regulators may seek civil monetary penalties at a later time."
Separately, the Georgia-based lender said that it recently discovered that about 4,000 of its foreclosure cases, or 15 percent of active proceedings, contained various deficiencies, joining other large banks that found similar weaknesses after conducting such reviews last fall. Documents will have to be re-filed with various courts, the firm said, temporarily halting home repossessions. It added that it doesn't expect the findings to have a "material adverse" impact.
The three lenders are part of the federal probe into improper -- and at times illegal -- foreclosure practices that have roiled the housing market. About a dozen federal regulators, along with attorneys general in all 50 states, are conducting both civil and criminal probes into the banks' mortgage practices. The Huffington Post reported Thursday that federal regulators could demand as much as $30 billion in penalties from the 14 largest mortgage firms. State regulators, who at present are only examining the five largest servicers, are looking to exact even heftier fines from the targeted firms.
Bank of America and Citigroup, the largest and third-largest lenders by assets, respectively, disclosed in their annual reports that they, too, could face fines and other penalties associated with their handling of mortgage documents. Citigroup said the federal and state probes "could result in fines, penalties, [and] other equitable remedies, such as principal reduction programs," according to its filing with the SEC. The company added that it could face "significant legal, negative reputational and other costs." Citigroup handles about $602 billion in home mortgages, Inside Mortgage Finance data show.
Bank of America, which handles $2.1 trillion in home mortgages, said the probes could "significantly adversely affect its reputation." It's the nation's biggest mortgage firm, according to Inside Mortgage Finance. The investigations could result in "material fines, penalties, equitable remedies...or other enforcement actions, and result in significant legal costs in responding to governmental investigations and additional litigation," Bank of America said in its report. It added it may be subject to additional lawsuits from borrowers and other parties.
The bank, which temporarily suspended home repossessions last year after finding deficiencies in its foreclosure practices, said it expects to resume foreclosure proceedings in some states this quarter. However, it continues to re-file documents in those cases in which it found shortcomings, Bank of America said in its filing.
Citigroup Could Lose $4 Billion on Lawsuits
by Matthias Rieker And Randall Smith - Wall Street Journal
Citigroup Inc. may have turned a corner with the sale of the U.S. government's last shares in December, but it still faces an outsize hangover from lawsuits from the market meltdown.
Citigroup said Friday in its annual report that it could face as much as $4 billion more in losses from litigation left over from the meltdown and other matters than it has already set aside. That is an estimate far higher than rivals Wells Fargo & Co. and Bank of America Corp., which disclosed their own estimates of $1.5 billion and $1.2 billion in excess of their respective litigation reserve.
Although Citigroup didn't say so, its exposure may be greater partly because it still faces lawsuits by stockholders and bondholders related to its disclosures about holding toxic mortgage assets that eventually produced $40 billion in losses. Last summer, Citi settled civil fraud charges by the Securities and Exchange Commission that it misled investors by failing to disclose the assets until November 2007, paying $75 million. But civil lawsuits by the investors in Citi securities remain pending.
The banks are giving the estimates of their total potential legal liability, beyond what they already set aside in reserves, for the first time in the reports just filed. Each bank listed a wide range of legal matters for which they may have to pay. The disclosure is a new requirement set by the SEC, demanding that companies tell investors what the losses from litigation could be in a worst-case scenario. Companies set a litigation reserve based on what they consider reasonable possible losses.
Citigroup's report describes a range of litigation that includes its role as an underwriter of mortgage securities and securities issued by lenders of riskier subprime mortgages. It cited another previously disclosed investigation by the SEC into its sale of collateralized-debt obligations, which are pools of assets tied to mortgages.
Bank of America Discloses Legal-Loss Exposure
by David Benoit - Wall Street Journal
Bank of America Corp. could face legal losses of up to $1.5 billion this year on top of what it has accrued, though the amount doesn't include the full picture of its legal battles.
In its annual filing to the Securities and Exchange Commission, the nation's biggest bank by assets disclosed that the legal liability it faces, on top of its accrued liability, ranges from $145 million to $1.5 billion. The bank doesn't disclose its accrued liability. It also said the range applies only to those matters it believes it can estimate, meaning there are other potential losses it can't estimate at this time. The bank also said in its filing that it had received "a number" of subpoenas from federal regulators on its mortgage-backed-securities underwriting.
Mortgage-backed securities have become a headache for banks, as the housing crisis exposed the problems with mortgage originations during the housing bubble. Many of the legal battles the Charlotte, N.C., bank faces are tied to mortgage securities, including from investors that bought deals the bank underwrote. Bank of America also said it has requested that the Federal Reserve allow for a "modest increase" in its dividend in the second half of 2011. The bank previously said it felt it was in position to start paying a higher dividend in the second half of the year.
The bank also said its investment-banking operation recorded net trading profits in 90% of its trading days for 2010. The bank previously said it had no trading losses in both the first and third quarters, and the second quarter had been positive on 81% of the days. The bank said its trading made more than $25 million for three-quarters of the fourth quarter, while it lost more than $25 million on 4% of the trading days. The largest one-day loss the bank had was $102 million.
In another disclosure, the bank said it had reached an agreement Thursday with Chief Executive Brian Moynihan allowing him to lease, with his own money, the corporate jet, pilots and flight crew for his own personal use.
Lloyds will not pay corporation tax until profits hit £15 billion
by Harry Wilson - Telegraph
Lloyds Banking Group has risked heightening public anger towards the City after the state-backed lender admitted that it will have to make £15bn of profits before it pays any corporation tax in the UK.
The admission came as Eric Daniels, the bank's outgoing chief executive, courted further controvery by saying he would only decide whether to accept a £1.45m bonus once the money was in his "hot little hands". Mr Daniels' comments, apparently in jest, were made ahead of his stepping down as Lloyds chief next week. He will be succeeded by António Horta-Osório, the former Santander UK boss.
Lloyds, which is 41pc owned by the state, is able to avoid corporation tax as it has billions of pounds of deferred losses that it can write off against tax liabilities. Barclays was criticised last week after it revealed it had only paid £113m in corporation tax in 2009, despite making a pre-tax profit of £11.6bn. The bank was able cut its UK tax bill by writing off losses made on US sub-prime investments.
Lloyds' admission drew criticism from Lord Oakeshott, the former Liberal Democrat treasury spokesman. "Yet again we see British banks paying far less than they should in corporation tax, meaning the rest of the British taxpayers have to pay more," he said.
On Friday the bank reported a pre-tax profit of £2.2bn for 2010, its first annual profit since taking over troubled lender HBOS in late 2008. However, because of the large losses the bank holds on its balance sheet, it paid no corporation tax on last year's profit. "I would have loved to have paid tax because that would have meant we were making more money," said Tim Tookey, finance director. "We look forward to the day we are making higher tax payments," he said, adding that the bank had £6bn in deferred tax assets that it can write off against corporation tax.
UK corporation tax is paid on statutory profits, which last year totalled £281m, meaning the bank avoided paying £79m in tax in 2010 through its use of deferred tax assets. At this level of statutory profit, it would be more than 50 years before Lloyds began paying tax. However, deferred tax assets can only be written off against a company's tax bill for about five years. Analysts estimate that it will probably be at least three years before Lloyds becomes sufficiently profitable to begin paying corporation tax.
Last year, Lloyds paid about £900m in employee National Insurance, bank payroll tax, irrecoverable VAT and business rates. Including employee pay-as-you-earn tax, the bank's total non-corporation tax contribution for 2010 was £2.5bn. Royal Bank of Scotland, which on Thursday reported a loss of £1.1bn for 2010, has also confirmed that it paid no corporation tax as the bank made no taxable profits. Like Lloyds, RBS has several billions of pounds of deferred tax assets that it can write off against future taxes. Lloyds' profits came as revenues at the bank fell 2.1pc to £23.4bn.
FSCS savings loophole puts UK customers at risk from failing banks
by Patrick Collinson - Guardian
A £50bn loophole has been revealed in the Financial Services Compensation Scheme, which will leave holders of "secure" or "guaranteed" savings accounts without any safety net if their bank or building society collapses.
So-called "structured" savings accounts promoted heavily by banks and building societies promise savers extra interest if they lock their money away for at least five years. Typically, they guarantee the underlying capital, a fixed rate of interest, plus some extra if the stock market hits certain levels. Many have been sold on the promise to savers that they are covered – up to £85,000 – if the bank or building society goes bust. Even investment Isas, which hold shares on the stock market, are covered by the FSCS up to £50,000.
But it has emerged that many are not covered by the FSCS after all, including ones sold by Barclays, Santander, RBS/NatWest and Lloyds/HBOS. Sue Castles from Shropshire was bewildered when she received a letter last week from Santander telling her that her Capital Guaranteed Fixed-Term Structured Product, in which she had deposited more than £30,000 two years ago and which lasts for another three years, was not covered by FSCS.
"There is no way I would have put the money into it if it wasn't covered by the FSCS," she says. A spokesman for Santander said: "No customer has lost any money in relation to our structured products. Santander remains a well capitalised, stable bank and the products themselves are performing well. "Nevertheless, if any customers do not wish to remain invested following receipt of one of our letters, we will take steps to enable them to withdraw from the product early without charge."
The Financial Services Authority says that, broadly speaking, a structured "deposit"-style product is covered by the FSCS, but a structured "investment"-style product is not. Much depends on factors such as the name of the "counterparty" that stands behind the product. It appears it is the responsibility of the firm selling the product to say if it is covered by the FSCS. But that will give little comfort to savers if the bank collapses and they later discover the product was not, in reality, covered by the safety net.
Some savers are now likely to lodge complaints with their banks that they were mis-sold, or seek compensation from the Financial Ombudsman Service. Firms are obliged to make any reference to the FSCS in their literature "clear, fair and not misleading".
Global Insurrection: Gerald Celente
by Max Keiser
Oil's 'inflexion point' and Wahabi central banks
by Ambrose Evans-Pritchard - Telegraph
The greatest threat to the global economy is not the oil shock itself but the risk that central banks will commit a blunder, compounding the damage by tightening monetary policy at exactly the wrong moment.
For the European Central Bank and the Bank of England this would mean raising rates into the teeth of the storm, as the ECB did with predictably disastrous consequences in July 2008. For the Fed this would mean talking up the prospect of rate rises sooner than expected, as the Fed did with equally disastrous consequences over the months of May, June, July of 2008. By then M3 money growth was already dropping like a rock.
Ben Bernanke’s behaviour was odd given that he wrote an academic paper in 1997 (Systematic Monetary Policy and the Effects of oil Price Shocks) arguing that "the majority of the impact of an oil price shock on the real economy is attributable to the central bank’s response to the inflationary pressures engendered by the shock".
Perhaps the screaming hooligans in the press and the Fed’s regional banks got under his skin. But then it is also clear that Bernanke had no idea was about to hit him between the eyes in 2008, though some monetarists and "Austrian" economists most certainly did.
It was this hawkishness after the economy had already tipped over that led directly to the Lehman, AIG, Fannie/Freddie blow-up in September of that year. The roots of the crisis were of course much deeper, stemming from East-West imbalances and the chronic use of debt leverage in the West (Greenspanism). But the way the central banks reinforced the denouement led to a cataclysm.
So take those itchy fingers off the trigger, look through the price spike, watch core inflation (not headline), and keep your eyes on the broad money supply. Conjuring ghosts of the 1970s is a certain formula for error. In that era M3 money was exploding. A wage spiral was well under way. There is no such pressure now (except, arguably, in Germany). After a spurt last year, M3 is contracting again in Euroland and the US on a month-to-month basis.
China, India, and parts of the emerging world may well be in a 1970s bind, but 60pc of the global economy is not. Opinions vary on the exact "inflexion point" where oil prices set off a global-macro headache.
The classic theory by Rotemberg and Woodford (1996) is that a 1pc rise in crude prices cuts 0.25pc off US output over six quarters or so. If they are anywhere near correct – and the "energy intensity" of the US economy has diminished over time – the sort of 40pc rise since last summer rise will indeed have a severe effect. Subsequent scholarship suggests this is too extreme, unless central banks behave like idiots.
Deutsche Bank says US crude at $120 a barrel would push oil costs to 5.5pc of global GDP, the trigger level that has historically caused upsets. Brent has flirted with $120 this week before slipping back, but US crude reached only $102. We are not there yet. Eduardo Lopez, a veteran oil watcher at the International Energy Agency, said the world was already "approaching dangerous waters" before North Africa blew up. He places the inflexion point at around $90 for US crude.
While reserve stocks are OK in the OECD countries at 57.5 days cover, though "not plentiful", the snag is that China and the other emerging powers driving the growth of oil demand do not reveal their data. Stocks are kept secret. "We don’t know what’s happening in half the world." "If (Brent) prices stay at $120 for the rest of the year, there will be serious consequences for the world economy," he said.
One reason oil shocks cause global damage is that consuming nations tighten their belts, while OPEC exporters, Norway, etc, do not immediately recyle the windfall gains. They save part of the money. The net effect is to drain global demand. In that sense, a sudden oil supply shock can be deflationary. Barclays Capital said we are lucky that this Mid-East crisis has happened now and not in 2008, when global spare capacity was wafer-thin. Today we have cover of 4.5m b/d (their lowish estimate). This is adequate, but not comfortable.
However, the bank said there had been a "monumental change" over recent years in the linkage between oil prices and the global economy. The idea that rising oil prices cause "exogenous shocks" to the world economy is a "fallacy". "Oil’s role seems more iconic than real, and, in our view the impact is being overstated." I don’t really agree. This analysis overlooks the "policy risk" of a botched response.
My own view is that global recovery is more fragile than it looks. The West is still on government life-support, and the great debt unwind purge has not yet run its course. It faces a globalized "Japan syndrome", with deflationary pungi pits waiting to catch us. In that context, an oil spike takes on added potency. If policy-makers blow this one, we are cooked.
Whether oil falls back or shoots even higher from here is almost entirely a function of events in Saudi Arabia. The Saudi fear premium is roughly $10-$15 a barrel, but it could go much higher. Assurances that the Kingdom is no danger of mass protests are worthless. Nobody can give such assurances. The status quo commentary reminds me of the reflex analysis just as the Soviet Union and its satellite system started to unravel. Most people could not believe it was happening, or would go so far, so fast. People never do. We are hard-wired for what is habitual.
As I reported earlier this week, the Mid-East experts at the risk group Exclusive Analysis see a 25pc chance of rebellions by the Shia in the oil-rich Eastern Province, and perhaps by Hejazi on the Red Sea side, leading to the break-up of Saudi Arabia. The ruling Saud family come from the middle. "We don’t think it is likely, but it will have a very big impact if it does happen," said Firas Abi Ali, the group’s strategist.
Libya’s Gaddafi looked rock-solid until ten days ago, and while I would not wish compare that scoundrel with the kindly and paternal King Abdullah – it is hard not to feel sympathy for a man who admits having trouble sleeping at night unless he is close to his beloved Arab horses – the king has inherited an absolutist regime. Saudi rule has many interesting features of interlocking clan networks but is ultimately held in place by the lash, the veil, the sword, and ferocity of secret Wahabi courts. It is Medieval, sitting on top of a 21st Century nation with Facebook.
Such regimes are brittle. The argument that most Saudis have been "bought off" by prosperity contains the implicit – oddly patronizing – assumption that they do not hanker after the same freedoms as the rest of the world. A great number of Saudis are not in any case prosperous.
Be that as it may, we in the West should not be a position where events in the Arabian sands can determine the fate of our societies. Regardless of whether you accept the global warming hypothesis – on balance I do, but please don’t all throw shoes at once – it is unwise to depend so heavily on fuel sources nearing crunch point, or to transfer vast sums of money to rentier theocracies.
Jeremy Leggett from the UK industry’s task force on peak oil and energy security argues that we risk repeating with oil what we did with financial uber-leverage: allowing a collosal problem to fester and then metastasize.
A ‘Manhattan Project’ would overcome this energy crisis very fast. It takes political will, and a ruthless confrontation of vested interests. One of my favourites is nuclear power based on safe, cheap, and relatively ‘green’ thorium, which is almost useless in weapons. But there are many ways to skin this cat. The status quo, however, is surely intolerable.
Kiss Egypt’s Revolution Good-Bye
by Richard Eastman - 21st Century Wire
After the ecstasy of revolution, the Bankers quietly begin carving up Egypt and North Africa
The European Bank for Reconstruction and Development (EBRD) is ready to lend one billion Euros a year to Egypt for reconstruction and “free-market reform”- even as Egypt’s Minister of Finance Samir Radwan has gone begging to the City of London bankers and the British Ministry of Trade and Investment for relief on debt payments that are about to throw Egypt into bankruptcy.All this, as Egypt has been such a good boy with regards to privatization and austerity, measures which awarded Egypt its celebrated 7 percent growth rate- mostly in investments that will end up in international hands as ventures fail to pay out with ever diminishing Egyptian domestic purchasing power.
First EBRD will lend at interest and build what they want backed by Egyptian collateral and the value of the projects themselves. Then when it turns out they can’t make the debt payments because of all the interest we have sucked from them, we take over all of the assets we have developed. That’s freedom and EBRD is really going to give it to them. After all EBRD is experienced at this. In 1991 the EBRD was organized to financially lead Russia and Eastern Europe in their transition from paternalistic socialism to sustainable free-market economies open to international investment.
The U.S. is the EBRD’s largest shareholder, although the combined stakes of European Union nations give that bloc the greatest say in how it operates. EBRD President Thomas Mirow in a speech at Oxford University declared:
“Twenty years ago, the EBRD rose to the challenge posed by the collapse of communism. Today, in the Middle East… we are ready to act again, championing the values that we hold dear. . . We have the ability to deliver the development of the private sector, particularly the small and medium-sized enterprises which drive job creation and thus supplement the efforts of other international financial institutions which focus on public infrastructure.”
European Union foreign policy chief Catherine Ashton told Egyptian Foreign Minister Ahmed Aboul Gheit that the EU will permit new loans and provide “expertise” if Egypt is willing to make the necessary economic reforms in order to get them.
Meanwhile new parties are being formed through Facebook to counter, and crowd out traditionally popular organizations like the Muslim Brotherhood. New Parties like the “25th of January Party” — no indication of what it stands for in the name — has garnered hundreds of thousands of “likes”. Another Party, the “Freedom and Justice Party” is a magnet for a secular pro-free-market Egyptians looking for power and position in the new Egypt. But a hundred other parties are being financed, each directed at peeling away one or more demographic groupings from the Muslim Brotherhood.
This important work is proceeding as the world is distracted by the violence in Libya. By the time the world is ready to look at Egypt again, the nation will show an entirely different political landscape.
It is clear that the little people have lost again, that Egyptians have lost their revolution and that the people simply are not well enough informed to raise up their own alternative to domination by International Finance. The so-called Egyptian revolution has been hijacked by the Rothschilds while the world has shifted its eyes to Libya.
“Citi has unveiled what it dubs the 3G countries: Global Growth Generators. The 11 countries it picks out as leading lights are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam.”
- The Wall Street Journal 2-24-2011
The closure of Egypt’s banks for two of the past three weeks has added strain on an economy already reeling from the evaporation of tourism and a prolonged stock market closure caused by the political upheaval that ousted long-time leader Hosni Mubarak. The bank shutdown and the draining of ATM machines have paralyzed businesses and left ordinary people scrambling for cash.
INVISIBLE HAND: US and Israeli regional policy goals are steering 'banking reconstruction' efforts in Egypt.
The country’s banks had long been a source of pride for Egyptians, with its strong regulatory environment and their lack of investments in the kind of toxic assets that hammered Western banks helped Egypt weather the worst of the global financial meltdown.
Two weeks Moody’s Investors Service downgraded its credit ratings for five Egyptian banks. Future loans from international agencies will depend on eliminating those regulations and meeting other benchmarks for “free-market reform”.
Banks remained open the first few days of the 18-day democracy uprising. But after a weekend of looting, arson and lawlessness on Jan. 28-29, they closed for a week and many ATMs ran out of cash. The following week, the banks closed. They reopened the week of Feb. 6-10 and this week on Sunday. The military-led caretaker government has sought to re-establish a measure of normalcy after Mubarak’s ousting. Banks reopened on Sunday and officials breathed a sigh of relief when a much-feared run on them did not materialize— the first weekday following Mubarak’s exit. They closed again on Monday, the central bank ordering them to remain shut at least until the start of next week on Sunday.
A week ago, Credit Suisse estimated that the unrest had cost the country at least $310 million per day, and predicted the Egyptian currency would come under heavy pressure as investors shifted to dollar deposits or pulled their money out entirely.
The projections for economic growth this year were quickly revised down from 6 percent to between 2 and 4 percent.In addition, the bank wants clearance to reinvest money repaid from earlier transactions which will raise the total to $8.2 billion over three years. EIB President Philippe Maystadt said the $8.2 billion would allow them to do something significant in coming years, especially for new projects in job creation for young people, who have become frustrated with lack of job opportunities and as a result, become the main drivers… for uprisings.
FINAL NOTE:
In 2010, the EIB lent a record $3.5 billion to projects in the Arab region, making it the biggest provider of long-term financing there, Maystadt said. That being said, Maystadt admitted of the $11.9 billion allocated between 2008 and 2013, only about $3.8 billion is left, and they are ready to do more. The EIB invests in new enterprises, lending funds to small and medium-sized companies, as well as investing in new transport, energy and infrastructure for new developments. Typically, it raises money by issuing bonds, guaranteed by the EU against political risk. Current projects include Morocco, Tunisia, Syria, Egypt, the Palestinian Territories, Lebanon and Algeria, but has not been authorized to invest in Libya.
Tax homes and control mine boom, Australian CEOs urge
by Stuart Washington - The Age
A tax on owner-occupied homes to arrest soaring house prices is among extraordinary measures proposed by five of the country's most admired chief executives to address the dark side of the resources boom. The bosses have said the impacts of the boom, including a higher cost of living, a shortage of staff and other industries withering, are the greatest challenges facing Australia.
But the five leaders, named today at the top of the annual Sydney Morning Herald-East Coles Most Admired business survey, have generally bemoaned a lack of long-term planning about the issues.
Among those calling for a broader debate about the dangers of the boom is the chief executive of the goldminer Newcrest, Ian Smith. He said his views were formed during his early career in Broken Hill where he witnessed the fallout from the last bust in the 1970s. ''If you have been in mining as long as I have, you have seen the cycles … and you never get deluded or sucked into the point that these good times are going to go on forever,'' he said.
As the former chairman of the Minerals Council of Australia, Mr Smith successfully led a campaign to cut $60 billion from the federal government's revenue forecasts from its initial resources super profits tax proposal. But Mr Smith said the tax was only one outcome and called for consideration of radical proposals including:
Following a Swedish model of government support for secondary industries so Australia was not ''hollowed out'' by a disproportionate focus on the resources industry.
Introducing ''technocrats'' into the Parliament for better handling of long-term policy issues.
''How do we build something that can 'learn' something from this boom … and come out of the back side of it in a better state than when we went in?'' Mr Smith said. ''I don't think we're doing that at the moment.''
The chief executive of CSL, Brian McNamee, said his global biotech business was facing challenges to hire the best and brightest in Melbourne because the boom was pushing up the cost of living. A capital gains tax on owner-occupied homes was needed to cap prices. This would attack one of the sacred cows of the tax system.
The top rate for capital gain on investment properties is 46.5 per cent, reducing to 23.25 per cent if the property is held more than a year. "Capital-gains-tax free on housing is poor policy because fundamentally it over encourages people to invest in their home," Dr McNamee said.
In 2009 the International Monetary Fund called for a capital gains tax on owner-occupied housing, arguing the current tax-free position encourages people to borrow too much then pay inflated prices for houses. Dr McNamee also supports a sovereign fund similar to that set up by Norway to ensure long-term benefits from oil exports.
Other chief executives in the top five of the survey who were concerned about the effects of the boom were Grant King at Origin, Chris Roberts at Cochlear and Richard Goyder at Wesfarmers. After the Henry review of tax last year, the government ruled out changes to the capital gains tax regime. In a statement, the Treasurer, Wayne Swan, said the government was ''acutely aware of the need to save more in the good times'', which was why it was aiming for a surplus in 2012-13.
Irish Remedy for Hard Times: Leaving
by Guy Chazan - Wall Street Journal
The people of Ireland go to the polls Friday to deliver what's expected to be a knock-out blow to the governing party. But many are choosing to vote in a traditional Irish fashion: with their feet. Tens of thousands are joining in a new wave of emigration, turning their backs on a country mired in economic malaise.
Martin Lynch's family is one of many that are being scattered to the four winds. In the past year, one son has moved to Germany, another to England. His daughter is planning her departure for London, and Mr. Lynch and his wife are bound for Australia. "Ireland has let me down," says the 62-year-old, a retired caretaker of the local technology institute here in the southeastern town of Carlow. "We just seem to be incapable of governing ourselves."
Nothing seems to better symbolize Ireland's economic crisis than the re-emergence of large-scale emigration, a scourge many hoped had been slain for good. It's a theme that has cast a long shadow over the campaign for this election, which polls suggest will uproot Fianna Fail, the party that has dominated Irish politics for 80 years.On the hustings and on voters' doorsteps, emigration is on everyone's lips. For many it encapsulates the sense of hopelessness that has descended on Ireland as the country grapples with one of the worst economic crises in its history. "We never thought we'd see this again," says Alan Barrett, an expert in migration at the Economic and Social Research Institute, a Dublin think tank. "It brings back a lot of bad memories."
Forced emigration was long Ireland's curse. A million fled in the decade after the great potato famine of the mid-19th century, which killed some 800,000 people. There was a huge exodus a hundred years later, with thousands lured away by a building boom in the U.K. Another mass migration followed in the 1980s.
The country's fortunes appeared to change for good in the mid-1990s, when years of big spending on higher education, low corporate taxes, generous European Union aid and an influx of foreign investment helped transform Ireland into the "Celtic Tiger." Between 1995 and 2000, the economy grew nearly 10% a year on average, and Ireland began to catch up with its richer European neighbors. The country's far-flung diaspora started trickling back to feast on the new opportunities.
However, by 2008, as Ireland's banking crisis triggered a deep recession and unemployment soared to 13%, the tide turned again. Ireland's Central Statistics Office predicts that 100,000 people will emigrate over the next two years, more than twice the number that left in 2009 and 2010. That comes to about 1,000 per week, and exceeds the last peak in emigration in 1989 when 44,000 people moved away.
The overall figure represents just over 2% of Ireland's population of 4.47 million, which economists say by itself isn't enough to prevent a recovery. But there are fears that the more people leave, the greater the tax burden on those who stay and the bigger the decline in public services like education and health care.
An exodus could also reduce demand for housing, depressing already low prices and deepening the losses faced by Irish banks. Since the government is on the hook for banks' liabilities, more losses could worsen Ireland's fiscal crisis, leading to more austerity measures and higher unemployment. Such a "fiscal feedback loop" could increase the incentive to leave, says John McHale, an economist at the National University of Ireland, Galway.
And while demographic data on emigrants is scarce, many of those leaving are believed to be well-educated professionals—precisely the people Ireland needs to lead a recovery. "In a modern, knowledge-based economy, dense, diverse cities full of highly-skilled people are a critical competitive advantage," says Mr. McHale. "If the most enterprising people leave, you undermine that advantage."
Ireland's loss is others' gain, and global demand for Irish workers has increased dramatically. "We've had more inquiries over the last six weeks from companies targeting Irish people than we've ever had before," says Stephen McLarnon, head of SGMC Media Group in Dublin, which organizes exhibitions for those wanting to work abroad. Mr. McLarnon says two-thirds of his current applicants have college degrees. Booths at SGMC's next exhibition have been snapped up by federal and state governments in Australia, New Zealand and Canada.
It's not just English-speaking countries that the Irish are heading for. After the U.K., the favorite destinations for Irish people last year were new European Union member states such as Poland and the Czech Republic, with older EU countries like France and Germany coming in third, according to figures from Ireland's Central Statistics Office.
Opposition politicians pin the blame on Fianna Fail. Enda Kenny, leader of Fine Gael, and the man expected to be Ireland's next prime minister, said in an interview that fighting unemployment, the main driver of emigration, will be his party's top priority if it wins the election. The party has pledged to create 20,000 new jobs a year over the next four years, and invest €7 billion, or $9.5 billion, in broadband, renewable energy and water infrastructure.
Yet whoever comes to power, Ireland faces years of austerity as it tries to wrestle down a massive budget deficit. To secure a €67.5 billion international bailout last year, the country committed to a four-year spending plan that envisages savings of €15 billion, or nearly 10% of its annual economic output. Pensions and benefits will be cut and taxes hiked.
Not all economists see emigration as a bad thing. Some say it could act as a crucial safety valve to help restore equilibrium to labor markets. And in a globalized world, moving abroad for work isn't necessarily a permanent loss for the homeland. Workers could gain experience and skills that will give them an advantage in the job market if they return home.
"It's terrible that it has to happen, but it's probably preferable to go abroad in search of work than to stay unemployed here," says ESRI's Dr. Barrett. "At a minimum it keeps their skills active, and it takes the strain off the social welfare budget."Mr. Lynch's story encapsulates the history of Ireland, with its ebb and flow of migration and return. His father moved to London in 1924 from the hardscrabble western county of Roscommon in search of work. It was a difficult time, with job ads routinely featuring the phrase, "No Irish Need Apply." He flourished nonetheless, running a string of pubs in London.
But he always felt homesick, and the family moved back to Dublin in the early 1950s, when Martin was five. They managed pubs there, but never attained the quality of life they'd enjoyed in Britain. "My parents always regretted coming back," Mr. Lynch says.
In the 1950s, the main pattern of migration was in the other direction. In the decade after 1945, some 320,000 people left Ireland, most of them for the U.K., then in the grip of a post-war labor shortage, and for the U.S. The Irish countryside was littered with abandoned houses, and parishes struggled to muster full football teams. Mr. Lynch remembers the "American wakes" of the time, all-night parties fueled with dancing and potcheen, a local moonshine, that marked the departure of young men for the U.S. "It was just like a wake, because you knew you'd never see them again," he says.
In 1966, Mr. Lynch emulated his father, moving to England to serve in the British army. But he returned after less than a year when his parents fell ill. Over the next 14 years he worked in sales at various Irish oil and gas companies. In the recession of the 1980s he lost his job, and spent much of the next eight years unemployed. It was a tough decade for the whole country, and many emigrated. Mr. Lynch recalls seeing tearful reunions at Dublin Airport as smartly-dressed sons and daughters came back home for the Christmas holidays. "I remember thinking—I hope to God my kids don't end up leaving like that," he says.
A quarter century later, Mr. Lynch's children are doing just that. Last year, his eldest son, Eoin, 29, met and fell in love with a German woman, took two years' leave of absence from his job at an insurance company and moved to Stuttgart. The college graduate is now studying German there in the hope of becoming a teacher. He says he was glad to get out when he did.
"There was a lot of negativity," he says. "People didn't have lots of money to spend on life insurance and pensions." Germany, in contrast, "is absolutely booming." Another son, Damien, 28, studied aeronautical engineering at Limerick University but couldn't find work in Ireland. He landed a job last year with a British engineering firm in the northern English town of Derby.
Neither Eoin nor Damien say they had qualms about quitting Ireland. But their sister, Clare, who is 24, is more conflicted. A nurse, she recently completed postgraduate training in pediatrics. But since the course ended last October, she's been unable to find a full-time job, partly due to a hiring freeze imposed by Ireland's state-run health service.
She has a temporary job with an agency, working at a center for children with learning disabilities in Cork. It's a 60-mile commute every day from her home in Limerick. She doesn't know from one week until the next whether she'll be kept on. "When I started, people said nurses and teachers would have jobs for life," she says. But by the time her studies were drawing to an end, that had changed. Clare recalls her dean of studies telling her at her graduation ceremony, "'I hope we won't lose you to England, but I'm pretty sure we will.'"
That prediction has now come true. Ms. Lynch says she has made the "painful" decision to try her luck in the U.K., where demand for nurses runs high. She spent New Year's with her brother Eoin in Germany, and "realized that we were all going to be living in different countries," she says. "It's heart-breaking."
For Mr. Lynch, Carlow symbolizes Ireland's downturn. A town of 18,000 in the country's southeast, it was once a magnet for foreign companies. But investment has dribbled away. A big sugar factory closed in 2005, taking 350 jobs with it, and a German engineering firm shut down its car component plant in 2007. Two years later, Procter & Gamble Co.'s Braun unit, which had once employed more than 2,400 staff in the town, closed an electrical appliance factory. Carlow's quaint high street—once nicknamed the Golden Mile—is pockmarked with boarded-up shops. "Our economic miracles are always of such short duration," says Mr. Lynch. "We just can't seem to have a sustainable economy."
At the Seven Oaks hotel in Carlow, the talk around the bar is of leaving. Declan Gordon, a tattooed mechanic who repairs wind turbines, says most of his friends are packing their bags. Some are bound for the U.K., he says, where the 2012 London Olympics has spurred demand for construction workers. The membership of his local Gaelic Football club has dwindled from 30 to 15 in less than a year as teammates have drifted away.
"It's not like the U.S., where you can move to another state if the work dries up," he says. "This place is so small, you have to leave."
110 comments:
Stoneleigh said "We do not make wind turbines with wind power or solar panels with solar power".
So true. Most people do not understand the true meaning of sustainability.
For our so-called renewables to be sustainable, the following conditions would have to be met:
1: All materials used would have to have to be from either a recycled source (no mining allowed) or from a harvested biological source, grown in a sustainable way.
2: All energy used in the above processes has to be from sustainable "income" sources, i.e., solar, hydro, or wind. Not a single drop of oil nor a single lump of coal.
3: The waste outputs from our processes must not in any way exceed the capacity of the environment to absorb them.
Now, imagine, if you will, producing steel for our windmills and solar thermal installations. No coke furnaces, only concentrated solar, electric arc furnaces, or charcoal-based processes. How well's that going to scale? Is it possible?
Sorry, folks, but "sustainability" is another cosy middle-class myth. We're in for a big shock.
Happy Birthday!
Happy Birthday, Ilargi!
All the best,
Paul
Stoneleigh,
Thanks for that essay. I agree that, in the long run, we will not be able to operate many large industries on solar PV energy. But I see PV as perhaps the best renewable -- with no moving parts and a long useful life. Texas or Mexico would probably be better locations for PV generation, with our latitude of about 33° or less, versus Ontario at about 45°
PV is vastly preferable to ethanol. Biofuels in general will result in massive environmental destruction, and corn-based ethanol is so incredibly wasteful of so many precious resources. That is where subsidies should be immediately canceled.
Vermont Castings has since been sold, but back in the day, they cast woodstoves out of old engine blocks (great high temperature alloy) using hydro power from Quebec.
Stoneleigh: "We do not make wind turbines with wind power or solar panels with solar power"
actually, this was attempted, decades ago, by one of the first US panel makers, Solarex. My first panels were from them. They started construction on a plant they were calling a "Solar Breeder", where they wanted to power panel fabrication entirely with solar panels; I'm not sure to what extent it ever functioned. The site was in Maryland, not a top solar energy site (but close to DC).
What happened to it? Wanna guess?
Solarex was purchased; by Amoco/Enron. Which was later acquired by BP.
Ilargi's birthday, by george! :-)
Nice choice of tribute there. And, by all means, Best Wishes, Ilargi, and Many Happy Returns.
Assuming that's appropriate. :-)
Great post.
I'm wondering what's a good non-battery-based approach to local energy storage. My best guess is to generate power using PV and/or wind and use the excess power to pump water up into a holding pool. When you have demand, say at night, set the system up to run the water through a microhydro generator.
But how much power (i.e. Wattage) can such a microhydro setup generate? Would it be enough to power a small house (say 200-300 W)?
Polka Dot Gallows!
http://tinyurl.com/45nv849
The Arizona GOP State Senate Majority Leader-
was NOT arrested, when found by state police at the side of the freeway, with bruises; but his bruised girlfriend, also there, was...
Monbiot: "Hands up all those who think this is a good investment...."
Ok, my hand would go up. I have irregular respect for Monbiot; some of his stuff, like the bit on astroturf, is very sound; some of it, like this; is slipshod.
Why would it be a good investment? Not because it makes cheap power, according to coal company type accounting procedures. Because- it stimulates a start-up technology that actually might have a future. Yes, sometimes radical new technologies benefit from initial subsidies; and the populace benefits, also.
Could the subsidies have been done better? Well, duh. Show me something; anything, where that is not true in hindsight.
@Greenpa, Arizona law says that members of the legislature can't be arrested during the legislative session or the few days previous to it.
I hope they get him as soon as session is over about June or so.
Re: the proposed arizona law about chain of ownership of property:
Finally, something our legislature has gotten really right!
peace, shamba
Happy Birthday Ilargi, appreciate all that you do. You owe yourself so have a great one!
Ilargi,
Happy Birthday!
So solar panels should drop in price for a while.
Not sure what to make of Celente's cold fusion "gamechanger". I'll believe it when I see it.
Stoneleigh,
We hear a lot about the problems associated with renewables. If you are aware of any renewable projects or policies that make sense and that provide a good example for others to emulate, I encourage you to write about them.
We need more examples of what to do and less of what not to do.
Hey Hey!
Happy Birthday!
Congrats on making it through another earthly rotation unscathed, hope we all manage at least another few (let's be optimistic eh).
Mucho love from Le Marche,
P+M x
Ilargi,
happy birthday.
flowers for your mom....
peace
I somewhat agree with Rob. It's not that we don't need information on what not to do, since there are plenty of well-intentioned but misguided renewable projects out there. But we do definitely need more information on things that will truly work - real renewable solutions.
If I had my own place, I would set aside a little land (perhaps not adjacent to my property) to grow trees (that can be coppiced) for firewood. I'd also try to set up a holding pool like I mentioned above to provide energy storage from PV/wind sources.
Though there's always the low-tech option: I remember seeing an Amish (?) setup where they had a horse walk on a treadmill generator for a few hours a day to keep the fridge running.
And, happy birthday, Ilargi! (I used Google translate to say it in Dutch)
@Draft,
A homebrew microhydro pumped storage system is probably going to be pretty inefficient. The many moving parts will also raise maintenance issues over time. I'm not sure of the relative cost.
And I wish someone would start making NiFe batteries again here in the US. Not because they are efficient, but because they are durable and do not contain heavy metals. I think they'd be ideal for an off-grid system.
@ Board...
Solar and wind still present a critical vulnerability: These technologies cannot be hardened against EMP because they rely on direct exposure to the atmosphere.
For example, most Canadians hug the 49th parallel and even if we were not hit with a direct strike (primarily directed at the USA) the EMP(s) would still fry virtually all Canadian electronics; solar and wind included.
Non-conventional war is a serious likelihood to contemplate:
Given the worlds massive population abomination, the historic policy of mutually assured destruction has transitioned to a policy of collateral damage.
Population is the single limiting factor of ALL antagonistic phenomena directed against the human posterity and the biosphere.
Given the law of limits, ALL the antagonistic phenomena can only be solved by addressing the root causal factor of population prior to addressing non-limiting factors.
All other factors, while they may be significant, are not limiting into themselves and are further down the chain of causation.
Even given a large nuclear exchange, there would still be whole areas on the planet that would be untouched by direct strike and minimally brushed by climate circulated fallout. (South America) Some people propose a nuclear winter from such an exchange, yet there have been well over 2000 nuclear tests (some below ground/water and some above ground) to date without any climate data to back up that theory.
There is a massive flux of the wealthy elite to South America. Wonder Why?
It is pragmatic to think about a world without fossil fuels, but it is also pragmatic to think about a world without electricity.
Cheers
NB: One can use a full size gun safe to create a Faraday cage to protect a back-up solar set up and other electronic equipment such as radio gear from a possible EMP.
@ Brunswickian and Stoneleigh
Just spent a few hours perusing the alt.energy web. In particular:
http://peswiki.com/index.php/Main_Page
I am a doomer. I have made a reputation in my community for predicting bad times for many many years, and most of my 'predictions' are coming to pass. I'm tired. I'd rather be optimistic, and more uninterested in the social and political and economic goings-on. I'd rather just go about my business, drinking coffee and coaching soccer and enjoying time with my kids, etc.
Unfortunately, I see very very bad times ahead. I see the noxious brew of massive QE and leveraged speculation, of an increasing disparity between the 'haves' and have-nots' of the world, and of dramatic black swan types of events (viz climate change, etc.) as leading us toward terrible times.
Is it in any way reasonable to be hopeful that these alt.energy innovations may stem some of the rising tide of incipient chaos?
If not....why??
happy birthday Ilargi!
@Draft
I'm wondering what's a good non-battery-based approach to local energy storage. My best guess is to generate power using PV and/or wind and use the excess power to pump water up into a holding pool. When you have demand, say at night, set the system up to run the water through a microhydro generator.
I have thought about this over a number of years.
I think there are 2 reasonable solutions for use on a small scale (single residence). One is to make use of VERY simple lead-acid batteries (that one has spent the time to develop a good understanding of -ie you can make your own...).
The other solution actually is to NOT store electricity at all, but store it as mechanical energy in a flywheel. There are obvious problems with moving parts, but on the other hand you can add much more energy (the upper "charge limit" can be much higher...), and the moving parts are pretty simple engineering-wise. You could go with mechanical couples direct from wind or hydro, rather than converting to electricity, or you could just have the whole thing rigged à la "regenerative braking" mechanisms in hybrids....put the motor/generator on the axle, send electrical power to "charge", "regenerative brake" to draw it off.
...Well, it's a use for all those Priuses (etc) once the fuel stops flowing... ;)
@Ash (from previous post)
You said, "I think the question really is how successful can the Fed (private banks) … very unlikely that we will skip right over the deflation and have hyperinflation within the next year or so."
I agree with you in general, but we may have already seen the largest bout of deflation in '08-'09. It may (and I stress "may" because I suspect Lehman was not a miscalculation) have been a rude awakening for the banks/Fed. They then resolved not to let that happen again--at any cost to the taxpayer.
The value of the banks mortgages and any securities derived there of are already worth so much less than their original market value that if they had to mark them to market the banks would have to admit they are insolvent. So the Fed, FASB and the Treasury let them pretend otherwise.
There is little argument that currently the real economy is in deflation. But the Fed is using hyperinflatioary monetary policy to combat it. The result: stagflation. I agree they may be trying to engineer a slow, controlled deflation, like Japan. If they are successful the US dollar should not collapse, given the US still is the world's largest economy by far.
However, the entire system looks extremely vulnerable right now. But I think right now the risk is on the side of hyperinflation, not deflation. Last time I checked, all measures of monetary aggregates are growing (including M3) and M2 looks like it's actually accelerating.
Despite the calls for gold-backed currency, I don't think this is what the banks want. Fiat currency is the source of their profits--their golden goose. Single fiat currencies may disappear but I don't think fiat money in general will--at least not as long as the banks control monetary policy.
At Davos they announced they want to double global debt over, I think, the next ten years. Gold would have to be priced to Mars in order to back a global currency, unless they used only a small partial backing for international settlements at the highest levels of finance.
Besides, I happen to think there is nothing fundamentally wrong with fiat currency. Does it make more sense to base a currency on a nation's output and the taxing power of the state, or a hunk of useless metal? The issue is control. I'm sure many commenters here are familiar with what Mayer Amschel Rothschild said about the control of money.
@Dan said...
Just spent a few hours perusing the alt.energy web. In particular:
http://peswiki.com/index.php/Main_Page
Is it in any way reasonable to be hopeful that these alt.energy innovations may stem some of the rising tide of incipient chaos?
If not....why??
Short answer on the above is NO. You can’t heat your house (or run your car) by taking in 30 degree air and extracting heat out of it (lowering its temp to say -10) and raising your indoor temp by 40 degrees. The universe doesn’t work that way. It’s the 2nd law of thermodynamics. Sorry.
A good rule of mental hygiene - be very skeptical whenever anyone mentions Nicola Tesla. He was a genius (developed and promulgated the AC electric systems we use today and an anti-Edison/anti-establishment figure in many ways) but had some rather strange ideas and has attracted kooky pseudo-science notions to his name for a very long time.
Stoneleigh:
You said power prices in Ontario have been falling. In 2003 I was paying 4.3 cents per KWH. Today, under the time-of-use regime, we are paying over 7 cents. That's an increase of roughly 58% in about 7 years. Even when adjusted for CPI inflation that's pretty high. Can you please explain your assertion that power prices have been falling?
You also infer we are in an age of deflation and falling prices. I see the opposite right now in utilities and services. Electricity prices are going up (as mentioned). Water prices are going up (yes largely due to infrastructure costs). Natural gas prices have not fully reflected the decline in spot prices. Cable and internet prices are going up. Insurance is more expensive in that they are either raising premiums or reducing coverages. Gasoline prices are going up--fast. And all this while the Canadian dollar has appreciated quite a bit. Also, these price increases have mostly occurred within the last year or so.
Then there's Canadian real estate, but I won't go there.
Hi Stoneleigh
I think I'd store energy domestically in a domestic hot water tank. It'll displace heating oil or gas and can be stored in a well lagged stratified tank from the top down. I realise that stored heat from electricity is low quality energy from high, but the simplicity of the system and the efficiency of the time shifting make it good for load balancing IMO
-Carbon, Coventry, UK
I have experience in doing this with wood fired heating systems.
@Draft, Subgenius
I think it's a good idea to store intermittent renewable energy in a domestic hot water cylinder. It should displace gas or heating oil and it's a energy efficient means of time shifting demand, as long as you have a stratified, well lagged tank and as long as you need hot water. I realise you'd be demoting high quality energy to low but the simple and robust load shifting might make it worth it. I have been involved with similar systems which store excess energy from wood fueled boilers into domestic hot water for use later.
Happy Birthday Ilargi!
Carbon - Coventry, UK
I forgot, Happy Birthday to Ilargi!
peace, shamba
sub- "The other solution actually is to NOT store electricity at all, but store it as mechanical energy in a flywheel."
um. I think you'll find there are very close to zero such systems in use; with the sole exception of very high end industrial installations. You might want to ask why. :-)
@ Dan...
"Is it in any way reasonable to be hopeful that these alt.energy innovations may stem some of the rising tide of incipient chaos?"
Your concern is warranted. I am surprised others have not paralleled your position. It would be tragically ironic if many the doomers were too optimistic in their outlook for the future.
The "elites" are not building sustainable farms with solar/wind/micro-hydro alternative energy solutions. They are building bunkers or jumping ship to south America. It seems people in the know, know enough to realize that one rearrangement of the titanic deck chairs is no better than the other. Having solar panels does not insulate your house or community from domestic or foreign attack resulting from unprecedented social upheaval or war. (Similar with having sustainable food production)
I fully support that alternative energy and sustainable food production are essential lifeboat constituents and desirable on many levels. For those who can do it without debt...getter done. :) For those of you already off grid... well done!
My skepticism rests not in building lifeboats, but the unprecedented scale of the wave about to come crashing down.
I am still shocked many of the TAE regulars have ruled out non-conventional world war (nuclear) as a likely scenario. War works on short time scales too.
NB: A previous post about the vulnerability of alternative energy to EMP in a nuclear exchange was lost in translation or selected out. If the later...No worries. ;)
Cheers
Tibetan Buddhists do not celebrate their "birthday" because they do not consider it an accomplishment. (Given a equal distribution of births approx 20 million people share the same birthday.)
This said, I commend Ilargi for his work @ TAE and the impact he has had on his audience. I intend to do so more than just annually. :)
Thank-you :)
Stoneleigh,
Excellent essay. Nominate for primer, please.
You wrote, "This turns renewable generation into a personal money generating machine with critical vulnerabilities. It is no longer about the energy, which should be the focus of any pubicly funded energy programme."
Feature, not a bug?
Correction: electricity prices going from 4.3 to 7 cents per KWH is a 63% increase.
Happy Birthday Ilargi, and thanks for this blog!
You said power prices in Ontario have been falling. In 2003 I was paying 4.3 cents per KWH. Today, under the time-of-use regime, we are paying over 7 cents.
T.M.O.
I don't know anything about Ontario, but I suspect that Stoneleigh is referring to wholesale prices and you to retail prices. Over here, in Melbourne, the tariffs are so complicated that I don't pay any attention - I simply reduce our consumption close to the minimum needed to get by.
The reason this is necessary, as we have pointed out before, is that the inherent fossil-fuel dependence of renewable generation leads to a case of receding horizons. We do not make wind turbines with wind power or solar panels with solar power. As the cost of fossil fuel rises, the production cost of renewable energy infrastructure also rises, so that renewables remain just out of reach.
The statist philosophy that one technology can't replace another without subsidy or economic intervention is completely at odds with history and free-market experience. It is precisely because the government can't choose wisely, or without crony capitalist corruption and influence, which technology should receive favor that this choice must be left to the free-market. If and when so-called 'renewables' ever become competitive with hydrocarbons that will be the time to switch; not before.
Re: Libya
I can't help noticing how the language in our mass-media has evolved. First, they were called protestors. Now, they are called rebels. Elsewhere, they would be called insurgents.
I don't why they seem averse to the term revolutionaries. I guess it is too close to France's 1789. :)
The continued abuse from the TSA leads me to believe we will soon be witnessing the opening scene from Bladerunner when the replicant says, "I'll tell you about my mother" and whips out a cannon. Now they are groping families coming off of trains. Land of the Free, Home of the Brave. Tra la la.
TMO,
I suspect you're right about Lehman not being a miscalculation, and this also may be why the deflation we have had so far has not been a rude awakening for the banks. It could very well be a massive extension of economic catastrophes that have been engineered by the US/IMF in the past... but anyway that's hopefully the subject of a future post.
You say that M3 money supply is increasing, but I was under the impression it is still contracting, although the contraction may decelerated a bit. Could you provide a source to the contrary?
With regards to fiat currencies, I agree that the credit money fiat system has been great for the banks over the years. My belief that all fiat currencies will eventually perish is that the underlying net energy to support their value will no longer be there in the near future...
As the Hopi saying goes,
"Only when the last tree has been cut down; Only when the last river has been poisoned; Only when the last fish has been caught; Only then will you find that money cannot be eaten."
Felicitations.
I'd like to rectify a comment on horowitz' derogatory anti-american accusation against Ron Paul, an offence which probably shouldn't be rendered as seditious libel at this time, although it can be argued that this particular defamatory statement does qualify as such, if it was so intended as a deeply chilling assault on defined liberties of congressional speech, but since too much of political discourse would then stand to be excessively criminalised in this way, vicious as it often is, best to treat it as common defamatory libel.
Also, the heavier charge of treason, as possibly applicable in this context to an agent of government issuing particularly libelous statements [of a seditious nature] concerning members of congress, could only be incurred if such libel was contained in a lawfully binding directive of some sort, with the explicit intent of enacting or authorising political persecution of members of congress on the basis of particular circumstance of protected political speech, either directly or by authorising persecution of citizens' principal dissemination of said speech.
Furthermore, for the charge of treason to possibly apply, similar political assaults in the form of a lawful directive with the verifiable intent of fatally incapacitating the functioning of said legislative body must then also be acknowledged as being intended to factually levy war against [the vitality of] the constitutional republic, or giving comfort to its enemies [who dislike free speech or congressional functioning], admittedly this may not be a valid interpretation of the constitutional stipulations of treason. But such an offence would at least qualify as seditious libel then.
Blogger Draft said...
I'm wondering what's a good non-battery-based approach to local energy storage.
Fuel oil/kerosene and lots of lamp wick. Paraffin if you got it.
You are here.
---
Happy Birthday Ilargi :-D
Stoneleigh,
I have been following you Ilargi and Ashvin for the better part of the last year and felt it was a good time to join in the commenting community. The ideas of your triumvirate has greatly influenced the expectations of this 26 year old moving forward in life . Much obliged.
Interesting article I ran into at SAR's blog in relation to Saudi and OPEC's attempt to suppress oil prices by not bringing something in the neighborhood of 70 oil fields online.
Do you think there is much truth to this "official" fact and do you it is of a significant quantity to keep our methamphethamine like addiction to oil tolling ? Thank you for your time.
http://www.nytimes.com/2011/02/25/opinion/25lynch.html
Wow. Illargi's birthday & I'm smashed from a friend's wedding party. Most excellent timing. :)
Ilargi rocks!! He's like Barcelona FC. The Xavi & Iniesta of the econosphere.
Land of the Free, Home of the Brave.
El G, you know very well that has always been a blatant lie we just love to tell ourselves. Let's face it, a reasonably accurate slogan wouldn't sell very well, would it?
One small-scale option that is VERY practical is micro-hydro. Not "no tech", but generally "low tech" and highly reliable. You need:
(a) a water supply with adequate drop and/or flow (a small seasonal stream is adequate for a house). You might need a water use license.
(b) pipe (mostly poly) plus various valves
(c) water wheel (usually a pelton wheel)
(d) generator (could be an alternator)
(e) wires (of course)
(f) optionally a battery bank (which entails a rectifier to clean up the signal and convert to DC). It's possible to power a house directly from the wheel, but not electronics since the power signal varies.
The highest tech part is the water wheel. Definitely worth the investment, and should be serviceable for a long time. You can make one yourself (the hard way) or buy a commercial combination wheel/generator (the easy way).
We have such a system, which was installed in the '80s by a previous owner. It hadn't been in use for years. Replaced the bearings, updated the generator (from a belt-driven alternator to a direct drive adapted motor from a washing machine).
Our generates plenty of power (much more than we need, so we don't run it at full speed, because unlike with PV panels, with a water wheel you need to send all the energy somewhere).
We know people who generate as little as 50W (1.2KWH/day) - that's from not much more than a trickle (which is fine if the drop is high). Not much, but in combination with PV, keeps the batteries topped up even in winter (at we live north of 49 degrees).
A larger system could power a cluster of houses, entire neighbourhood or entire community.
Around here (coastal south-west British Columbia), most small creeks dry up in the summer, so micro-hydro works best in combination with a PV system (and a generator for backup).
It's way easier to service than micro-wind (since the generator is on the ground not at the top of tower), and more consistent (water flow is easier to predict than wind).
follow up to my previous comment:
If you are contemplating buying property, look not just for water availability (for domestic use and irrigation), but also look for micro-hydro potential (even a tiny creek).
@VK
I don't think you mean the econosphere. I think you mean the econopocalypse.
Happy birthday Ilargi.
Regarding how to store excess power from renewable sources.
While many ideas sound interesting, most aren't practical. Take pumping water uphill with excess energy. This might make sense for a large scale system (e.g. it would be better to pump water up into a large reservoir than to throw it away lighting up all the office towers in a city at night).
But on a small scale, you need to do the math. To store a month's worth of energy, consider how big your ponds (both lower and upper) would have to be. That land is probably better used to grow food. A small reservoir for micro-hydro makes sense to stabilize water supply. Same goes for batteries - a small bank can even out energy over short time frames (days), but they aren't to store energy for weeks or months.
By far the best option to deal with intermittent power from renewable sources: prepare yourself for intermittent electricity.
Do high-energy tasks (e.g. vacuuming, power tools) when the sun shows, the wind blows or the water flows.
... But then Geithner takes a leap. He wants US banks to take the lead in these countries’ (e.g. China) financial development...
I don't know what he is smoking but the Chinese can do things their own way without any help from the West. Here is an article in the FT which implicitly contradicts him Prudential puts $500m in China fund
Mr Guo said part of Fosun’s motivation for partnering with Prudential was that as well as being “the second-largest insurance brand in the US” it was “one of the few US financial companies that did not require government assistance during the financial crisis”.
Additionally, the Chinese know all about AIG. I mean, the company did start up in China in 1919 and there was a panic in the East over its insurance policies and it has been selling interests over there.
Blogger I. M. Nobody said...
Land of the Free, Home of the Brave.
Land of the free, Home of the imprisoned.
Ash,
At least a couple of places where you can find stats on money supply:
The Fed's own web site: http://www.federalreserve.gov ; and http://www.shadowstats.com.
The Fed stopped publishing M3 back in '06 or '07, but Shadow Stats publishes its own M3 estimates. I believe Illargi uses the M3 data from Shadow Stats.
Mea culpa. You are correct about M3. The growth rate is still negative, but the trend is definitely up. While the actual amount of M3 in the system looks like it's levelling off from the decline that began in '09. M2 growth has never gone negative and looks to be accelerating.
Re: Lehman and TARP
My suspicion is that they knew an outright banking collapse was inevitable after the trouble started in the summer of '07 and the stress spread throughout the system.
Rather than wait it out and let the system collapse on its own, which would have had very unpredictable consequences, they decided to trigger the collapse at a time and place of their choosing as a kind of controlled demolition. (Lehman may have been chosen to help Goldman eliminate some competition at the same time.) Again, just my suspicions, but there are many others who are convinced this was an "inside job."
I find it very interesting that the original TARP figure of $700 billion was apparently not based on a calculation, but rather it was chosen because it sounded like a good figure--not to much, not too little. To add insult to injury, right after TARP passed in the Senate Hank Paulson pulled a bait and switch. Instead of buying bad assets, they took a chunk of the money and just gave it to the banks.
Furthermore, TARP was never designed as a one-time bailout. The TARP legislation gave the Treasury the ability to draw up to $700 billion in funds as many times as needed. Warren, the TARP oversight committee chair could not even find out where the moneys actually went. They have since neutralized her by putting her in charge of the Consumer Financial Protection Bureau.
And the games continue to this day.
Geithner’s Gamble
by Simon Johnson - Baseline Scenario
In a recent interview, United States Treasury Secretary Tim Geithner laid out his view of the nature of world economic growth and the role of the US financial sector. It is a deeply disturbing vision, one that amounts to a huge, uninformed gamble with the future of the American economy – and that suggests that Geithner remains the senior public official worldwide who is most in thrall to the self-serving ideology of big banks.
What should be becoming more obvious to the growing number of critics of government and reserve bank policies, is this: as insane as their actions seem much of the time, they are not uninformed. These people are out to make money and keep current power structures intact . . . the benefits are not for the masses, but for themselves and the corporate elite. Until journalists (a) get over the childish notion that those in charge are putting the needs of the many before their own greed, and (b) break the restrictive bonds of corporate news media censoring, the few voices of reason will remain heavily outnumbered.
The one glimmer of light is that more people seem to be getting fed up with the current system and seeing that somehow it is broken. Whether their energy is misdirected or used for some constructive purpose is where the fight lies. You can bet your @ss the corporate/political spin machine will be trying to engineer misdirection every step of the way.
Nassim
You are correct. While volatile, wholesale prices in Ontario are lower now than they were a couple of years ago.
So it looks like the recent retail price hikes are due to higher operating and capital costs rather than higher power prices. Are consumers being forced to make up for reduced industrial demand?
The Ontario government is planning to upgrade and rejig infrastructure toward more renewable sources. Paradoxically, a very large chunk of their projected power supply increase comes from conservation (which I guess includes remote control of things like air conditioners).
The gov says prices will double over the next 20 years. That's IF they properly execute on their current plan. I am gong to have dig deeper into what Stoneleigh said in her blog.
Gezellige verjaardag Ilargi!!
"Wisconsin officials decide not to evict protesters from Capitol
Opponents of an anti-union bill can stay for now, police say; the Republican governor stands firm behind his proposal."
http://www.latimes.com/news/nationworld/nation/la-na-wisconsin-unions-20110228,0,5205116.story
How very generous of them.
Based on US history of reaction to demonstrations by unions and other groups, I fully expect a Kent State event somewhere down the line. This will happen when things really get ugly as the public starts to fully appreciate what is happening to their future due to all the fraud at all levels.
If the Kent State-type event is brutal enough it could trigger a spreading uprising.
Cheers,
Robert
Thanks for excellent article.
Sorry for OT but I have to forward my depression here.
Today I received the response to an e-mail from the energy advisor of our prime minister.
I wrote:
Dear Karel, I hope you follow uneasy and worsening situation in Middle East and North Afrika, declining OPEC exports since 2005 (despite increasing oil price), decreasing oil production in North Sea…
Response:
I did not notice any problems in the oil market, where also according to EIA there is more than enough of oil and stocks. Only the speculative price increase as a result of unrest in Libya and other countries, which is very favorable for the financial giants, because they can warm up the inflation, which is not unwelcome by big government debtors… in short, Kaddáfí is even at the end of his career at least somehow useful…
Otherwise the year 2010 was very successful for oil, the production was cca 3,5 bln tons, which is more than 1.7% more than in 2009. Spare production capacity of OPEC despite the relative decrease in global production increased to 6 millions barrels of oil, while OPEC did not increase the quotas, in order to support the increasing price, but even so they were surpassed by 1.9 millions bpd. Not to mention the growing surplus of refining capacities…
So I live on the different planet? :-/
Stoneleigh:
After reading so many of your excellent posts and watching the video "A Century of Challenges" several times, I have a few of questions I wanted to ask you regarding oil, if you'd be so kind:
1. Do you think advances in drilling technologies could materially impact the supplies of conventional oil in the short term as they have done with nat gas?
2. I've heard North America has huge quantities of largely untapped oil reserves in such places as the Bakken, Alaska's North Slope and the Arctic ocean. Some people hold the view the US is holding off on fully exploiting these reserves until they drain the Mid East or the oil price goes high enough. First, of all, is this true? And if so, do you think exploiting these reserves could delay peak oil?
3. What's your view on abiotic oil? Are the reports out of Russia, RE: the super deep wells true? And if so, could this oil be abiotic as some claim based on the depth of these reserves?
4. I've heard that the whole biotic theory of oil was concocted by Rockefeller to create the perception of scarcity, but that at the time no one actually knew the true nature/origins of petroleum.
5. Many years back, I read an article in Scientific American about deep ocean methane hydrates. I seem to recall the article claimed there are vast deposits larger than the nat gas deposits we have on land. Could these be economically exploited?
I find these matters fascinating, so I was hoping you'd be willing shed some light on them.
Thanks.
The value of community to deal with catastrophe has been discussed here time and time again. Much gloom and doom then erupts, as people become sure that selfishness will result in everything being even worse.
But this doesn't have ot be the case. Seven days after a big EQ wrecked our second city, I find this discussion:
"The most remarked upon fact after the earthquake is the way in which people have been helping each other. Many people have acted in complete defiance of economic self-interest, and as a result, housing, labour, transport, equipment, all kinds of goods have been given to people who most need it.
Somebody can probably wrangle an explanation out of this that's consistent with classical economics. Perhaps helping the community is in their own long-term self-interest, and perhaps helping others means that they get helped in return.
But the bottom line is that a whole lot of people told the rational economic agent to take a hike, and as a result, they did a much better job of efficiently allocating resources (that's Economistspeak for “helping people and getting shit done”) than the market ever could. "
Also, about renewable energy.
I believe Stoneleigh is discussing the difficulty (impossibility) of making the conversaion to alternative energy on a civilization wide scale. We are too deep into our oil addiction, and we are starting to change to slowly, to half-heartedly, and too late.
Alternative power is a great idea on an individual level, though. It is not a matter of doing the math and saying "this makes no sense if everyone tries to do this" for the simple reason that most people are not going to change. And then it will be too late to change even if you wanted to.
I would be curious to know if Stoneleigh thinks that setting up your doomstead within "effective radius" of a large hydro station would be a viable strategy. Unless we have a violent civil breakdown, such power plants should be able to provide for people withina certain radius, and if you have food to trade for power, it might work well for you.
All Aboard the Crazy Train?
Sounds about the right time for a crash...like right about this week, assuming no more suckers to suck in.
Regards,
Paul
TMO,
1. Do you think advances in drilling technologies could materially impact the supplies of conventional oil in the short term as they have done with nat gas?
I think we have already seen such advances. I doubt there is much improvement to be made from here. The cost of working in more and more difficult environments inexorably rising, and the EROEI is falling.
2. I've heard North America has huge quantities of largely untapped oil reserves in such places as the Bakken, Alaska's North Slope and the Arctic ocean. Some people hold the view the US is holding off on fully exploiting these reserves until they drain the Mid East or the oil price goes high enough. First, of all, is this true? And if so, do you think exploiting these reserves could delay peak oil?
I don't think this is true at all. There are some reserves, but the EROEI is typically low (ie Bakken). US oil is 85-90% depleted IMO.
What is likely to delay peak oil is financial crisis, but at a cost of making the impact worse down the line.
3. What's your view on abiotic oil? Are the reports out of Russia, RE: the super deep wells true? And if so, could this oil be abiotic as some claim based on the depth of these reserves?
I think abiotic oil is a pure fantasy. Super deep wells would have very high costs and a low EROEI.
4. Many years back, I read an article in Scientific American about deep ocean methane hydrates. I seem to recall the article claimed there are vast deposits larger than the nat gas deposits we have on land. Could these be economically exploited?
Yes there are methane hydrates in large quantities, but I doubt very much if these could ever be exploited commercially. Trying to do so could risk disturbing them and releasing large quantities of methane into the atmosphere, which has been associated with large-scale extinction events in the distant past.
DIYer,
PV is vastly preferable to ethanol. Biofuels in general will result in massive environmental destruction, and corn-based ethanol is so incredibly wasteful of so many precious resources. That is where subsidies should be immediately canceled.
I agree completely.
Stoneleigh,
Thank you very much for your responses to my questions. Much appreciated.
The wretch, concentered all in self
cf.
A paradise built in hell : the extraordinary communities that arise in disasters
Solnit, Rebecca.
Why is it that in the aftermath of a disaster, people suddenly become altruistic, resourceful, and brave? Award-winning author Solnit explores this phenomena, looking at major calamities from the past 100 years.
Publisher: Viking,
Pub date: 2009.
Pages: x, 353 p. ;
ISBN: 9780670021079
TMO,
You said power prices in Ontario have been falling. In 2003 I was paying 4.3 cents per KWH. Today, under the time-of-use regime, we are paying over 7 cents. That's an increase of roughly 58% in about 7 years. Even when adjusted for CPI inflation that's pretty high. Can you please explain your assertion that power prices have been falling?
Look at the pool price of power. The peak was in 2005. you can follow daily pool prices here. It can make interesting viewing.
The Ontario government freed prices briefly, but panicked when they rose and cancelled the liberalization within 4 months (it has been suggested that Ernie Eaves went off his meds). We've had fixed retail pricing ever since.
You also infer we are in an age of deflation and falling prices. I see the opposite right now in utilities and services. Electricity prices are going up (as mentioned). Water prices are going up (yes largely due to infrastructure costs). Natural gas prices have not fully reflected the decline in spot prices. Cable and internet prices are going up. Insurance is more expensive in that they are either raising premiums or reducing coverages. Gasoline prices are going up--fast.
Rising prices reflect that rally we have been in for the last 2 years. They may continue for a short time after its end, as rising prices are a lagging indicator of returning confidence/liquidity. We should see prices fall some time after the market turns, as falling confidence/liquidity is a powerful driver of prices to the downside.
Remember, however, the falling prices do not mean cheapness when purchasing power is falling faster than price, as is very likely to be the case for most people (more and more all the time).
Nosa,
Interesting article I ran into at SAR's blog in relation to Saudi and OPEC's attempt to suppress oil prices by not bringing something in the neighborhood of 70 oil fields online.
Do you think there is much truth to this "official" fact and do you it is of a significant quantity to keep our methamphethamine like addiction to oil tolling ?
Stories like this can be found in relation to many places. Personally I don't believe them. I think they reflect a jarring fear of scarcity combined with somewhat comforting myths about the sustainability of our business as usual scenario. I don't think business as usual is an option going forward. There may be new fields to bring online, but if so IMO they are likely to be small, complex to produce and have a low EROEI.
A Fall Guy,
I second your recommendation of micro-hydro for those who are lucky enough to have access to it.
Stoneleigh,
Thanks for the links, the info--and the good humour.
I was wondering what you thought of this:
In his latest Theorist, and after a year and a half of incorrectly calling for Wave 3 down, Bob Prechter has actually considered the possibility that we may be approaching a Precther Point (a third of a third of a third) where the market could accelerate to the upside. If that happens, he forecasts this rally will continue for AT LEAST another year.
That said, he still favours the bear scenario, and has advised speculators to short the market with max leverage now (but to cover if the S&P hits 1359).
I have found over the last few years that the good gents at EWI are better at calling major rallies than major corrections. So if Prechter comes out and says the rally is still on, I would take that as extremely bullish.
Your thoughts?
TMO,
The Ontario government is planning to upgrade and rejig infrastructure toward more renewable sources.
Good luck to them with that. There simply isn't the grid capacity. Hydro One is getting stricter all the time about voltage stability, especially when renewable generation is connected to weak rural feeders a long way from distribution stations. They are imposing very strict limits on what can connect, and getting rid of the capacity allocation exempt category for small generation as well.
They say they plan to do a massive build-out of the grid in order to accommodate more renewables among other things, but pigs will fly first. They plan to spend billions over perhaps 10 years, but they would need to spend tens of billions over several decades (which they simply won't have) just for the transmission upgrades, let alone the distribution upgrades (where most small-scale renewable generation would have to connect).
I was involved in negotiating the parameters of the FIT programme with the OPA and have discussed many aspects of this with them. I don't find they listen.
Paradoxically, a very large chunk of their projected power supply increase comes from conservation (which I guess includes remote control of things like air conditioners).
They royally screwed up their opportunity to achieve this by insisting on high-tech smart meters, which will give them about 5% load shifting at best. They should have gone with the Woodstock metering system that worked because it got all the psychological drivers right. See my essays How Smart is Ontario's Smart Metering Plan? and Smart Metering and Smarter Metering, from The Oil Drum back in 2006. Power systems were my bread and butter for a long time.
The gov says prices will double over the next 20 years. That's IF they properly execute on their current plan.
Prices (ie pool prices) will most likely fall first, as demand falls. What the government does with their fixed tariffs will be less clear. They may well leave them where they are or raise them as a revenue grab. After all the Ontario power sector is still $40 billion in debt because they never paid for the last generation of nuclear reactors (that are now reaching the end of their design-life). The so-called debt-retirement charge isn't even covering the interest. The Ontario power system is in very deep trouble already.
Jeotsu,
I would be curious to know if Stoneleigh thinks that setting up your doomstead within "effective radius" of a large hydro station would be a viable strategy.
Yes, that would be a good idea. It wouldn't have to be that large either. I can think of a few that operate on a community scale near where I live. Those areas should be much better off, provided that no mechanism is found to commandeer the power 'in the public interest'.
I never grid-tied my solar panels, even though the government would pay me 80 cents/kWh through FIT if I did. For it me was about the power, not the money. I paid for the system myself and do not expect a public subsidy for having done so. Building in a storage component was a vital part of the exercise, and I didn't want it to be possible for the power to be commandeered either.
Stoneleigh,
I shouldn't be surprised that you were way ahead of the curve. The Woodstock system would certainly have its advantage as you explain in the article. I now see the smart meters we all got maybe weren't so smart after all.
Personally, I find that time-of-use rates have a greater effect on my household conservation efforts when the spread between the off-peak and peak rates is very large, making it a question of value. I find the current pricing structure is sufficient to alter my consumption behaviour. I never used to think of electricity costs before. But that's just me, I don't hear my friends and family talking much about it.
I absolutely abhor the Peak Saver initiative. Even if it would save me money, the last thing I want is for the government to control how much electricity I use and when.
So Ontario is in real trouble, eh? Should anyone with a detached house be putting solar panels on their roofs? Given the huge issue of capacity, I would have thought the gov would offer generous capital subsidies to have home owners generate their own power.
TMO,
So Ontario is in real trouble, eh? Should anyone with a detached house be putting solar panels on their roofs?
Can you afford to do it with no debt? If not, you could consider simply installing a decent battery bank. That would be much cheaper and could run your essentials even if power supply became intermittent. My battery bank runs the essentials 24 hours a day. We live in a rural area where we certainly wouldn't be a priority if there was another ice storm or other supply disruption.
Given the huge issue of capacity, I would have thought the gov would offer generous capital subsidies to have home owners generate their own power.
Don't hold your breath ;)
"The whole government is a Ponzi scheme" - Madoff
That gem is on the tapes.
Today, 28 February, Jim Kunstler wrote on his blog:
"The café layabouts of Italy, the flaneurs of France, and the bratwurst-devourers of Germany…"
Talk about losing it.
I have said and will repeat that "The long emergency" is a worthwhile introduction to our situation. But only the parts concerning the U.S. The rest is embarrassingly un- or misinformed.
If the above is what an intelligent fellow from the U.S. writes, what should we expect from the rest of the population?
This is not looking good.
Ciao,
FB
Just heard that Paypal has backed down due to public protest and now allows donations to Bradley Mannings defence fund.
A small victory!
re: Kunstler
for years I've proposed that the time would come when some of the European nations would not be able to depend entirely on the USA doing its dirty work in the Middle East to keep the oil flowing out.
FB,
It is important to keep in mind that Kunstler's fixation with the Middle East is rooted in the Ashkenazi culture he comes from. He cannot accept that that region can be prosperous and flourishing if outsiders stop buying off one tyrant after another and using them for their own purposes.
He thinks that it is some sort of divine right of the West to f**k about with the Near East - some sort of Lebensraum. Frankly, the sooner globalization draws to an end and all these tyrants (there are plenty left) realize that they cannot just take off for Paraguay or Switzerland at the end of their day in the sun, the better.
TMO
"
1. Do you think advances in drilling technologies could materially impact the supplies of conventional oil in the short term as they have done with nat gas?"
I think there is a new procedure similar to fracking for gas ... shattering of rock and injection of solutions to increase oil flow. Don't know how useful or productive that would be, but since you seem interested in extending 'the age of oil', how about doing a search on this method and let us know how feasible it is?
TMO & Logout,
About 25 years ago I had a neighbor who designed and built geophysical instruments. He had used his tilt meters to monitor oil field fracking operations to help them determine how successful they had been in breaking the rock. So, it's not that new a process.
It does increase oil flow in fields where the rock is not porous. Not a geologist, but I gather that shale is pretty damn not porous. Consequently, wells require a lot of bore contact area and fracking to achieve anything like decent flow rates. Even so, I believe the result is that a lot of the oil will remain trapped in the rock. It won't be cheap either in monetary or EROEI terms. Environmental concerns as well.
In shale gas fields, you get a good flow rate for a short period of time. So, you have to keep drilling new wells to stay ahead of the curve. The "recession" tripped up the gas drillers because they drilled in anticipation of rapidly increasing demand just before demand destruction set in.
While this and previous articles by Stoneleigh clearly express the futility of relying upon renewables for our energy future, they do leave open the question of what positive options may be available and feasible.
I would very much appreciate her views on the feasibility of modular nuclear power (whether molten salt MSR Thorium or integrated fast reactors IFR). It appears they could provide clean power, cheaper than coal, while consuming the bulk of the current nuclear waste. Unlike renewables, these do provide the energy density to largely re-produce themselves (e.g. to smelt ores into steel, etc). Is there any hope these can be commercialized and implemented in North America within the current and likely fiscal environment?
While this is somewhat beyond the normal range of TAE, a country with an abundant, clean, economical, secure power supply has a great deal better chance of economic recovery than if it is dependant upon foreign petroleum.
Nassim
I am afraid I must agree with you about Kunstler. Reading through The Long Emergency, I found his attitude toward the Arab world quite offensive. You can take the boy out of Brooklyn, but you can't take Brooklyn out of the boy.
I do check out his blog, but when I see him writing about the Middle East, which he has been doing quite a bit lately, I just skip the article.
I do enjoy some of his wordsmithing escapades though.
Ilargi
Feliz compleaños
Re the poster who wrote that the price of a loaf of bread was USD 4.50 in Guatemala, that must be a silver plated loaf. Guatemala is a lot cheaper than Argentina. Took a look at the price of French style bread at my local bakery this morning - USD 1.75 per kilo. Maybe the Guatemala loaf was a submarine with the Trident missiles still on board.
You can take the boy out of Brooklyn, but you can't take Brooklyn out of the boy.
Funny how the people who know least about the Near East and who are the least likely to speak any of the dominant languages in that huge region (Arabic, Farsi, Berber, Dari, Pashtu and Urdu) are also the ones who have the clearest vision about what the place should look like.
Stoneleigh Wrote:
"I think abiotic oil is a pure fantasy. Super deep wells would have very high costs and a low EROEI."
Deep wells are natural gas. The higher temperatures cook the hydrocarbons breaking down the liquid molecules that make up oil into gases, primary Methane.
As far as Methane Hydrodrates, they have a Negative EROEI. They are essential giant sheets of ice with methane that are deposited on the ocean floor. The ice needs to either be mined and hauled up to the surface or melted. Any large scale operation would release large quanitities of methane into the atmosphere.
One alternative for domestic electrical production is with Steam using Recipicating Steam engines or small scale radial steam turbines, that burn waste biomass or stockpiled coal. This would work to provide 7/24 power but could be used when wind/solar is not available or high power is required (ie to run heavy machinary for a short period). Waste heat can be used for domestic hot water, as well as winter heat.
as for Batteries, This new design has a potential for Off-grid use:
Sodium/Sulphur Battery: 20KWh, 2100 Cycles @ $2500, (4000 Cycles if 50% depleted)
http://solar.coolerplanet.com/News/8070901-ceramatec-develops-24-hour-solar-energy-storage-battery.aspx
Not perfect but perhaps a better option to Lead-Acid Batteries. Nickel-Iron Batteries are just too expense, 12KWh Ni-Fe battery Stack costs about $7200.00 USD. Perhaps if the price of Nickel collapses they will be more afforable.
Just a passing comment about the 'Frackapalooza' fashion trend in fossil fuel extraction. Several decades ago, while passing through Colorado, an odd news item in Denver caught my eye.
It centered on the Rocky Mt Arsenal outside Denver and a stockpile of nerve gas, left over from the 50's that was stored there. No one really knew what to do about it, or how to 'disarm it' chemically or where to put it so it was not so close to the expanding rim of Denver's Tragic Suburban Sprawl, then in it's infancy.
The Colorado School of Mines was just down the road, I knew some chaps there, who told me a plan was afoot to bury the nerve gas somewhere outside Colorado Springs in a 30,000 ft abandoned bore hole. The rock was thought to be very nonporous and there was little historic record of seismic activity.
Well to cut to the chase, they did 'relocal' the nerve gas to the deep bore hole, and all seemed well...until small 'earth tremors' started rumbling through the area. They increased in frequency and strength gradually but with a steady, alarming subtlety.
At first no one associated the tremors with the nerve gas well dump because no one could conceive that such a relatively small volume of liquid, be it nerve gas or anything else, would have the ability to cause measurable seismic activity in an area never really known for any. As Fate would have it, the bore hole intersected some previously unknown fault lines at that depth.
Eventually the dots were connected and the nerve gas pumped out into rail cars and sent the Utah (bless them) and wonder of wonders, the tremors stop.
Reason and Enlightenment Triumph once again.
THE END
Nassim said
“It is important to keep in mind that Kunstler's fixation with the Middle East is rooted in the Ashkenazi culture he comes from. He cannot accept that that region can be prosperous and flourishing if outsiders stop buying off one tyrant after another and using them for their own purposes. ... He thinks that it is some sort of divine right of the West to f**k about with the Near East”
Just a reminder that ‘Ashkenazi culture’ has also given us Noam Chomsky and Uri Avery and Norman Finkelstein as well as the Begins and Sharons. One must take care not to paint with too broad a brush or focus on only the negative products of a culture. That can and does lead to terrible things.
Ilargi,
Felicidades!
@ rcg1950
A friendly suggestion regarding the use of the That can and does lead to terrible things. card. Terrible things are happening now. There is no denying that some of those terrible things are being committed by misguided members of the Ashkenazi culture.
Uri Avnery, a monumental figure in my opinion, does not shy away from commenting on it and struggling against it. What I think Nassim was saying, it is certainly my opinion, is that Kunstler is no Uri Avnery or Noam Chomsky. Unlike Kunstler watching from afar, Uri can and does recognize good qualities that exist in his neighbors. Per this quote from his latest essay on Counterpunch.
DURING THE whole week I spent every spare moment glued to Aljazeera.
One word about the station: excellent.
It need not fear comparison with any broadcaster in the world, including the BBC and CNN. Not to mention our own stations, which serve a murky brew concocted from propaganda, information and entertainment.
Much has been said about the part played by the social networks, like Facebook and Twitter, in the revolutions that are now turning the Arab world upside down. But for sheer influence, Aljazeera trumps them all. During the last decade, it has changed the Arab world beyond recognition. In the last few weeks, it has wrought miracles.
Qaddafy and Netanyahu
The Crazy Prophet
By URI AVNERY
If terrible things happen indiscriminately to Jews again, it may not be possible to say that they did nothing to bring it upon themselves. IMHO, it would behoove the Ashkenazi community to give Mr. Avnery a lot more support.
One must take care not to paint with too broad a brush or focus on only the negative products of a culture.
rcg1950,
You are absolutely correct - they have splendid musicians and writers. However, it is the Begins and Sharons who are in the driving seat. They will not listen to people like Noam Chomsky until the barbarians are literally at the gates.
Stangely enough, in the Middle East, in conversational Arabic, they may mention Israel the country but the people there are always referred to as the "Jews". I guess it is tribalism - the opposite face of Kunstler's coin.
If terrible things happen indiscriminately to Jews again, it may not be possible to say that they did nothing to bring it upon themselves.
Who's "they" exactly? I'm not really certain what I did, but I am certain I'd be lumped in with "them." It's this kind of thinking that will come back to haunt any of us who have lived richly in the first world at the expense of the periphery. The truth be told, many of us are one of "them."
During my career in medicine and radiology I encountered an overwhelming number of Ashkenazi geniuses. They were represented far out of proportion to their numbers in the general population. This phenomenon occurs in other fields, particularly physics. Approximately 36% of Nobel Prize winners in the US are Jewish. Are there special Ashkenazi genes?
http://www.jinfo.org/Nobels_Physics.html
RW California
During my career in medicine and radiology I encountered an overwhelming number of Ashkenazi geniuses.
I am sure you are correct. But that is not the point.
Let me give you an example of what used to happen in the Ottoman Empire. I know that the Ottomans have reputation for having been corrupt and decadent - but that was only in the final stages. I mean, they could not be that stupid if they managed to hold a huge empire together for twice as long as the Roman Empire.
The Armenians have always been famous for being smart and very good at trading and at making money and Armenia was part of the Ottoman Empire. However, the Armenians, unlike the Turks, are not a particularly warlike people. Over time, the Armenians would gain power, wealth and influence within the Turkish Empire that was quite disproportionate to their numbers. Suddenly, something would snap and the Turks would get fed up and kill off a huge number of influential Armenians. This cycle happened several times as the Armenians were quite incapable of down-playing their smartness.
I am not saying that things will work out quite like that in the USA but I do think that being a "genius" at manipulating the system to one's advantage has limitations when the people work out what is going on.
For example, last week the USA was the only country on the UN Security Council to veto a move to get the Israelis to respect international law. At the same time, they come up with crazy statements like While ''rejecting in the strongest terms the legitimacy of continued Israeli settlement activity'', the US voted against the draft out of concern for the Israeli-Palestinian peace talks, ambassador Susan Rice said. I mean, you either think it is right to break international law of not. This lady's statement can only be understood within the context of the veto being a Kowtow toward Israel.
"My suspicion is that they knew an outright banking collapse was inevitable after the trouble started in the summer of '07 and the stress spread throughout the system.
Rather than wait it out and let the system collapse on its own, which would have had very unpredictable consequences, they decided to trigger the collapse at a time and place of their choosing as a kind of controlled demolition. (Lehman may have been chosen to help Goldman eliminate some competition at the same time.) Again, just my suspicions, but there are many others who are convinced this was an "inside job."
I find it very interesting that the original TARP figure of $700 billion was apparently not based on a calculation, but rather it was chosen because it sounded like a good figure--not to much, not too little. To add insult to injury, right after TARP passed in the Senate Hank Paulson pulled a bait and switch. "
You have to think outside the CNN/NPR/MSNBC/NYT/WP propaganda box to get to the truth. Most people can't get past it, but once you do Occam's razor proves an invaluable guide to understanding what's happening before our eyes.
The same propaganda matrix effectively blinds people to some of the tools at hand to deal with the extended criminal organization currently masquerading as our government.
This may be another AE "banned" topic. I don't know. Just ignore it if so, then move along. Nothing to see here. Another crackpot with a nutball theory
Full Spectrum Dominance: Behind the Egyptian Revolution
http://www.engdahl.oilgeopolitics.net/
Stoneleigh said "We do not make wind turbines with wind power or solar panels with solar power".
So true. Most people do not understand the true meaning of sustainability.
...........
Sorry, folks, but "sustainability" is another cosy middle-class myth. We're in for a big shock.
--------------------------
Yes, yes, of course as long as we remain trapped in the mainsteam paradigm propagated by the powers that be you're absolutely correct.
But I ask you to consider the possibility that there might be some things that they're not telling us about. I've tried to present some of the possibilities, but I get censored about half the time.
I understand that. I'm a registered professional engineer. I understand the laws of thermodynamics and the manner in which they are currently taught as part of the firmament of physics and cosmology. It's been very hard for me to accept the possibility that our understanding of energy balances and conservation may be incomplete.
However there is an abundance of evidence that is the case.
It challenges everything I was taught on first appearance, but there appear to be rational explanations that actually accommodate the existing paradigm.
The dogma is so well established that most engineers and scientists won't even look at the possibilities. That's been the pattern throughout history, though. It's well documented and explained in Thomas Kuhn's "The Structure Of Scientific Revolutions."
The difference this time around is that revolutionary energy technologies that could end the depression, and revolutionize society, are apparently known and being suppressed by certain elements in our societies.
And it appears that zeitgeist has been successfully guided in a direction that is not going to do anything to disturb that balance.
Anecdotal evidence of the demand destruction:
Yesterday my tipical BMW (bus, metro, walk) trip home from soon to be extinct workplace took half an hour less because there were no traffic jams. Because of the traffic and furious building and repairs on all the roads in Montreal the trip was a nightmare for many (not for those who have always an interesting ebook to read in the bus). Gas prices are in the 1.3$ a liter here; it's 2008 squared and furious all over again.
Regards,
Paul
JF,
I am a contrarian in many fields, and naturally sceptical of received wisdom, but I do believe the laws of thermodynamics are paramount, and I am not going to take seriously anything that contradicts them. To me that seems like the worst kind of wishful thinking, that distracts people from getting to grips with reality. The conspiracy element added on top doesn't help either.
@JF:
A single example of lowering the entropy would suffice. Apart from the Big Bang (or whatever created the energy gradients, G-d explanations included) a single example would do the trick. Ever stumbled upon one? I guess not.
Meanwhile if this is true, then maybe we can all say "goodbye cruel world!"
Regards,
Paul
@ Los Board
Apple and Bananas.
Most of us here at TAE think in terms of family, community, "human toll", etc. MOST people in government do not have that "luxury". They think in terms of ends, acceptable losses, hegemonic positioning, etc. Better to kill 100,000 Iraqi civilians in the near term, because it may save American lives over the long haul.
We think in terms of micro-systems. They don't.
Barack Obama probably WAS a good man, until he was elected. And then he was briefed about national security and about global financial issues by men who think in terms of those aforementioned "acceptable losses", the survival over the long term of the American Empire, etc.
And NOW Obama is a grown-up. He is an adult. And adults are saddened by the fact that they must promote fraud and deception, and that they must pursue policies that lead to suffering all over the globe...but that sadness doesn't stop them from doing so. It is the lesser of two evils, they opine. In the end....it is worth it.
Not to me.
Ron Paul joins the Collapse Party
"US Congressman Ron Paul is sounding like quite the shoo-in for a leadership position within the Collapse Party, which I proposed over three years ago (and which is fast becoming a great success: without fielding a single candidate in any election, it is well on its way to successfully implementing the entire collapse agenda).
Lately, Ron has been heard saying things like this:
[The US] government is in the process of failing, and they can't deliver on the goods, just as the Soviets couldn't deliver the goods and maintain their own power... We will have those same problems domestically. We face serious economic problems as this dollar crisis evolves. ... We don't need to just change political parties. We need to change our philosophy about what this country is all about.
So, Ron, what is the Soviet Union all about these days, other than staying dead?" ^1
By engineer Dmitry Orlov
1. cluborlov.com
@Paul
It's not stumbling across examples that is the problem.
Rather, one has to first establish to one's own satisfaction that what one has discovered is not an elaborate hoax.
Having done that, one must then embark on the impossible task of getting others to even pay attention to what you've discovered. It's hard enough to convince yourself that what you're seeing isn't fraud. Convincing others is several orders of magnitude more difficult.
In fact, I despair of even bothering to make any further effort at this point. I only hope that some adventurous others may follow up on some of this on their own, and that some of them will have more of a tolerance than I for countering the resistance that disseminating their discoveries will meet.
As for me, I guess I'll just try to make the best use of what I've found for myself.
"A little poison now and then: that makes for pleasant dreams. And much poison at the end for a pleasant death."
Since I'm offending the sensibilities of all who cleave to the established order I may as well completely outrage everyone by showing that I do recognize a hoax when I see one. It's just that I see hoaxes where others see the gospel.
http://www.youtube.com/watch?v=dDWFKbRwQmg&feature=mfu_in_order&list=UL
Was listening to NPR. Apparently the dems "outlawed" foam coffee cups, etc, in favor of biodegradables, etc. Boehner says that's nonsense--plastic & foam are back in vogue. I almost had to stop the car for my head to explode. It's like when Carter put solar panels on the White House & Reagan removed them. Or when Bush said something about our American way of life being non-negotiable. My head hurts!
The comment about "outlawed" foam coffee cups was with respect to the Capitol Hill society only.
I disagree with the paranoid tendencies that are showing up here.
I disagree with the phrase the extended criminal organization currently masquerading as our government. Governments and criminal gangs are not opposites - they are points on a continuum. Obama, like Bush before him (VERY like Bush, unfortunately) is not "masquerading" as President - he IS President.
And I disagree with looking for the ways in which characteristics of "Ashkenazi culture" (or "genes") are "to blame" for the world problematique. History is a series of crimes against humanity. We have to start from where we are to get to where we might possibly be going (if anywhere - and when the "we" means each one of us, we know, whether or not we feel it, that our own life on this earth is a temporary phenomenon.)
Here's something I wrote in 2005:
conspiracy theories - some go too far, some not far enough
just a few words on paranoia -
a paranoid's worldview sees the hand of an enemy in events, which he perceives as intentional acts designed to harm him
obviously, it is possible to be too paranoid, and to overinterpret the coherence of historical events and see connections that aren't really there - and to blame many events on a vast conspiracy - the jews, the illuminati, the communists, the jesuits, the "greys"
on the other hand, it is also possible to miss the coherence that is really there - to be oblivious or to have "false consciousness"
it's not easy to know what's really going on, and everyone applies a bayesian approach - we evaluate the probability of new information being accurate based on what we already believe
i try to stick to the middle way - to be appropriately suspicious - the goldilocks principle - neither too much nor too little
as i'm sure most of us here recognize, there really ARE conspiracies - a relatively large number, some working together, some at cross-purposes
at "all spin zone" there's been a discussion of the "paranoid shift" - a change of weltanschauung when a person begins to believe that some of the events of recent history really are connected in ways that have been concealed (recall that bush's first choice to chair the 9/11 commission - a commission he hadn't wanted in the first place - was henry kissinger)
woody allen said we stand at a crossroads - one way leads to despair, the other to total destruction - let us hope we make the right choice
New post up.
The Math is Different at the Top
.
@ mistah charley
Thanks for your post - I agree.
I believe it is not constructive to imagine powerful groups in full control of what going on. Absolutely, there are some groups that want to hide their agenda. But I don't attribute a small group of humans with being adept enough to control more than a few levers.
One insight that struck me in some of Julian Assange's early writings was that agencies that depend on secrecy (e.g. the CIA) suffer from their own inability to fully communicate. Such organizations can't have it both ways (hiding behind the cloak makes it hard to share knowledge across the agency). One of WikiLeaks goals is to force such agencies to become even more secretive (in reaction to the exposed leaks) and hence become more dysfunctional.
Similarly, I am skeptical of the fears and mystery surrounding the "Bilderbergers" and other such societies. I don't think they meet to plot world domination. The kind of people who attend are self-serving and greedy. When did they start co-operation for mutual benefit. More likely, they would plot to take over their adversaries (who may also be part of such groups). For example, I wouldn't be surprised if the Lehmann collapse wasn't somehow abetted to the benefit of some parties, but I certainly don't believe it was a well-orchestrated maneouver (certainly not all elites benifitted).
In summary: I do believe therd are many conspiracies (hidden agendas) on many levels across the globe. But not any one that dominates in an organized and controlled manner.
Some readers may cast me as naive and overly optimistic. Au contraire. Many conspiracy theories have a simple solution - find and expose the perpetrators. Systemic problems have no such simplistic solutions. And focusing on "they" is dis-empowering, when one should focus on one's own actions.
In an interview, Johan Galtung said something like "Dictators are less powerful than they think they are, and the people are more powerful than they think they are".
JF
Chin up. There is at least one other regular crazy on this blog. As to decreasing entropy, it has been over 15 years since I did a course in statistical thermodynamics, but I don't recall anything in it about, say, nuclear fusion. Not that the ***effects*** of nuclear fusion violate the 2nd law, but to my knowledge, there is nothing in thermodynamics that predicts this source of energy. Cold fusion also would not violate the law. The problem with fusion is that the activation energy is so huge. If it weren't for the Heisenberg uncertainty principle, the sun would stop shining. But if a nuclear catalyst were found to tunnel the activation energy, it would be quite possible. Not that I am saying that it is real, I just wouldn't be surprised.
Then there is entanglement and no one ever came up with a credible explanation for the dual slit light experiment, though Einstein and Bohr chewed it to death. Why do you need a conscious observer to collapse the probability wave function? To paraphrase Tina Turner, What Does Consciousness Have To Do With It?
And Einstein died scratching his head trying to figure out a valid way of getting around the fact that when he ground out his equations, a cubic meter of vacuum had more energy than a thermonuclear explosion.
And speaking of Einstein, let's try the following gedanken experiment. What if some bright dude made a break through that would allow everyone to put a safe 10 kwatt power plant in their basement for $500? Do you think the world banking cartel would shout, Whupididy doo da? Or hit the "a" key on their computerized rolodex for assassin?
Our current scientific ideas of what it is all about are probably just as laughable as Ptolomeic astronomy.
JF
Chin up. There is at least one other regular crazy on this blog. As to decreasing entropy, it has been over 15 years since I did a course in statistical thermodynamics, but I don't recall anything in it about, say, nuclear fusion. Not that the ***effects*** of nuclear fusion violate the 2nd law, but to my knowledge, there is nothing in thermodynamics that predicts this source of energy. Cold fusion also would not violate the law. The problem with fusion is that the activation energy is so huge. If it weren't for the Heisenberg uncertainty principle, the sun would stop shining. But if a nuclear catalyst were found to tunnel the activation energy, it would be quite possible. Not that I am saying that it is real, I just wouldn't be surprised.
Then there is entanglement and no one ever came up with a credible explanation for the dual slit light experiment, though Einstein and Bohr chewed it to death. Why do you need a conscious observer to collapse the probability wave function? To paraphrase Tina Turner, What Does Consciousness Have To Do With It?
And Einstein died scratching his head trying to figure out a valid way of getting around the fact that when he ground out his equations, a cubic meter of vacuum had more energy than a thermonuclear explosion.
And speaking of Einstein, let's try the following gedanken experiment. What if some bright dude made a break through that would allow everyone to put a safe 10 kwatt power plant in their basement for $500? Do you think the world banking cartel would shout, Whupididy doo da? Or hit the "a" key on their computerized rolodex for assassin?
Our current scientific ideas of what it is all about are probably just as laughable as Ptolomeic astronomy.
PS JF
I would be interested in your ideas at hpaulfuchs at the gmail company commercial.
PPS
I wonder what suppressed energy source Celente was referring to in the previous post Mad Max interview? Anyone know? Gerald can be cagey when he knows something that if he stated it explicitly, could be used to disqualify him. He has made it subtle clear that he knows the truth about 9/11, he is no dummy for sure, but never quite comes out and says it. I suspect that he had friends who died in the WTC and is part of the reason he is so pissed.
A really good article. Solar does still have a long way to go, and the panels can and will get even more efficient over time, as I keep reading in the news. But as it is it's still a great, risk-free investment, a way to power your property for 'free' after your ROI after a few years. There's a great tool I used to calculate this at www.richhesslersolar.com where they gave me an ROI after 30 years, and i was making money. Cool stuff.
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