Wednesday, December 14, 2011

December 14 2011: A Glimpse Into the Self-Destructive Psychology of Sharks

Unknown Bass August 17, 1900
A world's record 384-pound black sea bass caught by Franklin Schenck of Brooklyn with rod and reel off Catalina Island, California

Ashvin Pandurangi:

"You cannot survive without that intangible quality we call heart. The mark of a top player is not how much he wins when he is winning but how he handles his losses.

If you win for thirty days in a row, that makes no difference if on the thirty-first you have a bad night, go crazy, and throw it all away."

-Bobby Baldwin

There still remains a large population of stubborn "fish" in the developed world, who are clinging on to hopes of an economic recovery like incredulous poker players cling on to hopes of winning all their money back by playing three cards to a straight or a flush. 

These are the people who continuously get their clocks cleaned and then reload their chips in a vicious cycle of defeat; the people who keep the game alive and profitable for the "sharks".

At the same time, the bankrolls of fish have been diminished so severely and their egos bruised so badly that an increasing number are simply being forced out of the game for good. They can no longer ignore the fact that their lofty expectations have been flattened into silver dollar pancakes, and that they may find themselves lacking food to eat the next day if they continue gambling with what little wealth they have left.

On February 9, I wrote the following:
A Glimpse Into the Stubborn Psychology of Fish
"It's only when the school of fish stream towards the exits in unison that the "game" becomes wholly unprofitable for solid players. Until that tipping point arrives, our bets will continue to scream "I have a monster!" at the top of their lungs, and the fish will continue to make crying calls in stubborn disbelief.

The psychology of fish always leads them from a state of comfortable wealth to one of utter destitution over time, as they incessantly chase their losses, throwing bad money after even worse money.

As the total amount of money sunk into the pot exponentially increases along with net losses, the fish find it that much more difficult to simply walk away from the game. In the long-run, however, every fish goes for broke and is simply unable to purchase any more chips to play with.

The solid players are then left with a minimal or non-existent edge at their tables, as the game begins to consume itself, and that's when you know it's time to get up, leave the casino and begin the long journey back home."

In the financial investment world, anyone still speculating on rising share prices through "buy and hold" strategies, for example, would be labeled a huge "fish". A fish could also be a country such as Croatia, who recently decided to become a member of the EU in 2013. That was a classic move of "chasing" losses, or throwing good money after bad.

After being downgraded to nearly junk status by Standards & Poor a year earlier, and struggling to achieve any economic growth whatsoever, Croatia panicked and stubbornly decided that its best play would be to shove the remainder of its chips into the middle of an imploding European Union, scurrying for the last deck chair on the Titanic.

The most striking example of fish remains the rabid consumers of the developed world, who still feel the need to trample each other during the Holiday season for some sense of short-term gratification. They draw down their savings and run up their credit cards at a time when their jobs could evaporate at any moment along with the value of their assets and retirement accounts.

So while there are still quite a few individuals, corporations and countries harboring the stubborn psychology of fish, it’s also clear that fewer and fewer people and entities can afford to remain in this category – i.e. we have most likely reached the "tipping point". The point where there are no longer enough naive fish for the cut-throat "sharks" to feed on.

A shark is a solid, patient player who immediately assesses the playing styles of his opponents when sitting down at the game, and uses that information to pounce on every single situation in which the shark has a mathematical advantage. The shark is out to maximize value and profits like everyone else, but typically realizes many of his/her own limitations and does not hesitate to sit on the sidelines, patiently waiting for opportunities to strike.

The sharks also have a variety of tools at their disposal, including multi-layered deception and misinformation (something Bill Gross, the notorious financial shark, is familiar with) and an ability to make accurate probability assessments rather quickly with any given hand. Despite all of these advantages, even the most cunning sharks still share one fatal flaw – they are addicted to the game and refuse to quit even as the game collapses in on itself.

The #1 reason the sharks lose money in the medium to long-term is not because of bad luck or better opponents, but rather they beat themselves. They lose patience with bad players, they let their ego get the best of them against good players and they start to take unnecessary risks with their bankroll.

It could start off with small mistakes, such as getting into large pots with other players for the sole purpose of "out playing" them with weak hands, i.e. bluffing them off of the pot. These mistakes simply snowball on top of each other, as the inevitable losses pile up and the players begin to doubt their ability to remain patient and win.
Eventually, the losses and frustration build up to such a level that the good player feels compelled to move up in stakes and win some money back. So the player goes from, let’s say, a $500 max buy-in game to a game where one cannot play comfortably without a stack of at least $2000-$3000 in front. At this point, the formerly disciplined players have entered a self-destructive spiral of throwing bad money after good which they are very unlikely to escape from.

In a game of poker, the sharks can either put all of their available capital at risk on one game, or maybe leverage that capital up a few times by borrowing from a - pardon the pun - loan shark or the local bank, but that’s really about it. The desperate sharks in the world of international finance, though, can take their self-destructive attitude to a whole different level of extreme.

The highest stakes game in this world is obviously found within the shadow credit markets, where hundreds of trillions of dollars worth of derivative debt instruments are bought and sold between large institutional players. These games are established by the very largest players in smoke-filled rooms at the back of the speculative casino, and cannot be observed or regulated by any official exchanges.

ZeroHedge has been gradually piecing together what little we know about these "dark pools" to arrive at a more complete picture of how big this shark-infested game really is. It turns out that the total notional value of outstanding "over the counter" derivatives rose to a record $707 trillion in the first half of 2011, which was a $107 trillion increase in six short months. [1], [2]

$707,568,901,000,000: How (And Why) Banks Increased Total Outstanding Derivatives By A Record $107 Trillion In 6 Months
"So why did the notional increase by such an incomprehensible amount? Simple: based on some widely accepted (and very much wrong) definitions of gross market value (not to be confused with gross notional), the value of outstanding derivatives actually declined in the first half of the year from $21.3 trillion to $19.5 trillion (a number still 33% greater than US GDP).

Which means that in order to satisfy what likely threatened to become a self-feeding margin call as the (previously) $600 trillion derivatives market collapsed on itself, banks had to sell more, more, more derivatives in order to collect recurring and/or upfront premia and to pad their books with GAAP-endorsed delusions of future derivative based cash flows.

Because derivatives in addition to a core source of trading desk P&L courtesy of wide bid/ask spreads (there is a reason banks want to keep them OTC and thus off standardization and margin-destroying exchanges) are also terrific annuities for the status quo. Just ask Buffett why he sold a multi-billion index put on the US stock market. The answer is simple - if he ever has to make good on it, it is too late.

The description above almost perfectly captures the self-destructive psychology of sharks in action, as the game enters an entirely new phase of ridiculously high stakes and almost no margin for error. As the value of the shadow debt-derivative system implodes, the financial sharks are forced to throw ever-more leveraged money onto the table until they have nothing left, because the alternative is to simply quit the game and accept their current losses.

Peter Tchir provides some clues into what kind of derivative bets are being placed when he describes "The Ultimate Trade". It was recently revealed that many European banks have been selling large amounts of CDS insurance on the bonds of their home countries, while also buying large amounts of the sovereign bonds themselves. In essence, they are going "all in" on the bet that those countries will remain solvent.

The Ultimate "All-In" Trade
"But why would BSC be so willing to sell protection [on itself]? Well, the markets were very wide because of the fear that they would default. You sell as much protection as possible.

If you default what do you possibly care? Your stock is wiped out, your job is gone, and your strategy is totally explainable to future employees. If you don't default all this massive amounts of protection screams tighter and you have your best year ever. No brainer for the firm, an issue for the market.

So, why are French banks selling protection on France like it is going out of style? Why are Italian banks doubling down on Italy? Because if the bailouts work, it is free money. Huge tightening on top of the spread income until the bailout finally wins. If the sovereign defaults, is the bank really going to be around anyways?

It is the ultimate trade. If you make money, you get paid. If you lose money you were screwed anyways."

For the sharks swimming in the high seas of finance, current losses are so devastating to their balance sheets and their expectations that they cannot even conceive of a worse situation than leaving the game, so they double, triple and quadruple down using whatever capital and whatever leverage they can get their hands on through synthetic financial products. That’s the hallmark of a shark’s psychology right before he/she blows sky high:

"I’m such a clever player, yet so deep in the hole, that there’s no other choice but to let it all ride. Just give me one more game; one more hand to prove myself.

If I win, I’m back even or maybe even booking a healthy profit. If I lose, then I simply end up in the dark and frightening place where I would have ended up anyway."

The reality, though, is that this dark place ends up being much more frightening that anyone could have ever expected. After it’s all said and done, we can be sure the bruised and battered sharks will be begging the Lord Almighty to return them to the place where they were before they decided to make their final stand. But life simply doesn’t work that way, and that’s why we find our economies and societies held hostage to a self-destructive global banking system.

Reuters and Zero Hedge have recently cast some more light on the shadowy games played by the sharks of finance, as they examine the role of the "re-hypothecation" of collateral assets through a never-ending chain of large broker-dealers and banks. Boiled down to its most basic form (which is really all that matters), this process allows a single asset to be pledged as collateral for short-term loans an infinite number of times.

In the shadow banking system, many of these loans take the form of "repo" transactions, where the collateral security is "sold" for cash with the condition that it will be bought back at a specified date and rate of interest. These Escher stairs of OTC transactions, in turn, allow the financial sharks to potentially create an infinite amount of leverage behind their speculative derivative bets.

In this particular game, all of the big-name sharks gather in the City of London, where virtually no restrictions exist on how many times the same collateral can be "re-hypothecated". The following are excerpts and graphs from an IMF report prepared by Manmohan Singh and James Aitken, courtesy of Zero Hedge.

The (sizable) Role of Rehypothecation in the Shadow Banking System
" The United Kingdom provides a platform for higher leveraging stemming from the use (and re-use) of customer collateral. Furthermore, there are no policy initiatives to remove or reduce the asymmetry between United Kingdom and the United States on the use of customer collateral. We show that such U.K. funding to large U.S. banks is sizable and augments the measure of the shadow banking system.

… Rehypothecation occurs when the collateral posted by a prime brokerage client (e.g., hedge fund) to its prime broker is used as collateral also by the prime broker for its own purposes. Every Customer Account Agreement or Prime Brokerage Agreement with a prime brokerage client will include blanket consent to this practice unless stated otherwise.

… On-balance sheet data do not "churn," where churning means the re-use of an asset. If an item is listed as an asset or liability at one bank, then it cannot be listed as an asset or liability of another bank by definition; this is not true for pledged collateral...

However, off-balance sheet item(s) like ‘pledged-collateral that is permitted to be re-used’, are shown in footnotes simultaneously by several entities, i.e., the pledged collateral is not owned by these firms, but due to rehypothecation rights, these firms are legally allowed to use the collateral in their own name."

"Following the collapse of Lehman, hedge funds have become more cognizant of the way the client money and asset regime operates in the United Kingdom. For some, the United Kingdom provides a platform for higher leveraging (and deleveraging) that is not available in the United States.

In general, post Lehman, one would expect an increasing tendency for those providing collateral to counterparties to ask for their collateral to be segregated from the counterparty’s assets and to place limits on its further use.

Our understanding is that the U.K. FSA has not yet made any changes on the use (and re-use)of collateral since their LBIE experience that would remove or reduce the asymmetry in the U.K. and the U.S."

So, there you have it. The financial sharks are sitting down with each other in London to play one last game of incredibly high-stakes poker with infinitely leveraged capital, where absolutely none of them can afford to lose! Some of them will lose, though, and, when one or several major institutions do go down, it will become apparent that none of them really have the actual capital to back up their electronic chips.

In a sense, that is what has already happened with MF Global, and the liquidity crunch was only temporarily stalled by the coordinated action of the Fed and other central banks. To see why, we can return to the original article by Christopher Elias on rehypothecation for Thomson Reuters.

MF Global and the great Wall St re-hypothecation scandal
"MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation.

A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.

The volume and level of re-hypothecation suggests a frightening alternative hypothesis for the current liquidity crisis being experienced by banks and for why regulators around the world decided to step in to prop up the markets recently. To date, reports have been focused on how Eurozone default concerns were provoking fear in the markets and causing liquidity to dry up.

Most have been focused on how a Eurozone default would result in huge losses in Eurozone bonds being felt across the world’s banks. However, re-hypothecation suggests an even greater fear. Considering that re-hypothecation may have increased the financial footprint of Eurozone bonds by at least four fold then a Eurozone sovereign default could be apocalyptic."

As the institutional clients of brokers become increasingly fearful of having their funds effectively stolen through rehypothecation after the MF Global debacle, they will do everything in their power to make sure their cash cannot be further subjected to this process, which will only exacerbate asset sales to meet margin requirements, leading to lower valuations of toxic assets and more funding shortages at banks.
The most toxic assets right now are the sovereign bonds of peripheral Eurozone countries, up to and including Italy. If the banks turn to their governments (taxpayers) to re-capitalize them,  then the countries’ own funding needs will worsen as their debt yields go up, which also exacerbates the funding needs of the banks. Yalman Onaran describes this "death spiral" in his article on Bloomberg:

European Banks Taking Cash From Governments Seen Sparking 'Vicious Cycle'
"The size of potential losses at European banks has scared away short-term creditors, squeezing the region’s lenders. The European Central Bank has stepped in to replace funds being withdrawn, providing unlimited cash and lowering requirements on the quality of collateral it will accept.

"We’re in a death spiral," said Andy Brough, a fund manager at Schroders Plc in London. "As the yields on the peripheral bonds increase, value of the bonds decreases and the amount of capital the bank has to raise increases."

Basically, the amount of actual capital available for the pot continues to rapidly shrink, while the sizes of the outstanding bets and raises remain the same – a theme well-known to readers of The Automatic Earth. The central banks are trying to hold back a tsunami of margin calls that will produce waves of potentially infinite height, and therefore there is no way they can hold them back for very much longer.
As llargi at The Automatic Earth outlined in his post, Cash for Christmas, the funding situation for European banks remains dire despite the coordinated CB swap lines designed to lower the short-term cost of borrowing dollars, perhaps because there is a massive shortage of euro funding as well, and there is very little chance it will improve.

What is truly frightening about these financial sharks is that their predictable psychology ends up being much more destructive to the rest of society than to themselves. In a poker game, the sharks playing recklessly outside of their bankrolls will self-destruct, go home in tatters and perhaps drink themselves into a coma.

In the game of high finance, though, the sharks will be bailed out and/or go home with much their personal wealth intact, after the institution’s shareholders, creditors, employees, customers and just about everyone else associated with it is wiped out.

The sad fact is that we are all currently a part of their reckless poker game, whether we like it or not.  There is only one way around that - the people must force their governments to hold the bankers criminally, civilly and financially liable for their actions and losses.

If that doesn’t happen very soon, through whatever means necessary, then the only other option is to insulate yourself from the fallout through whatever means you are able and willing to undertake. The long journey from the casino back home is well underway, and now we must simply make it to that home, safe and sound.

American privilege rots an empire from within
by Andy Xie - Caixin

A rising empire rewards people who contribute to its growth and invest in its future. The empire’s decline begins when certain members of society are over-rewarded by means of privileges, and the empire’s money is wasted on outdated endeavors.

Today, America rewards the wrong people and spends disproportionately on projects of the past. Symptoms of the flawed incentive system in the U.S. economy include a massive fiscal budget deficit, high unemployment rate, crumbling infrastructure and a failing basic education system.

International competition isn’t threatening the United States, but internal problems are. And unless the United States tackles its wrong-way incentive system and spending spree soon, its gradual decline will continue until it eventually joins the likes of Latin America.

A serious effort to correct the U.S. course started in earnest a few months ago during a congressional fight over raising the national debt ceiling. Democrats and Republicans eventually agreed to mandate $1.2 trillion in budget cuts over 10 years through a “super” committee, which was assigned to work out details.

If the super committee failed to reach an agreement, the cuts would be proportionally slapped on future civilian and defense expenditures, with health care and social security programs exempted. Guess what happened? The committee failed to reach a compromise, and thus the consequences will be felt after mandated cuts begin in 2013.

Next year’s election may change the political landscape: One party may again dominate Congress and the White House, leading to a different outcome. Hence, the super committee’s failure isn’t consequential on its own, but it does provide ammunition for election campaigns, and offers another example of America’s dysfunctional political system.

Further, the cuts, even if successful, would not bring the U.S. government budget under control. The total amount on the chopping block is equal to less than one year’s deficit. That’s not very ambitious for a 10-year program.

Against this backdrop, the United States is experiencing a full-blown economic crisis. The nation’s real unemployment rate, which includes idled workers who’ve given up looking for jobs, is 18%. One-tenth of the nation’s properties have been foreclosed since 2007, and another tenth have negative equity.

The poverty rate is more than 15%, and another 20% of the population is struggling on incomes near the poverty line. Looming over these grim statistics is the federal government’s budget deficit, which is equal to about 10% of the nation’s GDP.

The breakdown began with the 2008 global financial crisis, which was like a dam break. Problems had been accumulating for years, and a debt bubble had merely temporarily covered up problems. Now, the U.S. government borrows roughly 40 cents for each dollar spent.

Alan Greenspan, a former U.S. Federal Reserve chairman, was mainly responsible for creating the bubble. The fiscal balance was later wrecked by rising health care costs, social security payments and defense spending along with veteran’s benefits.

Spending on these three items alone increased a combined 107% between 2000 and 2010, while nominal GDP rose only 45%, to $2.6 trillion — substantially more than total fiscal revenues. If spending on these three items had grown at the same pace as nominal GDP, the fiscal deficit would be less than half of what it is today.

How bad is it? Excessive health care spending tells part of the story, eclipsing the U.S. trade deficit in seriousness. Some 17% of the nation’s GDP is spent on health care — twice as much as in other developed economies — with about half paid by federal and local governments, and the other half covered by businesses and individuals. Unless these costs are brought under control, America will never resolve its fiscal crunch.

Ironically, excessive health care spending hasn’t produced a healthier population. The United States actually fares worse than other developed countries in areas such as life expectancy, diabetes and cardiovascular disease.

Unlike Europe and Japan, the United States has a growing population. So it could count on growth to solve problems. Its agriculture and mining industries are booming. And it has many competitive companies in industries in areas such as aerospace and pharmaceuticals. But it’s weighed down by excessive overhead costs such as health care, social security and defense.

The Occupy Wall Street movement drew attention to what organizers said was a huge gap between the 99% of the nation’s citizens whose lives are out of synch with the 1% wealthiest Americans.

The top 1% control about one-fifth of the nation’s income and two-fifths of the wealth. The top 10% take in about half of all income and have accumulated 80% of the wealth. Meanwhile, about 80% of Americans merely get by and have very little wealth available as a cushion for when personal finances turn down.

The gap between the rich and the rest, which has roughly doubled over the past two decades in the United States, is an inevitable result of competition. Of course, competition motivates people, and inequality is often a price worth paying if it motivates people to make the pie bigger.

All could be better off with a bigger pie, even if inequality worsened. Limiting competition improves equality but decreases incentives for people to work. A society needs to make a trade-off between the two.

Inequality worsens in an environment of limited competition, as inefficiency and social friction rise. Examples of this phenomenon include the Philippines, where few families rule through monopolistic practices. The country has become poorer relative to others over the past two decades, while inefficiencies are supported by Filipinos who work abroad and send money home.

Many Latin American countries fall into this category, too, and the United States is heading that way.

Fat paychecks
Most of America’s well-to-do are corporate executives, doctors, lawyers, bankers and the like. Their rewards are tied to positions, not performance. Corporate managers are paid a lot more than average employees, even if they’re not worth it.

For example, one report said salaries for big U.S. company CEOs have jumped to 343 times the average pay for their own employees, up from 42 times in 1980. Of course, a CEO whose work generates a lot of value deserves a decent slice.

But look at the stock market: Common shareholders have done terribly over the past decade. How can CEOs justify millions in take-home while shareholders — their bosses in theory — do so poorly. I’m sure the compensation consultants can come up with good excuses. But this has been going on for years.

Of course, when CEOs make tens of millions of dollars, their immediate subordinates can make millions. These steep compensation levels for executives are a major reason for rising inequality in the United States. And judging from stock performances, many executives don’t deserve fat paychecks.

When big companies started rising in the early 20th century and managers, not shareholders, took control, theorists tried to explain why it was efficient. But as managers essentially decide
their own compensation, large companies eventually exist for the benefit of managers, not shareholders nor workers. A board of directors is supposed to look after shareholders’ interests, but in reality, most boards are stuffed with friends of the CEO.

One could argue that the economic failure of the United States is not the fault of but the sabotage of capitalism. Indeed, corporate governance is breaking down, and that’s one of the most important causes of America’s current economic troubles.

Likewise, reaping unmerited compensation are highly paid financial professionals. Salaries in the financial industry have risen despite the sector’s collapsing firms, shareholder wipe-outs and taxpayer bailouts. This industry certainly has worked neither for the economy nor shareholders.

Lawyers are another group of well-paid professionals who maintain the rule of law. But the United States suffers from an oversupply of lawyers, which forces some to look for ways to circumvent or take advantage of the system.

The most extreme example is the professional niche of ambulance chasers who are busy seeking ways to sue hospitals, doctors and insurance companies. High-end lawyers working for corporations are busy helping corporate managers maximize benefits without breaking rules. How’s that for no added value?

Now, we come to health care. Doctors and hospitals in the United States charge more for their services than in other countries, yet the U.S. population’s health condition proves more spending doesn’t yield better results. Neither does competition work in the health care market, as the information asymmetry between patients and doctors seriously decreases the effectiveness of market competition in allocating resources.

Because patients are vulnerable and must accept what the doctors say, the health care market has a naturally inflationary tendency. Doctors are biased toward expensive treatment. Prices rise easily in a system in which patients are insured and, hence, not resistant to high prices. Of course, insurance premiums rise to reflect costs, too.

In other developed countries, the runaway tendency of health care costs is checked by government limits on doctor charges to ration services. While many argue the United States delivers better services in some areas, isolated examples can’t justify a system that costs twice as much and delivers a less healthy population.

Growing old
To understand the American government’s fiscal trouble, one must study the American Association of Retired Persons, which has more than 40 million members. They constitute a huge bloc of voters in national elections, and their biggest financial concerns are health care and social security.

Some 45% of federal expenditures go toward health and social security programs. This slice of the spending pie is expected to rise to 51% of total expenditures by 2016. Unless something happens that suddenly disrupts this upward spiral, these two parts of the fiscal budget will bankrupt the country.

Meanwhile, the federal government spends a mere 3% on education. Local governments fund most education services through property taxes, yet it’s shocking to see how little the federal government supports youths as opposed to retired people.

In addition to rewarding the right people, an empire rises by investing in the future. The United States went on a massive investment boom in late 19th and early 20th centuries, creating a superpower. An infrastructure program in the 1950s and information technology investment in the 1970s strengthened its superpower status after World War II.

But America has moved in the opposite direction over the past two decades. Its crumbling infrastructure is a sign that money has been diverted to support retirees. The number of wealthy Americans willing to support charity in the pattern set by the likes of Bill Gates and Warren Buffett are dwindling.

The financial crisis in 2008 and the current fiscal crisis are merely symptoms of deep structural problems in American society. Only a popular awakening and strong leadership can solve these problems and prevent the United States from following calling the International Monetary Fund and asking for a bailout.

Historians have all sorts of theories on why the Roman Empire fell, blaming everything from religion to barbarians. My take is that every empire in history eventually rots from within when privilege, not contribution, becomes the basis for compensation.

The children of the ones who contributed take advantage of their status as the offspring of the empire-builders. They can live comfortably, enjoying easy rewards, even as their neighbors lose jobs and homes. We’re seeing the consequences of this phenomenon today in America.

Britain is ruled by the banks, for the banks
by Aditya Chakrabortty - Guardian

Is David Cameron's kid-glove treatment of the City remotely justified, when it neither pays its way nor lends effectively?

The national interest. It's a phrase we've heard a lot recently. David Cameron promised to defend it before flying off last week to Brussels. Eurosceptic backbenchers urged him to fight for it. And when the summit turned into a trial separation, and the prime minister walked out at 4am, the rightwing newspapers took up the refrain: he was fighting for Britain.

In the eye-burningly early hours of Friday morning, exhausted and at a loss to explain a row he plainly hadn't expected, Cameron tried again: "I had to pursue very doggedly what was in the British national interest."

As political justifications go, the national interest is an oddly ceremonial one. Like the dusty liqueur uncapped for a family gathering, MPs bring it out only for the big occasions. And when they do, what they mean is: forget all the usual fluff about ethics and ideas; this is important.

You heard the phrase last May, as the Lib Dems explained why they were forming a coalition with the Tories. More seriously, Blair used it as Britain invaded Iraq.

But here Cameron wasn't talking about foreign policy; nor about who governs the country. The national interest he saw as threatened by Europe is concentrated in a few expensive parts of London, in an industry that would surely come bottom in any occupational popularity contest (yes, lower even than journalists): investment banking.

In its haste to depict events as Little Britain v Big Europe, the Tory press hasn't dwelt on the inconvenient details of last week's fight. But it was only after the prime minister failed to secure protection for the City from new financial regulation mooted by the EU that he told Nicolas Sarkozy to get on his vélo.

On one issue in particular, Cameron had a good case: Britain wants banks to put more money aside for a rainy day than the EU is considering. Elsewhere, he just looked unreasonable – what exactly is wrong with having international banking supervision? One reason for the euro crisis was that its members have 17 national bank watchdogs and barely anyone looking across borders.

Step back from what even EU officials were calling "arcane" details, though, and the big principle is this: the prime minister effectively stuck relations with the rest of Europe in the deep freeze in order to protect one sector of the economy.

In my recollection, no British minister in recent times has termed one industry as being of "national interest". "Vital" or "key"? Why, such words are the very currency of the MP's address to a trade association. But on the big phrase, I asked the Guardian's librarians to check the archives from 1997 onwards. They came back empty-handed.

Cameron is merely expressing more openly something Labour frontbenchers also believe: that the City is pretty much the last engine functioning in Britain's misfiring economy. Indeed, one of the Labour lines of attack against Cameron this weekend has been that he has left the City more open to regulation.

A few weeks ago, the shadow chancellor Ed Balls warned against any further taxes on financial trading within Europe. However, he said, he would urge a "Robin Hood tax with the widest international agreement". In other words, Balls will give his fullest support to something that has no chance of happening.

This is the same kind of political subservience towards the City, observed by the Financial Services Authority (FSA) in its report into the collapse of RBS. According to the watchdog, a major reason why Fred Goodwin wasn't checked as he drove RBS off a cliff was because of "a sustained political emphasis on the need for the FSA to be 'light touch' in its approach and mindful of London's competitive position".

Had regulators been harder on the bankers, "it is almost certain that their proposals would have been met by extensive complaints that the FSA was pursuing a heavy-handed, gold-plating approach which would harm London's competitiveness".

As all British taxpayers know by now, securing the "competitiveness" of RBS has wound up costing us around £45bn. So what is it that justifies the kid-glove treatment of the finance sector?

Switch on the news and you normally hear some minister or lobbyist (come on down, Angela Knight of the British Bankers' Association) talking about the vital contribution banking makes to employment. Our tax revenue. Or the role banks ideally play in directing money to needy businesses.

These claims are repeated so often that they rarely get even the briefest patdown from interviewers, let alone backbench MPs or economists. Yet they are largely bogus, as explained in a new book called After the Great Complacence, produced by academics at Manchester University's Centre for Research on Socio-Cultural Change (Cresc). Indeed, on nearly any important measure, finance actually contributes less to Britain than manufacturing.

Take jobs. The finance sector employs 1m people in Britain. Chuck in the lawyers, the PRs and the smaller fry that swim in its wake and you are up to a grand total of 1.5m. And most of these people are not the investment bankers for whom Cameron went to war in Brussels.

At the big British banks such as RBS and HBOS, 80% of the staff work in the retail business. Even if Sarkozy were to shroud Canary Wharf in a giant tricolore, those staff would still be needed to staff the branches and man the call centres. Even in its current state of emaciation, manufacturing employs 2m people.

What about taxes? Lobbyists like to point out that banks are usually the biggest payers of corporation tax, but usually omit to mention that corporation tax isn't that big a money-spinner. For their part, even leftwingers will usually assume that the bankers effectively paid for the tax credits, hospitals and schools we enjoyed under Labour.

It's not true. The Cresc team totted up the taxes paid by the finance sector between 2002 and 2008, the six years in which the City was having an almighty boom: at £193bn, it's still only getting on for half the £378bn paid by manufacturing. It would be more accurate to say that the widget-makers of the Midlands paid for Tony Blair's welfarism. But that would be a much less picturesque description.

Even in the best of times, the finance sector hasn't paid anything like as much to the state as the state has had to pay for them since the great crash. According to the IMF, British taxpayers have shelled out £289bn in "direct upfront financing" to prop up the banks since 2008. Add in the various government loans and underwriting, and taxpayers are on the hook for £1.19tn.

Seen that way the City looks less like a goose that lays golden eggs, and more like an unruly pigeon that leaves one hell of a mess for others to clear up.

Ah, but what about lending? After all, this is why we have banks in the first place: to channel money to productive industries. The Cresc team looked at Bank of England figures on bank and building society loans and found that at the height of the bubble in 2007, around 40% or more of all bank and building society lending was on residential or commercial property.

Another 25% of all bank lending went to financial intermediaries. In other words, about two-thirds of all bank lending in 2007 went to pumping up the bubble.

This doesn't look like a hard-working part of an economy humming along: it's nothing less than epic capitalist onanism. If the statistics don't support the arguments for the City's pre-eminence, the public don't either. In 1983, 90% of the public agreed that banks in Britain were well run, according to the British Social Attitudes survey. By 2009, that had plunged to 19%.

In other words, both the evidence and the voters are against investment bankers. So why do the politicians cling on to them?

Part of the answer is financial. Bankers used the boom to buy themselves influence – so that, according to the Bureau of Investigative Journalism, the City now provides half of all Tory party funds. That is up from just 25% only five years ago.

Another part must be cultural. Running this government are two sons of bankers. Cameron's father was a stockbroker, Clegg's is still chairman of United Trust Bank (and famously helped his son get some work experience). For its part, Labour spent so long outsourcing all economic thinking to Gordon Brown and Ed Balls that it has long lost the ability to argue against the orthodoxy of giving the City what it wants.

In a poorer country, the cosiness of relations between bankers and politicians would be scrutinised by an official from the World Bank and disdainfully pronounced as pure cronyism. In Britain, we need to come up with a new word for this type of dysfunctional capitalism – where banks neither lend nor pay their way in taxes, yet retain a stranglehold on policy-making. We could try bankocracy: ruled by the banks, for the banks.

What are the results of bankocracy? It means that the main figures arguing for a Robin Hood tax are the Archbishop of Canterbury Rowan Williams and Bill Nighy. It means that opposition to the rule of banks isn't found in Westminster, but in tents outside St Paul's or among a few grizzled academics and NGO-hands – with no political vehicle to carry them. Meanwhile, the politicians declare that the national interest of Britain can be defined by what suits one square mile of it.

Legal Problems Seen for EU Deal
by Matina Stevis and Frances Robinson - Wall Street Journal

Senior European officials said Tuesday it could be difficult to convert last week's political deal among European Union member states into a watertight legal pact, signaling a fresh concern about the region's latest response to the debt crisis.

In remarks to the European Parliament in Strasbourg, European Council President Herman Van Rompuy said the fact that the U.K. had vetoed an EU-wide agreement, forcing member states to sign a separate intergovernmental accord, would complicate the task of implementing new, stricter fiscal rules.

"An intergovernmental treaty was not my first preference, nor that of the most of the member states ... It will not be easy, also legally speaking. I count on everybody to be constructive bearing in mind what is at stake," he said.

A potential weakness of an intergovernmental agreement is that it could be easier to unravel legally. It may also not be easy to achieve either, with some EU member states that don't use the euro already indicating they may seek different terms than euro-zone members.

"We must continue to evaluate what it is that has been agreed. It is clear that Sweden will not enter this cooperation on the same terms as euro-zone members," Swedish Finance Minister Anders Borg told reporters in Stockholm Tuesday.

Sweden doesn't use the euro so will have "another role," Mr. Borg said. "It's not completely clear what situation faces countries like Denmark, Poland and Sweden which are not euro members."

The Czech government also said Tuesday that it needs to see details of the deal before it can commit to it. Czech Prime Minister Petr Necas said the euro zone and its leaders can't set a deadline by which noneuro-zone countries must make a decision on two "very serious" issues.

At the summit, EU leaders agreed to tighten control over the budgets of the 17 euro-zone members, a measure that may also be adopted by all other EU members with the exception of the U.K. They also agreed to channel as much as €200 billion to the International Monetary Fund, with about a fourth of the funds coming from noneuro-zone countries, to help fund its backstop mechanisms. But they put off till March a decision on raising the €500 billion cap on resources of the permanent euro-zone bailout fund.

Euro-zone borrowing costs have risen again this week and stock markets came under pressure after an initial relief rally on last week's summit deal faded. Among investor concerns was the region's failure to complete the work on a powerful financial firewall to stem the debt crisis. Some were also disappointed by European Central Bank President Mario Draghi's refusal to give an explicit promise that the bank would intervene more boldly in bond markets in exchange for the promised fiscal reforms.

Mr. Van Rompuy said Britain's position meant "there was no alternative" to agreeing a treaty among the euro zone members plus any noneuro countries that wish to join. And he said the breadth of support from EU member states for the accord made him optimistic a way will be found to enforce the deal. "I'm optimistic because I know it is going to be very close to 27, in fact 26 leaders indicated their interest," he said.

In the early hours of the morning last Friday, U.K. Prime Minister David Cameron decided to block changes to the treaty after other EU heads of government meeting at a summit in Brussels refused to give Britain an effective veto over future financial regulation initiatives.

Much of the three-hour debate turned into a verbal joust over David Cameron's decision to block the new fiscal rules being enshrined by changing the current Lisbon treaty. Mr. Cameron's decision also came under fire from Sharon Bowles, one of the most influential members of the U.K.'s Liberal Democrats in the European Parliament. The Lib Dems are the junior coalition partners with Mr. Cameron's Conservatives.

She accused Mr. Cameron of a "power grab" and said while the Conservative leaders pre-summit promises "many have fooled" some Liberal Democrats in London, "it didn't fool us—or me."

Mr. Van Rompuy and European Commission President Jose Manuel Barroso were careful in not criticizing the U.K. too harshly. Mr. Barroso said it was impossible for the other euro zone members to agree to the U.K. demands which represented "a risk to the integrity of the single market." But he insisted the Commission and the other EU institutions will continue to protect the interests of all its 27 member states equally, "including those of the U.K."

Mr. Barroso also confirmed the commission tabled a compromise protocol during last week's talks, which would have given some protection to the U.K. But he said "unfortunately, this compromise proved impossible."

Greece, Private Creditors At Odds Over 50% Haircut
by Costas Paris - Dow Jones Newswires

-Greece, Private Creditors Disagree On Coupon On New Bonds, Guarantees:
-Chinese Funds Reluctant To Participate In Haircut
-Needed 90% Participation By Private Creditors "Looks Difficult" To Achieve
-Talks Unlikely To Be Concluded Before February

The Greek government is at odds with its private creditors over a 50% haircut in the value of bonds they own, two people with direct knowledge of the negotiations said Tuesday.

The government is offering about half the coupon on new bonds that creditors are demanding, and some funds are reluctant to accept a haircut of the needed size, the two people said. "At this point there is no convergence. There are disagreements over the coupon and the guarantees sought by the creditors. There is also reluctance by some funds to participate, which means talks could stretch to February instead of the original plan to wrap everything up in January," one of those people told Dow Jones Newswires.

Greek Finance Minister Evangelos Venizelos met Monday with Charles Dallara, the head of the Institute of International Finance (IIF)--a trade body of the world's largest banks which is leading the talks--and officials from Greece's public debt management agency have been separately meeting with private creditors since last month.

The haircut is an integral part of an €130 billion second bailout package for Greece that will keep it from defaulting on its debts. If an agreement is reached, about EUR200 billion in debt held by private investors will by cut by half.

Greece has proposed a debt exchange under which investors would swap old government bonds for new ones worth 35% of their old face value, and with a coupon of around 4-5%. It is also throwing in a one-off cash payment equal to about 15% of the old bonds' value as an enticement, totaling around €30 billion.

The IIF has proposed a swap trading old bonds for new ones with a 50% lower face value, and is demanding a coupon of around 8%, plus guarantees for the principal of the new bonds estimated at around EUR30 billion. Those guarantees could come from a euro-zone body like the European Financial Stability Facility, the group's emergency bailout fund. For the exercise to be successful more than 90% of the institutions holding Greek bonds must participate in the deal.

A second person said Chinese funds holding "a significant amount" in Greek bonds are unwilling to participate as they consider themselves state entities and believe they should be treated like the European Central Bank, which is entitled to full repayment plus the coupon when bonds mature. Some hedge funds are also refusing to take part in the talks.

"The refusal of some financial institutions to participate complicates things," the second person said. "If the needed participation is not achieved the whole exercise is up in the air and the money has to be found from somewhere else."

He added that Germany's so-called "bad banks," which have come under state control and which had previously agreed to participate in a 21% write down, "are also uncomfortable with a 50% cut, but we expect that under pressure from Berlin they will eventually join in."

With a successful private sector involvement, the Greek government expects to save €5.1 billion in interest payments alone next year. The first person said that if the participation falls short, there are thoughts in Athens and the euro-zone about triggering the so-called "collective action clauses" that would force haircut on all creditors provided that around 75% agree to participate.

"Something like this will likely be seen as a credit event and trigger credit default swaps which nobody in the euro zone wants. However, both Athens and the euro-zone are determined to achieve the necessary participation," he said.

Greek budget hole widens, targets tougher to reach
by Ingrid Melander and Harry Papachristou - Reuters

* Central govt budget gap grows 5.1 pct y/y in Jan-Nov
* Construction down 38 pct in January-August
* Greece likely to miss 2011 budget deficit target
* Greece borrowing costs increase in T-bill auction

Greece's yawning public deficit widened in the first 11 months of the year, putting budget targets further out of reach, while building activity plunged by more than a third since the start of the year, data on Tuesday showed.

With international officials and bankers in Athens to work on details of a new 130 billion euro bailout package, the data underlined the stark challenge facing the technocrat government of former central banker Lucas Papademos.

"The recession will be deeper than the government and the troika are expecting," Capital Economics analyst Ben May said, referring to the joint inspection team from the European Union, European Central Bank and International Monetary Fund .

"Greece will struggle to reduce its budget deficit and will come under more pressure for austerity. There is certainly a risk that Greece may well come to the point it decides it might be best to default," he said.

Choking on debt amounting to 160 percent of gross domestic product and forecast to enter its fifth year of recession in 2012, Greece's weakened economy is staggering under the repeated doses of austerity prescribed by its international lenders.

Finance ministry data on Tuesday showed the budget gap of the central government widened 5.1 percent to 20.52 billion euros ($27.1 billion) in the first 11 months of the year.

The data suggests Greece could miss its target of cutting the deficit to 9 percent of GDP from 10.6 percent last year and may force the government to impose additional austerity measures to catch up with its budget goals in 2012.

Greece and its international lenders expect the economy to shrink by at least 5.5 percent this year and bleak construction data showed on Tuesday that a deep slump continued in what was a key driver of the country's growth when it joined the euro and organised the 2004 Olympics. Building activity by volume contracted 37.8 percent in the year to August while the number of new building permits dropped by 30.6 percent.

As inspectors from the EU/ECB/IMF troika combed through the books in Athens, private bondholders, also meeting in the Greek capital, failed to agree with the government on the outline of a bond swap that is part of the deal, and agreed to continue consultations.

This year's budget goals largely hinge on a string of emergency taxes imposed in September after Greece's lenders threatened to withhold bailout funds if it did not meet its budget goals. The recession has since cancelled out much of the extra revenues the government was hoping to raise.

With the year almost over, the finance ministry insisted that the 2011 budget target was still on track, despite the wider deficit figure reported on Tuesday. "The current revenue shortfall is expected to be addressed in December, when (emergency) tax measures will yield results," it said in the statement.

But a senior government official was less optimistic. "If current spending and revenue trends continue, the deficit will be at about 10 percent of GDP and not at about 9 percent," the official, who declined to be named, told Reuters before Tuesday's budget data were announced.

The new taxes included a charge of up to 5 percent on gross personal income as well as a controversial property tax which households must pay or face having their electricity cut off. These measures have failed to boost net tax receipts, which shrank 3.1 percent year-on-year in Jan-Nov, a slightly slower pace than a 4.1 percent drop in the first 10 months of the year.

Recession is dealing a further blow to the budget as the government steps up grants to social security organisations, whose revenues are drying up. Spending before interest payments rose by 3.0 percent year-on-year in Jan-Nov. The data refer to the state budget deficit, which excludes items such as local authorities.

Even though they are not identical, they are indicative of the general government shortfall, the benchmark for the EU's assessment of Greece's economic policy programme. Greece had to pay a higher price to sell T-bills on Tuesday, when the debt management agency sold 1.625 billion euros of six-month T-bills but saw the yield rise by 6 basis points to 4.95 percent from a previous auction in November.

Monthly T-bill sales have been Greece's sole source of market funding since it was shut out of bond markets early last year when its derailed finances triggered the country's worst crisis in decades. The country's cash deficit decreased slightly in the first 11 months of the year to 20.24 billion euros from 21.38 billion in the same period 2010, central bank data showed, largely thanks to privatisation receipts.

IMF slashes growth forecast for Greece
by Larry Elliott - Guardian

IMF report likely to fan financial market fears over debt default as Greece struggles to cope with austerity and recession

The International Monetary Fund slashed its growth forecasts for Greece and warned that ever-deepening recession was making it harder for the debt-ridden country to meet the tough deficit reduction targets under its austerity programme.

In a report likely to fan financial market concerns about a possible debt default, the regular health check by staff at the Washington-based Fund said the situation in Greece had "taken a turn for the worse".

Poul Thomsen, deputy director of the IMF's European department and its mission chief to Greece, said: "We have revised growth down significantly to -6% in 2011 and -3% in 2012. We expected 2011 to be an inflection point when the recession bottomed out, followed by a slow recovery. But the economy is continuing to trend downwards. The hoped for improvement in market sentiment and in the investment climate has not materialised."

The IMF, together with the European Union and the European Central Bank has imposed tough conditions on Greece as the price of financial support that has allowed the government in Athens to continue paying its bills. In the fifth report carried out since the start of the crisis 18 months ago, IMF officials suggested that the austerity programme might need to be eased in view of the damage being caused to the economy by the recession.

"Discussions [at the IMF] focused on recalibrating the programme's macroeconomic framework and adapting the implementation of reform and adjustment policies to an appropriate and feasible pace."

The IMF had previously assumed that the contraction in the economy would be limited to 4.5% this year, allowing the budget deficit to be trimmed to 7.5% of gross domestic product. Thomsen said the deficit was likely to be 9% of national output this year.

However, Greek officials are privately saying that the budget black hole is likely to be "in excess of 10%", making the imposition of yet more austerity measures inevitable. "Pay cuts have only made the recession worse," one source said.

The IMF report added that market sentiment had "steadily deteriorated, with 16.5% of bank deposits withdrawn since the end of 2010". Since the start of the recession, the economy has contracted by 15%. It has also suffered losses of more than €60bn (£50.5bn) in tax avoidance.

In talks with Evangelos Venizelos, the finance minister, international inspectors urged the authorities to streamline the bloated public sector by both closing state organisations and putting 30,000 civil servants into a special "labour reserve".

Opening up several "closed professions", which are often blamed for the country's notorious lack of competitiveness, has also been suggested. The social implications, however, of further belt-tightening on a populace now stretched to the limit by a barrage of tax increases, wage and pension cuts could be immense.

The report said IMF staff believed that the new Greek government, headed by Lucas Papademos, was committed to the austerity programme. "The authorities have taken steps to bring the fiscal programme back on track, taking meaningful measures to cut public wages, employment and pensions, and to broaden the tax base (prior actions)."

"Still, risks to the programme remain large, both from external sources (the worsening outlook for the euro area), and internal sources (a relapse into weak implementation)." The Fund explained that there was a "growing risk" that the outcome for Greece would be even worse than envisaged, especially if structural reforms were delayed.

"Accelerated private sector adjustment, on top of fiscal retrenchment, would likely lead to a downward spiral of fiscal austerity, falling disposable incomes and depressed sentiment. In effect, the economy would rapidly work off its external imbalance through deeper recession and wage-price corrections rather than through productivity enhancing structural reforms."

In its analysis, the IMF said Greece's debts were still sustainable even with the gloomier economic backdrop, but only if the country's private sector creditors accepted a writedown of 50% and Athens received financial support on favourable terms. "The previous 21 July financing package would not work. Public debt would peak at 187% of GDP in 2013 and fall to 152% of GDP by 2020. Net external debt would peak at 128% of GDP in 2012 and fall to 96% of GDP by 2020. These already weak downward trajectories would not be robust to shocks.

"Further progress in reducing the deficit is going to be hard to achieve without underlying structural fiscal reforms. Greece will not be able to undertake – in a socially acceptable manner – the large fiscal consolidation that still lies ahead without a much stronger resolve to tackle the problem of tax evasion."

Rapid rise in Arctic methane shocks scientists
by Steve Connor - Independent

Dramatic and unprecedented plumes of methane - a greenhouse gas 20 times more potent than carbon dioxide - have been seen bubbling to the surface of the Arctic Ocean by scientists undertaking an extensive survey of the region.

The scale and volume of the methane release has astonished the head of the Russian research team who has been surveying the seabed of the East Siberian Arctic Shelf off northern Russia for nearly 20 years.

In an exclusive interview with the Independent, Dr Igor Semiletov, of the Far Eastern branch of the Russian Academy of Sciences, said that he had never before witnessed the scale and force of the methane being released from beneath the Arctic seabed.

"Earlier, we found torch-like structures like this but they were only tens of metres in diameter. This is the first time that we've found continuous, powerful and impressive seeping structures, more than 1000m in diameter. It's amazing," Semiletov said. "I was most impressed by the sheer scale and high density of the plumes. Over a relatively small area, we found more than 100 but, over a wider area, there should be thousands."

Scientists estimate that there are hundreds of millions of tonnes of methane gas locked away beneath the Arctic permafrost, which extends from the mainland into the seabed of the relatively shallow sea of the East Siberian Arctic Shelf.

One of the greatest fears is that with the disappearance of the Arctic sea-ice in summer, and rapidly rising temperatures across the entire region, which are already melting the Siberian permafrost, the trapped methane could be suddenly released into the atmosphere, leading to rapid and severe climate change.

Semiletov's team published a study last year estimating that the methane emissions from this region were about 8 million tonnes a year, but the latest expedition suggests this is a significant underestimate of the phenomenon.

In late northern summer, the Russian research vessel Academician Lavrentiev conducted an extensive survey of about 25,900sq km of sea off the East Siberian coast. Scientists deployed four highly sensitive instruments, seismic and acoustic, to monitor the "fountains" - or plumes - of methane bubbles rising to the sea surface from beneath the seabed.

"In a very small area, less than [25,900sq km], we have counted more than 100 fountains, or torch-like structures, bubbling through the water column and injected directly into the atmosphere from the seabed," Semiletov said.

"We carried out checks at about 115 stationary points and discovered methane fields of a fantastic scale - I think on a scale not seen before. Some plumes were 1km or more wide and the emissions went directly into the atmosphere - the concentration was 100 times higher than normal." Semiletov released his findings for the first time last week at the American Geophysical Union meeting in San Francisco.


Anonymous said...

@ Scandia

I think there is a bit more significance behind the prune announcement than meets the eye. It is not simply eurocrats attempting to distract.

As you know, a number of natural substances and compounds of natural substances have active ingredients and produce effects, for example, prunes and many decoctions used in gardening.

For years, chemical and pharmaceutical companies have been attempting to ban any such substance that produces the same effect as one of their products. Monsanto is one company that comes to mind. The pretext is that these substances are medications or chemicals that must be regulated (banned). Hence, the attack against prunes.

So, when the eurocrats announce that prunes are not a laxative, they are in fact resisting the pressure of the multinationals.

Just so you know.


Ashvin said...

RIP Fed Dollar Swap Intervention: Central Bank Liquidity Injection Half Life Two Weeks

"Sure enough, judging by the action in two critical FX liquidity indicators - the 3M and 1 Y basis swap indicators, the dollar shortage is baaaaack... only this time, very paradoxically, with implied infinite backstopping from the Fed: if even that factor no longer has an influence on the market's perception of liquidity risk we are in very deep trouble. Which of course is to be expected: the gross synthetic dollar short back in 2007 was $6.5 trillion. Add a few years of ZIRP to this, where the USD is also the funding currency of the world, and one can see why the global USD short position currently is in the double digit trillions. So just how will the Fed backstop $10+ trillion in explicit USD shorts? We can't wait to find out.

3 Month Euro Basis Swap now almost back to pre November 30 global bailout levels

...but the real action now is in the 1 Year Basis Swap which is back down to December 2008 levels."

Jerry McManus said...

From the BBC, therefore somewhat UK-centric, nonetheless a scintillating snapshot of the situation in economics:

Top economists reveal their graphs of 2011

Greenpa said...

Scary news on the Arctic methane. Really scary.

That's the kind of thing that has the potential to drive extremely rapid change, with positive feedback aspects all over the place.

A news story from Japan a few days ago I did not post here, and can't find the link for now- the Japanese government has assembled a blue-ribbon panel to plan for Japan's sustainable energy future- and one of the directions they were most interested in pursuing was developing undersea methane hydrate deposits. "Huge potential" - they were saying.

Maybe we should talk them into restarting all the nukes. At least there 90% of the disaster stays local in Japan. Released methane goes global instantly.

Glennjeff said...

Flashing red lights and annoying buzzers everywhere at this moment.

p01 said...

They probably won't have the time/resources. Fukushima is not over yet, not by a long shot, and other plants are having problems at the moment. Couple that with their assured financial implosion, and I think we're safe from that methane. China was eying hydrates as well, and the same applies to them, plus social unrest on a massive scale.
We'll see what happens: just when you think it cannot get any worse, oops, there goes the permafrost :(

Ashvin said...

Guardian Blog

3.12pm: "There's little sign of festive cheer in the City today. Instead, the talk is of disfunctioning markets and a new credit freeze.

Louise Cooper, BGC's star markets analyst, warned in a research note today that the economic stresses "ripping apart the Eurozone" continue to build.

'Everywhere I look in wholesale, credit, and rates markets, I see signs of stress. Many of these markets are not functioning correctly and the actions of the central banks to alleviate the strains in these interbank markets are having little effect. The Politicians need to start focusing on these markets as if they completely seize up, then the banking system does too. The resulting credit crunch will cause a devastating economic slump.'

Cooper cited the rising cost of insuring government debt (through credit default swaps), and the dangerously high bond yields (Italy's 10-year yield remains over 7%).

In addition, the European Central Bank loaned €8bn of 'emergency' funding to one or more banks last night.

'This suggests that this is not a bank that has failed to do its sums correctly and discovered at the end of the day, it is a bit short. This suggests that a bank may be in trouble funding itself (hence all the rumours).'"

Jack said...

I thought it was human activity causing global worming but he says not is not so.

Greenwood said...

unlike the co2 emission debate, the hug quantities of methane being released can be measured in the relatively accurate estimate if the resources to do so are forth coming.

Seems hard to believe someone would not have noticed staggering amounts of methane being released from the arctic ocean bed before this so it begs the question; how much is being released and how long will it continue.

The green house effects of methane are relatively straight forward, few credible scientists contest what methane does in the atmosphere as far as being a very effective heat trapper. Methane is much worse than CO2, twenty times worst I believe.

To global change deniers, I guess they can say the methane releases being discovered are 'all natural' and have nothing to do with what humans have or haven't done to the ecosystem.

This is the perfect cover for explaining why there have been twice as many record high temps set as low temp records in the last few decades.

It's an all natural process. How convenientfor their argument.

I think that will get old as this positive feed back loop of methane gets up a full head of steam and the weather patterns go into a sort of 'cardiac arrest mode'.

Arctic ocean temps are rising rapidly (as seen by the massive disappearance of ice cover, even to the naked eye from space orbit)

Capitalist shippers are peeing their pants at the thought of seasonal ice free Arctic shipping lanes to cut the cost of shipping produces around the global.

The methane releases (all natural, cough) promise to make the Arctic ice free year round.

It's a win-win for them. More money! Hurrah!

Good news for global commerce and an easier time for oil drilling in the Arctic without that pesky ice sheet, aye?

el gallinazo said...

From the FT quote in the lead article:

"A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet."

Either by intention or negligence, this sentence is quite misleading. The redoubtable Janet Tavakoli points out that only a small subset of the FM Global theft falls into this loophole, and the vast bulk are covered as felonious embezzlement by current law.


"I thought it was human activity causing global worming but he says not is not so."

As it applies to the global financial crisis and the lead article, the big question now is where the beast will dump the results of this vast worming operation. It appears to be collectively in our front yards.

Also, yesterday Lauren Lyster of RT Capital Accounts interviewed Gerald Celente. She asked him toward the end of the interview that if he were a senator, what would he ask Corzine. Celente replied that the question was absurd because a Senate hearing was a ridiculous venue for this. The questions should be asked by financial pro federal attorneys in grand juries.

el gallinazo said...

One question that needs to be answered about methane release is what is its average half life in the atmosphere, at least as methane. Methane is a highly reduced compound and reacts easily to oxidation as in your kitchen stove. The terminal product of oxidation, after passing through methyl alcohol and formaldehyde, is carbon dioxide. It is ironic that this CO2 producing pathway should be regarded as a positive.

Ashvin said...

(Telegraph Live Blog)

[rumors of imminent French downgrade from AAA are also circulating]

16.16 "As the euro continues to slide against the dollar and markets tumble in the last hour of trading, this note from Kathleen Brooks, research director at, helps shed some light on the causes:

'We are in full risk aversion mode. The break below 1.30 in EURUSD highlights the escalation in the eurozone debt crisis. But where it goes from here depends on how traders digest the vast amount of commentary coming from Europe’s political classes.

On balance the most important comments (i.e., the ones that come from Germany) are negative. Firstly, Merkel ruled out a swift solution to the debt crisis when she addressed the Bundestag earlier. She said it will take years to solve.

So strains remain and as we head towards the end of the year there is a triple whammy of fears on investors’ mind: a failed Italian bond auction in Q1, a collapse of a bank and 3, sovereign downgrades.'

The note also includes this graph, showing the worrying rise in French banks' borrowing from the ECB."

el gallinazo said...

Holy Shit! Gold has gone into a death spiral in the last three hours. Banks and hedge funds must be dumping it to meet margin calls. Fasten your seat belts.

Phil said...


Perhaps someone would care to list all the peer-reviewed climate science papers Piers Corbyn has authored.

Not a terribly difficult task, I hasten to add.


I did have to laugh at Richard Koo's statement:

"There is something very unusual happening. The British private sector, like the US private sector, is paying down debts, or increasing savings, despite historically low - near zero interest rates. This goes against everything we were taught at university, it goes against everything that the text books say, as ordinarily this should be a time to borrow money."

A complete inability to factor in "consumer confidence" into his worldview. Scary!

BBC2's Newsnight covered the graphs well last night (32:30 in):

Concluding with a good, civil discussion with Gillian Tett, Ann Pettifor, and Louise Cooper

Greenwood said...

Onion-like headline snark:

Massive Methane Lease in Arctic is Obviously Al Gore's Fault:

Proof Positive of Climate Change Flatulence Plot by Vegan Frijoles Pinto Environmentalists.


Jack said...

El G
It is going down a dollar a second

Phil said...

I forgot to add Ann Pettifor's classic line in that discussion, which could have come straight from the pages of TAE:

"The banks are effectively insolvent"

(At 41:40 in)

Phil said...

@el G

If gold's sudden decline is matched by a sharp rise in Hormel's stocks, then we can blame Roubini.

There was an amusing thread in @Nouriel's timeline on twitter on how spam is a better investment than gold :-)

Ashvin said...

Rough year for bank employees. Gut the workforce to keep the bank solvent... if only for one more day/week.

*DJ Credit Agricole: Plans To Cut 2,350 Jobs, Including 850 In France

*DJ Credit Agricole: To Withdraw From Equity Derivatives, Commodities Activities

*DJ Credit Agricole: Board To Recommend No Dividend On 2011 Results

*DJ Credit Agricole: To Close Operations In 21 Countries

vangoat said...

Kyle Bass video on Zero Hedge.

One loves a good daisy chain, doesn't one?

vangoat said...

"There was an amusing thread in @Nouriel's timeline on twitter on how spam is a better investment than gold :-)"

It must be because he sure has sent me enough!

vangoat said...

"Fasten your seat belts."

Right ho Mr G ... particularly if you have a seat belt on the toilet, that is paper not bullion they are selling!

el gallinazo said...

Peripety aka Cheryl and a cast of thousands,

"Fasten your seat belts."

Right ho Mr G ... particularly if you have a seat belt on the toilet, that is paper not bullion they are selling!


I will break a resolution and reply to one of your posts because I would like to clarify a point.

I agree that this is paper gold, and for the moment, physical in small quantities is far less affected. However, there are two large forces going on that act in opposite directions. The first is the banking cartel's suppression of PM prices. The second is that it is all this virtual, Benny Bux credit that has allowed the price of PM, whether paper or physical, to explode upwards. In a deflationary collapse, which I believe we are now entering, I believe that the price of PM's will also decrease markedly, with physical lagging behind paper. Celente and others believe that the real reason for the MFG collapse was that the CME could not make good on its December physical gold delivery so they stole the gold positions from their clients.

There will be a time to buy PM's if you can retain your dollars long enough during the collapse, but this is not it. And anyone, at a time not so far in the future, going to the their local dealer to trade some gold for bagels, will wind up dead or in a KBR detention camp. PM's soon must be hidden for the long term and like Voldemort, may not be mentioned. So one will need fiat or doomstead essential production to get through the collapse.

Oer and out.

Lynford1933 said...

The massive CH4 releases in the artic is nothing new. It has been the subject of major discussions on 'The Oil Drum' for more than three years. It is one of those looming black swans on the horizon. It looks like humanity is nearing the confluence of several significant problems of which finance (though large) is only one. The analogy to ’The Perfect Storm’ and the sinking ship seems to apply.

Besides the enjoyable activity of groping old ladies, there is an investigation into TSA’s use of a type of x-ray that cannot locate C4 explosive but does radiate the body much more than earlier stated so frequent fliers (business people primarily) may be at risk. It is going through the courts now.

Lets think about toxic GMO plants eaten by most everyone with no very long term studies, shall we? Do you ever wonder why we have so many autistic children?

If you want to really get doomerish, think massive EMP from nuclear high altitude explosions or another Carrington Event (cir 1859). The former may be from any number of antagonists. Of course the latter will happen sometime. If that happens, estimates are up to 90% dieoff in the US due to our extreme dependence on the grid.

Not to worry, mate, eh?

el gallinazo said...

The Obumma administration is taking a lot of bad PR over Corzine, and one must wonder why they are willing to do it. After all, they could cut a deal with Corzine and mount a Blackwater prosecution, where they would actually prosecute him, but use their most incompetent lawyers, and if necessary, hire back some of Bush's, who graduated from religious fundamentalist law schools. I have two competing theories. One is that they are about to drop the hammer so soon that Corzine will be lost in the mayhem, and it won't matter much what the rabble thinks anyway. The other theory is that they can't risk the information that might leak from a grand jury, or be made public in an actual trial, regardless of how poorly handled by the prosecutors, reach the media.

Also, that bastion of, liberal, color revolution Arab Spring, George Soros, famous for swindling his fellow Jews as a teenager in the Budapest Ghetto and then turning them over to the Nazis, bought $2 billion of Italian bonds from FM Global **after** they had filed for bankruptcy. This was 5% under the market price meaning a quick $100 million profit. Selling assets in this fashion after a bankruptcy is patently illegal, as if it matters anymore.

vangoat said...

Mr El G,

As the Poet said: " Don't speak too soon for the wheel is still in spin"

Aside from what Bob, says here is something from someone who is more familiar with the ins and outs of the gold market than either you or I:
Gold Lease Rates Plunged to Record Low in Early December

Bye the bye I would add that you are wrong, AGAIN, but I am not Cheryl, so that is one wrong and one maybe :)

Oh yes, and when that great wakening day for gold that you mention, arrives, will you find any left for you? There have been times, at much lower prices than now, that supplies of bullion has been tight. Who knows what the future will hold.

About this:

"And anyone, at a time not so far in the future, going to the their local dealer to trade some gold for bagels, will wind up dead or in a KBR detention camp."

And after they come for my gold they will come for my cash and after they come for my cash they will come for my rutabagas and after they come for my rutabagas they will come and eat me. Shizen, I doubt I will get as far as that KBR detention camp, it is really going to be Hard Times going by your explication.

May I offer you some advice? ... LOL!

( PS: I guess I should add that I am looking at gold as a long term hold and do not hold what I could be forced to sell in the short term - invest in gold or fiat at your own risk, lol.)

ben said...


"One question that needs to be answered about methane release is what is its average half life in the atmosphere, at least as methane."

this comment below the Independent article that was posted in the previous thread help?:

"Over 20 years, molecule for molecule, this methane will trap 105 times as much heat as CO2.

The correct data for over 100 years is 33 times as much - the '20' quoted is wrong."

el gallinazo said...


As one as you so experienced and practiced in the financial blogosphere, I am honored that you assigned yourself a new Blpgger ID simply to respond to my post.

p01 said...

Lynford1933 said...
Wwhen that happens, estimates are up to 90% dieoff in the US due to our extreme dependence on the grid.

Always count on Lynford for a good dose of optimism. (Fixed the if in the quote). I'm currently in Quebec, trying to make peace with that thought, while training for future long sessions of wood-cutting (that is, if I'm lucky enough to get to the woods first) :)

But as I mentioned before, I would not trade Montreal for Tokyo, Seoul, NY, LA, etc. just yet.

scandia said...

@FB, Indeed the significance did not meet my eye:)
I surely hope that the collapse takes down Monsanto.

newgrowerjoe said...

One of my friends was at that session on the arctic methane plumes at the recent AGU meeting in SF. The russian researcher did mention that this area is notable in that it is a subduction zone, and hence the change in the temperature/pressure state of the clathrates ( be as much a result of the subduction activity as the loss of the ice cover. This of course was not picked up by the press.

Hopefully this is the case.

Ash said...

El g,

You just love to defame fm global ;-)

According to Elias and ZH, mf global like all other broker dealers transferred client accounts to UK so they could keep pledging those funds as collateral on their own trading accounts, which were used to speculate on ez bonds. When the value plummeted and margin calls came in they handed over client funds.

Im not quite sure what %of the $1.2bn loss they claim this was responsible for. What is certain is that these types of rehypothecation practices will be greatly curtailed in the wake of mf global creating huge shortages of liquidity within the banking system that CBs are helpless to reverse.

Ash said...

Democracy Now Interview with Nomi Prins

Here is a part of what she said in the interview, which captures the "psychology of sharks" quite well.

"What you have to understand about how MF Global operated, which is not indicative from the questions that are being asked on those panels, is why money would have been used from customer accounts, from which they are missing—everybody understands that. And the reason that money would have been used is because of these bets that Corzine made, and that he knew about, and that he authorized, and that he several times in SEC reports and with conversations with rating agencies said he was in charge of. He was betting that the powers that be would bail out European countries if they got too bad. And if you bet that was going to happen, you were going to make a ton of money. And he bet the equivalent of the farm on that.

The problem was, he couldn’t stay in the bet. He had to borrow money to stay in, because it didn’t happen fast enough, because European countries continued to deteriorate, because the money that, therefore, he was betting on them being bailed out wasn’t coming to fruition quickly enough, so he had keep putting money in and see if it will come to fruition, keep putting money in, keep putting money in. And it turned out he didn’t have enough money left, from which he had borrowed, in order to stay in that trade. And that’s why customers’ money somehow disappeared. It was because it was segregated, and it should not have been used to act as a backing for those bets. But it was."

I should note, though, that there are some who believe Corzine was intentionally pouring money into losing bets in order to benefit the his buddies who were on the other side of the bet (namely, this guy). Without any further evidence, I find this scenario hard to believe.

Lynford1933 said...

Thanks P for the 'if' fix but I was talking about the Carrington Event EMP happening again not the nuclear EMP. Since a Carrington Size CME has occured on the sun a few times since 1859 but fortunately were not pointed at us directly, I will stick with my 'when' though I don't have a clue when that might be.

This happened to be a glancing blow to parts of Canada so it was not a true Carrington Event.

Starfish anyone?

For other EMP information look here. This documentary is mostly about nuclear EMP but at about 32:00 it takes up solar CME/EMP.

Really nothing to see here P, move on to your woodpile.

Lynford1933 said...

Above first link should be

el gallinazo said...


I did a fast check on methane mainly looking for the rate of extinction processes in the atmosphere. Wikipedia

has a middling good article on it. The data goes back to 1999. According to this source, the greatest contributor was wetlands including rice agriculture at 37% of the total, with cow farts coming in second at 19%. According to this, hydrate decomposition only amounted to 2%. Molecule for molecule, methane has 60 times the heat retention capacity of CO2.

The data I was looking for was the pathway and rate of decomposition. Most degradation results from reaction with hydroxyl radicals, with a much more minor pathway Cl2, of which 85% takes place in the troposphere and 7% in the stratosphere. The net life of methane molecules in the atmosphere before degradation to CO2 is 8.4 years at the current levels of concentration. The reaction kinetics should be proportional to the concentration of methane. It also states that when you take degradation rates into account, methane is 25 times as strong a greenhouse gas as CO2. I am suspicious of this number as it may be lower, and my back of the napkin calculations do not give this 25 number much credibility. A lot of these numbers do not make sense to me when put together, particularly the statement that methane is responsible presently for 20% of greenhouse warming yet its concentration in the atmosphere is 0.5% of CO2. But this is not a chemistry blog :-)

Anyway, I guess the good news is that the methane in the atmosphere is depleted quite rapidly, so it won't sit around for 25,000 years like a lot of radioactive isotopes. OTOH, a sudden release of methane could overwhelm the hydroxyl radicals and vastly slow down the degradation as they are consumed in the process as opposed to say chlorofluorocarbons reacting with ozone.

vangoat said...

el gallinazo said...


As one as you so experienced and practiced in the financial blogosphere, I am honored that you assigned yourself a new Blpgger ID simply to respond to my post.

Aw shucks el G I am a mere buzzard puke in the financial eye of a Vulture Capitalist, and just to keep things straight, I really just change my ID so as not to attract flocks of daytime believers or do I mean midnight Butchers, either one the thought does not bear contemplation?

el gallinazo said...

Why a euro banking train wreck is inevitable. A short and high priority read with a great bonus picture.

Ruben said...

@El G, re: methane

From this Independent article

Each methane molecule is about 70 times more potent in terms of trapping heat than a molecule of carbon dioxide. However, because methane it broken down more rapidly in the atmosphere than carbon dioxide, scientist calculate that methane is about 20 times more potent than carbon dioxide over a hundred-year cycle.

el gallinazo said...

Kyle Bass looks at the Eurozone's "plumbing"
Worth the watch. This guy is one amazing analyst.

Phil said...

@Ruben and el g

A recent radio ecoshock show had a scary segment on methane. Its effects could be worse than we think

GreenWalker said...

A theme for 2012 -- Capital Controls

Capital Controls on Capital Inflow
Capital Controls on Capital Outflow.

Question #1: What forms can capital controls take depending upon whether a country is trying to control outflows vs. inflows?

Eastern European nations with weak national currencies and Peripheral European nations freshly ejected from the Euro are likely to impose controls on currency outflows. (i.e. restrictions on selling domestic currency in exchange for foreign assets, foreign currencies, or precious metals).

Question: Are currency controls often one-sided ?

(i.e. the restrictions prevent either capital outflows alone or capital inflows alone, but not both flow directions at the same time)?
In order for capital controls to be effective, it seems that capital controls would need to be one sided. Is this true?

Question #3: Would countries seeking to diminish currency outflows also impose restrictions on inflows?

For example, let's say you're a Hungarian citizen with a small pile of forints that are losing value relative to bread and milk at the grocery store. You've also got a large pile of gold that grocers are not allowed to accept in exchange for bread and milk. Would you be allowed to sell your gold in exchange for Hungarian forints (currency inflow) so you can buy bread and milk? Would gold selling be punitive (in the form of fees, taxes, or official selling rates below market rates)? What purpose would those punitive actions on gold selling serve is the country is trying to encourage capital inflows?

el gallinazo said...


All I am saying is that these numbers and articles have to be taken critically. For example, all references give current methane at 1.7 ppm and CO2 at 392 ppm. The Wiki article says that methane now accounts for 20% of all effective global warming gases. But if you do

392/1.7 X 20 = 8.7% and the WIki article says all global warming but this leaves out atmospheric water which is also a potent greenhouse gas.

Furthermore the 20 times figure is based on the supposed rate of CO2 absorbed into the oceans as carbonic acid, net 100 years, and then converted to various carbonate salts or ions. But as the pH of the oceans fall, besides causing all sort of problems for the biota, it slows down the absorption of the atmospheric CO2, making the 20 number smaller. However, this doesn't do us any good - it just means that the CO2 problem is proportionately bigger than the methane. Finally, in your article Dr. Shakova says:

"The concentration of atmospheric methane increased unto three times in the past two centuries from 0.7 parts per million to 1.7ppm, and in the Arctic to 1.9ppm. That's a huge increase, between two and three times, and this has never happened in the history of the planet," she added.

TTBOMK, atmospheric methane can only be determined by glacial or ice cap coring, and that is only available in magnitudes of hundreds of thousands of years. The earth is 4.5 billion years old, so where does she get "the history of the planet." Furthermore, earth cores taken near the North Pole a few years ago, indicate by their organisms that the arctic ocean was semi-tropical 55 million years ago which would mean a lot less hydrated methane there.

All I am saying is that one has to digest the data critically. I do see it as potentially a huge problem also.

NZSanctuary said...

RBM said yesterday...
Re: The Higgs Boson AKA 'the God particle'.
I don't expect this to really turn out. Whatever they find they may well misinterpret the data as they are so intent with expectations.

I'm in the same camp (I'm not sure if it's for the same reasons – I think a lot of cutting edge research is based on so many layers of deductive reasoning, that most researchers have a poor understanding of the premises their "beliefs" rest on and therefore don't know how to evaluate their observations properly).

GreenWalker said...

Hungarian Capital Controls. Get Ready.

I think Hungarian capital controls are going to dominate the news very soon. It's currently under review for a fresh IMF loan in order to roll-over debt maturing in the first months of 2012. The likelihood of IMF infusion is the only thing keeping the Forint in a Wile E Coyote levitation. If IMF were to reject a fresh infusion, the Forint will collapse in value and widespread defaults would be a possible for death knell for Austrian banks that lent heavily to Hungarian households using Swiss-Franc loans. The plunging value of the Forint would make it impossible for Hungaian households to maintain monthly interest payments on Swiss-Franc loans.

Here is the Problem. Politically and Fiscally, Hungary has been doing
things that piss of the IMF.

Authoritarian political parties are consolidating power and eroding democratic checks+balances with expansionary fiscal policies that shield pensioners and domestic businesses and borrowers. Domestic budget cuts ordered by the IMF have been disregarded.

Who is going to win this pissing match?

If the IMF pulls out, then the forint will plunge, capital controls will be imposed, and Austrian and Swedish banks are going to flash crash.

If the IMF goes along, then they are bending over for authoritarians who give them the finger while pursuing their own agendas.

Hungary is the Bellwether for Central Europe, where it goes, expect other central and Eastern Europeans to follow.

ben said...

LG, thanks for fleshing out the methane situation.

jal said...


Capitalism is great if you are at the top of the chain and can get unfettered monopoly.

To make your picture more realistic, I would add an OWS sheep realizing that he is about to be devoured and a big squid eating the whole chain of sharks.


Nassim said...

re: Methane in Arctic

As I understand it, the densest water is at 4 degrees Celsius (properties of water) - the temperature of the water at the bottom of the Arctic Ocean. If you have icebergs on top, you will have water at around 4 degrees skirting the sub sea terrain. Having thinner ice or a slightly higher temperature at the surface does not cause any change to the temperature at the bottom of the ocean. If the temperature at the bottom does not change, there is no reason for methane to suddenly start bubbling up. I expect this methane has been bubbling up for aeons of time - previously, it came out under the ice and was not observed.

re: climate change

As you may know, I have always believed that climates do change - in both directions. A look at the history books or a trip with a geologist in almost any countryside will confirm that.

When we were preparing to come to Melbourne from the UK in 2009, all our friends were warning us about the devastating effect climate change was having on this region and how we would be wise to go elsewhere. I pointed out the historical record and that did not make any impression. Well, we are now well into our third summer here - and another miserably cold and wet summer it is turning out to be. :)

In fact, our rainfall is well above its long term average at around 800mm - it was above average for the previous two years as well.

I have prepared a webpage with cuttings that I gleaned from a report in 2008 and a second, more recent, one - Australian Government Bureau of Meteorology

In the first report, the Melbourne region is classed as "lowest rainfall on record" and the second one concludes with "Melbourne's rainfall record displays no overall long-term trend". Just take a look at the graph and remember that this year it is 800mm and all will be clear.

Of course, the state government built some massive white elephants and indebted the local population to try to win an election - based on the first report.

The price of a drink

All I am trying to say is that a little healthy scepticism is in order when it comes to so-called "Climate Science"

el gallinazo said...

Capital Control

I agree with your analysis of Hungary right up to the very end. But....

"If the IMF goes along, then they are bending over for authoritarians who give them the finger while pursuing their own agendas."

To see the IMF from the vantage point of a **victim** to an authoritarian government, I am going to have to practice Linda Blair neck rotation exercises. Wish me luck - don't have a chiropractor near by.

Asmita said...

Chinese Capital Controls and Gold Confiscation:

For at least the past 12 years or so, China has fixed its currency relative to the dollar by forcing exporters to exchange dollars earned abroad for Renminbi -- a capital inflow control. The dollar liabilities backing the Renminbi issued by the Chinese Central Bank were invested in Treasuries to ensure maximum liquidity for Chinese Central Bank. This need for liquidity in its dollar investments explains, in part, why China is severly limited in its ability to act as a white-knight savior by purchasing long term European Sovereign Debt. If the Chinese currency comes under pressure during the unfolding real estate crash, the Chinese Central Bank may need to stabilize the currency by selling its liquid Treasuries to pull Renminibi out of the economy.

Was this capital inflow control used by China over the past 12 years similar to the US gold confiscation of 1933. During the US gold confiscation act of 1933 gold was forcibly exchanged for dollars in order to facilitate the devaluation of the US dollar relative to gold? Is it correct to view gold confiscation as a form of capital inflow control?

Lynford1933 said...

Though manures can create methane with a digester; cows don't emit 400 quarts of daily flatulence, as the term is usually understood. According to Professor Johnson, they emit 400 quarts' worth of burps, known in polite circles as eructation. Wrong end typically gets blamed for methane.

Further these burps can be somewhat controlled through diet and even vaccination. Even wine wastes (grape parts etc) will slow down methane creation in cows. Do winos fart more? Are wino burps worse? Strange as it may seem, grass fed cows emit more methane than corn fed cows. This is not to say corn fed cattle are better for you to eat than grass fed cows just that they produce less methane.

What we are talking about in the artic is something, AFAIK, that is not considered in the overall generally accepted global warming scenario. Therein is a problem depending on what global percentages these methane plumes turn out to be. IMHO, even a couple percentage points more methane could cause much earlier positive feed back tipping points.

GreenWalker said...

@ El G -- RE: Hungarian Govt.

Paul K weighed-in on Hungary earlier this week. He's taking no prisoners, and it's very interesting he never once mentioned Hungary's conflicts with the IMF over fiscal policy (e.g. shielding pensioners from IMF mandated cuts).

Paul K's take:
Right-wing populists are on the rise.......
the immediate threat comes from Fidesz, the governing center-right party. .......
Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power.....
judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there’s a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party......
this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe.

Paul K is Hungry for Hungary


The political balance of power is shifting in Central and Eastern Europe. If Hungary gives the IMF the finger, the the Post-1991 power broker status of the US may come into question.

Nassim said...

A week or so ago, someone was asking for stories about what it is like when TSHTF. This may be of interest:

SHTF Survival Q&A: A First-Hand Account of Long-Term SHTF Survival

jal said...

Reading about Hungary is the same as reading about the USA

GreenWalker said...

Re: Hungary

The Chief Justice of Hungary's Supreme Court was ousted Yesterday.

The Head of the Central Bank was just replaced.

The Tectonic Plates of Central Europe are Shifting Quickly

Things are moving quickly.

Robert LeRoy Parker said...

Great article Ash!

I'll be putting this one in the binder to share.

jamiepachomski said...

Hello el gallinazo/Ash/moderator:

If you’ll kindly indulge me, I just wanted to drop a quick note as a point of clarification.

“FM Global”—as cited a few times in this comment stream—is quite different than “MF Global,” as you may know. We’re a large, private (and successful) U.S.-based commercial property insurer with no ties to “MF Global” whatsoever.

Forgive me. Every time I see these unintentional errors I feel like someone is talking smack about my son when they really mean the neighbor’s kid.

...and it's not the first time we’ve been mischaracterized.

Check out this piece in Fortune: and story in WSJ: (video, too:, which came out, among others, not long after the House Committee Chairman kept saying “FM Global” instead of “MF Global” during last week’s Corzine hearing.

We were a little busier than usual on account of that faux pas…

Anyway, thanks for listening ;)


Jamie J. Pachomski, APR
Senior Public Relations Consultant
Brand Management
FM Global
270 Central Avenue
Johnston, RI 02919-4908, USA
T: +1 (1) 401 415 1895
C: +1 (1) 401 323 7806
F: +1 (1) 401 464 9031

Glennjeff said...

This is the second time that FM Global, in my reading, have poliely explained that they have some difficulty with the dislexic confusion that arises with their name in relation to MF Global; so I'm gonna give us a little mnemonic system in an attempt to solve the confusion

FM = Fine Merlot a very nice smooth red wine: Friendly Mermaids if you prefer abstinence.

MF = Mother Fuckers

OK, lets concentrateand and not generate any undue difficulties for the fine folks at FM Global.

p01 said...

Poor Jamie. I read about it on tweeter while they were making fun of you. Hey everyone, MF is not that hard to remember, Celente said how to memorize it: the first word is in fact Mother! :-)

Greenwood said...

Just to confuse things after you cleared them up, in military slang, FM has it's own meaning, to wit:


(US/UK) "Fucking Magic". Used to describe why a faulty electronic device unexplainably starts working again.

p01 said...

@Greenwood: Hey, that's exactly how the insurance business works. I got my mnemonics in order now, thank you!

lautturi said...

Just finished touring Southern Finland for a week. I gave a presentation with the title "Future ain't what it used to be" - topics included economy, energy and systemic issues. 7 places totalled about 170 people. I even ended up giving a 40min interview in national radio (could have been half a million listeners - WOW).

The week has been quite a ride. People aren't aggressive against my -a-bit- doomerish stories at all. Methinks the atmosphere is shifting big time - though most were expecting inflation. Now they are getting worried about deflation, my "this-is-the-last-hurrah" -speech might have something to do with that.

I agree with Stoneleigh that it's nice get to meet people. I met many, many readers of my site. Things WILL get interesting next year.

el gallinazo said...

Here is a take on Hungary from Bloomberg, dealing primarily with their mortgages in francs, which influenced my earlier comment.

DancesWithStapler said...


It appears you have made a concerted effort to write in a clear, direct style this time. Much appreciated. Good job!

Glennjeff said...

Fucking Magic

(Ex electronics Engineer)

Some of the stuff I have experienced with electronics and it's interaction with the users states of mind would really blow your mind if I could be bothered to elucidate, and if you gave the time to read my words.

Actually, if I bothered to elucidate the magical reaction of everything to everything else; well you would probably nail ne to a tree, so fuck it, it's all going to plan anyway.

el gallinazo said...

With the passage of the "Dissenters to Gitmo Act," soon to be signed by our teleprompter in chief constitutional scholar, and a last minute hiring rush by KBR for custodians and kitchen staff, I think that all the ducks are lined up in a row for "martial law." But as Ed Sullivan would have put it, we first need a "really big show" to stampede the sheep and daze them. I see a mushroom cloud in our future where a mid sized city used to be. Just might start studying Mayan astronomy.

freedom said...

Great article, Ashvin!

"What is truly frightening about these financial sharks is that their predictable psychology ends up being much more destructive to the rest of society than to themselves."

So destructive to families, to children.

scandia said...

Well El G. If they pick a mid sized city for the big event let's hope they pick a bankrupt city. I believe there are several to chose from:)
All problems, all accounting records go kaboom providing a virgin landscape for a new being...once the radiation levels subside of course:)

Ash said...

@Jamie from FM (NOT MF) Global

When I heard the Chairman say that two times (before correcting himself the third), I immediately thought of you and El G! Maybe it would be easier to just amend "NOT MF" into your corporate charter. Or, perhaps, make it ANTI-MF Global. Turn your company into a cause!


Glad you liked it. Is this a binder that contains printed out articles you share with those around you? Sounds like a good idea.


I would just like to let everyone know that the Diamond project is still underway and we expect it to fit in very nicely with the new site's format. Right now I am waiting on a few article submissions, and therefore holding off on polls until the first one is ready to publish. And, if anyone wishes to contribute an idea, please continue doing so at

[taediamonds at gmail dot com]


el gallinazo said...

Recommend the 15 minute video interview on Bloomberg of Michael Platt, $30B hedge fund manager of Bluecrest, now based in Switzerland but catering primarily to Americans. While continuing to do sniper trades, he is keeping 100% of his dollar reserves in 2 year treasuries and 100% of his euro reserves in 2 year bunds.

BTW, if you have a slower DSL connection and suffer from buffering of Bloomberg videos, they now offer a video quality selector on the bottom right. If you set this to low, you can stream at 1 Mbps without buffering.

el gallinazo said...


I found your lead post very interesting and also appreciate your current, less academic style. Still get all the substance but easier on an old brain.

Lynford1933 said...

Thank you Nassim for the link. I added a few items to our list of stores, i.e. multiple refillable butane lighters, flints and cans of butane. Of course if TSHTF does not happen so bad we’ll have a hundred year supply :)

The important part of his message as I see it; be prepared before TSHTF.

p01 said...

I see a mushroom cloud in our future where a mid sized city used to be.

Interesting to see The Great Vulture starting to have these kind of visions. I have received new antennas for my HAMs (no license, though, I don't plan on emitting until after the events, whatever they might be) and scanners (cheap analog from e-bay, second hand), I'll start wrapping them in aluminum foil. (this is not sarcastic)

el gallinazo said...


re: Methane in Arctic

As I understand it, the densest water is at 4 degrees Celsius (properties of water) - the temperature of the water at the bottom of the Arctic Ocean. If you have icebergs on top, you will have water at around 4 degrees skirting the sub sea terrain.


Also, for the non physical scientists or engineers among us and pO1's comment on aluminum foil, see

scandia said...

p01, I have lately thought that a Ham radio might prove useful in event of a lock down of other forms of communication.
I suppose there are Ham radio groups out there to learn from. I have no idea where to start...would appreciate your guidance.

p01 said...

What background do you have on radio communications? I would suggest a scanner first, there are cheap RadioShack ones on e-bay, or even at The Source (see clearance section). One of my transceivers was actually brought second-hand from Ontario, I will get the name of the company once I get home). Once you listen to operators, you will get the idea, because simply reading a technical website can be confusing at the beginning.
I remember building my first radio to listen to Radio Free Europe while I was a teen. First time I listened to Deep Purple on Shortwave, oh, the memories.

Lynford1933 said...

Another cash argument. This time from a hedge fund.

krollchem said...


Wouldn't space blankets work as well as tin (Al) foil in the case of a massive CME directed toward the earth. Just wrap your electronics in the mylar blanket and earth ground the blanket. What do your think?javascript:void(0)

While I believe in preparing for emergencies such as CME's the probability of their occurrence appears to be less than the last sunspot cycle based on the lower sunspot activity of the current cycle.

p01 said...

I was thinking of a double faraday cage to act as a very small capacity capacitor: wrap in foil, then in a bubble wrap, then mylar antistatic bags. I don't thimk faraday cages of regular shapes need grounding, because not much parasitic currents induced in the surface because of irregularities can create additional magnetic fields of enough magnitude to further induce currents in the circuits, but I may be wrong.
Make it a small capacitor, and no worries. Plese an electrical eng. correct me, I'm another type of engineer.

scandia said...

@p01, I have zero background in radio. A scanner looks doable. After last posting I remembered someone I know in my town who is into radios. I will call him for advice and instruction

Nassim said...


If you read Getting Prepared for an Electromagnetic Pulse Attack or Severe Solar Storm, you will see that he strongly recommends no grounding - unless package buried in ground which is not quite the same thing.

The other thing to keep in mind is that you don't need a nuclear explosion to have and an EMP event - Non-nuclear Electromagnetic Pulse Generation. I expect these things are in every self-respecting military's toolbox.

Nassim said...

el G,

Thanks for that chart. Do you have anything similar for the temperature distribution in the past?

p01 said...

Add Hanoi to the list of cities you don't want to be in, especially when fire services go belly-up:

Nassim said...


My pleasure.

Selco's blog is very different from
Ferfal's blog Surviving in Argentina

Selco was in a civil war with an army surrounding a city (perhaps Sarajevo) and Ferfal was in an even more anarchic situation (in Buenos Aires)

Their experiences were very different but there was a lot of commonality.

el gallinazo said...


You are a hell of a lot better with data base searches than I am. This is as far as I got:

jwhands4u said...

Oh well ,were going to end up looking like Mars.

NZSanctuary said...

Fukushima fall-out fun

sumacarol said...

Re: Nassim's post: SHTF Survival Q&A: A First-Hand Account of Long-Term SHTF Survival. Did this ruin anyone else's day??? I don't know how people kept on living from day to day, seriously. At some point, it seems hardly worth it. Maybe they were motivated by the possibility that things would get better.

seychelles said...

Before sinking the cornerstone of your own personal Franklin Trust, it might be prudent to pre-scan the general area with a metal detector.

el gallinazo said...


I wasn't going to mention it - but regarding Ferfal. I am no expert on Argentina though I did live there for 10 months and only left last March. My Spanish is three notches below fluent and I was busy with construction projects most of the time and didn't travel much. I lived two hours by express bus NW of the second largest city, Cordova, on the rural edge of a mid sized town that had quite a bit of tourism. I am not quite sure what the attraction was other than it was at the foot of "magic" mountain, famous for UFO's, and had an altogether hippy dippy motif - more so than say even Telluride CO. As to the UFO's, I actually saw my first one twilight shortly before I left, though it didn't land and offer me a ride. OTOH, I didn't stick out my thumb.

But back to Ferfal. I read some of his stuff maybe four or five years ago and now his logs are in a book on Amazon. But I remember his internet stuff as really gold and lead, and he is presently attractive to that crowd in the USA. I remember little of him talking about social cohesion. Also, Buenos Aires is to Argentina as NYC is to the United States. While most Argentinians are proud of it for architecture and European culture, they don't like the people at all, saying that they are loud, arrogant, and materialistic. I actually never got to BA myself. Each time we planned a visit, something happened. But I can testify that most of the tourist from BA did fit that description. The people in the town in which I lived were very socially cohesive and big on cooperatives.

el gallinazo said...

Let the games commence

U.S. to leave Iraqi airspace clear for strategic Israeli route to Iran

scandia said...

I just came across this research on psychopaths on Jesse's Cafe American.
Interesting to consider in these
dangerous times...

"Psychopaths:The Mask of Sanity "

krollchem said...


Thanks for the in depth EMP article. Looks like one should stock up on bubble foam and mylar sleeping bags to build the Faraday cages. The short notice of a future Carrington event forces pre-preparation.

Good points about climate change variables. Climate change arguments almost always degrade into a forensics political argument between the two sides with each side using a limited/exclusionary set of factors.

It would be interesting to incorporate the variables into a system model set of linked archtypes (e.g. Thinking in systems by Donella Meadows). Lacking answers, I have chosen to move further north to minimize global warming from greenhouse gases and near the Pacific coast to reduce any global cooling in the cases of no sunspots or in the next cycle or large volcanic eruptions (e.g. Iceland).

As for the methane plumes, the subduction argument appears to be correct. This occurs off the Oregon Coast along the subduction zone. OSU Oceanography scientists have also found cold venting carbonate mounds that off gas carbon dioxide and other gases released from the subduction of sediments. While deeper subduction would release a lot of methane shallower subduction zones off the Oregon coast have mostly lost their methane at the shallower subduction depths. See Dr. Bob Collier's work on frozen methane in sediments off the Oregon Coast for more info.

I would be more concerned about methane released from biological processes following permafrost melting of northern bogs. Release of frozen methane in deep marine sediments may still be a concern in the case of massive underwater avalanches( e.g. off Norway).

I hope this adds to the dialogue.

el gallinazo said...

Have to give today's Capital Account a must see recommendation. Very on topic the whole show with Karl Denninger as the interview guest. Don't have a cup of coffee near your laptop when, toward the end, he was asked about gold and deleveraging. Karl is every inch a libertarian, but Jeez, his predictions really part company with that crowd and sound a lot like I&S.


I am shocked, SHOCKED!!

Former president Chirac is found guilty of embezzling public funds.

Two year suspended sentence.

Greenwood said...

@ scandia

Great documentary narrated by Peter Coyote on Psychopaths called:

I Am Fishead

Has a good segment with long time Psychopath researcher Richard Hare.

The subtext of the documentary is the intersection of top financial executives and the psychopaths in their ranks.

Richard Hare is granted access to 200+ executives of Fortune 100 companies to test for psychopathic profiles among their 'high achievers'in upper management.

Hare seem to have won over some of these companies to the theory that having psychopaths on the payroll drives out the good high performance people over time and cost the company lost time and money.

Kinda like the old expression that bad money drives out good money.

Simply indentitying them is the first step in their exorcism.

To bad Hare couldn't run the tests on politicans, starting with the presidential 'contenders'(coughgagcough).


seychelles said...

Fascinating hypothesizing today by Golem xiv about how big sharks can disable and eat smaller sharks by using legalese in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act which allows repos, hypothecated assets and "lower quality assets" to circumvent automatic bankruptcy stays. The sordid details are at

After all, what good are laws if they do not confer legality to theft from one group of citizens by another?

p01 said...

Radioworld: 4335 Steeles Ave W, Toronto M3N 1V7. See what they have in store. I bought on-line. The Source has one on sale but it`s still very expensive, IMO at 130$.

p01 said...

Karl knows leveraged bubbles, it seems (as he should). I've been reading some interesting books lately on financial history, and the observations are as expected: 80-90%, all of them bubbles: Nasdaq, Dow, S&P, housing, gold, you name it, if if was inflated by debt, it will die a horrible death by debt destruction.

GreenWalker said...

RE: The IMpending Return of Capital Controls (restrictions on uninhibited monetary flows -- clearly the theme for 2012) -- Has TAE we factored this into it's predictions? The post-1970s Washington Consensus is Dying, and the post WW2 Bretton Woods System is nearing a Re-birth.

Are we properly considering the role of capital controls in the ability of central banks to bypass bond market shackles and thereby re-inflation?

We haven't seen this sort of thing since the early 1980s-early 1990s when the Washington Consensus successfully knocked over capital controls in country after country.

Post Great Depression, Keynes and others identified the impossible trinity as the justification of capital controls explicitly permitted by the IMF in the post war Bretton Woods System

The Impossible Trinity:
1) Independent control of Monetary policy (setting interest rates on short-term inter-bank lending).
2) Fixed exchange rate relative to trading partner currencies
3) Free capital flows (i.e. absence of capital controls).

Keynes and other contemporaries (e.g. US economist and Bretton Woods negotiator Harry Smith) understood that it's impossible for a country to control #1, #2, and #3 simultaneously. They can choose any two, but only two. IN the post-WW2 Bretton Woods system (1945-mid 70s), most of the world chose #1 and #2 in exchange for restricting the free flow of capital across borders using capital controls.

If the world returns to punitive capital controls (e.g. captial outflow controls that lock-in sovereign debt investments and force a rollover rather than a redemption), won't that enable central banks to pursue independent pro-inflationary monetary policies? In other words, in the presence of capital controls, central bankers are re-empowered to reinflate and bypass the control of the bond markets.

I don't think TAE has addressed this point. And it's about to dominate the press in the coming months.

GreenWalker said...

Then again, perhaps unbelievably punitive capital controls (Hedge fund managers become turnip farmers) is the theme for 2013, apres la deluge.

GreenWalker said...

Eastern European Capital Control

When Greece Defaults,

You can expect capital controls to be imposed throughout Eastern Europe. The Greek banks are not going to get their money back.

Greek Money already invested in: Romania, Serbia, Bulgaria, Macedonia, etc.... that money is not leaving. The moment Greece defaults and their banks try to pull that money, the doors are going to close (Eastern European Capital Controls)

Anticipation of that fact explains why Europe is currently freezing solid.

Ant Whisperer said...

@ El G

I'm currently working on some atmospheric deposition models and used a post-festive-celebration hungover-laden Friday to look into the longevity of methane in the atmosphere.

Methane is removed from the atmosphere by reaction with the hydroxyl (OH) radical, at a rate that depends on the atmospheric concentration of OH. But, the OH concentration depends upon the amount of CO in the atmosphere, which itself is a product of CH4 oxidation as well as a result of fossil fuel combustion and biomass burning. The OH concentration also depends on the concentration of ozone and NOx. Change in CH4 can affect the total amount of ozone in the troposphere (where it is the predominant organic molecule), so methane itself affects the concentration of the species (OH) that governs its removal.

These feedback loops provide massive difficulty when attempting to model the effects of additional methane in the atmosphere (as you can probably imagine).


NZSanctuary said...

Very nice piece by Damon Vrabel looking at the overarching power of the usury monetary system, and some of the commentary is very interesting to see.

Alexander Ac said...

Seems like new solar breakthrough came to the rescue!

Scientists report first solar cell producing more electrons in photocurrent than solar photons entering cell

cheers, Alex

Alexander Ac said...


2-year spanish bond yields tanks down because banks can borrow super-cheaply! Yeah, right, BAU solution finally works :-)

Growth forever! C(r)ash for Christmas delayed!

zenyata said...

@ Greenwood - had never heard of FM (fucking magic) before but ran into my own bit of it this week and the description fits perfectly...

laptop appeared to be having power supply / switch issues - absolutely would not power up... finally ended up taking it to a local computer guy who got around to looking at it after a few days. The guy called yesterday "yeah what was the problem with this - not powering on, right ? Well I just plugged it in and it turned right on !"

I tried everything I could think of over the past 3 months to get that thing to work - he plugs it in with the very same power cord and it turns on first try...


Ash said...

Capital Control,

To clarify, are you suggesting that coordinated capital controls by countries which seek to prevent capital from flowing out of peripheral Europe, for example, and into "safe havens" such as USD and US treasuries will effectively allow US authorities to produce dollar inflation or HI in the near-term?

mike said...

I'm dying to hear the end result? when the smoke clears of all the doom and gloom, will we be living 100 years in the past or 500 years.. It sounds to me like I should purchase a tank, as many weapons as I possibly can, food for years..

Alexander Ac said...


It sounds to me like I should purchase a tank

It means you want to live in a world where everybody has a tank?



scandia said...

@GREENWOOD, thank-you,thank-you for the " I am Fishead " video!
I am weeping in response but don't yet know why such a response. Perhaps a personal acknowledgement/regret for all the times I closed my own heart in order to fit in or to cope. The segment with Vaclav Havel opened the floodgate:)
I recently had an experience of the social network. When the protests against the Keystone Pipeline and the tar sands were organized I wanted to go to the protest in Ottawa against the tar sands. It was as if I couldn't live with myself if I didn't attend. That " icky feeling ". Except I didn't have the means to go. I mentioned it to my son and some friends. I was amazed to learn that my corporate son thought the tarsands " evil ". I didn't know he felt that way. Other friends living far away wrote that they thought the protest was important and wished they lived closer to Ottawa to attend. To cut a long but wonderful story short I was provided with a place to stay, a train ticket and spending money.
I would never have asked anyone for money. The means was offered freely.
When I attended the protest I was fully conscious that I represented more than just myself.

scandia said...

@Greenwood, Just came across this article on Bradley Manning that highlights the concept of " conscience "

" lest any other cogs in the machine start thinking about listening to their conscience instead of their commanders. "
" if you see something don't say something."

" No Justice for Bradley Manning "

Ashvin said...

DUBLIN, Dec 16 (Reuters) - "Ireland's economy contracted at its fastest pace in over two years in the third quarter after a global slowdown hit export growth, casting doubt over Dublin's ability to transform itself into the euro zone's comeback kid.

Gross domestic product slumped 1.9 percent on a seasonally adjusted basis, compared to a Reuters poll forecast of a 0.5 percent fall, making Ireland the worst euro zone performer in the third quarter apart from Greece, which no longer publishes seasonally adjusted figures."

Ashvin said...

The Dark Side of Dubai

"The wide, smiling face of Sheikh Mohammed – the absolute ruler of Dubai – beams down on his creation. His image is displayed on every other building, sandwiched between the more familiar corporate rictuses of Ronald McDonald and Colonel Sanders. This man has sold Dubai to the world as the city of One Thousand and One Arabian Lights, a Shangri-La in the Middle East insulated from the dust-storms blasting across the region. He dominates the Manhattan-manqué skyline, beaming out from row after row of glass pyramids and hotels smelted into the shape of piles of golden coins. And there he stands on the tallest building in the world – a skinny spike, jabbing farther into the sky than any other human construction in history.

But something has flickered in Sheikh Mohammed's smile. The ubiquitous cranes have paused on the skyline, as if stuck in time. There are countless buildings half-finished, seemingly abandoned. In the swankiest new constructions – like the vast Atlantis hotel, a giant pink castle built in 1,000 days for $1.5bn on its own artificial island – where rainwater is leaking from the ceilings and the tiles are falling off the roof. This Neverland was built on the Never-Never – and now the cracks are beginning to show. Suddenly it looks less like Manhattan in the sun than Iceland in the desert.

Once the manic burst of building has stopped and the whirlwind has slowed, the secrets of Dubai are slowly seeping out. This is a city built from nothing in just a few wild decades on credit and ecocide, suppression and slavery. Dubai is a living metal metaphor for the neo-liberal globalised world that may be crashing – at last – into history."

mike said...

no, Alex, it was a question as to how bad is this going to get? by what I read on here it sounds like a mad max scenario so a tank would fit in quite well.

jal said...

“... that the ECB could engage in quasi-QE, using the Eurozone banks as a proxy 'buyer of last resort' for sovereign debt, standing ready to purchase as much sovereign debt on the secondary markets as is needed.  This would end the current crisis at a stroke - and would be entirely within the confines of current EU treaties....”

In case you want a smaller explanation rather than read the whole article ...
Here it is.

Change the rules!
Make new rules.
Make new "tools".

The E.U. and the US have vowed not to let the financial system crash. If the financial system crashes then granma will not be able to get a dividend check or withdraw her saving.
They won’t let that happen. Must keep the stock market up for dividend checks and the institution able to give granma her savings.

They are willing to change or ignore the rules and regulations to achieve their goal of saving the financial system.

el gallinazo said...

Ant Whisperer

Thanks for the information. Sounds like mother nature is also into hyper hypothecation :-) I can see why a computer model of this would be a nightmare, particularly as there are positive feedback loops. Just out of curiosity, and if it is not too detailed for a financial blog, why would hydroxyl radical concentration depend of CO2 concentration? Seems anti-intuitive.

Ash said...


"To make your picture more realistic, I would add an OWS sheep realizing that he is about to be devoured and a big squid eating the whole chain of sharks."

I'm assuming your referencing Goldman as the "vampire squid" that will come out on top of a Europe-inspired banking meltdown. While you may be correct in the short-term, I believe it is a mistake to assume even the biggest shark is immune to the systemic processes that are occurring, of which its own over-extension and hubris is a significant part. I also believe it is a mistake to under-estimate the "OWS sheep", or the disenchanted masses, right now. This will not be a linear collapse, and there is certainly a lot of exploitation, struggle and bloodshed to come, but we should also remember that some [many] things are simply too big for humans to control in the last instance.

Biologique Earl said...

The hydroxyl radical, •OH, is the neutral form of the hydroxide ion (OH–). Hydroxyl radicals are highly reactive and consequently short-lived; however, they form an important part of radical chemistry.

In atmospheric chemistry, hydroxyl radicals are produced by the reaction of excited atomic oxygen with water

Ashvin said...

Telegraph Blog


Fitch has placed Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on rating watch negative.

17.45 The big news for tonight is that we are expecting downgrades of Spain and Italy later tonight. S&P downgraded the US at 1am on a Saturday earlier this year.

18.00 French-owned Fitch has affirmed France's AAA rating. Outlook revised to negative

Credit ratings agency Fitch has said:

'Quote Following the EU summit, Fitch has concluded that a comprehensive solution to the eurozone crisis is technically and politically beyond reach.'"

el gallinazo said...

Re sharks and squid

Reggie Middleton, who is one of the smartest cookies going re finance (as well as a noted Zulu warrior impersonator), believes that the Squid is following the exact same betting scheme as Motha F Global. They just have more credit and liquidity to wait it out. But if their wagers don't pan out soon, the Squid may wind up as calamari. A bail out seems politically impossible without a declaration of martial law which would require another giant "terrorist" attack first. The Fed may be able to bail them out opaquely though.

Bryan McNett said...

El Gallizano, anything to share about this? Reply obliquely if you must.


jal said...

"... the Squid may wind up as calamari..."

OWS would love to be invited to such an expensive bankquet.

I'll make sure to tell granny not to sell her costume jewelry.


vangoat said...

Reggie Middleton on Keiser

About half way in.

vangoat said...

Bankster loving PINKOS!

ben said...

stacy peralta, director of that bank of america commercial was a pioneering skateboarder, credited with inventing one of the moves you always see the kids doing on the playground, and co-founded the market making Powell Peralta skate company back at the beginning. his documentary 'dogtown and z-boys,' about the surf/skate scene in LA in the 70's is great. unfortunately he is a prototypically clueless angeleno (i might say vacuous if it wasn't the city of angels). dogtown and z-boys was narrated by sean penn who hopefully gave peralta some shit for that BAC commercial as well as whopper virgins.

scandia said...

@Ash, Your essay brought two things to mind.

first a quote," If you don't want to be eaten by sharks don't swim with the shark bait."

Second a song,

el gallinazo said...

Bryan McNett

Skimmed your link and this was the first time that I saw these claims made. So in that sense you know more (or less) than I do. The claims appear to be outlandish at first glance, but I will try to find time to read the article and site links critically in the near future. I have been suckered enough since 1963 to try to keep an open, if skeptically fact and logic driven mind. Have nothing else to write at present.

Joe in NC said...

Anyone read this from Golem XIV?

Plan B – How to loot nations and their banks legally

This is believable to me...and pretty scary stuff.

Any thoughts?


el gallinazo said...


Kurt Weill wrote Mack the Knife for his wife, Lotte Lenya, to perform, and she does a hell of a good job.

Also like Louis Armstrong's version

Bobby Darin's version was always a little too "snappy" for me.

Jack said...

Damon Vrabel says that the banking cartel has hierarchy and that the competition is fierce.

I am trying to understand something about FM Global and relate this to what Damon Vrabel said in his videos.

FM Global made a bet that some European countries would fail and it was a mistake that
cost over a billion dollars of investors money.

FM must have insider information and knows when these countries will fail so was this fiasco all planed or John Corzine was in a fierce fight with people in the cartel.

Again about Damon Vrabel
If the cartel has control of the world monetary system which includes Russia and China than why is there
this rivallry between these countries.
Why doesnt the cartel just swindle everyone without mercy.
No need to bothere with war and all that stuff

Gravity said...

Methane releases are positively correlated to several of the more significant mass extinction events, unlike rising co2 levels which have no clear correlation with mass extinctions.

All good interglacial periods come to an end eventually, humans may have no defined right to interfere with such a climate shifting process if it were to occur naturally as a primary evolutionary driver, not even to save their ill-adaptive and unmoveable urban civilization.
Conversely, humans may also have no defined right to cause such shifts by unnatural means, not even to facilitate the growth of cities, not if it would guarantee intractable biospere destabilisation lasting for generations.

That being said, I'd be willing to sacrifice half the vertebrate species on this planet if it were required to preserve human dignity from implementation of agenda 21, although that is a false dichotomy, we likely couldn't afford to lose half the vertebrate species without biospheric collapse destroying said dignity.

The ending of this interglacial period with its characteristically low atmospheric co2 and temperature, whether caused or prematurely triggered by humans or not, will necessarily coincide with the end of the growth of cities, as relying on such narrow climate ranges and predictable weather patterns for agricultural imperatives.
Concerning runaway methane feedbacks, there's nothing to be done that doesn't include geoengineering atrocities which will likely backfire.

Ant Whisperer said...

@ El G, I'm talking about CO, not CO2 :)

H2O + UV light -> H* + OH* (splitting of water into radicals)
CO + OH* --> CO2 + H* (forming a hydrogen radical)

You might also have a whole host of other radical reactions going on:
H* + O2 --> HOO* (superoxide radical formation)
HOO* --> OH* + O
O + O2 -> O3 (ozone formation)
2H* -->H2
2O -> O2



Gravity said...

The climate will probably shift severely in the coming centuries, back to a stable glacial mode, subtropical or arid configuration, perhaps changing too much to sustain sedentary civilization in. The biosphere may not be sufficiently disrupted by temperature-related factors alone to cause a mass extinction like the permian event, including the extiction of most marine life, although methane releases of some magnitude make it more likely.

The antropogenic effects of exogenetic contamination and industrial pollution may also easily trigger mass extinctions without directly effecting atmospheric consituents or temperature at all, with a greater probability than effects of excess greenhosuse gas expulsions and related feedbacks would. Emissions of exogenetic waste are definitely of antropogenic origin and will likely cause the extinction of all terrestrial plantlife within two centuries at current trajectories of contaminant vectors throughout the food supply, with more certainty and much more quickly than most greenhouse effects would.

Also, at this rate of fertility decline, the entire western population will be sterile by 2030 due to saturation effects of industrial pollution and the unforeseen effects of widely used modified foodcrops which have detrimental effects on fertility. An impending fertility crisis may be a more immediate threat to the survival of the species than slower scenarios of climate shift would pose.

Still, we're likely to lose half the vertebrate species within a few thousand years or so, mostly due to the destruction of viable habitats and cascading foodchain collapse, which is really sad. But they'll eventually be replaced in a few million years by newly adapted species suitable for a new climate configuration. The contemporary crop of species also came about as a result of previous mass extincions leaving ecosystem vacancies. I wonder what would fill our vacancy if we were to extinctify ourselves, another psychotic species of ape?

YesMaybe said...


Please don't confuse MF Global, Corzine's company, with FM Global, an unrelated company which has been suffering due to the similarity in their names. As others have suggested, it's easy to remember:

MF stands for mother****ers

Ash said...


"Second a song,

Can't go wrong with that!

When I read the comment, though, I was kind of expecting to be taken here.

O.A.R. = Of A Revolution

el gallinazo said...

Ant Whisperer

Thanks for your reaction pathways. Sorry for reading CO as CO2 in your original comment. CO makes a lot more sense :-) Assume the CO is coming mainly form human combustion byproducts, or perhaps some even from incomplete natural oxidation of biomass. If from solar UV, I would think it would be a radical.


"Also, at this rate of fertility decline, the entire western population will be sterile by 2030 due to saturation effects of industrial pollution and the unforeseen effects of widely used modified food crops which have detrimental effects on fertility. An impending fertility crisis may be a more immediate threat to the survival of the species than slower scenarios of climate shift would pose."

Since global population is still in a steep exponential rise, the only way your prediction for complete sterility would make sense is if it kicks in like an exponential hammer in the next 18 years. Also, Terran glaciation does not take place like a Swiss clock and it would be total conjecture to try to integrate human climate change with it. The only thing that seems reasonably sure is that in many thousands of years the earth will probably go into another ice age. I use the world "probably" because ice age cycles are the exception over the last 4.5 billion years, so at some point they will almost certainly stop.

Joe in NC

A few scattered and random thoughts:

The Golem XIV article is, as usual, brilliant - and frightening I guess, as it transfers the central bank and treasury loans to all but the TBTF into loot **of** the TBTF. When Obama signs the Dissenters to Gitmo Act, the US will be under de facto Martial Law indefinitely. I would say that the day he signs this bill will be the official future historically mandated date that the Republic becomes the Empire. However, I suspect that this Empire will be lucky to last 1/20th the duration that Rome did.

Golem initially deals with the question of whether this was a conspiracy of forethought or simply a concatenation of opportunism. He comes down for the former and then his entire article builds the case for the latter.

It doesn't deal with sale to Soros of $2B of PIIG bonds after the bankruptcy at a 5% discount of market price. From what I have read these were just straight bonds and not derivatives, and if so, a patent violation of bankruptcy law.

He doesn't deal with the billion plus commingling of client funds other than saying that it may well be a diversion of a larger issue. But he triggered in me the thought of the possible real reason why there has been no criminal charges against Corzine and the other MothaFG execs. With all the chickenshit that they passed through Congress in Clinton's waning days as well as the Debt Serf Act of 2005, the law still stands that stolen goods must be returned to their rightful owner. You cannot legitimately keep stolen goods, even if you bought them unknowingly and in good faith, not that the Morgue could be accused of that. So if criminal proceedings go down against MothaF Global, then the Morgue would legally have to kick back the client loot to the theft victims.

I would be curious to get Stoneleigh's take on the article.

A final observation. While I think Golem did a great and creative job of analysis, in the end all this legal shit amounts to nothing. The average debt serf isn't going top understand it anyway. In the end it will boil down, as Robber Baron Jay Gould so elegantly put it, to whether the banking cartel can hire half the working class to kill the other half.

scandia said...

thanks for the intro to O.A.R.
Nothing like a little revolution with my morning cuppa:)

Stan said...

I'm not sure why you think Physicians equate with Corporate Managers simply because Doctors may earn a good living. The average salaries for Physicians varies by specialty...but most are not earning 300 times the salaries of regular folks..and they damn sure spent a lot of time and money to become qualified.

This is where I part ways with your ideas...when you start spouting crap instead of reasoned thought.

Stoneleigh said...

Read this.

We've said all along at TAE that there would be a giant reaching down from the top of the financial food chain to the bottom in the process of extinguishing excess claims to underlying real wealth. Those who hold the financial instruments furthest removed from underlying real wealth are nevertheless best positioned to grab the real collateral in a meltdown.

I think the legal niceties are rather irrelevant at the end of the day though. Why should they care if their wealth grab is legal or not? As the article says, possession is 9/10ths of the law. The short term legality is probably a help, but I think this would have happened anyway. It was always in the cards that collateral would be grabbed, and it was always on the cards that laws would be rewritten, retrospectively if necessary, in order to deliver a fait accompi.

No one can rely on the law to defend them. Law is a tool to codify and legitimize existing power relationships. 'Twas ever thus. The impact under times such as these will simply be larger and the wealth grab more overt. We've lived through a slower-motion drip feed of wealth accumulation that will now shift into high gear as it eats the real economy for breakfast in a giant economic implosion. That's how bubbles always end.

Ash said...

re: GolemXIV article

I agree with Stoneleigh that this is simply the natural evolution of the system as opposed to a pre-devised plan to make theft of client/taxpayer money "legal" through a loophole in the US bankruptcy code. Golem certainly recognizes that fact when he says that this "plan B" is more of an opportunistic situation that major banks have found themselves in, with the aid of recently amended bankruptcy codes (although it is still unclear to what extent similar provisions exist in other jurisdictions around the world).

The major issue here is whether major banks, such as JPM, can extract cash collateral from weaker institutions, such as MF Global, that go bankrupt due to their status as repo creditors or counter-parties to a derivatives trade, before any other creditors or parties can assert claims to that cash during the bankruptcy process. In essence, whether they can instantly foreclose on any and all assets of the weaker institution even after bankruptcy has been filed.

If that is the case, then these major banks can basically sell derivatives and lend short-term money to other institutions without taking on any counter-party risk or risk of losing the money lent. As I pointed out from the Elias article, something like this can occur anyway before bankruptcy, as clients' assets are re-hypothecated [without restriction in the UK] as collateral for loans. Golem is suggesting that such a process can occur after bankruptcy is filed, and therefore the large banks may even have incentives to push weaker institutions into bankruptcy. At the very least, they simply don't care about the debtor/counterpary's solvency.

I am still uncertain as to whether either of those are the case (pushing them into bankruptcy or simply not caring one way or the other). It does seem like large risks would still remain for the larger institution, if for some reason they could only foreclose on the actual toxic assets pledged as collateral or their exemption status is questioned by the federal government. As Golem points out, these risks may be irrelevant due to the fact that the banks can act within hours while the regulators and other parties asserting ownership of cash collateral may get caught up in bureaucracy for months or even years.

OTOH, the federal government could quite easily nullify this "plan B" if they felt that it was threatening their own power. I don't think we should assume that the major banks have all the leverage in this particular situation, because they are not simply threatening to screw-over small-time debtors or taxpayers, but relative big institutional clients and basically the entire banking infrastructure. Who will continue operating within the financial system if this process is allowed to continue unimpeded? The MF Global debacle may have even been the beginning AND the end of it, unless the major banks still think they can pull off "plan B" and survive.

I still think that's unlikely, but possible.

Greenwood said...

@ Ash

What you describe about larger TBTFs tearing into smaller TBTF sharks sounds like a Financial Donner Party


jal said...

Re.: Sharks vs. squids

"The MF Global debacle may have even been the beginning AND the end of it, unless the major banks still think they can pull off "plan B" and survive.

I still think that's unlikely, but possible."
Predators stop thinking in a feeding frenzy.

Our social structures have a lot more breaking down to do before the Sheeps could become piranha.

Recall the conditions that you have read about in Haiti, N. Korea etc.

(When a school of piranha are in a feeding frenzy the water appears to boil and churn red with blood. They attack with such ferocity that they strip an animal of its flesh within a matter of minutes, even taking bites out of each other in the process.)

p01 said...


I can't find the comment that you reference, but no physician who destroys his patient's life because he's following the FDA/government guidelines is worth a spit, sorry. Not only they should know better (being so smart and all), but they swore an oath on top of that.

scandia said...

Continuing to think about psychopaths. In hindsight I have identified several I have encountered personally. Just spoke to a girlfriend who giggled and thought an enquiry into psychopathy was exotic. Breathlessly she asked, " You don't know one do you?"
Jeez no wonder its easy pickings for those without conscience.
I've been reviewing current global leaders looking for the signs. In that process it dawned on me that if I was a world leader hiring advisors and PR people I'd want a psychopathic bent in a candidate.
Psychopathy is in fact a requirement of the job.
Can one mix conscience and strategy?
I'm also trying to sort out the difference between Buddha consciousness, the teaching of non attachment with the emotional underdevelopment of the psychopathic mind.
Is Buddhism about mind, psychopathy about brain?
Shish, my head hurts:)

el gallinazo said...

There is an excellent web site called The Economic Collapse constructed by a fellow named Michael Schneider. Michael is a very occasional guest on Charlie McGrath's internet radio show, Wide Awake, and I always look forward to hearing what he has to say. He is highly intelligent, knows what's going down, and presents himself in a thoughtful, soft spoken fashion.

As a retired USA expatriate for the past two years, people often ask me about it. Schneider has written a very thoughtful article about it, certainly better than I could have done. But even more interesting than his article itself are the comments following it, and I recommend them strongly for anyone interested.

One item that comes up is the question as to whether it is better for awake Americans to stand and fight back against the fascist bankster takeover of the country or to leave. My father was born in Austria and came to the USA at the age of seven during the post war (WW I) blockade of Germany and Austria. His comment was that you didn't let your cat out then or it would wind up in your neighbor's pot. My USA roots go back a lot further on my mother's side. But the point is that all current consumers (citizen is so passé) in the USA at some point in their lives or ancestry moved there because they were fed up with where they were and were looking for a better life in some fashion. Even Native American ancestors who crossed the land bridge of the Bering Straits during the waning moments of the last ice age must have had some sort of motivations as they presented their credentials to custom officials in Alaska before wandering south :-) I think the point that I am making is that for all of us, moving on is, at least, in the ancestral record.

Schneider points out that there are so many factors to consider. If I weren't retired and on the home stretch, I probably would not have left. Also, for the moment at least, I can live a better life style in a "poorer" country. I would be living in real poverty if I tried to make it on my Social Security check in the USA, and would, like most Americans in my situation, be tearing through my savings to avoid this, since the interest on my savings, thanks to the Fed, won't even pay for my beer. So financially, expatriation to a country where the dollar, for the moment, goes a lot further, makes sense. It also gives me a certain emotional satisfaction to escape the poverty trap that the Fed and the Status Quo set for me. But on an emotional level, it can be difficult, particularly for people who are less socially interactive.

YesMaybe said...


This should help clarify for you the role of equanimity in buddhism:

Hopefully the difference between that and psychopathy should become apparent.

el gallinazo said...


Stan's tirade was prompted by a minor portion of the Andy Xie article on the main page. Apparently Stan thinks that all the articles on the main page represent the editorial opinion of Ilargi. In keeping with the sloppiness of his comment, he does nothing to refute what the article claimed other than to maintain that the average doctor earns less than 400 times the income of his patients as opposed to the top banker CEO's. This is probably unfortunate for if the average physician did earn 400 times the income of his average patient, it would shut down the entire health industry in the US and we could start over ago.

Despite the fact that I have started to pick up libertarian tendencies in my later years, I believe that all physicians should have their entire tuition in medical school at government expense as well as a reasonable stipend to live on. This would put an end to the expensive education argument. As to time and hard work, I know a lot of custodial workers, who in their 20's put in 12 hour days working their butts off, and who earned considerably lower pay in their 40's than physicians. As to being genetically superhumanly endowed and thus deserving of privilege, when I took a physical chemistry course, I was relieved to learn that the majority of the class was pre-med, a typical entrance requirement for med schools. We were graded on a curve, the median test scores often being lower than 50, and a large pre-med population made it easier to ace the course with the remainder being chemistry majors.

As a plumber on a boutique Caribbean island, a large proportion of my non-resident clients were physicians owning vacation villas which at their 2006 peak ran between one and three millian dollars.

mistah charley, ph.d. said...

There's a book from the Buddhist perspective, Saints and Psychopaths, by William Hamilton

Jack said...

about corzine
He made a bet that on the European countries going bust.
I personally don't believe that.
These bankers know when these countries will go bust.
He has the money hidden somewhere.

NZSanctuary said...

scandia said...
I'm also trying to sort out the difference between Buddha consciousness, the teaching of non attachment with the emotional underdevelopment of the psychopathic mind.

Non-attachment has nothing to do with a lack of empathy or compassion or love. Non attachment is parhaps better described as being non-clingy - whether that is to emotion, belief, ideas, people, physical things, etc. E.g. when your children grow up you need to be able to let them go – even though you love them greatly, you don't cling to them (of course this is a problem some parents get far too caught up in). Psychopathy is essentially the lack of empathy (and I have also read that psychopaths over-produce dopamine).

Joe in NC said...


I appreciate your views on the Golem XIV article. Your emphasis on the various uncertanties is important and very realistic.


ben said...

i find just a little clinginess beneficial - across the board. it provides traction. gravity is a recursive algorithm. i have seen a crutch operate without its rubber foot. the ones with feet admittedly are an improvement. the zero point is a good place for me to visit periodically but certainly not a place from which to work. i expect some will think that i misunderstand. perhaps i still do.

i'm reminded now of this article -- though OT it sorta speaks to said traction -- if anyone happens to be in the mood for the prettiness of obamaton jonathan franzen:

Supergravity said...

About methane releases and their correlation with mass extinctions, it seems the kind of release that is indicated as causal factor for previous extinctionary epochs is much larger than what has been observed in the arctic, extinctionary methane eruptions mostly come about by astrophysical calamities, chlathrate guns or assorted instantaneous cataclysmic events, not from gradual oceanic venting. This methane venting could be natural and not of dangerous magnitude, bad feedbacks should require that the mechanism for the venting is forced by oceanic temperature disturbances. Subduction could be a plausible mechanism as mentioned.

@el g
Indigenous population growth in western europe is not much above replacement rate anymore, but this is mostly demographic transition and not due to reduced fertility yet, though it may already be a minor factor in some regions.
The magnitude of decline in sperm count and quality, such as the extremes observed in russia, is contested and exhibits large regional variety, but such decline is observable and progressive in most industrialised countries.
It could be caused by environmental contamination with estrogen-like compounds disrupting repruductive tissues, a russian sperm study reported almost complete infertility in some places, this was attributed to localised heavy metal toxicity. Cumulative chromosomal damage due to radioactive contamination may also have contributed.

Massive infertility threatening the species survival would be unlikely if the observations of declining sperm counts and increasing female infertility remain isolated to industrialised populations and toxicity factors of industrial life, but there are additional factors which are now spreading across non-industrialised populations. GM products which have reportedly been observed to cause complete infertility in labrats within four generations, and would likely do so in all mammal species, are being widely distributed as agricultural crops, including for human consumption.
Such replicative sterilising contamination introduced in common foodcrops would contribute to future human infertility in a massive way.

There's additional radioactive contamination of yet unexplored magnitude enveloping the northern hemisphere. Such radioactive contaminant stressors, bioaccumulation of radioisotopes and vastly increased background radiation for millenia to come, as is anticipated, are known to damage reproductive tissues tremendously.
The magnitude of male fertility decline in industrial populations is controversial. If it is true that sperm counts have dropped precipitously in western males in the 20th century, then, considering additional factors which may accelerate this decline and may similarly impact female fertility, intensified infertility stressors as currently extrapolated will reach a synergistic environmental toxicity threshold in more contaminated areas somewhere around 2020-2060, whereafter most males will be practically sterile, as novel infertility vectors will also impact female reproductive systems there could be sudden children of men scenarios happening.

Joe in NC said...


Why no links to the "studies" ?


Joe in NC said...

And let's not forget that the stereotypical Russian male pounds down an above average amount of vodka...does that do anything to sperm count?


el gallinazo said...

"According to the most recent data compiled by the State Statistics Committee, the average life expectancy for Russian men is less than 59 years - 58 years and 11 months - while that for Russian women is 72 years. The combined figure is 65 years and three months.

By comparison, the average life span for men in the United States is 73 years and for women 79 years. Male life expectancy in France and Germany is 74 years, while for women it is 82 and 80 years respectively."

Even the sperm are drinking themselves to death.

jal said...

@ Stoneleigh

Could you give us a travel report?

g-minor said...

The mechanism by which GM crops are causing infertility in all species, plants as well as animals, is well and terrifyingly described in this interview at


Anonymous said...

I've recently become a convert to the deflation camp thanks in large part to the tireless and persuasive work of your dear leaders here at TAE, but there are still a few nagging questions that I was hoping someone might be able to clarify...

I know a central tenet of Stoneleigh's advice is that people will need to move into hard assets at some point to protect against currency devaluation.

#1. Since TPTB will not likely announce when they plan to abandon the dollar, what event(s) might signify that it's time to get out of cash?

#2. Is a banking collapse always a prerequisite for hyperinflation? Would a banking collapse necessarily include one or more of the big 6 banks?

#3. Given the FED's eagerness to destroy its own balance sheet, how does a bank run logistically overwhelm the FED's ability to throw fresh money at a failing bank?

#4. How might the bond market impose discipline on the FED when the FED is already the largest holder of treasuries? In other words, what prevents the FED from buying up any treasuries that others might sell?

#5. And finally, would an official announcement of QE3 do anything to alter the outlook at TAE regarding imminent deflation? If not, is there anything that would?

Thanks in advance for swiftly disposing of my ignorance in these matters.

Nassim said...

re Dubai,

The article seemed familiar and when I checked the date, I realised that I had read it 32 months ago.

I know several people in Dubai and I think the place is far from imploding. Essentially, it is a TBTF part of the UAE and Abu Dhabi is backstopping its financial follies. I could go on, but I don't want to give away too much. :)

Jack said...

Every single individual should take part in the OWS movement and take all that these bankers have and throw them on to the streets naked.

Ilargi said...

New post up.

2012 - The end -and the return- of Europe as we know it


scandia said...

@Mistah Charley,ph.d...thanks for the reference to " Saints and Psychopaths " . Seems there is no place to skip the due diligance phase of relationship/committment. That guidance check list of " Say,Mean,Do "is useful.
I'll have to get hold of the book....