"Steamer Detroit, Michigan Central Transfer. The launch, Ecorse, Michigan"
Ilargi: A brutal day across the board, and across the globe, with US banks losing 3-4% in one single session. Has reality sunk in yet on Main Wall Street? Who knows anymore? We’ll do an overview of all the ugliness later in the week when the BLS jobs data are out, and at that time we’ll also, how fittingly, tell you more about where we want The Automatic Earth to be heading. Big plans and lots to tell.
Meanwhile, here's the next installment of Ashvin Pandurangi's series on the value of gold. Not everyone seems to understand the value of what he's on to, and given his academic approach that may not be all that surprising, but I would recommend you give it a serious try. Precious metals will be a major topic for a while to come, and it doesn’t hurt to know what you're talking about. If you already know better without having read Ashvin, well, ......
Ashvin Pandurangi:
In Part I and Part II of this series, Dialectic Foundations and The Evolution of Value, we discussed how the material conditions of human existence drove the evolution of the capitalist political economy, and how wealth came to be created through the production of "surplus value" from commodity inputs (= its objective "use-value" minus its "exchange-value"). The fruits of surplus value were increasingly concentrated among those who controlled productive assets and managed cash flows (finance) in the "wealth accumulation" circuit (M-C-M+).
However, this value cannot be realized without monetizing the exchange-values of finished products or services in a market. The realization of surplus value becomes a significant barrier to capitalist growth when workers cannot keep up pace through proportionally increasing wages in an unfriendly, time-constrained environment (only 24 hours in a day), while thousands are also displaced by technological gains and added to the "reserve labor army" of the unemployed. The latter process was heavily influenced by the discovery of fossil fuels, which allowed machinery capital to generate a higher ratio of surplus value than labor.
As the dialectic struggle between workers and capitalists progressed, certain political concessions had to be made by the latter so they could continue recycling surplus value in consumer and investment markets. For example, a minimum wage had to be set, basic working conditions had to be improved and monopolies had to be prevented or disbanded so companies within an industry could theoretically offer competitive prices and wages. The "Socialist" revolutions of Russia, Eastern Europe, Latin America and China provide extreme examples of political concessions that did little to alter the fundamental reality of workers living in a world marked by capitalist relations of production.
Many "progressive" labor policies became more prominent in the West after World War II, when aggressive "safety nets" were created and labor was allowed to organize at larger scales. This trend was largely aided by the natural dialectic pullback from the perceived failures of capitalism during the Great Depression, which ultimately only ended for the the world through a global war effort. The monetary circuit (M-C-M+) of surplus value, however, cannot function well when labor's share of power is growing, which caused the "neo-liberal revolution" of the 1970s to reverse the trend and give an unprecedented wealth advantage to the purveyors of speculative financial capital.
From Life Magazine
Over the last 40 years, gains in productivity and income have continued to be distributed more unequally, as capitalists took their investments to parts of the world with much less influence of labor and, therefore, much fewer regulations of capital. This transition allowed transnational capitalists to reduce their costs and offer lower prices to consumers in their "home" country, as those developed economies oriented their growth towards finance and other related services.
It also allowed financiers to usurp the wealth extraction role of capitalist producers to a large degree, since many productive firms could only remain competitive within an industry when they were continuously financed; a distinct feature of capitalism that Marx terms "the coercive laws of competition". These laws should sound familiar, because they are the same ones that force the capitalist producer to continue re-investing portions of their accumulated wealth in the M-C-M+ circuit.
The system also relied on explicit coercive policies by the state to help organize and maintain the centralization of capital (selective private property rights, corrupt court systems, favorably complex tax structures, discriminatory regulation, etc.). For example, the state-led process of subsidizing financial markets during every recession over the last 30-40 years has helped to concentrate even more wealth, as larger institutions were subsidized for losses, continued their operations and soaked up the productive/financial assets of the smaller ones at huge discounts.
David Harvey, a sociologist and historian with a Marxist perspective, provides a very creative animated summary of how the dialectic evolution of financial capitalism has progressed over the last 40 years, in the following video [starts 5 minutes into 11 minutes] -
The striking result of the wealth inequality generated over time by financial capitalism is partially captured by the following graphs, featured in parts I and II of my article series, The Math is Different At the Top, as well as the additional data points I have included below them for purposes of this article:
U.S. Statistics
Global Statistics
The U.S., Japan and Europe are obviously the "central hubs" of global wealth, and comprised 77% of the pyramid's upper-level ($100,000-$1M) when it was released last year. [1]. In the U.S., almost 6.5M people have dropped out of the labor force since April 2008, with close to 550K of them dropping since January of this year. According to Mish Shedlock's calculations, in which 60% of these people want a job but cannot find one, the revised unemployment rate would be around 11.2% if those people were added back into the labor force. [2]. Are all of these unemployed workers receiving public revenues that keep will them happy and spending?
Well, according to the WSJ, at least 5.5M of them (nearly 30%) are not receiving any unemployment benefits. [3]. Of those jobs that do happen to exist, 41% of them are classified as "low income" positions. [4]. More than 44M Americans ore on food stamps right now, which is about a 90% increase since 2007 [5], and a study indicates that Americans are currently falling $6.6T short of what they "need" to retire. The Personal Consumption Expenditures component of Q1 2011 GDP dropped nearly 20% from last quarter, and the GDP itself came in at 1.8% (~1.2% came from "inventories"). [6].
Meanwhile, across the Atlantic, the European population is in a similar position, and countries such as Ireland, Greece, Spain, Portugal and Italy can barely afford to support their private economies through public deficits anymore. That fact is especially troubling for a country like Spain, which is financially closer to the EU's "center" than its "periphery", and whose educated youth suffer a jobless rate north of 40%. [7]. All of those Spanish "homeowners", like U.S. "homeowners", are watching their home equity, already purchased with debt repayments, rapidly evaporate while the real asset owners (large banks) are being subsidized for a large portion of their losses. [8].
Finally, Japan was in a low-growth environment for decades (~1.5%), has the highest public debt/GDP ratio in the world (225% as of 2010) and had an unemployment rate of at least 5-6% as of 2009. However, the latter number is severely under-estimated, as evidenced by the fact that the job offer/applicant ratio had declined (40% in one year), as well as average hours worked and wages paid (~3% in one year). Of course, the recent earthquake, tsunami and nuclear meltdown (ongoing) in the country has massively impacted economic growth (subtracted ~3.7%), and it will continue to be a major factor in the upcoming months and years. [9].
So how do we know that this highly unequal wealth destruction and redistribution has resulted from structural instabilities of capitalism, as Marx and Harvey argue, rather than just corrupt state policies and an ever-increasing portion of the population being "lazy" and unproductive? It is obviously not possible to know anything for certain, but the overwhelming logical and empirical evidence suggests that the latter are merely byproducts of the former. As briefly alluded to earlier, Marx's ideas about net negative demand in the entire economy, as a sum of the commodity and monetary circuits, meant that the system necessitated certain levels of finance over time.
To overcome the conundrum of net negative demand without sacrificing economic growth for too long, at least some consumers of commodities and investments (individuals, businesses, governments) must be able to issue debt and finance their consumption. Roll curtain and enter stage left the system of endogenous (internal) financial money, which has shined over decades of periodic booms and busts around the world. Although the state is obviously needed to maintain systemic finance within an economy, it is not the primary driver of credit creation.
That role is reserved for private financial institutions that "offer" credit and the firms/households that demand borrowed capital for investment and consumption. As described earlier, the concentration and centralization of wealth in the monetary circuit of capitalism makes it practically impossible over time for firms to finance productive investments and produce returns adequate to cover their debts and other expenses, while also generating a profit. To maintain a somewhat stable and growing economy, then, both the firms and households must be able to produce artificial cash flows through the use of speculative finance.
Hyman Minsky has clearly laid out how a capitalist economy with a developed financial sector is endogenously prone to speculative credit bubbles that could ultimately result in a severe debt deflation and depression, and Dr. Steve Keen has thoroughly outlined and modeled this process in his research. [Policy Forum: Household Debt, Australian Economic Review]. As investment concerns from the last credit bubble continue to linger on (there is always a previous credit crisis in financial capitalism), firms and households only take out debt to finance relatively conservative investments. Once these investments start paying off, the investors become less risk averse and more aggressive with their projections of future revenues.
The banks are more than willing to finance these aggressive investments, since they are also optimistic about productive growth and debt repayments, and they are not practically restricted by any "fractional reserve requirement". At this point, the credit bubble takes off in full force and every investor with some pocket change to spare hops on for the ride, allowing their debt to equity ratios to rapidly balloon up. People who are not typically considered investors also jump in the inviting water, as they glimpse a chance to increase discretionary consumption and grab hold of the "American Dream". Interest rates in most credit markets remain quite low for some time during the bubble, aided by the loose monetary policy of the central bank and financial "innovation".
However, since much of the borrowed capital has been used to purchase assets or asset-based securities for the sole purpose of speculating on price appreciation, as well as goods that are not "self-liquidating" (i.e. SUVs), productive cash flows begin to dry up and some investors must start selling assets to service their debt. This tipping point will lead to decelerating asset prices and higher interest rates, making it more difficult for new borrowers to enter the asset market or existing borrowers to roll over their obligations. Eventually, the "ponzi financiers" who have taken on huge leverage ratios for pure speculation will find themselves in a seller's market, with very meager cash flows from the underlying assets and very high debt servicing costs.
Graph Showing Interest Burdens Consuming Productive Capacity in Australian Economy (applies to most other OECD countries as well) [From "It's Just a Flesh Wound" on Dr. Keen's Debt Deflation Blog]
Graph Showing the Correlation between Debt, Aggregate Demand and Economic Deterioration in the Age of Speculative Financial Capitalism [From "It's Just a Flesh Wound" on Dr. Keen's Debt Deflation Blog]
As these investors and financiers become insolvent, the entire financed market begins to implode in a self-reinforcing manner, in which lower asset prices lead to less revenues, lower ability to service existing debt, business layoffs, lower consumer spending, etc. which all feed back into lower prices and less affordable debt. If the system had allowed this process of debt deflation to continue unabated in the asset markets of 2008 (mainly housing), it would have eventually taken down the entire economic and political apparatuses of countries and regions around the world. The rate of debt deflation has only decelerated over the last few years due to the unprecedented intervention of governments and central banks around the world.
The latest GFC is surely the most potent crisis that capitalism has ever had to face, and therefore it is no surprise that the capitalists have tried that much harder to overcome the debt deflationary barrier through aggressive fiscal and monetary intervention since the implosion began. However, that doesn't necessarily mean their only option is to spend multiple trillions of dollars (or the equivalent amount in foreign currency) each year and monetize every single bad debt-asset on the books of private institutions. Another option would be to simply continue doing what they are doing now, albeit at a somewhat larger scale over time.
They will continue to run record deficits, but mostly spend that money for the benefit of the "defense" industry, financial institutions, energy corporations, big agribusiness, etc. Entitlement spending is certainly a huge component of the budget, but it has become increasingly evident that most taxpayers and retirees will be forced to bear the brunt of the "austerity" plans that are designed to make them "live within their means". As the housing market dips back down hard (the Case-Shiller index of home prices has fallen ~6% since last year [10]), mortgage-backed assets will be monetized in some cases, and left to the whims of "free market" forces in others, depending on how much political influence the owners of such assets have.
The point, then, is to exercise a degree of control over the deflationary process, and make sure the losses are properly socialized among those who can least afford them. There is very little blood left to squeeze from the collective turnip of human civilization, but our financial owners will not be satisfied until they get every last drop. Whether they are successful or not in this aim is largely irrelevant for our current discussion, though, because the damage has already been done. People who used to identify themselves as part of the "first-world" and "middle-class" will watch those labels "melt into air" just as quickly as their wealth.
With these dynamics revealed, it becomes clear that physical gold as an independent monetary asset could ideally be a great receptacle for those with enough excess wealth to save, but it would be valued entirely differently by that class who desires to constantly accumulate wealth and is ever-so important to the financial capitalist system - the financial capitalist. As discussed in Part II, it may not be valued in the capitalist system at all, beyond whatever limited surplus value it provides as a commodity in the production of goods and as a speculative investment play.
The reason is because a new global and stable "wealth reserve" will not aid the system in replenishing aggregate demand and maintaining economic growth. Some may argue that inflating away currency-based debts will alleviate the present burden of insufficient demand in both consumer and investment markets, by freeing up much more money for people to spend and invest. For example, the theory of Freegold argues that a process of dollar hyperinflation ("HI") will inevitably occur soon, during which a new global financial system and gold-based monetary order will arise.
The physical gold will allegedly recapitalize the major banking sectors and governments of the world, and that will then allow businesses and consumers to continue financing productive investments in their regional or national currencies. [Deflation or Hyperinflation?]. It is presumed that economic growth will once again be left unencumbered after a relatively short period of major monetary transformation. Even assuming this process actually did occur, we must still ask ourselves how it would realistically affect the dynamics of Marx's "realization problem".
The financial capitalists unconditionally require an expanding circuit of capital, in which monetary capital produces greater exchange-values over time (remember, the use-value of money = its ability to produce future exchange-value), and a portion of such values are continuously monetized for profits. The value of gold under the Freegold system would be inherently constrained, since it is meant to sit still and absorb some excess currency wealth, while the majority of people in the world still find themselves with tiny scraps of wealth to save, spend or invest in the first place.
The latter fact is especially true when we consider that most consumers in the developed world hold a large portion of their savings in fiat currency-based accounts. Indeed, Freegold advocates make it quite clear that HI will act as a rapid means of socializing the investment losses on the books of a few large institutions, and the super-wealthy individuals that own/manage them, throughout the productive economy via currency devaluation. If you happen to be saving most of your excess currency wealth in physical gold before HI really sets in, then perhaps you will be able to at least preserve that wealth, but how many people can we reasonably expect to be positioned in such a way?
[Welcome to Slaughterhouse-Finance]: "What are the chances that the majority of people who find themselves invested in U.S. government bonds and the dollar will get anything close to a return on their investment over 10, 20 or 30 years? The answer to that is probably a massively negative percentage, because the psychological pain of holding on for that long will be even worse than the total wipe out itself. However, the herd typically doesn't figure out how close they were to the edge of the cliff until after they are tumbling down the other side."
In addition, the prospect of "net producers" placing significant excess wealth in gold would leave even fewer profits for the capitalist's to realize from monetizing their goods and services in consumer and investment markets, which means fewer profits for the financiers who now control production. The aggregate level of consumer purchasing power at a given time would necessarily drop, because "fast" money would be traded to the capitalist class for dormant gold. For the above structural reasons, it is highly unlikely that the economic system of Freegold ever takes hold at a scale even close to that which its advocates envision.
That, in turn, means that investors or "savers" should not expect their current gold holdings to skyrocket in value to the equivalent of at least $55,000 in purchasing power anytime soon (as suggested in FOFOA's The Value of Gold). That prediction is based on a flawed conception of value in the capitalist economy, as explained in Part II - The Evolution of Value, and therefore fails to account for the "realization problem". Freegold views the future dollar HI event and the resulting destruction of the dollar's role as the global reserve asset as a wealth transfer from "easy money" debtors to "hard money" savers (those who place excess productive capacity into physical gold).
Perhaps this process is an accurate description, at least to some significant extent, but that means the debtors are necessarily defined as anyone who does not have a majority of his/her savings in physical gold. That definition, in turn, encompasses almost every worker, investor and "saver" in the developed world and many in emerging economies as well. It really only excludes, of course, the major institutions and super-wealthy individuals (and their political apparatuses) who control the means of production, sell toxic debt-assets to taxpayers at face-value and had previously extracted massive amounts of energy, resources and hard capital from the rest of the world.
If these people are almost instantly given 10-20x the purchasing power they already receive from their current physical gold holdings, then they will truly be the "demand of last resort" for consumption and investment in the markets of our global capitalist economy. That is wholly incompatible with the capitalist model of economic growth, which relies on the constant expansion of Marx's monetary and commodity circuits, in which surplus value is created and realized, respectively. It should also be noted that the natural processes of demographic shifts, climate change and energy/resource depletion (peak oil) will severely constrain productive income gains, making realization of value even more difficult.
Therefore, it is very unlikely that the current crises of capitalism will lead to a new reserve system based on physical gold, and is instead likely that they will lead to systemic collapse of financial and productive markets around the world. In the final part of this series, Part IV, we will discuss what this process of collapse really means for physical gold as a means of preserving wealth over time. The discussion will focus solely on financial collapse, rather than the demographic/environmental issues mentioned above, but the latter should obviously not be ignored when considering various means of preserving "wealth".
With regards to systemic finance, we can explore the realistic likelihoods of short-term deflation and HI, which are obviously very important considerations, as well as the specific properties of locations in which financial deterioration occurs. These properties may belong to anything from one's region or country to one's state, local community and household. As the trend towards centralization and concentration of capital grinds to a halt, our perceptions of a unified and "small" global society will also give way, as we are forced to observe the simple and enormous world existing right in front of our eyes and at our feet.
"All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind."
-Karl Marx and Friedrich Engels, The Communist Manifesto
Falling Home Prices Hit Big Banks, Fannie, Freddie
by Diana Olick - CNBC
Home prices began double-dipping months ago, but now that S&P/Case Shiller has chimed in, it really must be so.
This report is the most widely-followed home price index, equally quoted in bank boardrooms, Treasury Department back rooms, and Congressional Committees. The report finds home prices in Q1 of this year are now 2.9 percent below the previous quarterly bottom in Q1 of 2009, effectively giving up all the gains of the past few years, which were of course fueled by the home buyer tax credit.
"Just about everybody agrees we're going to miss the seasonally strong period in 2011, which we should be at the very beginning of right now with May, but nobody thinks that will make any difference," says S&P's David Blitzer. "Everybody's now keeping their fingers crossed for 2012 and wondering whether people just don't want to own homes anymore."
Keeping your fingers crossed for the housing market is just the tip of the iceberg. Prices have now fallen, on this index, more than they did during the Great Depression. "On that occasion, the peak in prices was not regained until 19 years after they first fell," notes Paul Dales at Capital Economics.
So what about the banks? Sure, they took huge write-downs already, but there is clearly more pain to come, especially given that this report out today is actually a three month running average based on home sale closings in March, so really you could say the whole thing is based on sales contracts signed around six months ago. We've seen considerably more housing weakness since then.
"All will have to take new markdowns if these price pressures continue, which everything points to the fact that it will," says Peter Boockvar at Miller Tabak. "Bank balance sheets are still cluttered with mortgage loans, and they are still being asked to take back bad mortgages from those that bought them, like Fannie Mae and Freddie Mac, so the lower home prices go, the risk rises that another round of balance sheet write downs may be necessary."
And speaking of Fannie and Freddie (and I'll throw in private label and FHA), when you consider the enormous volume of bank-owned (REO) inventory of foreclosed properties they're holding....
...you have to also consider what a drop in home values means to all that. The chart we have shows all the REO without the banks included, as we don't know that, but if you take additional data from RealtyTrac showing total REO inventory at 872,990 in May and multiply it by the latest median home price from the National Association of Realtors ($163,700 in April), you get around $142.9 billion in value at risk minus at least a 25 percent discount because it's a foreclosure already. "With each subsequent dip in home prices, the portfolio is worth less and the banks will suffer increasing losses," notes RealtyTrac's Rick Sharga.
It's impossible to say what the bank losses are right now, especially when you have to add in more potential put backs, where Fannie and Freddie force the banks to buy back bad loans. All we know is that the more home prices fall, the more the banks stand to suffer, and we all know what happened the last time they suffered.
"If we do not see a meaningful recovery in home prices by the end of the year, we may need to contemplate impairment charges on first liens owned by banks and wholesale write-downs of second lien exposures. This implies solvency issues for BAC, WFC, JPM and C, and big losses for the U.S. government and private investors," says Chris Whalen of Institutional Risk Analytics.
ADP: U.S. Added Just 38,000 Workers in May
by Timothy R. Homan - Bloomberg
Companies in the U.S. added fewer workers than forecast in May, a sign that job growth is struggling to gain momentum, data from a private report based on payrolls showed today.
Employment increased by 38,000 last month, the smallest increase since September, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May.
Such gains in employment are insufficient to help the world’s largest economy accelerate after a surge in food and fuel costs earlier this year. Businesses added 207,000 jobs last month after a 268,000 gain in April and the jobless rate dipped to 8.9 percent from 9 percent, economists project a Labor Department report to show in two days.
"It is a warning shot across the bow that job growth is also weakening along with the other high frequency numbers," Eric Green, chief market economist at TD Securities Inc. in New York, said in an e-mailed note to clients. "The weakness reflects a general slowdown and turn in sentiment that set in with the sharp rise in energy prices, disruptions from Japan, and to a lesser extent risk aversion stemming from the Greek fiasco."
Stock-index futures dropped after the report. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.4 percent to 1,338.6 at 8:37 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.02 percent from 3.06 percent late yesterday.
Survey Results
Estimates for the ADP data ranged from increases of 125,000 to 200,000, according to the Bloomberg survey of 37 economists. Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in December, when it overestimated the increase in employment by 184,000.
Another report today showed employers announced fewer job cuts in May than a year earlier, signaling the labor market is improving. Planned firings dropped 4.3 percent to 37,135 last month from May 2010, according to figures from Chicago-based Challenger, Gray & Christmas Inc. Government and nonprofit agencies had the most cutbacks. Today’s ADP report showed a decrease of 10,000 workers in goods-producing industries, which includes manufacturers and construction companies. Employment at factories fell by 9,000.
Data Breakdown
Service providers added 48,000 workers, ADP said. Companies employing more than 499 workers cut their workforces by 19,000 jobs. Medium-sized businesses, with 50 to 499 employees, created 30,000 jobs and small companies increased payrolls by 27,000, ADP said. The drop in manufacturing may reflect supply disruptions caused by the earthquake and tsunami in Japan, Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, which produces the data with ADP, said in an interview on CNBC Television.
Some companies are already looking beyond the temporary slowdown and are making plans to expand payrolls further in 2012. General Motors Co. said last week it will invest $69 million and add 2,500 jobs to start making new models at the Detroit plant that builds the Chevrolet Volt plug-in hybrid as the automaker boosts U.S. production. Overall payrolls, which include government workers, probably rose by 180,000 in May after climbing by 244,000 a month earlier, according to the median forecast of economists surveyed before the Labor Department’s June 3 report.
Federal Reserve officials have said the jobless rate "remains elevated" at 9 percent, one reason central bankers pledged at their last meeting to complete an asset-purchase plan by the end of this month and to keep borrowing costs near zero. The ADP report is based on data from about 340,000 businesses employing more than 21 million workers.
U.S. consumer confidence declines in May
by Jeffry Bartash - MarketWatch
Expectations for economy six months from now worsen
Consumer confidence fell in May as Americans grew slightly more pessimistic about future job prospects and business conditions, according to a closely followed survey. The nonprofit Conference Board said its consumer-confidence index fell to 60.8 in May — the lowest reading in six months — from a revised 66 in April. Economists polled by MarketWatch had forecast an increase to 67.5.
The decline in the Conference Board index conflicts with another consumer survey by Reuters and the University of Michigan that showed an increase in May owing to a drop in gas prices.
Economists say the Conference Board index is more closely linked to the health of the U.S. labor market than the Reuters/Michigan survey, which might explain the difference.
Still, most economists were surprised by the decline. Some attributed the drop to the cost of gas, a downward spiral in housing prices, recent weakness in the economy, and even to a series of tornados and floods wracking parts of the U.S. A few suggested the decline could be an aberration in an index that’s often volatile on a month-to-month basis.
Lynn Franco, director of consumer research at the Conference Board, said a "more pessimistic outlook" is responsible for the pullback in the index. Inflation concerns also rose. "Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects," she said. The expectations index, which measures the view of consumers six months out, fell to 75.2 from 83.2 last month. It’s the lowest reading since last October.
A slightly higher percentage of consumers expect business conditions to get worse over the next six months — 15.5% vs. 14% in April. And 20.8% expect fewer jobs to be available, compared to 18.7% in April. For the present, however, consumers did not appear quite as pessimistic. The board’s "present situation" index barely fell, at 39.3% last month from 40.2% in April.
The percentage of consumers who say jobs are plentiful increased to 5.6% from 5.1% in April, although the percentage who say they are hard to get also rose slightly to 43.9%. The consumer-confidence index remains low by historical standards. In a healthy economy, the index averages about 95 points. The index has more than doubled, however, since touching a record-low 25.3 in February 2009.
R.I.P. Reaganomics Revolution: 1981-2011
by Paul B. Farrell - MarketWatch
Like the Roaring Twenties, ending in a crash
The 30-year Reaganomics Revolution will be over soon. Like the Roaring Twenties, ending in the game changing crash. Though more than 80 years apart, they share a common theme song of irrational exuberance: "I’m Forever Blowing Bubbles."
Many bubbles, now merging like tornadoes, in a perfect storm, a megabubble itching to blow, signaling the end of the ego-centered Reaganomics Revolution, which must, unfortunately, also take down America’s markets, economy and monetary system.
Yes, folks, that one song captures the collective mind-set of both the Roaring Twenties and the Reaganomics Revolution: "Forever blowing bubbles. Pretty bubbles in the air. Dreaming dreams. Scheming schemes. Building castles in the sky. Fortune’s always hiding. I’ve looked everywhere. Forever blowing bubbles. They fly so high, nearly reach the sky. Then like my dreams they fade and die."
Then … like our dreams … they fade … and die. Nearly a century ago the bubbles popped in the Crash of 1929. Then the bubbly went flat during the long Great Depression. It repeats with the Reaganomics Revolution’s endless "pretty bubbles." For a generation we have watched the damage created by a selfish ideology: The S&L disaster. Dot-com crash. Wars. Subprime meltdown. Great Recession. And, yes, there’s more to come, more "pretty bubbles." You’ll see below.
Irrational exuberance blinds us. On March 20, 2000, as dot-com exuberance raged, our column began: "Next Crash, You Won’t Hear It Coming." Then came a 30-month recession. We went on reporting 20 advance warnings of the 2008 meltdown. Nobody listened. Till it was too late. Till a conflicted Treasury Secretary, myopic Fed Chairman and clueless Congress all panicked, making matters worse, setting up a new meltdown, dead ahead.
Reaganomics Revolution destroyed values of American Revolution 1776
Today our collective brain has been consumed by a greed-is-good virus. We have lost our moral compass. The values of the American Revolution of 1776 are dead. The Reaganomics Revolution has replaced those values with the unregulated free market with an "every man for himself, get rich quick" ideology that’s destroying America from within:
In the Bush years some cocky conservatives predicted a "permanent majority" lasting "for years, maybe decades." The hubris gods had other plans. Then after Obama’s election, one cocky liberal wrote "40 More Years: How the Democrats Will Rule the Next Generation." Wrong again. Both parties will lose in the final flame-out of the Reaganomics Revolution.
Yes, so many "pretty bubbles" merging. And still, the pundits and press love the bull, arguing that no one bubble is a game-ender. Even after a generation of increasingly bigger, more frequent economic disasters drain our fiscal and monetary resources, raising our debt to unsustainable levels, destroying our trust in democracy, it’s now obvious that America many "pretty bubbles" are making us vulnerable, inviting trouble.
Get it? Today any one "pretty bubble" can trigger a flash point, ignite a chain reaction, an economic nuclear bomb exploding the American Dream. Here are America’s most toxic bubbles, warnings of the coming crash … the one we refuse to hear:
New tech ‘pretty bubbles’
Bad sign: Pundits are desperately trying to dismiss the LinkedIn IPO, arguing it’s not another 1999 sock-puppet crash signal. They’re wrong. "LinkedIn inspires others" to "take serious step toward IPOs," warns USA Today’s Matt Kranz. Another even bigger warning comes in an Economist cover story, "The New Tech Bubble: Irrational exuberance has returned to the Internet world. Investors should beware."
The Economist has a great track record. It predicted the dot-com crash in advance. Years before the subprime meltdown, in a June 2005 cover story, it wrote: "The worldwide rise in house prices is the biggest bubble in history. … Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000." Values increased 75% worldwide in 5 years. "Never before have real house prices risen so fast, for so long, in so many countries … the biggest bubble in history." America ignored it. Warning, another huge tech bubble is brewing.
Oil-energy ‘pretty bubbles’
Whether it’s the BP Gulf spill, four-buck gas, oil-driven inflation, "peak oil" warnings, domestic political pressure to drill baby drill, that requiem to "The Oil Age" in Foreign Policy, or the oil giants’ ads bragging about what good guys they are, a big bubble is blowing.
In Ben Casselman’s recent Wall Street Journal feature, "Facing Up to the End of Easy Oil," energy analyst Alex Munton says the "major oil fields in the Gulf region have pumped more than half their oil, the point at which production traditionally begins to decline." Supplies are disappearing: "The U.S. Energy Information Administration said earlier this month that world-wide oil consumption would hit a record 88 million barrels a day this year," with global reserves of 434 billion recoverable barrels of heavy-crude, costly using existing technology. Peak oil, demand up, costs up, war risks increasing.
Wall Street-Federal Reserve ‘pretty bubbles’
Or call it the "Cheap Money Bubble." First it was Greenspan’s obsession with Reaganomics, now Bernanke. Both so deep in bed with Wall Street banks they’ve lost perspective, putting the bank demands ahead of consumers, taxpayers, investors … feeding on cheap money, huge bonuses, arrogance and greed … feeding off high unemployment, foreclosures, a declining dollar, foreign capital … feeding on mercenary lobbyists with no moral integrity, bought congressional votes, self-serving regulations, market manipulation and information control that’s killing capitalism and democracy.
How? Because Wall Street’s banks do control the Fed, Congress and the presidency. They install insiders and tell the Fed bosses what to do. Yes, folks, this "pretty bubble" has been pop-popping throughout the 30-year Reaganomics Revolution.
Megadebts ‘pretty bubbles’
Even if the GOP/Tea Party of No-No fails to get a no vote on the debt limit, America’s too deep in a hole. One that the GAO, CBO and others warn we may never be able to dig out. And it’s not just federal debt at a ratio of debt to GDP over the 90% danger point, but excessive debt throughout the economy: consumer debt, state budgets, corporate, underfunded state and municipal pensions, the insolvent Fannie Mae and Freddie Mac, and a Social Security Trust Fund that doesn’t have a dime in it, except the questionable "good faith and credit" of a declining dollar. This bubble is about to pop.
Military war spending ‘pretty bubbles’
Yes, the GOP’s Ryan Plan may be backfiring on Medicare, but military spending is still off the table. Why? The GOP loves war. Ever since Reagan, conservatives have given the Pentagon a blank check. Now, thanks to misguided war policies, the military wastes half the Federal budget, and is now the major cause for America’s $14 trillion debt, along with Bush tax cuts for the rich.
Which reminds us of Nixon strategist and historian Kevin Phillips’ warning: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."
Commodities: Oh so many ‘pretty bubbles’
All over the world, commodities are getting scarcer and costlier as population grows, demanding more. China is buying and hoarding huge reserves worldwide. Of seven billion on the planet, two billion people live in poverty, spending 50%-70% of their income on food. When food staples recently soared, desperation increased, many cut from two meals a day to one.
Money manager Jeremy Grantham warns, "The world is using up its natural resources at an alarming rate. This has caused a permanent shift in their value." And still, world leaders are turning a blind eye, can’t hear, won’t listen … till it’s too late.
Many more ‘pretty bubbles’
Warning: Our world is filled with many more "pretty bubbles" rubbing against one another, heating to a flash point that can easily trigger a cascade of unstable ticking time bombs: Out-of-control health-care costs … the Social Security bubble … a politicians/lobbyists/special interests bubble destroying our democracy … the unregulated $680 trillion global derivatives casino bubble … China owning over a trillion of our debt, with China’s GDP predicted to exceed America’s in five years … and the biggest, the exploding global population bubble that doubled the past two generations, now at seven billion, predicted at nine billion by 2040 … more "pretty bubbles" of humans demanding their own version of the American dream … and when they get it, all demanding nonrenewable resources at the same rate as America.
Eulogy: Reaganomics, you’ve had a generation to do the right thing for America. But you got too greedy. Too arrogant. Lost your moral compass. Became a myopic, ego-centric ideology. Soon you will pay the price. So will America. All of us. With a collapse of markets, the economy, democracy. Collapse of your kamikaze capitalism.
So now, as in the Roaring Twenties, your theme song builds to a crescendo: "Forever blowing bubbles. Building castles in the air. Dreaming dreams. Scheming schemes. Blowing pretty bubbles … they fly so high, nearly reach the sky ... but like all dreams … they fade … they die … still you can’t see … can’t stop … keep blowing … pretty bubbles in the air … till it’s too late … till another meltdown … game over … R.I.P. Reaganomics.
300,000 cash-strapped British families switch £60 billion worth of mortgages to interest-only
by Philip Aldrick - Telegraph
Up to 300,000 cash-strapped households have switched more than £60bn of mortgage debt from repayment into risky interest-only deals over the past three years to help cover their living costs.
Analysis of Financial Services Authority (FSA) data demonstrates just how desperate families have become as they contend with what Mervyn King, the Governor of the Bank of England, has described as the most dramatic squeeze on family finances since the 1920s.
With the average UK mortgage at £109,000 and average borrowing costs at 3.5pc, switching from repayment to interest-only saves households roughly £230 a month. But although the move may help families with their immediate cash-flow problems, concerns have been raised about how the debts will be repaid. Darren Winder, UK economist at Oriel, said: "For someone who's trying to alleviate monthly cash flow pressure, moving to interest-only makes sense. But it does raise questions about how that loan gets repaid."
The trend also runs against the FSA's advice. It has threatened to "constrain future interest-only lending", branding much of it unsustainable. In its Mortgage Market Review paper last July, the FSA said: "Evidence suggests that interest-only mortgages have often been taken to extend affordability, with no firm plan in place to repay the capital... "Our current view is that interest-only should be used only where there is a genuine repayment method in place." However, it added: "We do not intend to restrict interest-only from being used as a forbearance method for customers in arrears."
The FSA disclosed to The Telegraph that, between the onset of the financial crisis in the third quarter of 2007 and the final three months of last year, the value of interest-only mortgages increased by £99bn and the number of borrowers rose by 369,370. Some of those will have been new deals, but FSA sources confirmed the bulk were due to "forbearance" – as banks move homeowners on to more affordable payment plans to avoid defaults.
Although the regulator does not break out precise figures on new lending and "forbearance", the data shows that around two-thirds of the increase came from struggling households. Over the three years, the proportion of loans classified as interest-only rose from 40.04pc to 42.95pc but the proportion of interest-only deals available fell from 49.51pc to 31.41pc as banks cut the supply of higher risk products.
As the total UK mortgage stock in that time increased from £1.13 trillion to £1.21 trillion, the value of interest-only lending should have risen by no more than £35bn as its share of the stock would have been stagnant or declining, Mr Winder said. He added that the data demonstrated a large number of homeowners are not re-mortgaging but simply changing the terms of their existing deal. An FSA spokesman confirmed revised terms do not show up as "new lending" but the changes are visible in the "stock" numbers.
Mr Winder added: "Non-discretionary spending [such as food, petrol and tax] is rising considerably more quickly than incomes. Therefore, there is a natural incentive to move to interest-only products."
Britain 'will become nation of renters within a generation', study claims
by Andrew Hough - Telegraph
Britain will become a nation of renters within a generation amid claims young people will give up on the dream of home ownership, according to new research.
A new study has found that almost two thirds of prospect home owners believe they will never own their own property. Almost half of people aged between 20 and 45 admitted they thought the country was becoming more like Europe, in which renting was considered the norm. Experts added that the research pointed to Britain becoming a nation of renters within a generation.
A majority of the 8,000 people surveyed admitted that the perception that banks were not lending was one of the biggest problems. Nearly two in three potential buyers also said they were put off atempting to climb the property ladder due to the stress and anxiety involved in applying for a mortgage.
But the study, from National Centre for Social Research, found that more than three in four people who have yet to get a foot on the property still aspired to buy their own home. It found 84 per cent of potential first-time buyers conceeded that banks did not want to advance them money and would find excuses to turn them down.
At the same time, 92 per cent of people said they thought it was hard for first-time buyers to get a mortgage, with almost two thirds saying it was either very hard or virtually impossible.
The large deposits currently required were seen as a further barrier, with only a small pecentage of people saying they were making sacrifices to save for a deposit. Most, however, admiitted they were either did not have enough spare cash to save, were not interested in setting aside money or had tried to do so but failed.
Alison Blackwell, of the which compiled the report for Halifax, said: ''The phenomenon of Generation Rent could have major socio-economic implications. ''It would mean fewer homeowners being able to buy and therefore fund the construction of the new homes required in the UK to meet demand, resulting in a slowing-down in the housing market. ''It could open up a widening of the wealth gap that already exists between homeowners and non homeowners. And people in Generation Rent risk insufficient finances at retirement.''
Halifax, the high street bank, which commissioned the study, said it planned to launch a first-time buyer pledge in July in response to the problems people faced getting on to the housing ladder. This will involve it publishing a detailed overview of its lending criteria, as well as a personalised promise on how much it will advance people, without it leaving a lasting record on their credit file.
If an application is rejected, it will give customers information on why this happened and it will provide them with a plan on how to move forward regardless of whether they are successful or unsuccessful with their application.
UK construction sector insolvencies jump by nearly a fifth
by Julia Kollewe - Guardian
Experts warned on Monday that the construction industry could sink deeper into recession as the number of companies unable to pay their debts rose by nearly a fifth in the last quarter, the first rise in two years.
Insolvencies in the construction sector climbed by 19% to 948 in the first three months of the year from 796 in the fourth quarter of last year, according to the accountancy firm Wilkins Kennedy. It is the first quarterly rise in insolvencies since early 2009 and has stoked fears of another prolonged downturn for the sector. The figures show that the number of construction companies going bust had fallen steadily every quarter since the 1,209 insolvencies at the start of 2009, when Britain was mired in recession.
Construction was a key industry driving growth during the boom years up to 2007, along with financial services. While banks and other City firms have recovered strongly over the last two years, construction firms have continued to shed jobs and report low levels of business activity. Although the overall economy is growing, construction shrank in the last two quarters, according to government figures.
A monthly survey for May out on Thursday is expected to show a slight recovery in the sector's health after property companies reported strong demand for office building in London and the south-east. The CIPS/Markit survey of construction company purchasing managers dropped to 53.3 points in April, from 56.4 in March, and closer to the 50-point mark that separates expansion from contraction.
The construction industry had been kept afloat by big public-sector projects but the government is now cutting back sharply as part of its austerity measures. Wilkins Kennedy said the cancellation of public sector building programmes such as Building Schools for the Future, has driven this rise in the number of construction firms going bust.
Anthony Cork, director at Wilkins Kennedy, said: "The government has slashed capital spending on infrastructure across the board in order to plug the deficit and that has pushed the construction sector into a double dip. Fiscal stimulus at the start of the recession had included substantial infrastructure projects that keep the construction sector's head above water. But that support is now being withdrawn. "The question now is how quickly private-sector construction work will be able to pick up the slack left by the public sector. So far this has not happened."
Among those that have fallen into administration in recent months are the property repair and maintenance group Rok; Carvill Group, one of Northern Ireland's leading construction companies; Coventry groundworks contractor CJ Haughey; John Laing Partnership, the former social housing unit spun off from John Laing Group in 2002; and social housing group Connaught last September.
Experts estimate that public-sector spending on construction represents about 40% of the industry's turnover. The government is committed to halving this, slashing more than £90bn of capital spending between now and 2014. Research from the construction data group Barbour ABI reveals that the value of contracts awarded for construction projects fell to just £21bn in the year to May 2011, down from £34.6bn on the previous year.
While the banks failed to meet their lending targets in the first quarter, – lending to small firms fell more than £2bn short of targets set by the Treasury as part of the Project Merlin deal struck in February – it appears that the situation has improved more recently.
At the same time, there are signs that lending to small and medium-sized companies has improved in the second quarter, albeit with credit costs remaining high, according to the manufacturers' lobby the EEF. A survey of almost 500 companies by the EEF about 18 months into the recovery showed just as many small companies reported an increase in the availability of new lines of borrowing over the past two months as reported a decrease. This compared with a balance of -11% in the previous quarter.
There was a similar improvement among mid-sized companies. For existing credit facilities the balance of companies reporting decreased availability dropped from 11% to 7% among manufacturers. However, rising costs remain a challenge. While fewer companies reported rising rates on existing loans, a balance of 22% reported an increase in the overall cost of credit over the past two months. On new lines of borrowing a balance of 28% reported an increase in the overall cost.
Lee Hopley, EEF chief economist, said: "For the first time since the recession ended, manufacturers are reporting improving access to finance. Hopefully, this will translate into better news on new lending in the coming months. But availability is only part of the story and we also need to see costs coming down." She added: "Ensuring companies have access to the finance needed to invest and grow is critical for the recovery. We need to see a sustained improvement before concluding that the actions taken by banks and government are bearing fruit and that no further measures are required."
The Real Endgame In Greece That European Leaders Are Privately Praying For
by Gregory White - Business Insider
Eurozone officials have now agreed that there will be no restructuring of Greek debt, and that the country will receive new funds from the European Union, in addition to those from the IMF. Negotiations on this package are still ongoing, but it's a near certainty that we will see some sort of second bailout secured by the end of June.
But why another bailout when everyone knows that the country can't pay its bills? The reason for the further kick of the can is that it pushes out the costly and dangerous restructuring event until 2013, when the European Stability Mechanism, or ESM, comes into play. That's the successor program to the ad-hoc European Financial Stability Fund, that has thus far been used to support debt troubled states in Europe.
The reason leaders want to get Greece to the ESM stage is that it entails some sort of orderly restructuring of the country's debt, where private creditors will take part in the deal. There is the potential that the ESM could swap its debt to creditors in exchange for the sovereign debt they are holding. Essentially, that's a eurobond in exchange for a Greek bond, in everything but name. This has not yet been agreed to, and will likely garner significant political opposition.
In 2013, collective action clauses will be installed in the sovereign debt of member states. This will allow private bondholders to vote on what they will accept in exchange for their current debts. German Chancellor Merkel has expressed support for such measures, which will make it easier for eurozone leadership to discuss restructuring at the least, and debt replacement if eurobonds come into existence.
But here's where it gets interesting. By 2013, most Greek debt won't be owned by the private sector (banks, bond funds, individual investors), but rather the IMF and European Union.
So, if Greece gets to 2013, a restructuring event or eurobond swap would really just hurt the ECB, EU, and IMF, saving banks and private creditors the costs and the region contagion risks. Hence the desire to kick the can yet again, giving the rest of the eurozone more time to clean up its act, and the region's banks a chance to further decrease their exposures.
Europe Problems Go ‘Way Beyond’ Greece
by Rishaad Salamat and Bei Hu - Bloomberg
Europe’s financial problems aren’t confined to Greece and a reorganization of the continent’s banking system is necessary, Laurence D. Fink, chief executive officer of BlackRock Inc., said in a Bloomberg television interview today. "The European problem is way beyond Greece," Fink said in the interview in Hong Kong. "Greece is the most immediate problem. I find it very difficult to restructure Greece without the understanding that we’re probably going to have to restructure Ireland and restructure Portugal."
Inspectors from the EU, International Monetary Fund and European Central Bank are set to wrap up a review of Greece’s progress in meeting the terms of last year’s 110 billion-euro ($157 billion) bailout in coming days. The EU will then formulate its plan for further aid to Greece, which remains shut out of financial markets a year after the rescue package.
Many smaller banks in Europe will need to be recapitalized, said Fink. The largest banks on the continent are well capitalized, though devaluation of some of the sovereign credit will put stress on them, he added. "The banking system in Europe owns all this debt," Fink said. "If we restructure one country, we’re now basically putting huge capital stress on these banks. Before we restructure any country, we’re going to have to restructure the banking system in Europe."
Europe is going to need a "giant TARP," Fink said, referring to the Troubled Asset Relief Program that the U.S. introduced to rescue financial firms. BlackRock advised the Federal Reserve on illiquid debt portfolios during the height of the financial crisis.
Building BlackRock
Fink, one of the co-founders of BlackRock which began as a fixed-income firm in 1988, said he’s more bullish on U.S. equities than bonds. Fink, 58, has built the firm into the world’s biggest asset manager through acquisitions including the purchase in December 2009 of Barclays Global Investors. The $15.2 billion deal, the largest for BlackRock, added passive funds such as ETFs to BlackRock’s active stock and bond strategies.
BlackRock manages about $3.65 trillion in assets in its stock, bond and hedge funds, as well as its iShares exchange- traded funds. The firm’s BlackRock Solutions unit advises financial institutions and governments around the world on hard- to-value assets. BlackRock this year was picked by the Central Bank of Ireland to advise on the assets held by six of the nation’s largest banks.
In 2005, BlackRock bought State Street Research & Management to add more stock, real estate and hedge funds. In 2006, it expanded its equity business with the purchase of Merrill Lynch & Co.’s money-management unit. In 2008, BlackRock acquired a division of Quellos Group LLC to add hedge-fund assets. The purchase of BGI, the biggest seller of index- tracking ETFs, was the largest to bring together active and passive funds.
They can try to 'delay and pray' but the euro is running out of time
by Roger Bootle - Telegraph
As a doomsayer from the start, who has written several times on the subject, I have recently been reluctant to burden my readers with more jeremiads about the euro. But fasten your seatbelts. Here I go again. My excuse is that this crisis keeps surprising the unwary. There is so much to say that I will have to have several bites.
Before we can find solutions, which I will discuss at a later date, first the causes. Why is the euro in crisis? Because it was fundamentally flawed at its inception. Only good luck, strong economic growth and enlightened economic management could keep it together. In fact, the eurozone has had to suffer the opposite of all three.
Giving up sovereign currencies is a serious challenge. Exchange rates act as a safety valve. When you remove them, the pressure either has to be reduced or it will find some other way out. In a fixed exchange rate system, such as the ERM, currency speculation could and did break the system. Advocates of the euro project drew comfort from the fact that, by contrast, a full monetary union is immune from such attacks.
It was recognised that economic and financial pressure might still find an outlet as countries which diverged from the core had to face higher bond yields. But this would be a good thing. The prospect of it should serve to restrain them. It wasn’t imagined, though, that strain in the bond markets could threaten the stability of the euro itself.
Four things went wrong. The first two were private sector failures. First, far from reacting to their newly shackled state, Spain and Ireland went on a private sector spending spree. (Meanwhile, in Greece the government led the bonanza.) Second, in all these cases, the bond markets were hopeless at foreseeing possible difficulties and imposed bond yields only marginally higher than on Germany. Accordingly, they provided no restraint at all.
The third and fourth were failures of government. The authorities presided over an extremely shaky banking system, acutely vulnerable to shocks. And their policies over many years resulted in a high government debt to GDP ratio, not only in the peripheral countries, but also in the supposedly solid core. In common with almost everyone else, the European authorities grossly underestimated the possibility of sovereign default as a realistic threat and market worry, and underestimated its capacity to cause a full scale banking crisis.
The fact that the political elite ploughed on with the euro project was the result of profound arrogance. Where possible, electorates would be denied the chance to say whether they approved of the euro and other aspects of integration. Where they had to have their say, they would be compelled to go on voting until they said "yes". The current crisis has the same roots. The project’s difficult economics would be overcome by the politics. The Brussels establishment would ensure that everything turned out all right.
But it hasn’t. Now the economics threaten to overwhelm the politics. Greece’s sovereign indebtedness is so high that it is impossible to see how it can honour its debts without outside help (ie. gifts). And the economy will go on contracting for years. There will have to be "an event". The only issues are when this will happen; who will pick up the tab; and what it will be called.
This being the European Union, nomenclature is extremely important. Of course it won’t be called a default – I doubt it will be called anything beginning with "de". Bad things begin with de – like decline and defeat. It will be called something beginning with "re". Good things begin with "re", including rebirth and renewal – and restructuring and reprofiling. But default it will be.
Who picks up the tab is important because the bill could seriously undermine some banks. Remarkably this threat includes the ECB itself because it has taken on a large amount of Greek debt. The rows over the bill are likely to delay any sort of solution and to poison the atmosphere between member states. Meanwhile, the fate of the European banking system will be hanging by a thread.
This is why the "when" issue is so important. The current approach is to try to stave off the event until things get better. You will notice that this bears a striking similarity to the sophisticated strategy adopted by British banks in the face of dud commercial property loans, namely "delay and pray". Mr Micawber had the same idea but expressed it differently.
So even though the markets cannot cause the euro to break up by exchange rate pressure, they can cause an internal financial crisis worse than any currency panic. The prospect, or the reality, of such a crisis could yet cause some European leaders to precipitate the end of the euro as we know it.
Accusations of Treason in the Greek Parliament
by Covering Delta
Leaving aside for a moment the obvious questions of criminality and treason that have arisin from the details of the Memorandum of Understanding between the Greek government and the Troika (IMF/EU/ECB), which concedes total sovereign authority of the Greek state over the fate of its own citizens to foreign banks, let us turn to recent allegations made in Parliament against the Prime Minister of Greece himself, George Papandreou.
Recently, in an interview on Greek television, Member of Parliament for New Democracy, Mr. Panos Kammenos, made allegations that if true, could very well constitute treason for the Greek Prime Minister, members of his staff and possibly members of his own family. These allegations were repeated by Mr. Kammenos on the floor of parliament and given support by the leader of LAOS, Mr. George Karatzaferis. These allegations are therefore, not made lightly, and have now been plainly put forth before the Greek people. They can no longer be ignored, and the Prime Minister is obliged to respond to them.
The gist of the allegations rest on the charge by Mr. Kammenos, that the Greek Prime Minister, Mr. George Papandreou and members of his team, presided over the sale of 1.3 billion dollars worth of credit default swap contracts (CDS on Greek sovereign debt) on or around December of 2009, shortly after coming to power. The 1.3 billion dollars worth of insurance protecting against a Greek default was bought during the spring and summer of the same year, by the Hellenic Postbank, a public banking arm of the Greek government.
It is unclear what the intentions of the Postbank were when it purchased the credit protection. Clearly, the previous government that was in power at the time (New Democracy or N.D.) understood that Greece was headed towards a fiscal crisis, otherwise they would not have purchased the insurance. However, we do not know if the move was initially made with the intention of reaping private profit, or simply as a hedge by the government itself against it’s own default.
Leaving this uncertainty aside for now, we know that, so long as the credit protection remained at the Hellenic Postbank of Greece, the CDS contracts would function as insurance against the type of "credit events" that would transpire over the following twelve months. Indeed, the very insurance that was being held in public coffers by the Hellnic Postbank, is today worth approximately 27 billion dollars.
Considering that Greece is now under duress to raise collateral for its "bailout" money, 27 billion dollars would go a long way towards preventing the privatization and sale of the nation’s assets to foreigners. Unfortunately, the Greek government is no longer in possession of this 27 billion worth of CDS, because it sold them in December of 2009, for a paltry 40 million dollar profit. The contracts were sold to a private firm for "high net-worth individuals" founded in 2009, by the name of IJ Partners.
IJ Partners, based in Geneva, has a number of well-known Greeks who serve as either managing partners or members of the board, including former IMF economist Miranda Xafa (who intermediated Greece’s dealings with the IMF), former CEO of Piraeus Bank (one of the banks named in a law suit as shorting Greek government bonds during the period in question) and Theodore Margellos, the infamous exporter accused of falsely passing off imported corn from Kosovo as Greek produce. I should also note that the firm’s Vice President, Mr. Jose-Maria-Figueres, shares board membership on a separate NGO with none other than the Prime Minister’s own brother, Mr. Andreas Papandreou Jr.
Unfortunately, the story gets much worse. Around the time that the Hellenic Postbank of Greece sold these CDS to IJ Partners, the Prime Minister’s office was consulting with the International Monetary Fund about how to proceed with what eventually would become the notorious 110 billion dollar Greek bailout package. News of these discussions had not yet leaked, and the Prime Minister had yet to address parliament on the matter.
In addition, credit markets had yet to uncover the extent of the impairment to Greece’s national balance sheet, as the country’s bonds were still trading at below 200 basis points spreads from German bunds. In practical terms, this meant that anyone fortunate enough to have bought Greek CDS during this period would be in a position to make an absolute fortune. It also means that anyone who owned, or had a stake in Greek CDS stood to benefit directly from either a Greek default, or the perception that a default was increasingly possible, since this would drive up the price of credit protection, and thus the value of Greek CDS.
Implicit in these most recent and quite damming accusations therefore, is that the Prime Minister not only arranged for, facilitated and possibly forced the sale of a national asset (the 1.3 billion in CDS that would turn into 27 billion – a roughly 2,700% gain) to a private firm that he or members of his family had a personal stake in, but that he also did so during a period where he knew that the value of this asset would rise substantially. In fact, his own words and actions had the potential to positively affect the outcome.
If you will recall, it was during this time that George Papandreou decried the role of speculators in driving up the yields on Greek debt, by trading the very CDS contracts that he has now been accused of selling (and possibly buying through IJ Partners). Rising bond yields caused by such speculation single-handedly pushed Greece into the clutches of the IMF. If it were not for being priced out of the bond market, Greece would not be in the position that it finds itself in today.
And yet, in addition to all the things that I just mentioned, during this period where Greek bonds were being sold short (in some cases using naked short selling) by the major banking institutions in Europe and the United States (including Goldman Sachs, JP Morgan, RBS, HSBC, UBS, Deutsche Bank, Societe General, etc.), the Central Bank of Greece quite curiously decided to change the legal settlement period for shorting government bonds from 3 days to 10 DAYS. This had the ostensible effect of aiding naked short sellers who were able to keep their positions against Greek national debt open longer, thus driving down the price of the country’s bonds, spiking its yields, and pumping up the price of Greek CDS.
The criminal implications of this accusation are so immense that I cannot begin to contemplate what the punishment should be if it were proven to be true. What I can say is that Mr. Kammenos, despite the fact that he has put himself in a very precarious position by exposing this fraud in the public domain, is NOT THE ONLY ONE MAKING THE ACCUSATION. In fact, I had first read about the role of the Central Bank of Greece in this entire affair from a legal document produced by Dr. Kyriakos Tombras and Mr. George Noulas over 1 year ago. Unfortunately, the allegations seemed so damning that, at the time, I had a hard time coming to grips with their implications.
Normally, I would not proceed to give an opinion on this matter, considering that it is an issue for the courts. However, given the extent of corruption in Greece, and the urgency of the moment (new terms are being negotiated as we speak that could lead to further destruction of the Greek Nation), I must concede that I find the accusations more than just plausible. I find them highly probably, for all the reasons that I have cited above.
The implication of false accusation by Mr. Kammenos, Dr. Kyriakos and others is far too damning, the details far too lucid and the silence of Mr. Papandreou all too deafening for these allegations not to have merit. As I said before, this is not the first time that we have heard of these accusations, and in all that time, their substance has not once, to my knowledge at least, been addressed by the Prime Minister, George Papandreou. At the very least, something feels very wrong here. If Mr. Papandreou himself was not involved in these actions, then he should know who is. Transactions of this magnitude do not simply go unnoticed to senior members of government.
This is a very urgent moment for the country. Terms of national surrender are being negotiated abroad as we speak that have existential implications for Greece herself. Her borders, her mineral and resource rights and the social and culture lining of her very womb are at stake. The Greek military budget is being gutted under the terms of the memorandum, just as Turkish ships are reportedly increasing their oil and gas exploration efforts off the Aegean coast and as the EU has moved to, yet again, challenge the national borders of Greece with the recognition of the European Federation of Western Turks of Thrace. The groundwork is being laid for the existential destruction of the Greek nation through diplomacy, debt, and who knows, even physical occupation at some point in the not to distant future.
This cannot stand. Greeks cannot and must not allow this treason to stand any longer. The memorandum signed in May of last year is null and void. It was treasonously conceived and illegally passed in direct violation of the Greek constitution. Our government cannot be trusted, and many of our "leaders" may very well be working on behalf of their own best interests and on behalf of the interests of foreign agents intent on stripping Greece of the VERY SOVEREIGNTY that her founders worked so tirelessly to ensure during the revolution against Ottoman rule and subsequent German occupation.
I don’t know what else to say. There is nothing left to say. Defiance is the only course of action left at this point. Greeks cannot trust their own leaders to protect that which is rightfully theirs. George Papandreou wishes to return from this weekend’s negotiations bearing "gifts" from the Troika that are nothing but ticking time bombs. The man is a wolf in sheep’s clothing. Our country is being sold down the Rhine for morsels of bread. I cannot stand to watch this continue for any longer.
Greece awaits IMF verdict in shadow of continuing protests
by Helena Smith - Guardian
Demonstrators vent anger at austerity measures as EU officials hold emergency talks over new aid package
The banner flapped in the wind for almost a week surviving the rigours of sun and sudden downpour. But as thousands of Greeks last night flooded into Constitution Square, Athens' main meeting point, protest ground and central piazza, the fading slogan summed up the mood of the nation at the centre of Europe's debt crisis. "We want our life, we want our happiness, we want our dignity," it declared. "So out with the thieves and out with the IMF."
A year after it was forced to accept the biggest bailout in western history a new and fearless spirit is stalking Greece, clogging its city centres, bringing traffic to a standstill and putting authorities on alert. In Athens, the spirit takes hold just before the sun has set. It is then that Greeks, young and old, married and single, employed and unemployed flood the square in a wave of protest against the austerity and recession that has brought their country to the brink of despondency and despair.
"Openly we say that we have been inspired by the demonstrators in Spain," said Simos Adamopoulos, an organiser who has spent three nights sleeping in a tent in the square. "Our motto is 'the battle that is never waged is never won.' We will stay here, and in squares up and down the country for as long as it takes."
While even protestors admit their endgame remains unclear, their motivation beyond the realms of party or political creed has surprised even the most cynical. As in Spain the demonstrators – estimated in Athens alone to have exceeded 50,000 on Sunday – have been lured into action by Facebook. Motivated by a peaceful desire to vent their spleen, they have turned up at rallies with pots and pans rather than the more lethal Molotov cocktail preferred by violence-prone youngsters.
"But," says Adamopoulos, "we're also really disgusted with the system, with the political establishment, with all those crooks and thieves. As we've got poorer they've got richer and that you could say is also spurring us."
Last night, on the sixth day of protest, the smouldering rage looked poised to intensify as Greece's international creditors applied pressure to it's squabbling political leaders to come to consensus over the need for yet more belt-tightening measures. "If consensus is possible in Portugal and Ireland, how come it is not in Greece," asked Olli Rehn, the European Commissioner for Economic Affairs. "This is not a matter of political games but national destiny."
Political agreement over additional spending cuts – and what will amount to one of the biggest ever privatisation programmes – is now seen as key to the EU and IMF throwing Athens a second financial lifeline.
On Monday, the main opposition conservative leader Antonis Samaras reiterated he would refuse to throw his weight behind the "memorandum" – outlining the terms of the bailout – until taxes were drastically reduced to kick start the recession-hit economy and spur growth.
Barely 12 months after securing €110bn worth of emergency loans to prop-up its cash-strapped economy, Athens recently accepted that it will be unable to return to capital markets to service its borrowing needs – a condition of the original rescue package – any time soon. Greeks face an estimated €60bn in maturing debt in 2012 and 2013.
This week EU and IMF officials, inspecting the country's public finances, are expected to deliver an excoriating verdict on its inability to meet budget deficit targets and bring the money-sapping public sector under control. Amid persistent speculation that Greece is headed for sovereign default, senior EU officials held unannounced emergency talks with the Greek government over the weekend.
Concerns over the looming credit crunch were heightened last week when the IMF warned that it would withhold the next instalment of aid – due in June and at €12bn (£10bn) crucial for payment of pensions and civil servants wages – unless the EU guaranteed Athens' funding needs for the year ahead.
A new aid package, expected to be worth €65bn, was believed to be the focus of behind-the-scenes talks on Tuesday, with EU sources saying it could involve a mixture of collateralised loans from the EU and IMF, additional revenue measures and unprecedented outside supervision of Greece's privatisation process. A step that is bound to further stoke up tensions among the nation at the eye of the storm of Europe's worsening debt crisis.
Greece set for severe bail-out conditions
by Peter Spiegel, Quentin Peel and Ralph Atkins - Financial Times
European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens. People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures.
Officials hope that as much as half of the €60bn-€70bn ($86bn-$100bn) in new financing needed by Athens until the end of 2013 could be accounted for without new loans. Under a plan advocated by some, much of that would be covered by the sale of state assets and the change in repayment terms for private debtholders. Eurozone countries and the International Monetary Fund would then need to lend an additional €30bn-€35bn on top of the €110bn already promised as part of the bail-out programme agreed last year.
Officials warned, however, that almost every element of the new package faced significant opposition from at least one of the governments and institutions involved in the current negotiations and a deal could still unravel. In the latest setback, the Greek government failed on Friday to win cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.
In addition, the European Central Bank remains opposed to any restructuring of Greek debt that could be considered a "credit event" – a change in terms that could technically be ruled a default. One senior European official involved in the talks, however, said ECB objections could be overcome if the rescheduling was structured properly.
Despite the hurdles, pressure is building to have a deal done within three weeks because of an IMF threat to withhold its portion of June’s €12bn bail-out payment unless Athens can show it can meet all its financing requirements for the next 12 months.
Officials think Greece will be unable to return to the financial markets to raise money on its own in March – as originally planned in the current €110bn package – meaning that the IMF is now forbidden from distributing any additional cash. Without the IMF funds, eurozone governments would either be forced to fill the gap or Athens could default. To bring the IMF back in, the new deal must be reached by a scheduled meeting of EU finance ministers on June 20.
Muddle along for now, but Greek default inevitable
by John Plender - Financial Times
As European policymakers inch their painful way towards another stopgap bail-out for Greece, a high-level debate is taking place on the nature of the country’s plight. In one corner is Otmar Issing, the respected former chief economist of the European Central Bank, who roundly declares that Greece is insolvent and will never pay its debts. In the other sits Lorenzo Bini Smaghi, a board member of the ECB, who told the Financial Times that the country’s balance sheet was far from being a wreck.
With Greece’s debt potentially heading towards 180 per cent of gross domestic product, Mr Bini Smaghi’s position might seem Panglossian in the extreme. But before dismissing the case out of hand, it is worth taking a careful look at the arguments advanced by those who are adamantly opposed to debt restructuring. There is, after all, no watertight definition of the solvency of a sovereign debtor. And on one point Mr Bini Smaghi is right. When a country has been as badly run as Greece, the turnround potential is large.
This is particularly true of the bloated and wasteful public sector, where there is a lot of room for productivity improvement and for a large-scale privatisation programme that could make a big contribution to debt reduction. Reform of the woefully inadequate and historically corrupt tax collection system also has the potential to make a big budgetary impact. An inefficient private sector, which on some estimates has lost more than 20 per cent in wage and price competitiveness during the past decade, likewise holds out great potential for productivity enhancement.
The reform programme imposed by the International Monetary Fund in support of the European bail-out is intended to realise this potential, which is in itself a worthy goal regardless of Greece’s debt position. The snag lies in the balance of the programme and in the execution. In effect, Greece is being asked to cope with the IMF’s traditional dose of painful budget adjustment, but without the help of currency devaluation or debt restructuring. Putting so much of the burden on to fiscal policy makes great demands on the population, which is enduring a deep recession. This erodes the tax base, which in turn exacerbates the debt-to-GDP numbers.
Meanwhile, the workforce is being required to endure wage deflation – internal devaluation in the jargon – that will have to be savage if competitiveness is to be restored. On top of this, European politicians are discussing the need to pass operational control of the privatisation programme to an external agent along the lines of the Treuhandanstalt after German unification. Also under discussion is external involvement in handling tax collection.
With protesters out in force in streets all across the country at a relatively early stage in this austerity process, it seems to me unlikely that Greeks will tolerate such heavy erosions of sovereignty and inconceivable that Greece will be able to deliver the requisite budget adjustment. Many businesses have shut up shop and left the country. With Greek 10-year government debt yielding more than 15 per cent – miles above any realistic view of the potential growth rate of the economy – the markets are saying default is inevitable.
I think the markets are right. And while the ECB is ferociously opposed to any talk of debt restructuring, the recapitalisation of its own balance sheet has been interpreted as implicit recognition of the likelihood of defaults. But we are where we are. Given the extreme vulnerability of the European banking system, Jean-Claude Trichet, ECB president, is justified in resisting debt restructuring now. The contagious impact on the rest of southern Europe and Ireland would, as he has said, be all too similar to the aftermath of the Lehman collapse.
So there is little option for the moment but to play for time by continuing to muddle through. This means plugging the immediate funding gap with a mixture of official funds and privatisation receipts, while rolling over debt held by the Greek banking system and eschewing any attempt to impose a bail-in of the foreign private sector creditors – notably the German and French banks – who contributed so royally to this mess.
If a package is agreed in June, which seems probable, the challenge will be to bring Greece to a primary budget surplus where revenue exceeds costs before interest payments. At that point, it would be sensible for Greece to bow out of the monetary union and take advantage of currency devaluation. For that to work, though, European banks would need in the interim to have bolstered their capital. And the execution risks are phenomenal. This is policymaking on a wing and a prayer.
Greece Prepares New Austerity Package As Opposition Mounts
by Alkman Granitsas and Terrence Roth - Dow Jones Newswires
Greece's government Monday stepped up preparations for billions of euros worth of new spending cuts and tax hikes that it will unveil in the next few days, even as widespread public opposition to the new measures continued to mount in the streets of Athens.
In a series of meetings this week, Prime Minister George Papandreou is due to speak with cabinet members and Socialist deputies to hammer out details of the new measures--as well as forestall rumbling discontent within the ranks of the ruling party. The talks come as Greece closes in on a final agreement with a visiting troika of European and International Monetary Fund officials that have spent the last month in Athens deciding whether the country should receive the next tranche of a EUR110 billion bailout agreed last year. "The talks with the troika appear to be very close to a conclusion," a Greek government official said. "I think we are finally closing one of the most difficult months Greece has faced."
The measures, which will total almost EUR29 billion, are aimed at narrowing Greece's budget deficit from 10.5% of gross domestic product last year, to below 1% by 2015. Alongside those measures, Greece has also promised to kick-start a much-delayed privatization plan that aims to raise some EUR50 billion over the next five years to narrow the country's staggering debt burden, now hovering around 150% of GDP.
In May last year, Greece became the first eurozone country since the launch of the common currency in 2000 to receive an extraordinary loan from its European partners and the IMF in exchange for steps to fix its public finances and overhaul its hidebound economy. But last year's bailout agreement also foresaw Greece being able to begin borrowing in capital markets this year. So far, Athens' attempts to win back global investors have failed. The now largely notional interest rate Greece must pay for two-year bonds has soared to a crippling 24%, and Greece is now asking for an additional EUR60 billion in aid for the next two years.
In the past few days, the IMF has warned that unless Greece's European partners stump-up additional aid to cover that looming financing gap, it will not lend money to Greece on its own. Other European leaders have been reluctant to do so, fearing a backlash from resentful taxpayers elsewhere in the 17-country euro zone. The matter has been further complicated by the fact that many market-watchers- -and some European governments-- now believe that some form of debt restructuring is inevitable and that Greece's debt burden is unsustainable.
The ECB, which is opposed to any debt restructuring, says such a move will cause a domino effect on other indebted European countries. At the same time, European officials are groping with the tricky task of easing the repayment schedule on Greece's debts, without provoking major credit rating agencies to declare Greece in default and bringing about a collapse in the Greek banking system. Even before the new measures are due to be announced, opposition has been rising, with the country's two major umbrella unions--and many of its smaller unions--planning strikes to oppose the new austerity package and the sell-off of state assets.
On the streets of Athens Monday, thousands of demonstrators gathered for a sixth day running outside the Greek parliament in a mass protest modeled on Spain's "Los Indignados" movement, which has occupied Madrid's central square for weeks. Antonis Papaioannou, a 20-year old student studying mechanical engineering in Athens, said that the austerity measures have hit education. In the past year, spending cuts have led to power outages at his college, walkouts by professors that have not been paid, and even shortages of printing paper for student computers.
"I'm indignant because all I see from the government and troika is how they are trying to squeeze the Greek people dry without spending any money on education," he said. "The Greek government represents big capital, not the Greek people." On Sunday, some 30,000 protesters turned out to join the movement, while a small tent city of several dozen demonstrators have since set up a permanent protest in Athens' central square.
Meanwhile, efforts to get broad political consensus behind reforms, also stipluated by the EU, have failed. Talks last Friday between Prime Minister George Papandreou and opposition party leaders ended without agreement, while Antonis Samaras, head of the main opposition New Democracy party, again rejected the government's austerity program Monday. In a troubling sign for the ruling Socialists, the New Democracy party has now taken a narrow lead over the governing party for the first time in three years, a public opinion poll published in the Eleftheros Typos newspaper showed Sunday.
Intolerable choices for the eurozone
by Martin Wolf - Financial Times
The eurozone, as designed, has failed. It was based on a set of principles that have proved unworkable at the first contact with a financial and fiscal crisis. It has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution. This is what is at stake.
The eurozone was supposed to be an updated version of the classical gold standard. Countries in external deficit receive private financing from abroad. If such financing dries up, economic activity shrinks. Unemployment then drives down wages and prices, causing an "internal devaluation". In the long run, this should deliver financeable balances in the external payments and fiscal accounts, though only after many years of pain. In the eurozone, however, much of this borrowing flows via banks. When the crisis comes, liquidity-starved banking sectors start to collapse. Credit-constrained governments can do little, or nothing, to prevent that from happening. This, then, is a gold standard on financial sector steroids.
The role of banks is central. Almost all of the money in a contemporary economy consists of the liabilities of financial institutions. In the eurozone, for example, currency in circulation is just 9 per cent of broad money (M3). If this is a true currency union, a deposit in any eurozone bank must be the equivalent of a deposit in any other bank. But what happens if the banks in a given country are on the verge of collapse? The answer is that this presumption of equal value no longer holds. A euro in a Greek bank is today no longer the same as a euro in a German bank. In this situation, there is not only the risk of a run on a bank but also the risk of a run on a national banking system. This is, of course, what the federal government has prevented in the US.
At last month’s Munich economic summit, Hans-Werner Sinn, president of the Ifo Institute for Economic Research, brilliantly elucidated the implications of the response to this threat of the European System of Central Banks (ESCB). The latter has acted as lender of last resort to troubled banks. But, because these banks belonged to countries with external deficits, the ESCB has been indirectly financing those deficits, too. Moreover, because national central banks have lent against discounted public debt, they have been financing their governments. Let us call a spade a spade: this is central bank finance of the state.
The ESCB’s finance flows via the euro system’s real-time settlement system ("target-2"). Huge asset and liability positions have now emerged among the national central banks, with the Bundesbank the dominant creditor (see chart). Indeed, Prof Sinn notes the symmetry between the current account deficits of Greece, Ireland, Portugal and Spain and the cumulative claims of the Bundesbank upon other central banks since 2008 (when the private finance of weaker economies dried up).
Government insolvencies would now also threaten the solvency of debtor country central banks. This would then impose large losses on creditor country central banks, which national taxpayers would have to make good. This would be a fiscal transfer by the back door. Indeed, that this is likely to happen is quite clear from the striking interview with Lorenzo Bini Smaghi, a member of the board of the European Central Bank, in the FT of May 29 2011.
Prof Sinn makes three other points. First, this backdoor way of financing debtor countries cannot continue for very long. By shifting so much of the eurozone’s money creation towards indirect finance of deficit countries, the system has had to withdraw credit from commercial banks in creditor countries. Within two years, he states, the latter will have negative credit positions with their national central banks – in other words, be owed money by them.
For this reason, these operations will then have to cease. Second, the only way to stop them, without a crisis, is for solvent governments to take over what are, in essence, fiscal operations. Yet, third, when one adds the sums owed by national central banks to the debts of national governments, totals are now frighteningly high (see chart). The only way out is to return to a situation in which the private sector finances both the banks and the governments. But this will take many years, if it can be done with today’s huge debt levels at all.
Debt restructuring looks inevitable. Yet it is also easy to see why it would be a nightmare, particularly if, as Mr Bini Smaghi insists, the ECB would refuse to lend against the debt of defaulting states. In the absence of ECB support, banks would collapse. Governments would surely have to freeze bank accounts and redenominate debt in a new currency. A run from the public and private debts of every other fragile country would ensue. That would drive these countries towards a similar catastrophe. The eurozone would then unravel. The alternative would be a politically explosive operation to recycle fleeing outflows via public sector inflows.
Events have, in short, thoroughly falsified the premises of the original design. If that is the design the dominant members still want, they must remove some of the existing members. Managing that process is, however, nigh on impossible. If, however, they want the eurozone to work as it is, at least three changes are inescapable.
First, banking systems cannot be allowed to remain national. Banks must be backed by a common treasury or by the treasury of unimpeachably solvent member states. Second, cross-border crisis finance must be shifted from the ESCB to a sufficiently large public fund. Third, if the perils of sovereign defaults are to be avoided, as the ECB insists, finance of weak countries must be taken out of the market for years, perhaps even a decade. Such finance must be offered on manageable conditions in terms of the cost but stiff requirements in terms of the reforms. Whether the resulting system should be called a "transfer union" is uncertain: that depends on whether borrowers pay everything back (which I doubt). But it would surely be a "support union".
The eurozone confronts a choice between two intolerable options: either default and partial dissolution or open-ended official support. The existence of this choice proves that an enduring union will at the very least need deeper financial integration and greater fiscal support than was originally envisaged. How will the politics of these choices now play out? I truly have no idea. I wonder whether anybody does.
European integration is unravelling
by Peter Spiegel - Financial Times
Once a decade, a crisis divides the European Union and stalls the post-war effort to bring the continent closer together. Veterans of these battles insist that, whether it comes from overseas (Iraq) or at home (rejection of an EU treaty), the crisis eventually passes and the European project is revived.
This time could be different. In the past month, the integration project has not just stalled but now seems to have been thrown into reverse. Both the euro and Europe’s visa-free travel zone, the two most visible achievements of postwar integration, are under such serious assault that officials openly speculate about their demise. Greece’s European commissioner last week became the first top Greek official to suggest the drachma could return. French police and Danish customs officials are returning to their national borders to check incoming overland traffic, and Brussels is to reconsider the rules of Europe’s Schengen borderless zone.
This sudden unravelling reflects a strong shift in the political winds. European voters, who a year ago seemed grudgingly to accept austerity measures and bail-outs, are no longer acquiescing. In the past six months governments have fallen in Portugal and Ireland, while populist anti-EU parties made big gains in Finland and the Netherlands. Parliamentarians are revolting in Berlin, students are demonstrating in Barcelona and trade unionists are blockading the headquarters of state-owned companies in Athens.
The question Europe must answer is whether this is a temporary flare-up or a fundamental shift in the way politics is played. In the US, similar populist demands from the Tea Party have led to an overhaul of the Republican agenda and reshaped the party’s presidential race. Thus far, Europe has responded much more slowly. José Manuel Barroso, president of the European commission, last month called on national governments to resist "populist temptation" and sidestep demands of anti-European voices.
Yet it may be neither wise nor possible to marginalise these groups. The Netherlands, which has tussled with an increasingly mainstream anti-globalisation camp since the assassination of populist leader Pim Fortuyn nearly a decade ago, illustrates the dangers of ignoring the growing chorus. The Netherlands has served as the California of Europe, setting trends for the continent from the Enlightenment ideas of Baruch Spinoza to global trade spurred by 17th century Dutch maritime power, and the tolerance and openness symbolised by Amsterdam’s coffee shops and red-light district.
It has also been at the very core of Europe’s postwar integration, a founding member of every major institution from Nato to the euro itself. But in recent months the Netherlands has arguably become the most obstructionist country in Brussels’ fights over the EU’s future. The Dutch government ardently opposed giving the eurozone’s €440bn bail-out fund more powers to help the EU’s debt-laden periphery. It is increasingly isolated in blocking EU enlargement to the western Balkans. And it has pressed Brussels to overhaul asylum and migration policies amidst a flood of north African refugees on Europe’s shores.
Dutch officials strongly object to being labelled obstructionist. But it is no coincidence that the minority Dutch government last year became the first eurozone country since the financial crisis began to rely on an openly anti-EU party – the Freedom party of anti-Muslim populist Geert Wilders – to stay in power. As a result, the Dutch government has not only ignored Mr Barroso’s advice to shun populist sentiments; it is warning Brussels to pay more attention to people’s rising anger and sense of economic insecurity, and to take their fears more seriously.
"The most stupid thing is to neglect this and tell these people they are behind the curve, that they don’t understand what’s going on in the world," says Ben Knapen, the Dutch EU affairs minister. It is a lesson other eurozone governments should heed. Finnish leaders were blindsided this spring when the anti-EU True Finns party almost won national elections. Marine Le Pen, the new leader of France’s far-right National Front, has added anti-EU rhetoric to her party’s traditional anti-immigrant sentiments, and is gaining support.
But is acknowledging populist concerns enough to win people over? The Dutch strategy has yet to show electoral dividends. Mr Wilders made major gains in March regional elections, and the governing coalition failed to secure a majority in the Dutch senate last week. Instead, we may be witnessing a generational change in European political dynamics. Traditional left-right divisions have narrowed. No mainstream social democrat now advocates centralised economic planning, just as no conservative candidate seriously questions the underpinning of the welfare state.
In its place, we are seeing a new division, between globalisers and localisers. The urban elites on both the left (intellectuals, liberal internationalists) and the right (free traders, global business leaders) face a challenge to their postwar consensus from a new group of revanchists. This political force also comes from both the left (trade unionists, working-class whites) and the right (rural nationalists, far-right xenophobes). More importantly, it may spell a new, unprecedented challenge to the European project.
Mobius Says Fresh Financial Crisis Around Corner Amid Volatile Derivatives
by Kana Nishizawa - Bloomberg
Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.
"There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. "Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes."
The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.
The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman’s downfall and the market bottom on March 9, 2009.
"With every crisis comes great opportunity," said Mobius. When markets are crashing, "that’s when we’re going to be able to invest and do a good job," he said. The freezing of global credit markets caused governments from Washington to Beijing to London to pump more than $3 trillion into the financial system to shore up the global economy. The MSCI AC World gauge surged 99 percent from its March 2009 low through May 27.
'Too Big to Fail'
The largest U.S. banks have grown larger since the financial crisis, and the number of "too-big-to-fail" banks will increase by 40 percent over the next 15 years, according to data compiled by Bloomberg. Separately, higher capital requirements and greater supervision should be imposed on institutions deemed "too important to fail" to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.
"Are the banks bigger than they were before? They’re bigger," Mobius said. "Too big to fail." The money manager had earlier said at the same event that Africa has an "incredible" investment potential and that he has stakes in Nigerian banks. "These banks are doing very well and are much better regulated than they were in the past," Mobius said, without disclosing which lenders he holds.
Banks account for five of the eight stocks in the MSCI Nigeria Index. Guaranty Trust Bank Plc, the country’s No. 2 lender by market value, surged 31 percent in the six months through May 27, according to data compiled by Bloomberg. Shares of Access Bank Nigeria Plc recorded the second-biggest decline on the gauge in the period, the data show.
U.S. Has Binged. Soon It’ll Be Time to Pay the Tab.
by Gretchen Morgenson - New York Times
Say this about all the bickering over the federal debt ceiling: at least people are talking openly about our nation’s growing debt load. This $14.3 trillion issue is front and center — exactly where it should be.
Into the fray comes a thoughtful new paper by Joseph E. Gagnon, a senior fellow at the Peterson Institute for International Economics, which studies economic policy. Written with Marc Hinterschweiger, a research analyst there, the report states plainly: "That government debt will grow to dangerous and unsustainable levels in most advanced and many emerging economies over the next 25 years — if there are no changes in current tax rates or government benefit programs in retirement and health care — is virtually beyond dispute."
The report then lays out a range of outcomes, some merely unsettling, others downright scary, that face us as a nation if we continue down the big-spending path we are on.
The report, "The Global Outlook for Government Debt Over the Next 25 Years: Implications for the Economy and Public Policy," arrives when our debt as a percentage of gross domestic product is around 65 percent and rising fast. Much of the recent increase, up from 43 percent in 2007, is the result of the panic of 2008 and the ensuing recession, when the government stepped in to mitigate the damage.
The authors do not suggest that policy makers should hurry to raise taxes or cut spending right now. They acknowledge that the economic recovery is still fragile and propose that lawmakers wait to implement budget cuts currently under discussion until 2013 to 2015. Additional cuts would ideally go into effect in 2016.
What needs to be done now is to design a long-term plan to reduce fiscal deficits in the future. The authors contend that such a program would "reassure the markets, keep interest rates low and instill greater confidence and certainty about future tax and spending policies, thereby encouraging businesses to commit their resources to job-creating investment projects."
An intriguing aspect of their analysis is how it views the rising tide of debt around the world from a historical perspective. For so many countries to be groaning under so much debt at the same time is unusual, the authors say. More typical are the somewhat contained debt crises, like in Latin America in the 1980s or in Russia in 1998. While both of those episodes reverberated beyond the countries from which they sprang, today’s debt problems are far more widespread. And, as a result, more worrisome.
The simultaneous buildup of very large public deficits and debt positions in virtually all of the advanced high-income countries "is a new element at work in the global economy," the report says.
"It is unique in peacetime for so many countries to have so much debt," Mr. Gagnon said in an interview last week. But he added that global capital markets, and the access to lenders that these markets provide, probably mute the ill effects of this simultaneous borrowing binge.
The paper assesses the potential consequences of a more pervasive debt crisis, one involving a number of countries in the same perilous position at the same time. The authors also consider the impact that future interest rate increases may have on these debt loads and provide separate estimates of how debt levels would grow under differing circumstances. They incorporate into these estimates expected growth rates in various regions as well as rising health care costs and retirement obligations. The analysis uses figures from the International Monetary Fund and the Organization for Economic Co-operation and Development.
Some of the results are surprising. For example, the study rebuts the commonly held notion that the outlook for Europe is worse than for the United States, as far as debt levels and obligations are concerned. This is because some euro zone countries have already begun to deal with their fiscal problems, Mr. Gagnon explained. "They’ve made some changes to long-run pensions, such as raising retirement ages," he said, "and they’ve already made spending cuts and tax increases."
Another surprise in the study: emerging markets are in much better shape, Mr. Gagnon said, than he had anticipated when he began the project.
Now, to the numbers, all of which are based on the status quo in tax rates and government obligations relating to health care and retirement.
You sitting down?
Under a best-case outlook, according to the authors, the nation’s net federal debt will rise to 155 percent of gross domestic product in 2035, more than double the current levels. (Net debt is defined as the government’s financial liabilities minus its financial assets.)
Under a more pessimistic view on growth rates, that load ratchets up to 302 percent of G.D.P. that year. As the paper notes, "debt ratios of around 200 percent of gross domestic product are at the extreme limit of what advanced economies can experience without becoming destabilized."
Estimates for the euro zone fall well below these figures. Using an optimistic outlook for growth in that region, the analysis projects Europe’s debt to rise to 72 percent of G.D.P. in 2035. Taking a dimmer view on growth brings the debt level to 155 percent of output in the euro area.
Taken over all, debt levels in the advanced economies would rise to 122 percent of G.D.P. given an upbeat outlook, or 234 percent under grimmer circumstances, the study projects. Both Japan and the United States exceed these figures in expected debt loads.
By comparison, emerging economies look positively robust. Using an optimistic projection, their debt comes in at 35 percent of G.D.P., and under more pessimistic circumstances, rises to 59 percent.
Happily, Mr. Gagnon and Mr. Hinterschweiger do not believe a Greek-style crisis is in the cards for the United States. They say that we have some time to start addressing our debt problems — five years at least. But given how our debt is growing, a fiscal crisis looms if policy makers do nothing.
"There may never be a single defining moment of crisis," the authors write, "but rather a drift into ever-higher inflation and interest rates, ever-lower growth or deeper recession, and eventually hyperinflation along with rapid currency depreciation. Most economists would view such a prospect as a progressive strangulation of a nation’s well-being."
This is straight talk on a vital topic. Let’s hope our leaders understand that living beyond our means will not be viable for a whole lot longer.
Ireland Taoiseach Enda Kenny: 'We don't need a second bail-out'
by Rupert Neate - Telegraph
The Irish Taoiseach has categorically ruled out a fresh bail-out after his cabinet colleagues raised fears that the country may struggle to borrow money in the international debt markets.
Enda Kenny said Ireland did not need to top up the €85bn (£74bn) rescue package provided by the International Monetary Fund (IMF) and European Union in 2010. "There will be no need for a second bail-out. Ireland is involved in a bail-out deal with the IMF/EU/ECB," Mr Kenny said. "The bail-out programme runs to the end of 2013 and Ireland has sufficient money in all circumstances to deal with that."
Mr Kenny's comments come after Ireland's transport minister, Leo Varadkar, said Ireland would probably be forced to go cap-in-hand to the EU and IMF for an additional loan before 2013.
Fears have been raised that Ireland may find it difficult to find buyers for its debt when it tests the money markets in late 2012 after a two-year hiatus. Michael Noonan, the Irish finance minister, said: "We won't be fully back in the markets but we hope that the NTMA [Ireland's debt management agency] will be able to raise some private funds in the market in the last quarter of next year."
However, Brian Devine, an economist with NCB Stockbrokers in Dublin, said he still believed Ireland would have to tap the EU's permanent rescue fund in 2013. "I don't see how things are going to clear sufficiently for it to be otherwise," he said.
It comes amid suggestions that Greece could receive a further €20bn bail-out to improve finances before it ventures back into the money markets. The country has already received €110bn. On Monday, Greece began preparations for the sale of national assets with the introduction of licenses for oil and gas exploration in its territorial waters. The Greek energy minister said the license could raise as much as $15bn (£9bn).
China manufacturing growth slows further
by Chris Oliver - MarketWatch
China’s manufacturing activity expanded in May at its weakest pace in three quarters, as the economy faced headwinds of high inflation and government efforts to rein in prices, according to rival surveys of companies released Wednesday.
The official China Federation of Logistics & Purchasing Managers’ Index eased to 52.0 from 52.9 in April, marking the slowest pace of growth in nine months. The result was below the median forecast of 52.2 in a Reuters survey of economists.
Meanwhile, a separate PMI published by HSBC and compiled by U.K. group Markit, showed headline activity at 51.6, easing from 51.8 in April, the slowest pace of growth in 10 months. Analysts at Credit Suisse said that the Federation’s PMI showed new orders declining at a faster pace than the slowdown in the overall reading, a sign that manufacturing activity may have already peaked in the current economic cycle. "Actual economic activity may have cooled down faster than the headline suggests," said Credit Suisse analysts
HSBC’s PMI was in line with its early reading of China’s manufacturing activity, released last week, though Wednesday results were slightly stronger. HSBC said that activity was still below the long-term average of 52.3. Readings above 50 show an expansion in manufacturing activity, while those below indicate contraction. "This is still just a moderation rather than a meltdown in growth, so there is no need to worry about an overtightening," said HSBC chief China economist Hongbin Qu in comments released with along the PMI results. Among other details in the data Wednesday, the Federation’s input-price sub-index slipped to 60.3 from 66.2, suggesting an easing in wholesale inflation.
Meanwhile, the new orders component slipped to 52.1, from 53.8 in April, according to the Federation’s PMI. Concern over high inflation has prompted China to tighten monetary policy and enact other measures meant to cool the economy. But analysts said Wednesday that the weaker growth implied in the PMIs were not likely to likely to sway the Chinese government from its current policy direction, with Credit Suisse analysts saying that "Beijing is fine to see a softening in growth."
Analysts said the PMIs have a tendency to moderate in May after accelerating in February and April, and that this year’s decline was actually softer than the month-on-month slowdown reflected in last year’s data. On a less optimistic note, however, the reading was the weakest seen for the month of May in the seven-year history of the Federation’s PMI.
Bank of America-Merrill Lynch said Wednesday, ahead of the economic releases, that investors were getting overly worried about a hard landing. Merrill analyst Ting Lu sees a more benign situation unfolding, as Beijing seeks to stabilize housing and consumer prices ahead of a power transfer at the top political level slated to begin later this year. He said a major slowdown had a "low probability" and that if equity prices were to decline in the coming months, it should be viewed as an overreaction and would represent a buying opportunity. China is more or less on hold with its current tight-credit policy approach, Lu said, adding he believes Beijing has "no plan" to escalate the tightening.
Australian economy suffers worst GDP decline in 20 years
by Amy Coopes - AFP
Australia's economy was hit by its heaviest contraction for 20 years in the first three months of 2011, according to data, shrinking 1.2 percent on-quarter after wild weather rocked mining and farms. The Australian Bureau of Statistics said gross domestic product saw its largest quarterly fall since the March quarter of 1991, when the nation was last in the grip of recession, as the weather hammered key mining exports.
"Flooding which began in late December 2010 combined with cyclones in both Queensland and Western Australia have had a significant impact on the March quarter activity," the ABS said on Wednesday.
However, the figures, which also showed a 1.0 percent increase in growth from a year earlier, beat market forecasts of a 1.4 percent fall in the quarter and on-year growth of 0.7 percent.
The fall in net exports detracted 2.4 percentage points from growth, which Treasurer Wayne Swan described as the single largest hit to exports since records began. The volume of shipments fell 8.7 percent, Swan added, "the largest quarterly fall in 37 years."
Rallying commodity prices helped stave off more dire outcomes, driving the terms of trade 5.8 percent higher than the previous quarter and boosting gross national income by 0.3 percent. It is the first contraction in Australia's growth since the depths of the global financial crisis, when GDP fell 0.9 percent in the fourth quarter of 2008 before rebounding on strong mining exports to Asia, dodging recession. The Australian dollar surged to US$1.0722 from US$1.0674 after the data was released.
Swan said the result was "unsurprising" in light of the unprecedented natural disasters. The floods and cyclones in both northern and western Australia had cost $12 billion in lost production, $6.7 billion of which Swan said was in the March quarter, chiefly in the key coal mining industry. Australia is home to the world's largest coal export port and sends millions of tonnes of the fuel annually to Asian steelmakers and power companies, with total 2010 shipments worth Aus$43 billion.
Separate data released Tuesday on Australia's account deficit showed a 27 percent slump in coal exports between the December and March quarters, with mines swamped and vital rail and port infrastructure damaged or destroyed. Steelmaking coal shipments plunged $1.8 billion or 35 percent in the three months to March, while thermal coal, burned to produce power, lost 39 percent or $434 million.
But Swan said the calamities were just a blip in Australia's broadly resilient growth, with the nation "just at the beginning" of investments worth $430 billion, mostly in the key resources sector. "Despite the magnitude of the disasters that we've seen in the March quarter they have not altered the strong underlying fundamentals of the Australian economy," said Swan. "We should not let the adversity obscure the strong fundamentals that we have in our economy and the strong prospects we have for the future."
Analysts backed Swan's optimism, tipping a bounce in the June quarter due to resilient domestic demand and private consumption and recovery in the disaster-hit north. "You actually had domestic demand up 1.3 percent, in stark contrast to the headline number, which was weighed down enormously by the disruptions to exporters," said Westpac economist Huw McKay. "The economy is relatively strong, backed up by a very tight labour market, and this is a temporary disruption." The government last month forecast growth of 2.25 percent in 2010-11, recovering strongly to 4.0 percent the following year.
Japan Faces Debt Downgrade as Jobless Rise
by Keiko Ujikane and Aki Ito - Bloomberg
Japan’s debt rating was put on review for a downgrade by Moody’s Investors Service, adding to Prime Minister Naoto Kan’s fiscal challenges after an increase in joblessness and smaller-than-forecast gain in factory production.
Faltering growth prospects and "a weak policy response" may hinder government efforts to cut the nation’s debt burden, said Moody’s, which had put Japan’s Aa2 rating on negative outlook in February. Government reports showed separately that output rose 1 percent in April, half the median estimate in a Bloomberg News survey, while unemployment rose to 4.7 percent from 4.6 percent.
Kan, facing a no-confidence motion in parliament, said today he won’t step down, signaling continued political infighting that may hamper legislation to finance long-term reconstruction after the March earthquake and tsunami. Japan, which has the world’s biggest public debt, saw its currency retreat for a second day against the dollar and bonds fall.
"This means we’re one step closer to a downgrade, and it reflects how we haven’t seen any political progress on fixing public finances," said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. "There are still plenty of people in the JGB market to keep buying, so it’s not like we’re going to see a sudden spike in yields. But this will put upward pressure on yields through an added risk premium."
Downgrade Possibility
Most credit rating reviews result in a downgrade, and Japan’s will likely be completed in three months, Thomas Byrne, senior vice president at Moody’s, told reporters in Tokyo today. He also said that the possibility of more than a one-notch rating reduction was "low."
Japanese government bonds fell for the first time in three sessions, with benchmark 10-year securities yielding 1.15 percent as of 3:10 p.m. The yen weakened to 81.45 per dollar. The Nikkei 225 (NKY) Stock Average gained 2 percent to 9,693.73 on manufacturers’ forecasts that production will accelerate. The companies said they plan to boost output 8 percent this month and 7.7 percent in June, according to today’s report.
The Moody’s step comes four days after Fitch Ratings lowered the outlook to negative on its AA- long-term local currency rating for Japan. Standard & Poor’s cut its outlook on the AA- grade in April after lowering the rating in January. The current grade at Moody’s, the third-highest, is one step higher than S&P and Fitch.
Deficit Reduction
Moody’s said it’s concerned at the government’s ability to "fashion and achieve a credible deficit reduction target." Japan’s government debt is projected to reach 219 percent of gross domestic product next year, the Organization for Economic Cooperation and Development estimates, a burden that may be exacerbated by efforts to rebuild the nation after a record March 11 temblor. Kan, facing declining approval ratings and a recession, hasn’t indicated how he plans to cut deficits in an economy plagued by deflation and a shrinking population.
"Rating agencies are very concerned whether fiscal discipline will be maintained or not," said Mitsumaru Kumagai, chief economist at Daiwa Institute of Research in Tokyo. "The government should raise the sales tax by around 2015. Otherwise, Japan’s public debt will likely become unsustainable." Kan’s approval rating stood at 28 percent, according to a survey taken jointly by the Nikkei newspaper and TV Tokyo on May 27-29. Forty-six percent of the respondents said they oppose a tax increase as a means of paying for quake reconstruction. Kan has said raising the 5 percent consumption tax can pare debt.
Quake Disruptions
The gain in industrial output, after a record decline in March, missed the 2 percent median estimate of 30 economists surveyed by Bloomberg News. The jobless rate advanced from 4.6 percent as payrolls fell, a separate report showed.
Disruptions caused by the quake have had an impact beyond Japan, with South Korea reporting today that industrial output expanded at the slowest pace in seven months in April. South Korea’s industrial output climbed a less-than- expected 6.9 percent from a year earlier last month and in Singapore, production fell a sharper-than-expected 9.5 percent from a year earlier in April.
Japan’s economy shrank at an annual 3.7 percent pace in the first quarter and analysts surveyed by Bloomberg News expect a slump of 2.5 percent in the three months ending June, extending a contraction that began in the final three months of 2010.
Wages Fall
Wages fell 1.4 percent in April from a year earlier, a separate government report showed today, the biggest drop since December 2009. The job-to-applicants ratio deteriorated to 0.61 from 0.63, an indication that there are 61 positions available for every 100 applicants. Overseas sales decreased 12.5 percent in April from a year earlier, the biggest drop since October 2009, evidence that companies are still struggling to produce and ship goods to meet overseas demand. The value of automobile exports plunged to its second lowest level since data began in 1979, the Finance Ministry said.
Nissan Motor Co. Chief Executive Officer Carlos Ghosn said on May 17 that the automaker plans to invest 3 billion yen to reinforce the foundation of its most heavily damaged domestic factory after the earthquake in northern Japan disrupted output. Rival Honda Motor Co., Japan’s third-largest automaker, said on May 17 that it will return to normal production before the end of the year. Toyota Motor Corp. expects production to normalize by November or December.
'Inexorable' Debt Increase
Kan plans to come up with second extra budget for reconstruction after parliament approved a 4 trillion yen ($50 billion) package this month. He needs the cooperation of opposition politicians to get the budget enacted. The government in March estimated that damage from the disaster will swell to as high as 25 trillion yen.
Moody’s said Japan will spend about 2 percent of GDP for reconstruction, excluding costs that arise from helping Tokyo Electric Power Co. pay for the Fukushima nuclear accident. "The inexorable rise in government debt suggests that actions are urgently needed to regain a path of fiscal consolidation," Moody’s said. "The government’s large refinancing needs introduce a susceptibility to a credit market tipping point, which could lead to an abrupt fall in JGB prices and a rise in yields."
Canada's crude politics on oil sands
by Martin Lukacs - Guardian
A certain powerful North American country has been brazenly meddling in Europe's affairs, bullying and twisting arms to advance a corporate agenda on the most pressing environmental issue of our time. A phalanx of its lobbyists has descended on European capitals to covertly scheme with oil companies and menace EU parliamentarians who would dare address climate change.
It's not who you might think … but Canada. If any illusions remained about this country's behaviour abroad, they should be put to rest. Newly released government memos have exposed a secret war that Canada is waging in Europe to kill clean energy policies and ensure no market closes to the dirtiest crude in the world – the tar sands of Alberta.
The decline of easily accessible oil has set in motion not a shift to renewable energy but a frantic race for the filthiest, hardest-to-extract and most geographically remote fossil fuels. The prize resource are the tar sands: a sludgy bitumen found in northern Alberta whose conversion to oil requires a uniquely destructive, energy-intensive and costly process. To extract the vast deposit – trailing only Saudi Arabia's in reserves – the industry is stripmining a pristine Boreal forest the size of England, guzzling one of the planet's largest watersheds, poisoning downstream native communities, and emitting three times more carbon than conventional oil production. The planetary scars from the largest industrial project in history can already be seen from outer space.
The dream of the tar barons scouring new frontiers should be familiar to the British: that the sun never sets on their pipeline empire. Canada's laboratory has provided an environmentally disastrous but extremely profitable model – which they now want to export everywhere: Congo's rainforests, Russia's remote basins, the US desert, Jordan, Venezuela, Madagascar and even Trinidad and Tobago.
But the road to these spoils leads through Europe. While the continent doesn't import any Canadian crude, the oil giants and their government backers realise a European fuel quality directive that would slap a dirty label on tar sands to promote cleaner transport fuels could set the global standard – and effectively shut the door on Alberta's exports. "Our fear is that if something happens in the EU and it is spread in other countries … we could have roughly one third of the world's population subscribing to regulation or legislation that mitigates against our oilsands," a provincial minister in Alberta said last year. It is also sure to raise the heat on European oil companies to withdraw their enormous and growing investment in tar sands industries.
Hence the public relations blitzkrieg, conducted since 2009 through missions in key cities: London, Paris, Brussels, Oslo, Berlin and the Hague. Headquartered in England, an "oil sands team" run by Canada's foreign ministry has mounted the offensive. They've monitored green groups; furiously lobbied against the fuel quality directive; coordinated junkets to Alberta for EU parliamentarians; and targeted international journalists in an attempt to improve media coverage. The British government appears to have succumbed to the campaign and is working to block the EU from singling out the larger carbon footprint of the tar sands.
Canada's foreign team has also been getting cozy with big oil corporations they call "like-minded allies". They've held numerous secret meetings with BP, Shell, Total and Norwegian Statoil to share "intelligence" and discuss joint initiatives. The plans run to the very top: Canada's prime minister, Stephen Harper himself, met covertly with Total's CEO in Paris in June 2010, after a visit with French President Sarkozy. Total has since announced plans to pump $20bn into their Alberta projects by 2020.
Harper's Conservative party now has majority control of a government that is the most rightwing in modern Canadian history. He will eagerly execute a philosophy befitting the son of an oil executive. This means the construction of pipeline corridors – to the south through midwest US states, to the eastern seaboard, and to the west carrying crude for shipment to China and beyond – with the goal of converting Canada into a "global energy powerhouse". Output will increase five-fold to 5m barrels of dirty oil a day by 2040. The cost to the global climate is incalculable.
The good news, however, is that the Canadian government is losing the wider battle over hearts and minds. "Oil sands are posing a growing reputational problem [in Europe], with the oil sands defining the Canadian brand," states one government memo anxiously assessing the "resurgence of highly critical public campaigns" on the continent. The Keystone XL pipeline that would run through the US heartland has faced stiff resistance, and is currently under review by Secretary of State Hilary Clinton. And on the home front, the world's top political risk consultancy Eurasia has acknowledged that the opposition of scores of First Nations (indigenous peoples) to the westward "Gateway" pipeline may be insurmountable: "Native land claims scare the hell out of investors," they note.
Even Hollywood seems be pitching in: director Peter Jackson is seen apparently describing shooting the Hobbit in Alberta, with the tar sands as the set of the dark land of Mordor. The video of Jackson has been outed as a Yes Men-style hoax, but a fellowship of international and domestic protest may indeed be the best bet to topple the reign of tar sands oil-induced evil in Canada. Little else will prevent this real-life Sauron from catapulting us towards an environmental catastrophe and ever-deeper climate crisis.
Funds Revive Ag Bets as Droughts Hurt Crops
by Elizabeth Campbell - Bloomberg
Funds boosted bets on rising agricultural prices for the first time in four weeks, led by rebounds in holdings of wheat and soybeans, as extreme weather threatened to limit output as global demand increases.
Speculators raised their net-long positions in 11 U.S. farm goods by 8.9 percent to 723,658 futures and options contracts in the week ended May 24, government data compiled by Bloomberg show. The increase was the first since April 26. A broader measure of commodity holdings also advanced last week, with gold up 7.1 percent and crude oil gaining 1.9 percent.
The Standard & Poor’s GSCI Agriculture Index climbed for the second straight week as droughts lingered in China and Europe while excess moisture delayed planting in the U.S. and Canada. Last week, Goldman Sachs Group Inc. and Morgan Stanley signaled a bullish outlook for commodities, raising their forecasts for crude-oil prices by more than 20 percent.
"After the unwinding in the past few weeks, we are seeing interest come back in commodities that have strong fundamentals," said Walter "Bucky" Hellwig, who helps oversee $17 billion at BB&T Wealth Management in Birmingham, Alabama. "The planting of grains in U.S. has been affected because of weather conditions. As long as the global growth story is intact and the fundamentals remain strong, we will see interest in commodities."
Corn and silver futures have more than doubled in the past year, while wheat, cotton, sugar and gasoline are up more than 50 percent on rising demand from China to Brazil. Global food prices have risen in nine of the past 10 months, touching a record in February, according to the United Nations. The global recovery from a recession that followed the 2008 financial crisis "is gaining strength and is becoming more self-sustained," the Group of Eight leaders said May 27 after a summit in Deauville, France.
China, the world’s biggest user of commodities from cotton to zinc, will expand 9.9 percent this quarter, outpacing this year’s first two quarters, a Bloomberg survey of economists showed. In the U.S., the Thomson Reuters/University of Michigan final index of consumer sentiment rose to a three-month high of 74.3 in May from 69.8 in April. The net-long position of funds across 18 U.S. commodity futures and options jumped 7.6 percent to 1.17 million contracts in the week ended May 24, after holdings plunged 27 percent in previous three weeks, data compiled by Bloomberg from the U.S. Commodity Futures Trading Commission show.
'Little Pause'
Investors poured $702.8 million into commodity funds in the week ended May 25, the first increase in three weeks, according to EPFR Global, a Cambridge, Massachusetts-based researcher. The previous three weeks had outflows totaling $5.5 billion. "There was a little pause in the steady drumbeat of uninspiring macroeconomic data," Brad Durham, an EPFR managing director, said May 27 in a telephone interview.
Wheat prices surged 75 percent in the past year on the Chicago Board of Trade as droughts and floods limited global output. The International Grains Council on May 26 cut its estimate for world production to 667.3 million metric tons from an April forecast of 672.2 million. About 54 percent of U.S. spring wheat was planted as of May 22, below the five-year average of 89 percent, the government estimates.
Hedge funds increased bullish wagers on wheat futures and options traded in Chicago by 155 percent in the week ended May 24, the most since the week ended Dec. 7, government data show. Wheat futures for July delivery closed May 27 at $8.1975 a bushel in Chicago, up 1.6 percent for the week.
'Back On' Commodities
"The game is back on" in commodities, said Ron Lawson, a managing director at Logic Advisors, a commodity consultant in Sonoma, California. "You have a weather situation that’s bad in a lot of ways. The agriculture component of the market is pretty loaded for any kind of up move."
U.S. farmers are running out of time to plant this year’s corn crop after wet weather swamped fields from North Dakota to Ohio and may switch acres to soybeans, which can be sown until late June. Parts of the Midwest, including Illinois and Missouri, received more than double the normal amount of rainfall in the past 30 days, according to the National Weather Service.
Some relief from the tight supply may come from Russia’s decision to let its grain-export ban expire on July 1. The ban imposed in August because of a drought-hit harvest helped drive up global food costs. In India, the second-biggest wheat grower, the monsoon landed in the southern states two days early, increasing optimism that the rains will boost crops.
Speculators increased holdings in oil futures and options by 4,112 contracts to 225,677 contracts, halting a three-week slide of 79,553, or 26 percent, CFTC data show. Net-long positions in gold increased by 13,130 contracts to 198,515, after four straight weeks of declines that totaled 43,192 contracts, or 19 percent.
Not all commodity holdings increased. Net-long positions dropped in cocoa, hogs, gasoline and copper, while speculators remained bearish with a net-short position in natural gas. Managed-money funds held net-long positions in silver totaling 15,226 contracts, down for a fifth straight week and the lowest since February 2010. While silver prices are down 24 percent from a 31-year high of $49.845 an ounce on April 25, the metal has still doubled from a year ago, more than the 27 percent gain for gold.
'Catching Up'
"As a long-term investment, gold still has some catching up to do with silver," said Matt Zeman, a strategist at Kingsview Financial in Chicago. "Silver still looks iffy. Gold is a safer bet, and you’re less likely to get shook out of the market in huge swings like we’ve seen in silver." Gold futures closed at $1,537.30 an ounce on May 27 in New York, near a record of $1,577.40 reached on May 2.
"The big players like Goldman Sachs are luring people back into commodities," Zeman said. "A weaker dollar, euro-zone debt issues, and a slowing U.S. economy are going to keep a floor under gold and silver." Twenty-three of the 24 commodities tracked by the S&P GSCI index are higher than a year earlier. The weaker dollar is also boosting demand for commodities. The Dollar Index, which tracks the U.S. currency against those of six trading partners, has dropped 13 percent in the past 12 months.
"The general trend is higher for precious metals, industrial metals and agriculture," said Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which manages $14.8 billion. "When you have an improving standard of living in so many parts of the world, demand will continue to move higher."
Worst ever carbon emissions leave climate on the brink
by Fiona Harvey - Guardian
Greenhouse gas emissions increased by a record amount last year, to the highest carbon output in history, putting hopes of holding global warming to safe levels all but out of reach, according to unpublished estimates from the International Energy Agency.
The shock rise means the goal of preventing a temperature rise of more than 2 degrees Celsius – which scientists say is the threshold for potentially "dangerous climate change" – is likely to be just "a nice Utopia", according to Fatih Birol, chief economist of the IEA. It also shows the most serious global recession for 80 years has had only a minimal effect on emissions, contrary to some predictions.
Last year, a record 30.6 gigatonnes of carbon dioxide poured into the atmosphere, mainly from burning fossil fuel – a rise of 1.6Gt on 2009, according to estimates from the IEA regarded as the gold standard for emissions data. "I am very worried. This is the worst news on emissions," Birol told the Guardian. "It is becoming extremely challenging to remain below 2 degrees. The prospect is getting bleaker. That is what the numbers say."
Professor Lord Stern of the London School of Economics, the author of the influential Stern Report into the economics of climate change for the Treasury in 2006, warned that if the pattern continued, the results would be dire. "These figures indicate that [emissions] are now close to being back on a 'business as usual' path. According to the [Intergovernmental Panel on Climate Change's] projections, such a path ... would mean around a 50% chance of a rise in global average temperature of more than 4C by 2100," he said.
"Such warming would disrupt the lives and livelihoods of hundreds of millions of people across the planet, leading to widespread mass migration and conflict. That is a risk any sane person would seek to drastically reduce." Birol said disaster could yet be averted, if governments heed the warning. "If we have bold, decisive and urgent action, very soon, we still have a chance of succeeding," he said.
The IEA has calculated that if the world is to escape the most damaging effects of global warming, annual energy-related emissions should be no more than 32Gt by 2020. If this year's emissions rise by as much as they did in 2010, that limit will be exceeded nine years ahead of schedule, making it all but impossible to hold warming to a manageable degree.
Emissions from energy fell slightly between 2008 and 2009, from 29.3Gt to 29Gt, due to the financial crisis. A small rise was predicted for 2010 as economies recovered, but the scale of the increase has shocked the IEA. "I was expecting a rebound, but not such a strong one," said Birol, who is widely regarded as one of the world's foremost experts on emissions.
John Sauven, the executive director of Greenpeace UK, said time was running out. "This news should shock the world. Yet even now politicians in each of the great powers are eyeing up
extraordinary and risky ways to extract the world's last remaining reserves of fossil fuels – even from under the melting ice of the Arctic. You don't put out a fire with gasoline. It will now be up to us to stop them."
Most of the rise – about three-quarters – has come from developing countries, as rapidly emerging economies have weathered the financial crisis and the recession that has gripped most of the developed world. But he added that, while the emissions data was bad enough news, there were other factors that made it even less likely that the world would meet its greenhouse gas targets.
- About 80% of the power stations likely to be in use in 2020 are either already built or under construction, the IEA found. Most of these are fossil fuel power stations unlikely to be taken out of service early, so they will continue to pour out carbon – possibly into the mid-century. The emissions from these stations amount to about 11.2Gt, out of a total of 13.7Gt from the electricity sector. These "locked-in" emissions mean savings must be found elsewhere. "It means the room for manoeuvre is shrinking," warned Birol.
- Another factor that suggests emissions will continue their climb is the crisis in the nuclear power industry. Following the tsunami damage at Fukushima, Japan and Germany have called a halt to their reactor programmes, and other countries are reconsidering nuclear power. "People may not like nuclear, but it is one of the major technologies for generating electricity without carbon dioxide," said Birol. The gap left by scaling back the world's nuclear ambitions is unlikely to be filled entirely by renewable energy, meaning an increased reliance on fossil fuels.
- Added to that, the United Nations-led negotiations on a new global treaty on climate change have stalled. "The significance of climate change in international policy debates is much less pronounced than it was a few years ago," said Birol. He urged governments to take action urgently. "This should be a wake-up call. A chance [of staying below 2 degrees] would be if we had a legally binding international agreement or major moves on clean energy technologies, energy efficiency and other technologies."
Governments are to meet next week in Bonn for the next round of the UN talks, but little progress is expected. Sir David King, former chief scientific adviser to the UK government, said the global emissions figures showed that the link between rising GDP and rising emissions had not been broken. "The only people who will be surprised by this are people who have not been reading the situation properly," he said.
Forthcoming research led by Sir David will show the west has only managed to reduce emissions by relying on imports from countries such as China. Another telling message from the IEA's estimates is the relatively small effect that the recession – the worst since the 1930s – had on emissions. Initially, the agency had hoped the resulting reduction in emissions could be maintained, helping to give the world a "breathing space" and set countries on a low-carbon path. The new estimates suggest that opportunity may have been missed.
146 comments:
Victoria talk this evening:
7pm
Fairfield's Garry Oak Room, 1335 Thurlow at Moss St.
Victoria, BC
Where it says 'reservations' on the front page, with my travel email address, it means to reserve a talk for a particular community. There are no reservations required to attend a talk. All you need to do is to turn up. Everyone is welcome.
I'm trying to get location details up for all the talks as soon as possible.
I'm a little sad to confess how much I laughed (not really) watching mr Cash, the Finnish deputy Prime Minister, explaining how Cabinet negotiations were wrecked. Man looked like a worm in a hook, sweating like a pig etc. (^_^)
Negotiations lasted 13 days - and the tipping point were tax issues. Lefties and Social Democrats didn't want to bend over on higher VAT taxes (ie. tax-targetting of little people) but demanded more progressive taxing. Mr Cash, true to his colours (methinks he's been 3 times to Bilderberger meetings - um, sorry - coffee table discussions), showed them the door...
There were also rather large expanses cutting list (10 billion €) which obviously was used to lure other parties to sell their positions ie. claiming some victories while agreeing to most of neoliberal crap. I wish I could listen to those and future negotiations - then again I'm sure somebody would swap a giggling fly on the wall.
This is a rather unique situation in Finland as this might lead even to a minor coalition Cabinet. Before that Mr Cash will surely try to lure Centrist party into Cabinet but I don't think that will fly very well. Centrist party was the biggest loser (down to 35 seats from 51 seats in '07) in April elections. People were pretty mad at their tumbling lately, especially bribing incidents - um, sorry - how the party was supported by certain industrial factions. Quite a many are actually flirting with the idea of re-elections, too. That would be something...
In any case it sure looks like the cards need to be reshuffled big time here. I'll report later again whether Finland goes the Belgium way ie. no Cabinet. I've supported that idea very strongly on my site... not much flak for those texts - yet.
I'm playing with the idea of a "terrorist incident" in capital area but that might be a bit extreme arm twisting from the puppet masters. Then again you never know... I'm quite sure that would back-fire heavily, though. We'll see.
Remember Steve from Virginia's Un Black-Out Électrique …?
It's getting real:
France is now on heatwave alert after the hottest spring since 1900 has left water tables down and farmers struggling to feed their livestock.
Two stories made me feel bad. Things are going down the drain, and we are unaware of it happening. Thanks for the info.
300,000 cash-strapped British families switch £60 billion worth of mortgages to interest-only
Accusations of Treason in the Greek Parliament
To anyone who is not informed
GET OUT OF DEBT!
@ jal
Sorry, those stories have IMHO trivial consequences compared to the reported 1.6 gigaton increase in CO2 emissions and Alberta spreading bribes to make sure they keep increasing.
Money may be the most important thing in the world, but it is not the most important thing happening to the planet. What happens to the planet will ultimately determine what happens to money and to the apes that invented it.
@ I. M. Nobody
The stupidity of using/depleating natural gas to get oil is beyond me.
It just goes to show that this sort of energy in vs energy out will keep going on even if it is negative because people want oil.
jal
Western special ops in Libya. "No, we are not there, are we not?"
In the US, Congress about to cut food stamps while Pentagon wants robotic long distance nuke bombers. Setting priorities straight, eh?
All your base are belong to us.
It was pure comedy genius ending the post with that global warming hysteria piece. A bit of humor like that puts our real problems into perspective. Good job!
@ lautturi:
Congress can't cut food stamp distribution, that's one of JP Morgan's main profit centers!
As for long-distance nuclear bombers, the only thing the average US Congressman loves more than hypocrisy and ignorance is blasting the hell out of goats and sand with hi-tech weaponry.
jal said ...
It just goes to show that this sort of energy in vs energy out will keep going on even if it is negative because people want oil.
A claim is out there that Alberta synthetic has an EROEI of about 2. I would not be at all surprised to learn that some energy inputs are not counted. In addition to that oil returned over water invested is about 0.25, which IMO sounds like a pretty lousy deal.
We should give a tip of the hat to Metanis for expressing so vividly why it will continue. Right up until it all ends. That great thinker, statesman and AWOL fighter pilot, George Walker Bush, gets credit for the revelation that we are addicted to oil. As with most all of his pronouncements, he was wrong. Being wrong was his Special Purpose.
I know of no cases of people shooting it into their veins, snorting it or chug-a-lugging it. Nope, what we be addicted to is industrial civilization. Or more precisely, the comforts, conveniences and grand spectacles that only industrial civ can provide. Without the combustion of oil and coal, industrial civ comes to an abrupt end.
Since our addiction precludes the cessation of fossil fuel consumption, climate change will not be mitigated. Given the weather events observed over the past half dozen or so years, a time when global average temp increase is said to be only about 3/4 degree C, I find myself powerless to imagine what Gaia can conjure up with all the extra energy embodied in a 2-12 degree C increase in stored planetary energy. I haven't been able to find any estimate of how much energy that would be, but it has to be a lot and it will be driving the planet's weather.
The ultimate expression of lethal intelligence is on. The race to see whether civilization will end for lack of fuel or lack of consumers. Metanis sez global warming claims are amusing. I find it amusing that the four archaic elements earth, wind, fire and water will all participate in the coming climatological dance of death. How is that for irony?
@ thethirdcoast
Ah, yes - had forgotten about that molten bread racket (>_<) thanks for reminding. How about this one: US-housing double-dip worse than expected? Looks like the Titanic is starting to leak from both sides - only time will tell when bottom of the hull is ripped off totally...
@thethirdcoast, speaking of hypocracy have you been watching Syria and outrage from the west. ahem, Canada sends people to Syria specifically to be tortured. US administration thinks torture is a useful tool. What the fcuk!
Think I'll play outside to-day:)
Bonnie Faulkner of KPFA, Guns & Butter broadcasts a recent interview yesterday with General Hamid Gul, former head of Pakistan's ISI intelligence during the war between the Afghan resistance and the Soviet Union.
"The Way Forward For US/Pakistan Relations" with General Hamid Gul. Background on the US/Pakistan relationship; CIA contractor Raymond Davis; US raid on alleged Osama bin Laden compound; the attack on the Mehran Naval Station in Karachi, the Pakistan Taliban; the Chicago terrorist trial and informant David Headley; Mullah Omar; the way forward.
One thing Gen. Gul said that was quite interesting was that according to local witnesses of the attack on the purported OBL complex, there were three Blackhawks. Two stayed in the air and one attempted to land. In the attempt to land, the helicopter crashed and exploded and everyone aboard was killed. The other two Blackhawks picked up the bodies and classified materials and flew back to Afghanistan. Somewhat different story than the US MSM but would explain the "buried at sea" as well as a lot of other things.
Positive feedback starting in declining electric power generation:
“The unilateral German decision is a big blow to Europe,” Christian Bataille, French Socialist lawmaker, told a parliamentary hearing yesterday. “It’s a decision that affects Germany’s neighbors and is not credible because Germany will start coal and gas plants and buy more French nuclear power. This will weigh on the French market.”
Loops with this:
Most EDF reactors are cooled by river waters and output at these plants could be reduced or halted if river temperatures become too high or flow drops too much, French Environment Minister Nathalie Kosciusko-Morizet has said
There may be nuclear "events" in France this summer. This is very very serious, as Steve has stressed.
After yesterday's 2%+ collapse of the US market, other exchanges around the world are down sharply. The US markets just opened fairly unchanged. The USD was down sharply overnight. It is unclear whether the relative strength of the US market today was due to the weak dollar or the PPT turning their computers back on and buying ES futures overnight.
A Walk in the Woods – regarding Ethanol,
I haven’t noticed any issues with my Stihl chainsaw but still don’t like it. Will look into the Marine Stabilizer.
I can say that like race cars my high compression engine vehicle does much worse on it and I lose somewhere between 10-20% in mileage. Some years ago, when driving to Kentucky we filled the minivan with non-ethanol gas after crossing the border from Oregon to Idaho and promptly increased mileage from 23 to 26 mpg despite driving 5-10 mph faster.
It is a nice simple carb source for the motor on my bike, (me!), but due to the poor side effects, poor balance, blurred vision, and bad judgment, intake prior to riding is not recommended. ;-)
I suspect the USD will have a pretty sharp reversal in the next few months, as people start to understand the extent to which the Fed/elites are willing to roll with asset declines for their own benefit and postpone further QE. Even if they start hinting at more QE relatively soon, I suspect it will be less than devastating for the dollar and not very beneficial to equities at all, because the EU and Japan will continue to implode, while negative US economic data slowly trickles out as well and the debt ceiling/austerity fiascoes progress, but with a significantly more controlled (demolition) flavor.
Lower energy output from ethanol compared to hydrocarbons is baked into the cake. Ethanol is already significantly oxidized (lower on the food chain so to speak) and contains no double bonds. Hydrocarbon based gasoline has no oxidized components. Additionally, it has significant benzene type resonance energy boost components. Bottom line - ethanol contains much lower basic potential energy.
I. M. Nobody said...
“I find it amusing that the four archaic elements earth, wind, fire and water will all participate in the coming climatological dance of death.”
I have a habit of following “The oil drum” to keep informed about energy and related problems.
Gaia is already conjuring all kinds of thing that are affecting GDP growth, wealth, improvements, survivability of social structures and individuals.
Its easy to see by reflecting on a simple example.
The bunny that just keeps going and going because it has a battery that does not need changing/replacing/repairing/reinvesting.
The climatological dance of death is causing “two steps back for every step forward”.
I believe that Gaia has been in an unusual long pleasant balance that has been favorable to our global expansion.
Uncertainty was more common, given that all previous civilizations invested huge amount of resources in trying to understand, predict and act upon what mother nature was doing and could be doing that would affect their survival.
Since we now occupy and rely on a world wide network of complex systems for the proper functioning of our social structures, it is not surprising that there will be climatic events somewhere that will shake and threaten our social/economic structures.
It is only now that the economists are starting to realize the implication of the Japanese earthquake and tsunami.
They have yet to voice their opinions on the destructions of the cash flow from the destroyed assets from other disasters. The hurricane seasons has just started. More uncertainties are blowing in the wind.
I’m sure that Gaia is not amused by the “tickling” that we are doing to her.
jal
WB7 with another great piece of dark comedy on ZH...
http://www.zerohedge.com/article/couldnt-stand-weather
The dollar image on the "Twisted" one is pretty amazing.
US banks borrow from FED next to zero interest - and lend to federal government on waaaay higher rates. I guess simply giving money to banks would be only slightly more "transparent" - or is it "obscure"?
Black is white, up is down, dead is alive - and all that...
lautturi said...
US banks borrow from FED next to zero interest - and lend to federal government on waaaay higher rates. I guess simply giving money to banks would be only slightly more "transparent" - or is it "obscure"?
Huh? Was that on Dancing with the Stars? Or was it a rerun of Happy Days? Shit, my sofa is full of crumbs from my Twinkies. And I can't find the remote to the plasma. I might have to get up.
Ash
Banzai just put up a new one with a photo of the Lloyd cross dressing in a flimsy thing on Wall Street. Titled
Fat BoTToMeD GoLDMaN GiRLS
Enough to make you skip lunch :-)
Ah man, I should have listened to my instinct NOT to look at the pic after reading your "lunch" comment El G...
Alas, I am just another cog in the consumerist machine, so my curiosity prevailed.
Now, I'm going to recommend others visit the following link, because the true selfish consumer never wishes to suffer alone...
Fat Bottomed Goldman Girls
this 3 part series has got to be the biggest load of marxist claptrap i have read in a while.... oh those evil capitalists creating all those evil jobs only to replace people with evil machines, gasp, whatever are we to do.... oh the horror of it all
i guess the car should never have been invented as it displaced all those horse and buggy drivers
If you were to get in a time machine and get an average person from 100 yrs ago and bring them to modern day america the first thing they would say is "wow, it looks like capitalism created a utopia... everyone has a car and everyone has a phone and there is plenty of food for people to eat, heck, most poor people are fat!"
the author of this essay uses a lot of big words and fancy, seemingly logical writing but he has no understanding of underlying causes & effects... if you read and understand Human Action by Mises and you will be able to see right thru this claptrap
@mthierauf
"oh those evil capitalists creating all those evil jobs only to replace people with evil machines, gasp, whatever are we to do.... oh the horror of it all"
Oh yes, the "let's pretend like he made a moral argument against capitalism that he didn't make to undermine the objective evidence in support of his argument"...argument.
I'm just telling you why your and Mises' system of financial capitalism is irreversibly breaking down, and why it's not coming back, at least for a very long time. Whether that's "good or bad", you decide for yourself, but don't hold your breath waiting for GM and Honda to invent a flying sports car that you race around in the virtual reality platform invented by Microsoft and Sony...
If you were to get in a time machine and get an average person from 100 yrs ago and bring them to modern day america the first thing they would say is "wow, it looks like capitalism created a utopia... everyone has a car and everyone has a phone and there is plenty of food for people to eat, heck, most poor people are fat!"
My grandparents were born almost 100 years ago. One of the things that they said about the great depression is that it really had little effect on most Americans. They were poor before the depression, and they were poor during it, and didn't know it. They all said there was plenty to eat and plenty to do.
As you can tell though, they didn't live in Oklahoma or Kansas.
Both Grandfathers did talk about how in the CCC, they had plenty to eat, and everything you'd want to eat, so long as you wanted beans.
I clearly remember that the two things that they felt were the most important advances of our modern age were, clean water from a faucet and the end of polio, smallpox, typhoid and cholera.
I don't remember them envying fat people, seeing that as a sign of gluttony. And I know they would call us lazy.
Of the three great grandmothers that I knew (all born in the 19th century), I can't recall that any of them even learned to drive a car.
According to the U.S. Energy Information Administration, these advances mean there is at least six times as much recoverable natural gas today as there was a decade ago.
Even if this guy is wrong (as everyone appears to be in this field), there still appears to be a lot more hydrocarbons out there than people realize.
PS. You guys make me laugh prophesying doom and destruction on any given Tuesday but I'm supposed to worry about 2 degrees of additional warmth in maybe 100 years? Pick a catastrophe for me to worry about and stick with it OK?
@Ash... Mises doesn't have a "system", he just observes the natural order of things. Here is what he observed: real stabilization arises out of chaos i.e. the free-market... a perfect example is the moral-hazard created by central planners like the Federal Reserve
Gold arose out of the chaos after hundreds of years of bartering to become the only true "money" that was recognized in the known world. Compare that to the fact that there hasn't been a single "fiat" currency that has lasted thru an entire boom-bust business cycle.
Austrian economists don't argue for a government run "gold standard" they simply want the market to determine what is money and more than likely it will eventually go back to some sort of gold/silver standard.
@Metanis... well played... i also dont understand where all this excess carbon dioxide is gonna come from if we are gonna be out of oil/natual gas to create the excess carbon dioxide...
Politicians claiming to be implementing policies by Mises have produced results every bit as horrifying as those pitching Marx.
Invention of the car was a bad idea, but not as bad the invention of economists. The good news is that the car will be uninvented in a few years. The future of economists is much less predictable.
A far better use for that Time Machine would be to send mthierauf forward 100 years. If he doesn't die of heat stroke and manages to find a living human, that noble specimen could be brought back here. I expect the rage would be palpable.
The more likely outcome would be some fried circuits in the Time Machine and we would be rid of a dyed-in-the-wool idealog and most likely a sock puppet. Though plenty of non sock puppets do whole heartedly believe that crap. Worse yet, they believe that following those prescriptions would save our asses. St Ludwig is no more the answer than was St Ronald.
The game of Monopoly has finally arrived at its logical evolutionary end. All of the cards now read Go Directly to Jail, Do Not Pass Go. The game of Life now has a destination of Olduvai Gorge. The Dice have been cast and it's, Snake Eyes!
@mthierauf...
You may want to look at these pictures before extolling the virtues of capitalism.
Metanis said, Even if this guy is wrong (as everyone appears to be in this field), there still appears to be a lot more hydrocarbons out there than people realize.
And of course, volume is more important than rate or quality, as any cornucopian will tell you.
As an example, say someone sets up a trust fund for you with Ten billion dollars, you're now a multi-billionaire! And say that the trust fund pays out 100 Zimbabwean dollars a month.
What would be your first luxury purchase?
Now imagine a world where the oil doesn't run out for 300 years, but 40 years from now, the rate goes down to a thousand barrels a day for the whole world. That would prove us doomers wrong, wouldn't it?
Metanis,
Laughter is good for you and worrying is not. Why are you asking us to give you something to worry about? Tickling your funny bone is our mission in life. And we appreciate you tickling ours.
You really should stop reading about how many hydrocarbons there are. That kind of information could become disturbing and you don't want that. I don't see how it could possibly be pleasing to learn that there are more than enough hydrocarbons to finish the job.
Actually, I don't know why you would run the risk of reading blogs like this one, which do occasionally publish some worrying thoughts. Oh wait, yes I do know why.
Mises believes the capitalist system of production (which is not to be confused with a "free market" system, although it may contain "free markets" once in awhile) is sustainable and has a tendency to stay within a range of equilibrium if people are left to follow their own unrestricted, self-interested decisions.
According to most logical and empirical evidence, that is a very flawed view. Complex systems can produce order out of chaos in certain circumstances, but they also have an evolutionary tendency to stray further and further from equilibrium over time. That is evident over much short time scales in human socioeconomic systems, than in biological or environmental systems.
Minsky's Financial Instability Hypothesis is a much more realistic view of how economic boom-bust cycles occur in a financial capitalist economy, rather than the Austrian Business Cycle. For example, the empirical data suggests that the Fed does not actually drive the interest rates or money supply in the private economy, and its creation of base money reserves actually lags the creation of credit money by private financial institutions.
I can remember the depression. We lived in Northern Indiana. We didn't have much but we got along. My single aunt with two children were worse off but we all chipped in and got by. My mother-in-law who was much older said the depression in East Texas wasn't too bad. Worse by far the the influenza of 1917-18 that killed about half the people in their small town. The wagons came by every day and picked up the bodies and burried them. I asked how they got along after that and she said, most everyone knew how to sew, make clothes, garden, blcksmith, work with wood, tend pigs and butcher. They just dug in a got it done. I look around now and find that kids (and adults) 'texting' with little or no practical ability to live in a depression or difficult time.
Good book:
"We Had Everything But Money: Priceless Memories of the Great Depression..."
Thanks Lynford1933.
Three of my grandparents came from East Texas.
The one grandmother born outside the state, told a story about how her father moved the family to Tyler Texas from Georgia, using a buckboard wagon and a team of mules. He started the first department store in Tyler.
Another fine example of 21st Century Capitalism at its best
Japan's addiction to a huge, infrastructure business continues, despite the disaster at Fukushima I Nuke Plant. Now, the Ministry of Land, Infrastructure, Transport and Tourism has given the approval to start building the line for the "Linear Shinkansen (bullet train)" in the middle of Japan, through the pristine mountainous region dubbed in Japan as "Japan Alps", so that people in a nation with dwindling population can go from Tokyo to Osaka in 1 hour, instead of 2.5 hours.
The project has been on the drawing board for 30 years but NOW seems the best time to get it underway!!!!
I think that PM Kan read the foot notes in the Mises view of Capitalism. Ya know, the one that says sometimes SH*T Happens but then you must double down.
@Lynford1933
Thank you for that book recommendation. I just ordered it.
My dad passed away last year at the young age of 94! Over the years I talked with him at great lengths about his formative years, but especially his experience in the CCC during the depression. It was a subject that was very dear to him, and provided a special bond between us during our conversations.
I miss those conversations and hope that the book will give me an even broader appreciation of his world. One thing I know, he never knew fear no matter how desperate things were.
In the last post, after some discussion of addiction, I linked to Bruce Alexander's paper, The Roots of Addiction. Someone else offered a link to discussions with Gabor Mate. I think it may have been El G, who, commenting on the Mate interview, noted that people want to remain children and not grow up.
I found this interesting, because Gabor Mate co-authored a book called Hold On To Your Kids, about attachment parenting.
The thesis is that good parenting causes kids to "attach" to their parents. This sounds like a weird dependency, but really it means the goals set for children is to mature and grow into a responsible and contributing adult. The yardstick of success is achieving adulthood.
The opposing force is "peer attachment", where kids get their validation and parenting not from adults for approaching adulthood, but from other kids for kid-like things, like success in video games and fashion. Peer attachment can be overwhelming in the teens, and so it is good to set good frames of the goal of maturity at an early age.
So, then, wondering about why the rise in peer attachment instead of adult attachment? And that brought me back to Alexander's thesis of Dislocation. The markers of maturity in Western Society have been systematically destroyed or devalued--starting with the Enclosure movement to push people into the labour pools of the Industrial Revolution. The result has been generations of people birthed by older children and raised by younger children, with few markers of what "growing up" means.
Anyhow, those are the thoughts I thunk.
For the global warming affectionados:
I will have you know that Melbourne has had the coldest May in 40 years. Earlier, we had some of the wettest weather for 100+ years.
Not so very long ago, we had the papers full of articles like this: Drought and fire here to stay with El Nino's return
Chris Field, co-chairman of the Intergovernmental Panel on Climate Change, told a science conference in Chicago at the weekend that tropical forests could dry out and become vulnerable to devastating wildfires as global warming accelerated.
He said soaring greenhouse gas emissions were driven by a surge in coal use in countries such as China and India.
Higher temperatures could see wildfires raging through the tropics and a large-scale melting of the Arctic tundra, releasing billions of tonnes of carbon into the atmosphere that would accelerate warming even further, he said.
Dr Field said the IPCC's last report on climate change, in 2007, had substantially underestimated the severity of global warming.
Yawn.
You know the TAE is relevant when the song and dance players of Kabuki theater turn up to comment.
I really don't like getting into "global warming" debates with people (mainly due to the level of pure frustration it generates), but I do have one question for those who either doubt its happening or doubt its influenced by human industrial activity:
Do you really think that releasing half of the oil that only came to be stored within the Earth's surface over millions of years in about 150 years does not have a significant affect on average global temperatures? And do you really think that significant increase in temperature would not cause significant changes in weather patterns and severity?
Now, I know that's not a rigorous scientific argument, but once you consider those questions, there are plenty of credible studies, models and data out there to support the theory of AGW, or at the very least... GW.
Ruben,
The left promotes entitlement from cradle to grave minus any obligation. The right promotes infinite expectations & an infinitude of easy pleasure - You can be what you want to be. Then came the 3rd way, a combination of both.
Basically it creates a childish society, infant like in nature. Always seeking endless pleasures & distractions while the belief of entitlement is entrenched.
Concerning climate change.
It's real. We have thousands of peer reviewed papers on it.
If you think you're such a scientific hot shot, become a climatologist and publish peer reviewed literature instead of pseudo BS.
If you think the peer review system doesn't work then be my guest & reinvent the scientific process. Till then, it's the best we've got. Period.
Peer review does not replicate and so validate research. Peer review does not prove that a piece of research is true. The best it can do is say that, on the basis of a written account of what was done and some interrogation of the authors, the research seems on the face of it to be acceptable for publication…Experience shows, for example, that peer review is an extremely unreliable way to detect research misconduct.
That Wobbly Foundation: Peer-Reviewed Research
If the science is so compelling then why is it so exceedingly difficult to get the original unaltered research released to the public for review?
UVa has yet to release Mann's work although they have now been ordered to do so by a court within the last week or so.
The foot dragging looks very suspicious to me.
I wanted to put a note out about the proposed talks in Prescott AZ and Louisville KY. There have been problems with either organizers' time or venues, so there are no workable arrangements at the moment. I am happy to come if someone local would like to make arrangements. I could be in Prescott June 20th and in Louisville on the 25th.
If you think you're such a scientific hot shot, become a climatologist and publish peer reviewed literature instead of pseudo BS.
If someone were to pay me big bucks and I was allowed to pick the data I want, I would be happy to produce peer-reviewed (i.e. paid-reviewed) papers on climate-change - in either direction. :)
The fact of the matter is that the sun provides an amount of energy that dwarfs by many orders of magnitude whatever fossil fuels generate and the sun's radiation varies by 10% over time - it swamps any mischief that we make. It is like comparing the energy of a racing car engine with that of its sole, sedentary, passenger.
Science is not some sort of popularity contest - where the number of people agreeing with something proves that it is correct. Plenty of economists think that neo-classical economics is the Holy Grail - are they correct and the tiny minority like Steve Keen wrong?
Look at this graph of temperature versus CO2 and tell me if you can see any correlation.
I think, we all agree here that the banking business has been corrupted - what makes you think that science is politics-free? Perhaps you were too young to remember when cigarettes were considered to be good for your health - by scientists.
Can you not see the correlation between solar irradiance and temperature in the following graph?
Northern Hemisphere Temperature vs Solar Irradiance 400 years
Whenever I find myself facing a choice, I try to base my judgement on the data - not what people want me to think. I respectfully suggest that you do likewise.
Concerning climate change.
It's changing.
re read my post at 12:14 PM
jal
@ lautturi:
I am one of those filthy renters and my eventual doomstead was paid off 15 years ago, so I am footloose and fancy free with regard to house prices!
@ scandia:
I hadn't seen the news about Syria, but I'm not surprised in light of the fact that Usonians have allowed moral cockroaches to infest near every position of significant authority.
"I will have you know that Melbourne has had the coldest May in 40 years. Earlier, we had some of the wettest weather for 100+ years."
Short term anecdotal 'evidence' of really cold or really warm weather is meaningless.
This long term trend line is accelerating, not equalizing.
"Gerald Meehl, a senior scientist at the National Center for Atmospheric Research, compared the number of record daily highs to the number of record daily lows in the U.S., he found they were roughly equal in the 1950s.
Today, he says, “for every two record highs, there is only one record low. If there was no warming going on, the ratio would be one to one (on a short and long term running average), so we are shifting the odds toward having a better chance for setting a record high versus a record low.”
At some point, we may look fondly upon today’s two-to-one ratio (of record highs to record lows), as climate models suggest the ratio will reach 20 to 1 (of record highs to record lows)by year 2050 and 50 to 1 (of record highs to record lows) in 2100.
Yet even then, when the U.S. average temperature may have risen by several degrees C, “We still get some daily record low temperatures,” Meehl says. “We still get extremely cold weather, although it will happen much less frequently.”
_
Here is a picture of a tornado that you might never see.
http://c2.api.ning.com/files/7C3Fv1EuCqBG-gr1CPe8ki3J0hvk37eDE72Wq3M1IHiPAjDhSZZx8JLagulQe34bigSmlGgMExJWYoSRbEmg8YjGg4n3-dFa/FireTornado.JPG
Now! ... back to the business of making money
http://www.washingtonsblog.com/2011/06/congressional-research-service-confirms.html
Congressional Research Service Confirms Big Banks Borrowed Cash For Next To Nothing, Then Lent It Back to the Federal Government at Much Higher Rates
The Fed released records under pressure in December and March that showed the extent of its largesse. The CRS study shows for the first time how some of the most sophisticated financial firms could have taken the Fed's money and flipped easy profits simply by lending it back to another arm of the government.
***
In all, more than $3 trillion was lent to financial institutions from the Fed, and terms were generous. Junk-rated securities were pledged as collateral for taxpayer-backed loans. The Fed did not provide conditions for how the money was to be used.
***
Sanders said the spread between firms' borrowing rates and their lending rates to Uncle Sam amounted to "free money." For Bank of America during the third quarter of 2009, the spread was nearly 3 percent.
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.
The government's zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet.
And now for something completely different: http://tinyurl.com/3wrortw
Richard Sauder is a native Virginian, with an abiding interest in Forteana, unusual information and anomalous paradigm-busting data of all varieties. Beginning in early childhood he has experienced first-hand contact with a variety of paranormal phenomena that have left him a bit puzzled, flummoxed and thoroughly persuaded that there is much more to the Earth and to human perception and consciousness than the mainstream American culture believes.
Nassim,
Whenever possible I choose to base my judgement on personal observations. For the past two weeks I have been visiting in Northern California. Not too far from the area where I lived for 30 years. The cool temps and almost daily rains are a remarkable change from the boringly regular and famously warm and sunny weather pattern seen here in the 70's and 80's. It started to change in the 90's. High wind and heavy rain events came to be a normal part of the weather pattern.
I now live in the same small midwestern town where I grew up 50 years ago. The weather pattern now bears a resemblance to that of the 50's mainly in that we still have four seasons. Back then the rain and snow almost always fell nearly vertically. Now it frequently blows horizontal just like the video shots during hurricanes and blizzards. Spring rains the past several years have been heavier and more frequent. Making planting of crops sufficiently difficult that they have just barely gotten planted. Lifelong residents seem mostly to agree that the summers are cooler and winters are warmer. And I guess we are becoming used to living in Mudville.
Does this prove AGW or even GW? No, I don't suppose it does. But something has happened to our weather up here. It does seem to correlate pretty well with the claimed increase in CO2 and something is sure jacking with the jet stream to bring a weeks long stream of arctic air to Santa Rosa this time of year. The fact that some place is cooler does not prove that the globe is not warmer. Meteorologists are concerned with air temps and air does after all move around. What we need be concerned about is how it flows and how fast.
I am well aware that scientists fudge data. Like every other segment of the population, they have proven to be corruptible. That also does not prove the globe isn't getting warmer. But, go ahead and yawn all you want. I've already put out my opinion on why nothing is going interfere with the combustion of those fossils. Either our descendants will die baked and starving or they won't. We can hope that won't happen, but the current trend seems to favor it. What I am confident of is that we are going to leave it up to Gaia and Ra to decide. I'm afraid we have done precious little to court their favor.
I find attacks on peer review annoying. Since I have played the peer-reviewed science game in the past, it either makes me more or less qualified to talk about it, depending if you now consider me to be a part of a great,dark science conspiracy. (I guess peer review, like democracy, is the worst possible solution, except for all the others.)
Regarding the arguement that papers that refute AGW are being blocked, I call BS. We had a paper blocked once. It was in a very small field. We knew there was only one lab that could really review us, and the problem was, our data trumped theirs. So they blocked us. WHat did we do? Went to another journal, changed the focus of the article. (So now it wasn't about the baceria, it was about the laser we were shining on the bacteria.) The laser-centric journal laved our rather wacky work. End result, all our results got published, the attempt to block failed.
If there was good counter AGW stuff out there, it could be peer reviewed and published.
I return to my earlier statement: Either climate change is natural, and thereis nothing we can do about it, or climate change is man-caused, and there is nothing we are going to do about it. All we can do is increase our resiliency, and prep for some nasty decades to come.
Our farm has been hit by four 50-year storms in the last 6 years. Weather is not climate. Anecdote is not evidence. And yet, the bridge has gone underwater again. Time to re-engineer the bridge for higher flows. :)
There can be little doubt that the average temperature of earth is heating up. Of all the data available, I find the biological and ecological data from northern Canada the most convincing. Doubting the reality of global warming puts one in the flat earth category. And an increase of the average temperature of the earth of 2-3 degrees K will have enormous consequences. It's not just which sweater to wear today.
The valid debate is whether this increase is due to the release of greenhouse gases into the earth's atmosphere by human industry or by an increase in the total luminosity of the sun. I lean toward the greenhouse effect, but there is some interesting data regarding solar luminosity, and my mind is still open to that theory, though I found Nassim's argument regarding energy magnitudes to be totally bogus. Of course almost all the energy that warms the earth comes from the sun. (The "almost" is due to radioactivity of the materials that comprise the earth). The question is whether the warming is due to increased solar luminosity or constant luminosity being trapped by the earth due to the quantum mechanical characteristics of certain gas molecules. Nassim's argument is similar to saying that throwing a pinch of finely powdered platinum into a multi ton explosive mixture of hydrogen and oxygen cannot possibly have any effect because the relative quantity is so small.
In my opinion, it will make little difference in outcome, as humans are not about to give up their energy slaves until they die of depletion (both humans and the fossil fuels). Though strangely enough, some humans were willing to give up their human slaves on occasion. In ancient Israel debt slaves only had to serve six years - we should be so lucky. Guess they didn't have WalMart then.
The Alex Jones and James Corbett crowd argue that AGW is a sham by the oligarchs of the new world order to impose additional taxes. They are correct in as much as there is nothing that Goldman Sucks and their suck puppet, Al Gore, would like more than tradable carbon credits. But climate change is no more an illusion than hurricane Katrina. The fact that scumbags made billions on Katrina through misappropriation of taxpayer funds doesn't make the hurricane or its devastation an illusion. As that mega scumbag, now Mayor of Chicago, likes to put it, "Never let a good crisis go to waste." A Naomi Klein poster boy.
Given time, I would like to investigate the solar luminosity theory in greater detail, but I can't take Nassim's graph link seriously. A plot of solar luminosity versus temperature from 1600? The very detail of it makes it all the more ludicrous. Just to check my dates, I looked up the history of the thermometer and Langley's bolometer on Wikipedia. They were quite unable to measure either parameter properly in 1600.
jal,
I showed your fire tornado picture to my son-in-law. He's a fireman and quickly spotted the fire as being a training burn. He said he had seen such things before, but never one that big.
@ AWitW
Record highs are being reported rather often these past few years. We experienced several quite warm days this past winter. A quick check of the record data shows that last year record highs were equaled or exceeded 12 times. Record lows were equaled or exceeded 3 times. The daily lows showed a significant trend to be several degrees warmer than the average low.
IMN,
Sure, I agree, the weather changes. People I know in Cairo all agree that far more rainfall falls now than was the case 40 years ago. However, in Brisbane, house sellers have been told to wait until buyers have forgotten about the floods if they want a good price - around 5 years. People have short memories.
Like I said, one can pick the data to suit the (paying) audience. Of course, one can readily find places where the converse has been the case and less rain has fallen. That is precisely why the two links I gave are valuable - they give global values and they go back many years.
Over here, it is now commonly acknowledged that the proposed Carbon Tax is really all about raising money for the politicians to spend on their favourite projects. It would not surprise me if Australia becomes one of the very few countries that do it.
There can be little doubt that the average temperature of earth is heating up.
Data please!
Don't pick your location and period and think that is good enough.
If you don't like the graphs I linked to, find better ones (e.g. for a longer period)
Ruben said...
I found this interesting, because Gabor Mate co-authored a book called Hold On To Your Kids, about attachment parenting. The thesis is that good parenting causes kids to "attach" to their parents. This sounds like a weird dependency, but really it means the goals set for children is to mature and grow into a responsible and contributing adult. The yardstick of success is achieving adulthood.
I haven't read his book, but have read/listened to some other stuff of his. I got the impression that he thought kids should be encouraged to see the family as more important than peer groups, and that kids were by default going through (often negative) initiation processes with their peers, instead of traditional initiations guided by adults, as would have been the tribal norm. That, at least, seems reasonable.
VK said...
It's real. We have thousands of peer reviewed papers on it. If you think you're such a scientific hot shot, become a climatologist and publish peer reviewed literature instead of pseudo BS.
As much as do not want to encourage trolls, peer review can actually encourage the status quo even when it is shown to be wrong. I have no strong personal leaning one way or the other toward climate science (however, I would invoke the precautionary principle at the very least), but to say that AGW is true because thousands of peer reviewed papers have been published on it is a fallacy.
El G...
Given time, I would like to investigate the solar luminosity theory in greater detail, but I can't take Nassim's graph link seriously. A plot of solar luminosity versus temperature from 1600? The very detail of it makes it all the more ludicrous. Just to check my dates, I looked up the history of the thermometer and Langley's bolometer on Wikipedia. They were quite unable to measure either parameter properly in 1600.
Again, I have little knowledge in this area, but can't average temperature data throughout history and prehistory be determined by other means – studying ice cores (oxygen isotopes), trees, etc.? I have no idea how accurate this is for measuring temperatures in a short geological time period. Perhaps someone else can elaborate.
In my at best only just barely qualified opinion, solar luminosity almost certainly does matter. But, the crux of the problem is whether or not there is a greenhouse gas effect. It seems to me that if there is not then increased luminosity should result a higher maximum daily surface temperature. My supposition is the increased heat would generate an increased radiation loss into space during the night. Yielding little change in average daily temps.
On the other hand, a greenhouse effect will throttle the radiation loss and temps will rise. So IMHO, how much Ra's temperament matters depends quite a bit on the extent to which CO2 does or does not block infrared radiation. If it does, then a drop in luminosity would be nice.
FWIW, I suspect it would be easier to persuade Ra to cool his jets and than to convince Homo Carbonicus to leave them fossils in the ground. Let us pray and make offerings. A little help here Nassim. What was it he was believed to like? Do we need to scour the land looking for virgins or something like that?
National dating standards lowered
http://www.theonion.com/video/national-dating-standards-lowered,20647/
NZSanctuary
Again, I have little knowledge in this area, but can't average temperature data throughout history and prehistory be determined by other means – studying ice cores (oxygen isotopes), trees, etc.? I have no idea how accurate this is for measuring temperatures in a short geological time period. Perhaps someone else can elaborate.
==============
Global temperatures might be derived by the indirect means you suggest. But I am leery that the degree of accuracy necessary for meaningful conclusions in this area could be found. We are talking one or two degrees K. It's hard enough to do it with satellites and all our modern electronics with huge debates raging on the results. But I am far more skeptical about measuring solar luminosity from this type of indirect data. May be possible but I don't have a clue how.
Hi Nicole,
I'd love to have you give a presentation in San Diego.
Would you be available on June 15th or June 18th (either side of your LA area stops)?
I'm concurrently trying to secure space at a local church, just in case your schedule is flexible.
I would've sent this via private email, but I couldn't find it on the main page.
>>There can be little doubt that the average temperature of earth is heating up.<<
el g, that depends on your start and stop points, no? ;-)
and let us all remember, correlation doesn't necessarily translate into causation.
Global temperatures might be derived by the indirect means you suggest. But I am leery that the degree of accuracy necessary for meaningful conclusions in this area could be found.
There are lots of different ways of measuring historical temperatures as can be seen here - Measuring Temperatures
In general, they use the overlap with our modern instruments to calibrate the mechanism and then they project it back in time.
There is no doubt - because of archaeology - that the medieval warm period in Europe was a lot warmer than today. Land that used to be farmed was abandoned at the end of that period. Whole areas - in France for example - became depopulated. Other areas had to change their crops. BTW, be careful of the chart on the Wiki entry as it stops in the year 2000 - compare it to my link above.
North Atlantic
A radiocarbon-dated box core in the Sargasso Sea shows that the sea surface temperature was approximately 1 °C (1.8 °F) cooler than today approximately 400 years ago (the Little Ice Age) and 1700 years ago, and approximately 1 °C warmer than today 1000 years ago (the Medieval Warm Period).
Excellent article on EROI
The Tyee – How Fish Use Energy Teaches True Oil Economics
Glacial ice melt + thermal expansion = oceanic seawater level rise
This is global warming.
Do not pass Go. Do Not Collect $200.
I think it's Great that I $ S have outsourced TAE.
Enjoy your travels, guys!
Ian
@thethirdcoast and all...speaking of " moral cockroaches' a must see film that speaks to our times is-
" Hands over the City" (1963)Francesco Rosi
http://www.criterion.com/films/799-hands-over-the-city
here are global CO2 emissions during the period 1990-2010. The growth during 2009-10 seems to be the fastest ever.
Where does that leave us? That despite one of the largest and ongoing recession/depression, we were NOT able to significantly decrease our fossil addiction. Just the opposite!
Only 40 years of global depression could save livable planet for future generations (if there are such)...
None of this means that there aren’t genuine environmental problems, some of which require regulatory solutions. It merely suggests that the precautionary principle is a poor guide to deciding how to address these and other dangers.
How the Precautionary Principle Refutes Itself
Hi Nassim,
I have enjoyed your posts since you started making them. Very informative and sometimes very entertaining.
I believe you to be an open minded person. Re climate change, I recommend you take a look at the link below:
http://www.wunderground.com/climate/
You will find a map showing hotter than normal, average, and colder than normal areas of the world for the month of April. Sure enough you can see that parts of Australia have been experiencing colder temperatures than normal for the last few months and as we know from the news reports much heavier than normal rainfall. It is clear that it is so now, at least for April based on this single chart.
However, you need to look at the big picture as Stoneleigh so often emphasizes re world economic matters and economic interactions.
This is true for the weather patterns too. Keep an eye on this site and the updates that follow. Don't forget Australia suffered several consecutive years of extreme heat and dryness before the present period.
If I wanted to get in a pissing match with you, which I do not as I respect your intellect and fairness re most issues, I would point out the extreme dryness and heat that parts of Europe are experiencing now, especially France. It is to the point that many crops will not make it to harvest even with heavy rains which are not in the near range forecast. It is also worthwhile to the point out that some nuclear plants may have to be shut down due to lack of sufficient cooling water from rivers. France has in place laws that limit how much hot water can be returned to rivers without raising river water temperatures to the point where it affects oxygen levels and the aquatic life.
I will not go on about France and European weather other than to mention the extreme heat Russia experienced last year.
Climate models predict increasing temperatures with time due to increasing CO2 in the atmosphere. They also predict that many feedback mechanisms can kick in as temperatures begin to rise(eg, decomposition of organic matter in peat bogs with higher temperatures yielding huge amounts of additional CO2. Also bacterial methane evolution from thawing permafrost and newly formed lakes in the Arctic as well as thawing of methane clathrate in the Arctic ocean and in permafrost to give even more of the very potent greenhouse gas, methane.)
In other words a runaway scenario is possible whereby the global heating rates can increase with time.
These same climate models also predict certain areas will experience colder and wetter periods from time to time. But as pointed out by AWITW the overall picture based on ongoing data is one of global temperature increases. The April temperature map in the link above clearly shows a world wide trend in increasing temperatures.
Please take the time to look at the link above and links within that link over a period of time before deciding which side of the fence you sit on.
There has been a lot of good research carried out since the climate change issue started to become public. This research supports a trend toward global warming.
Best regards,
Robert
Why even argue with climate change deniers? Let them eat cake. Heh, heh, heh.
Here's another theory of gold ... someone posted on ZH this morning.
http://www.youtube.com/watch?v=ZPWH5TlbloU
(animation, circa 30 mins)
I can't follow all that Hegelian philosophy but this matches my internet-shortened attention span.
Many of the older members of U.S. astronauts who flew in previous decades were totally stunned by what they observed regarding polar ice coverage and glacial ice/snow coverage on global mountain ranges.
Glaciers represent a vital fresh water storage system in many parts of the global. Truly life or death critical hydrological system.
They are disappearing rapidly and so shall the people and cultures who depend on them.
Has climate changed and had huge swings over time?
Well Duh.
That is not even remotely the issue at hand.
Climate has historically changed often but the velocity of the swings, as fast or as slow as they have been, is within certain parameters. Those velocity envelopes are being broken. The CO2 rise, in terms of sheer speed is unprecedented.
Sure, Nature has built up CO2 concentrations very high in the past without the Nake Ape's help. But short of massive asteroid hits or phenomenal volcanic eruptions, it has never produced such a CO2 rise as quickly as what we are seeing now.
The question is not whether climate change occurs. It does. The question is whether H s sapien is producing climatic change due to 'artificial' man-made processes. Can humans change climate? Simple deforestation alters weather patterns. Large forests produce their own weather. Cut them all down and that effect is gone. Happened many times since 'civilization' reared it's ugly head ten thousand or so years ago.
_
... posted after watching the first 14 minutes of it ... sorry, it sort of goes downhill after that.
And the ending was just silly.
This is very far from the return of the bear market. The market is still over 20 percent up in comparison with the last year and even that level was overvalued. Maybe Dow below 9600 would mean that something is happening. However, the market making new highs in one month should not surprise anybody.
@Ogardener Winters low of -20F instead of -30F. Four frost-free months instead of three.
Nope, no climate change here in New Hampshire.
Nassim said... "For the global warming affectionados:
I will have you know that Melbourne has had the coldest May in 40 years. Earlier, we had some of the wettest weather for 100+ years."
Last week my wife had me adjust the thermostat on our freezer. It's colder in there now, than it's ever been.
You can quote me on that.
My story offers exactly the same sort of proof that your does.
Nassim said..."If someone were to pay me big bucks and I was allowed to pick the data I want, I would be happy to produce peer-reviewed (i.e. paid-reviewed) papers on climate-change - in either direction. :)"
Why don't you work for the oil industry then? They pay big bucks for this stuff.
Honest climatologists don't make very good money at all.
But that's what it's all about isn't it? If you're wrong, the worst that could happen is the extinction of the human race. All of your descendants dead.
But balance that against the money you make by engaging in meaningless debates, and it seems worth it, doesn't it?
Now that the rich have filed their income taxes and taken their tax cut so that they could hire more people,
WHY DID UNEMPLOYMENT INCREASE?
JAL
Another lost employment opportunity
http://www.bbc.co.uk/news/world-europe-13629772
You would've been perfect for that job, El Gallinazo.
I would probably have been fired for opportunistic pecking.
Another lost employment opportunity
hehehe
Don't despair ... banksters will eventually be the main target
Skilo,
I would be happy to come to San Diego. I have a few days between talks in San Francisco and Pasadena. I should think the 14th or 15th would work best.
Another thoughtful analysis by CHS
http://www.oftwominds.com/blogjune11/taking-away-punchbowl6-11.html
If you have any doubts on our species survival instincts, look no further.
A thoughtful panel discussion on:
In The Know: Should The Nation's Unemployed Be Buying New Apple Computers?
matched up with this pearl:
Boy Regrets Selling His Kidney to Buy iPad
_
http://www.oftwominds.com/blogjune11/taking-away-punchbowl6-11.html
That would only be true if they printed and did not go through the federal reserve which take a cool 3% interest spread.
The banksters would not let anything affect their 3% cut.
Since I don’t know how the interest is calculated when they sell their purchase a week later, I’ll assume the worst case scenario.
Flipping and getting 3% per week means 3 x 53 = 156% per year.
The Onion is satire. But you may already know that, 'A Walk in the Woods'.
CHS's rant reminds me that TPTB have already started spending the 'flight to safety' funds that haven't even begun yet in earnest.
The borrowing of 'money' at ZIRP (something the Japanese perfected over the last 20 years or so) can go on a long long time. The Japanese used their own domestic savings piggy bank to fund their homespin ZIRP racket. The U.S, which has no savings what so ever will simply use FTS (flight to safety) funds to recreate the same scam.
And the mere anticipation of all that foreign 'panic money' (the sky is falling along with the Euro runforyourphuckinglife flighttosafety) is enough to put a spring in the step of TimmyG and his sidekick The Bernanke.
How much flight-to-safety dough is there in the whole globe that will want to make a beeline to U.S. treasuries?
So much that running U.S. deficits for the foreseeable future is not even an issue in the diseased mind of the Financial Lounge Lizards That Be.
_
yoa Weaseldog
It's All Satire All the Time
"..Life's but a walking shadow, a poor player that struts and
frets his hour upon the stage and then is heard no more...
It is a tale told by an idiot, full of sound and fury, Signifying nothing..."
Wild Bill Shakespeare
_
Europe's New Road to Serfdom
By MICHAEL HUDSON
The title pretty much says it all. My interpretation is that WW-III is already on and contrary to Einstein's apparent expectation, the WMD are financial, not fissile. He was probably right about WW-IV though.
Are you new folks here on behalf of the oil industry's PR campaign?
If you are, how much does it pay?
And if you aren't, but you're here fighting a PR battle, then why aren't you getting paid?
Recommend Paul Craig Roberts not easily scoffed at opinion, which adds support to CHS' opinion that deficits can go on for a very long time.
Hail Caesar!
For many of the Lizard Class there is another not easily factored risk lurking in the background. As reported here, there is a growing possibility that many of their tribe might suddenly descend from the sky asking for assistance in resettling and getting established. The Lizards are I believe pretty much obliged to help and will undoubtedly wish to do so. They will therefore want to fill their counting houses to the rafters in advance. In addition, they will want it to be possible for Uncle Samuel to be able to pony up as well. In fact it says they are offering guarantees that he will. Who doesn't love a guarantee?
My Big Fat Greek Anschluss
http://www.zerohedge.com/article/troica-demands-deep-public-sector-cuts-higher-taxes-part-greek-bailout-2
Marshal Dillion is dead. Yet another marker in the end of our innocence.
Would it be impertinent to refer to the Troika as The Condor Legion?
Being largely unaware and indifferent is not the same as being innocent. We're guilty as sin.
That said a tribute to James Arness is in order. There was good reason why Gunsmoke was one of the most popular TV shows ever. He was made for the part. RIP.
The growing economic impact of this years catastrophic weather.
A few snippets from today's Weather Underground post:
By Dr. Jeff Masters
Published: 7:57 PM GMT on June 03, 2011
Five EF-5 tornadoes confirmed in 2011
- April confirmed tornado total was 683, making it the busiest tornado month on record. The previous record was 542 tornadoes, set in May 2003. The previous April record was 267 tornadoes, which occurred in April 1974. The 30-year average for April tornadoes is 135.
Joplin tornado the 7th U.S. billion-dollar weather disaster of 2011
The Joplin tornado is the 7th U.S. weather disaster of 2011 costing more than a billion dollars.
With a major flooding disaster coming on the Missouri River, and hurricane season still to come, 2011 has an excellent chance of beating 2008's record of nine billion-dollar weather disasters.
The billion dollar weather disasters of 2011 so far:
1) 2011 Groundhog Day's blizzard ($1- $4 billion)
2) April 3 -5 Southeast U.S. severe weather outbreak ($2 billion)
3) April 8 - 11 severe weather outbreak ($2.25 billion)
4) April 25 - 28 super tornado outbreak ($3.5 - $6 billion)
5) Mississippi River flood of 2011 ($9 billion)
6) Texas drought ($1.2 billion)
7) Joplin tornado ($1 - $3 billion)
@ Wyote:
As CNBC put it, "It's transitory!"
The fine folks at Zero Hedge would put it as, "It's transitory, bitchez!"
But fear not, the bread and circuses roll onward. There are at least 10 to 15 festivals in my modest metro area of 1 million this weekend.
I should probably be out frittering away what's left of my youth right now, but I'm growing tired of weekends lost to binge drinking.
* Using natural gas to get oil is stupid but then people prefer oil to gas; Nobody is addicted to oil because he doesn't ingest it; If we could just hurry up and use all the hydro-carbons global warming would stop; Ethanol is basically just rusty gas
* Markets are down but might go back up; Housing double dip is worse than expected; Congress cuts off food stamps; Pentagon wants robotic bombers
* France has hottest Spring since 1900; Melbourne has coldest May in 40 years; Global warming is so funny, let's all laugh on 3; Energy from the sun is like a race car and man is just the puny driver who can do nothing more than drive the car off a cliff; Everyone complains about the weather but nobody does anything about it
* Serfs up in Europe; Germans to close nuke plants; Britains switch to interest only mortgages; Mortgage: Anglo-French from mort (dead) + gage (pledge)
* US Dollar experienced a take down but expect a reversal unless FED tries an illegal headlock
* Earth, wind, fire and water are actually the four horsemen; Gaia has a few tricks up her sleeve; Gaia has been balanced for a while but now the foundation is wobbly; Fat bottomed girls make the rockin' world go round
* Banks borrow low from the FED and lend high to the Feds; Capitalist create evil machines and evil jobs; A visitor from 1911 visiting Detroit in 2011 would be impressed; Other peoples envy our obesity; Sadly, probably no flying car in your future
* Mises didn't have a system, he just bet on the horse with the funniest name; The earth was without form and void before Ludwig said "Let there be gold"; Austrian economists want the market to make the important choices like which color to paint the dining room
* New Monopoly version has only two cards: Bank Error in Your Favor for the top hat, cannon and race car; Go Directly to Jail for all other pieces
* Parents parent best; Peer review of teens retards maturity
* Word of the Day: Claptrap from clap (applause) + trap (catcher) - Showy language intended to impress
Society is craaaazy.
@Stoneleigh,
i guess that puts the ball in my court.
let me get to work tomorrow and see what i can do to secure a venue for the 14th or 15th ASAP. I will post tomorrow with an update.
Physical Gold, pysical smold, what I would like to know is when is the double dip that you guys said, was shortly to be the future, going to happen? Good thing for you, that I figured, back then, it was any minute now, or else I would be some pissed off!
@muchtooloose
Well on first reading of your comment and that you might be some pissed off, it made me so nervous that I had to empty the piss from my shoes. But on second reading, I couldn't figure out what the phuck you are talking about. Are you referring to the equities markets or what is left of Main Street?
el g, he was referring to his trollness.
something he can't seem to shake.
http://skilo.myopenid.com/
Tables Turn: Deputies and movers show up at bank to seize property for homeowner
My post was deleted at 4.19. Must have upset Illargi but that's easy to do.
I said in that deleeted post that TAE had lost its way, that I $ S seemed to spend most of their time travelling, at subscriber expense, and now out-sourced TAE (well, travelling takes time)
The result is a desultory response, often a few dozen replies (most of them by I Am Nobody - he's Somebody on TAE..and no-where else I suspect)
Compare to Zero Hedge - a post every two minutes and a lively, in-your-face response sometimes of many hundreds. Does Tyer Durden go on 'speaking tours' to address 20,30 people? Or is he for real?
I repeat. TAE has lost it. Just like well-intentioned pollies when they start, the lure of personal satisfaction/gain/ego has done its work.
OK that's my bit. Go ahead Illargi, do what you do so well...DELETE!!!
And I should add that despite my critism of Stoneleigh, I still have respect for her integrity & beliefs.
I think that if she stops and considers, she might even agree that I have a point in that constant travelling, speaking to a relatively small number of people is not as effective as running a dynamic web-site (and posting herself- something we see little of these days..)
Travel is fun, interesting, great to meet people etc. But not as effective. No way.
My take.
Ian
And just so we can get 3 deleted posts in a row, my above comments don't apply to Illargi, who prefers to hide behind his non-de-plume and who, whilst highly intelligent & articulate, is basically Stoneleigh's handbag.
Love youse Illargi... :)
I don't want to be critical of other lead writers, but Stoneleigh's posts are much more enjoyable to read. Other writers seem to think that obtuseness is a virtue.
Even when I don't agree with her conclusions I enjoy the journey reaching them.
@Ian
I can assure you that Stoneleigh's travels are not your typical yuppie's holidays in the Bahamas. She's sometimes forced to stay in people's houses and try to sleep before a long flight (and after another long travel) while the cats of the house scratch at the door :)
I do recommend you read a book called "The Story of B" by Daniel Quinn; can be found even for "free" if one is inclined not to buy it (or simply does not have the money).
I think what she does is in no way comparable to that funny but meaningless site everyone seems to read and cheer for these days(ZH). Please remember that however funny and witty, those are financial-oriented people losing their financial-oriented lives. They trade in this unholy $hit, and have bathed in it for a long time.
Bottom line: don't compare TAE to ZH.
Zero Hedge's comment section is a bastion of adolescent limousine libertarian fart jokes.
What's not to love.
Utterly disconnected ham handed knuckle dragging 'silver backed' Daytraders crushing empty cans of Red Bull on their foreheads as the first of the nine steps in their highly ritualized charge display to impress their imaginary harems.
Wow, and craptilicious witty repartee to boot!
Even Tyler doesn't know the difference between 'short selling' and the sleazy immoral 'naked short selling', probably because he and the rest of the Lord's of the Flies ZH posse engage in it routinely.
Anything for a Buck is subtext in the Zero Hedge kool-aid stand.
_
AWitW,
If you've got some of those evil bucks you don't want, I'd be glad to take 'em off your hands.
They'd be useful for gambling in the (rigged) silver market, or I could make another donation to TAE with 'em.
"..Compare to Zero Hedge - a post every two minutes and a lively, in-your-face response sometimes of many hundreds..."
Seriously phucked Attention Span Deficit is a virtue?
The squirrels at the bird feeder can do that.
And this from crack 'elite financial keyboard commandos', defenders of 'the Free Market' (cough,gag,cough) which as any Adult knows,has never existed, and who only complain when someone like the Vampire Squid out games them with HST at gaming their very own inbred day-traitor Market.
Real Men don't Day Trade
Ask Jamie Dimon
_
@Ian
You gotta love the age of the selfish and childish internet blog reader...
where sitting at your computer and running a glitzy site packed with short bits of financial data and commentary and scores of comments (90% of which are repetitive and/or meaningless) is much more honorable than traveling around the world to give carefully crafted presentations and Q&A sessions that get real communities of people thinking and involved, while also maintaining a popular site that gets diverse and unique posts but also sticks with certain central themes throughout.
So you don't like my posts (or my race?), then just come out and say it. Ilargi has posted a few great articles recently, you don't like those either? Stoneleigh still manages to produce informative articles/reports in between her important circuits of travel, such as those on Fukushima, but that's not good enough for you either?
And don't get me started on the comment section here... I count at least 110+ comments from several different people on this thread alone that are insightful, informative, humurous and/or just plain relevant in one way or another. Only a few of them have been irrelevant, whiny and annoying....
So you prefer a robotic, homogenized site that writes with the same style and about the same subject twice or three times every day, and has comments that only talk about that subject over and over again with ever-fewer insights as they progress? Well I obviously would like to see TAE expand and reach more people, but never in that immature way.
BTW, while ZH may generally be much more self-centered and narrow-minded when discussing with important financial issues, I have to give them a lot of credit for bringing out good solid information and perspectives every so often.
For example, they went out on a significant limb with their readership by posting this piece:
Attention Marxists: Labor's Share Of National Income Drops To Lowest In History
Like Rosie, Zero Hedge is not a marxist blog: quite the opposite, but like him we come to the same troubling conclusion: "extremes like this, unfortunately, never seem to lead us to a very stable place." We would go further: not only does the US already have the core elements, should one be so inclined, to provoke a (rather active) anti-fascist movement based on some interpretations of pro-corporatists policies adopted by the administration, but should another be so inclined, the country also has the groundwork in place for another neo-Marxist revolution: just take this chart, add some slogans, mix, and simmer.
You have to give Ian credit for figuring out that I am in fact a nobody. Though it isn't really that big an achievement given that I have on several occasions stated it emphatically and my pseudonym might be a clue. As far as I know, only Stoneleigh thinks I'm a somebody. I expect to be seeing her again in a few days. She may yet perceive the truth.
FWIW, I have more than once implored her to spend more time at home with her family. But, a girl's gotta do what a girl's gotta do.
Ian, from one nobody to another, how about coming back after your shift at the sock puppetorium is over and tell us something we can use. Imitating ZH does not seem to be in our DNA.
I find there's no substitute for speaking to people in person when the goal is to bring people together to build community. The idea is that those I address then spread the ideas and motivation to prepare to others. The audiences have often been large and extremely engaged. Connecting with real people is of the greatest importance to me, and I have never had a bad reception anywhere I've been.
Driving long distances does take time, but that (in my little fuel-sipping car) and staying with local people keeps the costs bearable. It also gives me an opportunity to learn what makes specific areas tick, which means I can offer a better big picture. Figurative ivory towers don't offer much in the way of learning opportunities in comparison to being truly engaged in the world. Openness to new people and their realities keeps a worldview informed, relevant and fresh.
Trying to find the right balance between speaking and writing can be challenging. That balance will vary over time, depending on many factors. Sometime the speaking engagements are quite tightly packed and sometimes the distances in between are very long. At least I'm not trying to balance TAE with a full time job as I used to before last spring. Now all my efforts all the time go into this project because I honestly feel that there's nothing more important I could be doing.
@ Ian:
Travel is fun, interesting, great to meet people etc. But not as effective. No way.
Ian, face-to-face contact is still a hugely valuable means of communication. In my mundane working life I am well aware that if something needs to get unstuck my best option is to mosey over to the roadblock's office and politely request action.
@ A Walk in the Woods
Zero Hedge's comment section is a bastion of adolescent limousine libertarian fart jokes.
I'd add a healthy dose of misanthropy to the mix over at ZH. I am also oft astounded by the mental gymnastics they engage in to paint all their problems as the result of "librrrrruuuuuuuulllsssssss!!!"
Why would anybody bother responding to Ian?
1) if he is a shill, he is probably getting paid by the response, not the post. So the more he irritates you into response, the more money he makes.
2) if he is not a shill, you are certainly not going to insult him into sudden enlightenment. He does not want to understand.
I know Ilargi did not delete his original post--though that sure makes a convenient drum to beat--but I do think he should be deleting posts--just not Ian's--he should delete the responses.
Let's try to vent offline, to our loved ones and drinking buddies, and keep the quality comments coming.
"pretty bubbles in the air … till it’s too late … till another meltdown … game over … R.I.P. Reaganomics."
Sigh. The problem with all this is that Farrel is just as delusional as the True Believers in Reganomics.
He apparently actually believes that the crash and obvious causes of it will change the behavior and beliefs of the Reganomics camp.
History say; Triple Fortissimo - no, it won't. They will go on believing and acting as they have; they will find myriad scapegoats to explain why it didn't work this time, as astrologers always do. They will eagerly work for the next future opportunity to institute their beliefs; and the opportunity will pretty certainly arise.
There is no RIP.
@Ian, You've stirred the pot causing us to rethink. This is good.
Just this morning while volunteering for the Council of Cdns I had a flow of people in disagreement with my world view. Especially challenging is to stay in communication with those who support nuclear energy.Or the Dr. who supports privatization of healthcare or the middle aged man who sees eldercare as a waste of declining resources. Being a community sure doesn't mean we are all on the same page. When I feel my own intolerance flare I access my memory of meeting Stoneleigh in person, her demonstration of genuine listening, her patience, how she builds a great case by utilizing good points made by others.
Just saying face to face has value. I also get your point about reaching more people. It's a tough call.
And a little Fukushima follow up over on mine:
http://tinyurl.com/4522jug
Basic NHK news release; "Gov't says, sure, we knew; sorry about that."
Watching the incredible gyrations of all involved in "fixing" Greece, I'm once more moved to make my perpetual suggestion: Cut The Gordian Crap.
So in case anyone from the Greek government- or military - is reading; here's how you get out of this.
The Government of Greece declares, formally, that the financial deals now killing it were, and are, illegal and criminal, and are therefore totally void.
Why yes; you can do that. It's been done in history often; just not in the last couple hundred years much.
Then- you sieze the assets of the criminals, put in jail those you can catch- and- hey, it's all in court.
Wanna guess how long you can string that out? Without having to make payments on illegally tricky deals?
Way longer than anything else you're looking at.
Look; guys; how did the USA get out of Vietnam? You don't remember? Easy; we declared victory; all goals achieved; and we left.
It's not that hard, kids. Cut the crap.
Financial Times: "First, banking systems cannot be allowed to remain national. Banks must be backed by a common treasury or by the treasury of unimpeachably solvent member states. Second, cross-border crisis finance must be shifted ..."
He's got a 3rd. You REALLY want international finance systems to be fair and solvent?
I'll add a 4th; imperative. "Bankers caught cheating must be executed; promptly; international safety demands it."
I am not Ian.
This is not directed at Ian.
Just a response. Mine.
My name is mikel. A label only of identity. One. Of many.
I convince no one. A digit. Alive. Part of the mystery. Our beautiful mystery....we will all end up accepting. Differently. And move on.....
Meanings sent are not meanings received.
We are songs.
Meant to be shared. Cast.
Heard. Seen. Written. Played. Listened to. Contemplated. Liked. Not liked. Thrown off. Digested. Spun. Tossed. Stored. Saved.
The road. Ours. Mine. Yours.
Nothing is wasted.
Daddy sings bass. Momma sings tenor.
peace
Greenpa, this would be confirmation that reactor 3 indeed blew?
ian, that crossed my mind last year. sign of the times... it'll pass. i'm also chalking it up to stoneleigh attachment. :)
720,000 terabecquerels in contaminated water alone.
Scandia, you might like this one. I'd say sh!t is really starting to hit the fan. I don't expect much but - well, who knows... we just need to live through this.
@Greenpa, Love your " cut the crap " thesis:) Goes to show whose trough the Greek gov't is drinking out of that they can't figure it out as you have. Oh they know they can do as you have suggested. They just don't want to. Where's the money in it for them if they do?
They'd have to wave bye-bye to all those commissions for selling off the public assets.
@Lautturi, thanks for the article on the brave page. The official response demonstrates the gov't , including the opposition, wants to maintain the status quo.The servile response from the Liberals justifies the gutting of the Liberal Party that the voters served up in the last election.
Hearing that the first Green MP, Elizabeth May, was quick to tug her forelock as well is discouraging.As a card carrying Green I would have cheered if May had stood along side the page.Shish, they wouldn't even let May participate in the Leaders' debates! What has she got to loose to stand for truth?
The room belongs to the Queen? Oh " cut the crap"!
Just a reminder - if you're in the Portland area, and would like to attend a social potluck dinner with Stoneleigh on Sunday evening, send me an email for directions and details at tae.klieb at spamgourmet.com. PS: last year the elusive and talented TAE Summary showed up, so maybe we'll get lucky again this year... hint, hint.
Then on Monday evening we have the official presentation at Multnomah Friends Meeting Hall, 4312 SE Stark St, Portland, OR, at 7pm. See you there!
http://tinyurl.com/3zbc5ys
http://tinyurl.com/6dmo5rd
Chris Martenson interviews Gunderson.
..... Arnie Gundersen: Well, I am in touch with some scientists now who have been monitoring the air on the West Coast and in Seattle for instance, in April, the average person in Seattle breathed in 10 hot particles a day. !!........
So you don't like my posts (or my race?), then just come out and say it.
Hello Ash. You’re a tad sensitive. I don’t think I mentioned you at-all. Truth is, I’ve just skimmed your stuff as I find it a bit dense (and yes, maybe I’m the one who is dense). Racist? Where are you from then? Come on Ash, you can do better than that…
Ian, from one nobody to another, how about coming back after your shift at the sock puppetorium is over and tell us something we can use.
Well, IAM, you could try to keep your ego in check. You use TAE as your personal, daily even hourly diary. Do we need to know all your stuff? I don’t. Thanks. (but do keep on otherwise posts will be down to next to nothing).
I find there's no substitute for speaking to people in person when the goal is to bring people together to build community.
As I’ve said before Stoneleigh, you’re the real deal and ‘I dips me lid’.However (and there has to be a ‘however’) my earlier comment stands. I used to read TAE daily when you posted often but now just browse from time to time. The forum is very much in a rut (imo of course). Your posts these days (and may have missed a lot) seem to be a travel advisory. Hello?
Connecting with real people is of the greatest importance to me, and I have never had a bad reception anywhere I've been.
I’ve no doubt about that what-so-ever. But is it really effective in spreading the word?
It also gives me an opportunity to learn what makes specific areas tick, which means I can offer a better big picture……..Openness to new people and their realities keeps a worldview informed, relevant and fresh.
Again, can’t argue with that…totally valid.
Why would anybody bother responding to Ian? Thanks Ruben, for doing so.
As Skandia intimated, I am a stirrer but not maliciously so; I simply tell it like I see it and I’m prepared to apologise and recant if I consider my position incorrect: happens quite often.
And finally, Mikel Paul….Peace bro, keep smokin’ d’ pipe o’ love.
So that’s my take and now I’ll move on. Good luck to all TAE ers….
And I would be remiss if I didn't thank Illargi for his forbearance in allowing an alternative voice like mine to be heard. Seriously - thanks Illargi.. ('an I was only joking about the handbag: I see you more as the swirling, protective cape around Stoneleigh's adequate shoulders...is that better?)
@NZSanctuary,
About those 720,000 TBq in the water, Arnie Gundersen mentioned something the other day. And later I did a little rough calculation as well.
That much radiation is not only deadly to any living thing near it, it also gives off about a megawatt of decay heat. So if they try to purify the water, they end up concentrating the radwaste, which quickly gets hot enough to melt their plastic plumbing and filters.
The whole cleanup effort is this amazing lose-lose proposition.
New post up.
Where From Here?
.
Ian,
I never said that you are a racist and don't necessarily think you are... only that you have a knack for coming off as a bigot. You repeatedly used the word "out-sourced" instead of just saying S has stopped posting as much... and I'm quite sure you know exactly what race I am. If you had just said the latter and voiced your opinion on the matter, you probably would have never seen me respond.
Instead, you started making inane comparisons about how this site should be more like ZH and claiming the site "lost its way" and Ilargi was deleting your comments. Fine, that's your (flawed) opinion, but I don't care if you're a troll or a shill or whatever, if you make inaccurate comments (IMO of course) directly or indirectly involving me or my posts, I'm most likely going to respond.
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