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India struggles to handle onion crisis – Central & South Asia – Al Jazeera English

October 26, 2013 8:37 pm / Leave a comment

India struggles to handle onion crisis – Central & South Asia – Al Jazeera English. (source/link)

India has become so desperate for fresh stocks of the onions it uses in spicy curries that it is trying to import them from neighbours, and is even considering airlifts to ease soaring prices.

Indians go through 15m tonnes of onions a year, using them as the base for traditional dishes such as biryani and bhaji. The country is the second-largest onion grower in the world, after China, and normally exports them.

But retail prices have quadrupled in the past three months, to as high as 100 rupees ($1.62) per kliogram, making the onions an unaffordable luxury for India’s poor.

The soaring prices could become an issue in elections scheduled for next month in five states, including the capital, New Delhi.

To ease prices, the state-run farm cooperative issued a tender this week to purchase onions from abroad.

Supplies from abroad may take weeks to arrive, however; Farm Minister Sharad Pawar proposed on Wednesday importing them by air, because sea transport takes longer.

“The state-run agencies are floating import tenders, but supplies are likely to come only after 3-4 weeks,” said Changdev Holkar, a director at the National Agricultural Cooperative Marketing Federation. “And quantity would be also miniscule compared to demand.”

‘Cheating consumers’

A new crop of onions should be harvested in two or three weeks, but heavy rains are expected in the coming days in several onion-growing states, which could have a disastrous effect on the crops.

The government blames the crisis on both bad weather and speculation by middlemen. KV Thomas, the Indian food minister, accused traders on Saturday of “cheating consumers,” urging them to sell onions at “affordable rates.”

His ruling Congress party fears a backlash from its main support base. “The sky-high prices of onions have given the opposition a potent weapon to attack the government with,” commented the Hindustan Timesnewspaper recently.

Costly onions have a history of political fallout, with the Hindu nationalist Bharatiya Janata Party (BJP) being ousted in 1998 Delhi state polls after surging onion prices soured the voter mood.

In January 1980, the late Congress leader Indira Gandhi rode back to power on the back of rising onion prices, waving huge strings of them at campaign rallies and saying that a government has no right to govern if it cannot control onion costs.

The latest onion price rise has also come in the middle of India’s most important religious festival season, an occasion for multi-day feasts and family dinners.

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Brazil’s Flaws Are Clear… | Zero Hedge

October 26, 2013 6:10 pm / Leave a comment

Brazil’s Flaws Are Clear… | Zero Hedge. (source)

While Eike Batista’s collapse from grace may be the poster child for the country, this deep dive into the Latin American economy concludes Brazil’s flaws are clear. Commodity prices have been volatile; global growth has been weak and inconsistent. Brazil can no longer depend on these factors for growth. A closer look reveals that internal conditions are progressively becoming Brazil’s main economic foe. Ironically this is good news as the country is increasingly in a position to take control of its destiny. What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country. Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future.

Via Rodrigo Serrano of RCS Investments,

Brazil’s emergence as a significant economic force over the past decade generated noteworthy investor enthusiasm. From 2003 to 2008, an amalgamation of principal factors such as: macroeconomic stability stemming from prior reforms in the country, a recovering U.S. economy from its 2001 recession, historically low global interest rates, appreciating commodity prices, and rising demand from China set the stage for a sustained period of solid economic growth in Brazil.

While most of the aforementioned tailwinds provided a sound incubator for solid economic growth across all BRIC nations during the same period; Russia, India, and China averaged 7.1%, 8.0%, and 11.3% respectably; it was Brazil that more than doubled its rate of growth from 2.0% during 1997-2002 to 4.2% from 2003-2008 according to the World Bank. This improvement was the best among the BRIC nations.

As the 2008 financial crisis approached, many prominent investors and academics, fond of the bullish long-term prospects of the BRIC nations, entertained the decoupling thesis. From the Economist: “Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy. Decoupling does not mean that an American recession will have no impact on developing countries… The point is that their GDP-growth rates will slow by much less than in previous American downturns” (Economist: The decoupling debate).

While the American downturn and subsequent financial crisis did precipitate a global recession largely debunking the idea that BRIC nations could step in and save the world economy,investor interest in Brazil only intensified when the event seemed like it would be little more than a slight bump in the road in terms of economic growth. Brazil’s economy registered a scant contraction of 0.3% in 2009, which was then followed the following year by the strongest pace of annual growth in 25 years at 7.5%. Furthermore, Brazil’s Bovespa index rocketed higher from the nadir of its stock market crash in late 2008 by roughly 129% by the end of 2009, the second best performance among BRIC nations over that period after Russia’s MICEX index.

Despite these impressive performance statistics, since peaking in 2010, economic growth has been widely lackluster, souring investor sentiment and bringing into the spotlight the panoply of structural problems facing Latin America’s largest economy. This extensive report covers a brief economic history of Brazil, a focus on the country’s current economic impediments, and steps for positive future development.

Full report below:

RCS Investments: Brazil Special Report

 

Rising Energy Costs Lead to Recession; Eventually Collapse | Our Finite World

October 26, 2013 10:46 am / 2 Comments on Rising Energy Costs Lead to Recession; Eventually Collapse | Our Finite World

Rising Energy Costs Lead to Recession; Eventually Collapse | Our Finite World. (source)

How does the world reach limits? This is a question that few dare to examine. My analysis suggests that these limits will come in a very different way than most have expected–through financial stress that ultimately relates to rising unit energy costs, plus the need to use increasing amounts of energy for additional purposes:

  • To extract oil and other minerals from locations where extraction is very difficult, such as in shale formations, or very deep under the sea;
  • To mitigate water shortages and pollution issues, using processes such as desalination and long distance transport of food; and
  • To attempt to reduce future fossil fuel use, by building devices such as solar panels and electric cars that increase fossil fuel energy use now in the hope of reducingenergy use later.

We have long known that the world is likely to eventually reach limits. In 1972, the bookThe Limits to Growth by Donella Meadows and others modeled the likely impact of growing population, limited resources, and rising pollution in a finite world. They considered a number of scenarios under a range of different assumptions. These models strongly suggested the world economy would begin to hit limits in the first half of the 21st century and would eventually collapse.

The indications of the 1972 analysis were considered nonsense by most. Clearly, the world would work its way around limits of the type suggested. The world would find additional resources in short supply. It would become more efficient at using resources and would tackle the problem of rising pollution. The free market would handle any problems that might arise.

The Limits to Growth analysis modeled the world economy in terms of flows; it did not try to model the financial system. In recent years, I have been looking at the situation and have discovered that as we hit limits in a finite world, the financial system is the most vulnerable part because of the system because it ties everything else together. Debt in particular is vulnerable because the time-shifting aspect of debt “works” much better in a rapidly growing economy than in an economy that is barely growing or shrinking.

The problem that now looks like it has the potential to push the world into financial collapse is something no one would have thought of—high oil prices that take a slice out of the economy, without anything to show in return. Consumers find that their own salaries do not rise as oil prices rise. They find that they need to cut back on discretionary spending if they are to have adequate funds to pay for necessities produced using oil. Food is one such necessity; oil is used to run farm equipment, make herbicides and pesticides, and transport finished food products. The result of a cutback in discretionary spending is recession or near recession, and less job availability. Governments find themselves in  financial distress from trying to mitigate the recession-like impacts without adequate tax revenue.

One of our big problems now is a lack of cheap substitutes for oil. Highly touted renewable energy sources such as wind and solar PV are not cheap. They also do not substitute directly for oil, and they increase near-term fossil fuel consumption. Ethanol can act as an “oil extender,” but it is not cheap. Battery powered cars are also not cheap.

The issue of rising oil prices is really a two-sided issue. The least expensive sources of oil tend to be extracted first. Thus, the cost of producing oil tends to rise over time. As a result, oil producers tend to require ever-rising oil prices to cover their costs. It is the interaction of these two forces that leads to the likelihood of financial collapse in the near term:

  1. Need for ever-rising oil prices by oil producers.
  2. The adverse impact of high-energy prices on consumers.

If a cheap substitute for oil had already come along in adequate quantity, there would be no problem. The issue is that no suitable substitute has been found, and financial problems are here already. In fact, collapse may very well come from oil prices not rising high enough to satisfy the needs of those extracting the oil, because of worldwide recession.

The Role of Inexpensive Energy

The fact that few stop to realize is that energy of the right type is absolutely essential for making goods and services of all kinds.  Even if the services are simply typing numbers into a computer, we need energy of precisely the right kind for several different purposes:

  1. To make the computer and transport it to the current location.
  2. To build the building where the worker works.
  3. To light the building where the worker works.
  4. To heat or cool the building where the worker works.
  5. To transport the worker to the location where he works.
  6. To produce the foods that the worker eats.
  7. To produce the clothing that the worker wears.

Furthermore, the energy used needs to be inexpensive, for many reasons—so that the worker’s salary goes farther; so that the goods or services created are competitive in a world market; and so that governments can gain adequate tax revenue from taxing energy products. We don’t think of fossil fuel energy products as being a significant source of tax revenue, but they very often are, especially for exporters (Rodgers map of oil “government take” percentages).

Some of the energy listed above is paid for by the employer; some is paid for by the employee. This difference is irrelevant, since all are equally essential. Some energy is omitted from the above list, but is still very important. Energy to build roads, electric transmission lines, schools, and health care centers is essential if the current system is to be maintained. If energy prices rise, taxes and fees to pay for basic services such as these will likely need to rise.

How “Growth” Began

For most primates, such as chimpanzees and gorillas, the number of the species fluctuates up and down within a range. Total population isn’t very high. If human population followed that of other large primates, there wouldn’t be more than a few million humans worldwide. They would likely live in one geographical area.

How did humans venture out of this mold? In my view, a likely way that humans were able to improve their dominance over other animals and plants was through the controlled use of fire, a skill they learned over one million years ago  (Luke 2012).  Controlled use of fire could be used for many purposes, including cooking food, providing heat in cool weather, and scaring away wild animals.

The earliest use of fire was in some sense very inexpensive. Dry sticks and leaves were close at hand. If humans used a technique such as twirling one stick against another with the right technique and the right kind of wood, such a fire could be made in less than a minute (Hough 1890). Once humans had discovered how to make fire, they could use it to leverage their meager muscular strength.

The benefits of the controlled use of fire are perhaps not as obvious to us as they would have been to the early users. When it became possible to cook food, a much wider variety of potential foodstuffs could be eaten. The nutrition from food was also better. There is even some evidence that cooking food allowed the human body to evolve in the direction of smaller chewing and digestive apparatus and a bigger brain (Wrangham 2009). A bigger brain would allow humans to outsmart their prey. (Dilworth 2010)

Cooking food allowed humans to spend much less time chewing food than previously—only one-tenth as much time according to one study (4.7% of daily activity vs. 48% of daily activity) (Organ et al. 2011). The reduction in chewing time left more time other activities, such as making tools and clothing.

Humans gradually increased their control over many additional energy sources. Training dogs to help in hunting came very early. Humans learned to make sailboats using wind energy. They learned to domesticate plants and animals, so that they could provide more food energy in the location where it was needed. Domesticated animals could also be used to pull loads.

Humans learned to use wind mills and water mills made from wood, and eventually learned to use coal, petroleum (also called oil), natural gas, and uranium. The availability of fossil fuels vastly increased our ability to make substances that require heating, including metals, glass, and concrete. Prior to this time, wood had been used as an energy source, leading to widespread deforestation.

With the availability of metals, glass, and concrete in quantity, it became possible to develop modern hydroelectric power plants and transmission lines to transmit this electricity. It also became possible to build railroads, steam-powered ships, better plows, and many other useful devices.

Population rose dramatically after fossil fuels were added, enabling better food production and transportation. This started about 1800.

Figure 1. World population based on data from "Atlas of World History," McEvedy and Jones, Penguin Reference Books, 1978 and Wikipedia-World Population.

Figure 1. World population based on data from “Atlas of World History,” McEvedy and Jones, Penguin Reference Books, 1978 and UN Population Estimates.

 

All of these activities led to a very long history of what we today might call economic growth. Prior to the availability of fossil fuels, the majority of this growth was in population, rather than a major change in living standards. (The population was still very low compared to today.) In later years, increased energy use was still associated with increased population, but it was also associated with an increase in creature comforts—bigger homes, better transportation, heating and cooling of homes, and greater availability of services like education, medicine, and financial services.

How Cheap Energy and Technology Combine to Lead to Economic Growth

Without external energy, all we have is the energy from our own bodies. We can perhaps leverage this energy a bit by picking up a stick and using it to hit something, or by picking up a rock and throwing it. In total, this leveraging of our own energy doesn’t get us very far—many animals do the same thing. Such tools provide some leverage, but they are not quite enough.

The next step up in leverage comes if we can find some sort of external energy to use to supplement our own energy when making goods and services.  One example might be heat from a fire built with sticks used for baking bread; another example might be energy from an animal pulling a cart. This additional energy can’t take too much of (1) our human energy, (2) resources from the ground, or (3) financial capital, or we will have little to invest what we really want—technology that gives us the many goods we use, and services such as education, health care, and recreation.

The use of inexpensive energy led to a positive feedback loop: the value of the goods and service produced was sufficient to produce a profit when all costs were considered, thanks to the inexpensive cost of the energy used. This profit allowed additional investment, and contributed to further energy development and further growth. This profit also often led to rising salaries. The additional cheap energy use combined with greater technology produced the impression that humans were becoming more “productive.”

For a very long time, we were able to ramp up the amount of energy we used, worldwide. There were many civilizations that collapsed along the way, but in total, for all civilizations in the world combined, energy consumption, population, and goods and services produced tended to rise over time.

In the 1970s, we had our first experience with oil limits. US oil production started dropping in 1971. The drop in oil production set us up as easy prey for an oil embargo in 1973-1974, and oil prices spiked. We got around this problem, and more high price problems in the late 1970s by

  1. Starting work on new inexpensive oil production in the North Sea, Alaska, and Mexico.
  2. Adopting more fuel-efficient cars, already available in Japan.
  3. Switching from oil to nuclear or coal for electricity production.
  4. Cutting back on oil intensive activities, such as building new roads and doing heavy manufacturing in the United States.

The economy eventually more or less recovered, but men’s wages stagnated, and women found a need to join the workforce to maintain the standards of living of their families.  Oil prices dropped back, but not quite a far as to prior level. The lack of energy intensive industries (powered by cheap oil) likely contributed to the stagnation of wages for men.

Recently, since about 2004, we have again been encountering high oil prices. Unfortunately, the easy options to fix them are mostly gone. We have run out of cheap energy options—tight oil from shale formations isn’t cheap. Wages again are stagnating, even worse than before. The positive feedback loop based on low energy prices that we had been experiencing when oil prices were low isn’t working nearly as well, and economic growth rates are falling.

The technical name for the problem we are running into with oil is diminishing marginal returns.  This represents a situation where more and more inputs are used in extraction, but these additional inputs add very little more in the way of the desired output, which is oil. Oil companies find that an investment of a given amount, say $1,000 dollars, yields a much smaller amount of oil than it used to in the past—often less than a fourth as much. There are often more up-front expenses in drilling the wells, and less certainty about the length of time that oil can be extracted from a new well.

Oil that requires high up-front investment needs a high price to justify its extraction. When consumers pay the high oil price, the amount they have for discretionary goods drops.  The feedback loop starts working the wrong direction—in the direction of more layoffs, and lower wages for those working. Companies, including oil companies, have a harder time making a profit. They find outsourcing labor costs to lower-cost parts of the world more attractive.

Can this Growth Continue Indefinitely?

Even apart from the oil price problem, there are other reasons to think that growth cannot continue indefinitely in a finite world.  For one thing, we are already running short of fresh water in many parts of the world, including China, India and the Middle East.  Topsoil is eroding, and is being depleted of minerals. In addition, if population continues to rise, we will need a way to feed all of these people—either more arable land, or a way of producing more food per acre.

Pollution is another issue. One type is acidification of oceans; another leads to dead zones in oceans. Mercury pollution is a widespread problem. Fresh water that is available is often very polluted. Excess carbon dioxide in the atmosphere leads to concerns about climate change.

There is also an issue with humans crowding out other species. In the past, there have been five widespread die-offs of species, called “Mass Extinctions.” Humans seem now to be causing a Sixth Mass Extinction. Paleontologist Niles Eldredge  describes the Sixth Mass Extinction as follows:

  • Phase One began when first humans began to disperse to different parts of the world about 100,000 years ago. [We were still hunter-gatherers at that point, but we killed off large species for food as we went.]
  • Phase Two began about 10,000 years ago, when humans turned to agriculture.

According to Eldredge, once we turned to agriculture, we stopped living within local ecosystems. We converted land to produce only one or two crops, and classified all unwanted species as “weeds”.  Now with fossil fuels, we are bringing our attack on other species to a new higher level. For example, there is greater clearing of land for agriculture, overfishing, and too much forest use by humans (Eldredge 2005).

In many ways, the pattern of human population growth and growth of use of resources by humans are like a cancer. Growth has to stop for one reason or other—smothering other species, depletion of resources, or pollution.

Many Competing Wrong Diagnoses of our Current Problem

The problem we are running into now is not an easy one to figure out because the problem crosses many disciplines. Is it a financial problem? Or a climate change problem? Or an oil depletion problem? It is hard to find individuals with knowledge across a range of fields.

There is also a strong bias against really understanding the problem, if the answer appears to be in the “very bad to truly awful” range. Politicians want a problem that is easily solvable. So do sustainability folks, and peak oil folks, and people writing academic papers. Those selling newspapers want answers that will please their advertisers. Academic book publishers want books that won’t scare potential buyers.

Another issue is that nature works on a flow basis. All we have in a given year in terms of resources is what we pull out in that year. If we use more resources for one thing–extracting oil, or making solar panels, it leaves less for other purposes. Consumers also work mostly from the income from their current paychecks. Even if we come up with what looks like wonderful solutions, in terms of an investment now for payback later, nature and consumers aren’t very co-operative in producing them. Consumers need ever-more debt, to make the solutions sort of work. If one necessary resource–cheap oil–is in short supply, nature dictates that other resource uses shrink, to work within available balances. So there is more pressure toward collapse.

Virtually no one understands our complex problem. As a result, we end up with all kinds of stories about how we can fix our problem, none of which make sense:

“Humans don’t need fossil fuels; we can just walk away.” – But how do we feed 7 billion people? How long would our forests last before they are used for fuel?

“More wind and solar PV” – But these use fossil fuels now, and don’t fix oil prices.

“Climate change is our only problem.”—Climate change needs to be considered in conjunction with other limits, many of which are hitting very soon. Maybe there is good news about climate, but it likely will be more than offset by bad news from limits not considered in the model.

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‘Wounds of Waziristan’: The Story of Drones As Told By the People Who Live Under Them | Motherboard

October 26, 2013 10:46 am / Leave a comment

‘Wounds of Waziristan’: The Story of Drones As Told By the People Who Live Under Them | Motherboard. (source/link)

A MOTHERBOARD PREMIERE: A NEW DOCUMENTARY BY MADIHA TAHIR

The drone war is obscure by design. Operated by armchair pilots from clandestine bases across the American west, the Predators and Reapers fly over Afghanistan, Yemen, and Pakistan’s Tribal Areas at invisible heights, where they are on orders from the CIA to kill “high value” targets with laser-guided “surgical” precision thousands of feet below. But because of where the Hellfire missiles land, and because the program is operated in secret, verifying their precision and their lasting effects isn’t easy.

For years, US officials have downplayed the number of civilian deaths in particular, even as a chorus of independent reports have offered their own grim estimates. The latest, according to new research by the United Nations and Amnesty International: 58 civilians killed in Yemen, and up to nine hundred in Pakistan. In a speech in May, President Obama finally broke his silence on drones, acknowledging that civilians had been killed—he didn’t say how many—and promising more transparency for the program. “Those deaths,” added the President, “will haunt us for as long as we live.”

For journalist Madiha Tahir, the numbers are important, but they’re not the whole story. Her documentary “Wounds of Waziristan,” which premieres above, features interviews with the people who live in the southern part of the Federally Administered Tribal Areas, bordering Afghanistan, under the eyes of the drones, and in the wake of their destruction. The film switches up the typical calculus that drives the drone debate at home. Tahir, who grew up between Pakistan and the U.S., points out that drone strikes aren’t just about the numbers of casualties, or the kinds of ethical arguments that arise around “just war” concepts like proportionality. The effects of the drone war have as much to do with the way those casualties rip apart communities and haunt the living, in distant places that ​exist on the fringes of law and order.

“Because drones are at a certain remove, there is a sense of uncertainty, a sense that you can’t control this,” Tahir says, describing the attitude among the people who live in Waziristan. Already haunted by the legacy of British colonialism and the laws it left behind, this part of the Tribal Areas is now ruled with a brutal fist by the Pakistani military and various insurgent groups. But the buzz of the drones, sometimes seven or eight overhead a day, signals another kind of indeterminate power. “Whether its true or not, people feel that with militants there is some degree of control. You can negotiate. There is some cause and effect. But there is no cause and effect with drones. It’s an acute kind of trauma that is not limited to the actual attack.”

For the operators of the drone program, who have launched more than 300 missile attacks in Pakistan since 2008, the semi-governed Tribal Areas are subject to their own kind of war-on-terror calculus. As the New York Times reported last year, the American government has been counting all military-age males in a strike zone as “militants,” which leads to skewed figures about who exactly has been killed. The Obama administration has executed “signature strikes,” drone attacks based on a so-called “pattern of life” analysis in which simply suspicious behavior is enough to qualify for an attack. And in a so-called “double tap” maneuver, a second attack follows an initial strike, killing those who have come to recover bodies from the scene.

“When an attack happens, the media claims to know how many militants were killed,” says Noor Behram, a journalist in the Tribal Areas who has been photographing the casualties of drone strikes for years. “Actually, you only find body parts on the scene, so people can’t tell how many have died.”

In one interview, Tahir speaks with a man from South Waziristan named Karim Khan, whose brother and son were killed in a drone strike. “What is the definition of terrorism?” he asks her, and she returns the question to him. His tired eyes light up.

“I think there is no bigger terrorist than Obama or Bush,” he says. “Those who have weaponry like drones, who drop bombs on us while we are in our own homes, there are no greater terrorists than them.”

Despite the secrecy, independent reports by Human Rights Watch and Amnesty International, combined with a set of leaked cables detailing secret dealings between Islamabad and Washington and published in the Washington Post, have shed new light on the still-secret program. On October 29, a family injured in a strike that Amnesty International mentioned in its report is scheduled to testify before Congress (though their lawyer, Shahzad Akbar, who also appears in the film, has been denied a visa.)

In a separate report last week to the UN, which is due to be discussed before the General Assembly in New York on Friday, the special rapporteur on human rights and counter-terrorism, Ben Emmerson called for the US to declassify the program, which he said may be in violation of international laws—a claim that many officials and rights groups have echoed.

“By hiding behind arguments of secrecy and exploiting the difficulty in confirming details of specific strikes due to the lawlessness, remoteness and insecurity of Pakistan’s Tribal Areas,” Emmerson writes, “the USA is contributing to the litany of violations and abuses endured by a population that has been both neglected and assaulted by their own state and victimized by al-Qa’ida, the Taliban and other armed groups.”

Reports like these are an important start to making the drone debate more public, Tahir says, and pressuring the administration to change course. But there are deeper wounds to consider too, ones that are harder to calculate. “There need to be ways we can talk about drones beyond the legal discourse,” she says. “What are the ways we can think about what it means to experience life under drones, and about exactly what it means to be, as the President said, ‘haunted’ by the loss of life.”

For more, see the film’s website, Madiha’s website, and find her on Twitter.

Also see

Vice News: Pakistan After Bin Laden

Motherboard TV: Drone On: The Rise of American Drones

US Drones Have Killed Up to 900 Civilians in Pakistan

Despite a New Drone Playbook, CIA Drones Have Free Reign in Pakistan for the Next Year

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Global Debt, Global Currency » Golem XIV – Thoughts

October 26, 2013 10:43 am / Leave a comment

Global Debt, Global Currency » Golem XIV – Thoughts. (source)

With the latest installment of the ‘US debt ceiling’ melodrama over, for now, perhaps it’s a good time to ask, what was it all about really?

I know that officially it was supposed to be an edge of your seat, high stakes thriller about how much debt the US government can carry before some disaster strikes, and who has the authority to decide. But I think that behind the lumbering domestic stage show there was actually a different, larger battle, with different stakes, being played out. The debt ceiling debate was, to my mind, something of a proxy war. Real for those caught up in its angry rhetoric, but seen from further away, clearly just a local manifestation of something deeper, and something being directed by different people than those making speaches in the spot-light.

Actually I think the fight over the US debt ceiling is a proxy for who controls the world’s real reserve currency. And that currency is not the dollar. I suggest we would understand events more simply if we recognized that the world’s real reserve currency is debt -pure debt.  We should not be confused by the fact that debt, globally, is denominated in several forms. Much like the dollar comes in bills of ten and twenty,  so the debt currency comes in dollars, euros, Yen and Yuan. But they are not the currency itself they are just the different bills it comes in.

In Britain we have pound notes issued by the Bank of England but also by the Royal Bank of Scotland, Clydesdale and Ulster Bank, but they are not different currencies, they are all pounds no matter whose logo in on the notes. I think globally we are now in the early and perhaps not quite recognized days of a similar situation. It is debt which is globally traded and used to settle and value all deals everywhere. The problem is this global debt system is not yet fully formed. It is still umbillically tied to the old system of national currencies and their issuers. And like mummies everywhere the old issuers like to think they are in charge long after they no longer are.

If you are willing to accept this idea, at least for argument’s sake, then the domestic dramas in different countries over how much of this or that kind of debt backed note, with this or that logo on it, should be permitted, take on a different character. I am not saying that the domestic arguments over how many dollars or euros can be printed up, how much debt should be carried are unimportant. They are important and do have profound real life consequences for people and businesses. But I am saying that the driving logic is not domestic and nor is it controlled or even understood by most of the domestic players.

Think of the Vietnam war. In Vietnam it was North vesus South. But for the wider world North and South were just proxies for a much deeper conflict of Communism versus America. And the politicians of South Vietnam were not really in charge of very much. I think this is increasingly the situation of domestic politicans when it comes to finance, debts and currency. Only they don’t yet know this one vital fact. Thus we have the dis-spiriting spectacle of watching the fag ends of our representative democracy argue about things most of them do not understand. An endless stage show where the actors strut and fret, and deliver their lines with gusto, pulling with all their puffed-up might on the familiar levers of power available to them, expecting applause. Yet all the while their drama and the levers of power they squable over are less and less connected to the actual engines of change.

The Democrats and Republicans think they are arguing over who should control the amount of debt the Fed will take on. Not realizing that neither of them, neither Republican nor Democrat controls the matter over which they are arguing. Neither do they realize – not fully at least – that theirs is no longer a theatre of power, it is mostly just a theatre. Power, fundamental power,  has moved elsewhere.

What the debt-celing debate was about, I suggest, was a fight between those who think they control the Fed and the currency (because once they did) and those who do control it but would prefer we not quite realize this.

I think the real battle going on is between the financial players led by the global banks, assorted funds and Insurers, all of whom are very much addicted to fiat debt-money, and a dwindling cadre of politicians who still think central banks control the currencies and elected officials decide how much debt is enough.

This latter group seemingly cannot understand why they can’t get the Fed or the ECB to do what they both said, ever since 2008, they would do, which is to ‘exit’ or to use the prefered term ‘taper’ the ‘extraordinary’ and ‘temporary’ measures they took in 2007, then took again in 2008 and again in 2009 and again in 2010 and 2011 and 2012 and 2013. Which is, let’s be fair to our puzzled politicans and pundits, a confusingly frequent use of ‘extraordinary’ and a long time for ‘temporary’. Hence their confusion.

What our politicians – most of them but crucially not all of them – seem reluctant to underdstand is that neither the FED nor the ECB nor any other central authority, can limit the amount of debt that is issued into the global markets. The banks issue the debt not governments. But that debt, conjured into existence by extending loans does then, particularly in periods of market uncertainty, ‘need’ – or rather or ‘demand’  – backing from a national currency. This creates a pressure on central banks to ‘issue’ more sovereign debt paper to provide the backing for the ALREADY created debt.

The big banks issue the reserve currency. It is a global reserve currency and replaced the dollar some time ago, only no one noticed becaue they kept the old brand name going. It’s not even as if it is just American financial intitutions which issue dollar debt which the Fed finds itself being forced to cover – foreign banks do it to. And anyone who issues dollar denominated debt has a hand on the strings which move the Fed around. Obviously the same is true for other major currencies and their central banks.

The governments and central banks can try to influence the creation of debt though interest rates or ‘stress tests’ and setting levels of ‘regulatory capital’ that must be held. But all of these can be and are gamed by the banks. And when gaming is not sufficient then a debt crisis can be brought in to play to force the reluctant politicians to do what they ‘must’. And that last ploy is the debt ceiling.

Once private debt has been created the central banks are under-pressure to create public debt with which to back it. They know this is how it works they are on record as saying so. But they are caught in a dilemma. The politicians and the public think the government and central banks are in charge and can tell the markets how much debt is enough. The central banks know they do not really have this power because in reality it is the markets not the central banks who are in charge and  decide how much debt is good for THEM.

What can the central banks do? Nominally they work for the government. The people even think they work for them (ho ho!) Whereas the logic which controls lies in the markets and the levers are in the banks. If the Central banks were to come clean and tell the government and the public who is really in charge, who they really work for, what would happen? So they don’t come clean, at least not in public, leaving the poltiicans to argue fatuously amoung themselves for our entertainment.

There are only a limited number of end games I think. The issuance of debt will go on despite the increasing drama of the decisions. The question for the banks will be how best to manage it with the minimum of fuss and least chance of the real situation becoming too clear too early.

Debt issuance will go on because the present economic system, fueled as it is by debt, requires growth above the rate of interest they are all charging each other. The Pension companies require more growth than that because they have long term obligations to pay out at a higher rate. In boom times growth takes care of itself. In bad time that growth ‘must’ be provided by ‘stimulus’ AKA public debt. The minimum growth they want for the headlines is 3%. Which seems reasonable till you do the maths and find 3% growth means a doubling every 17 years. Given the frequency of ‘busts’ built into the debt based system and how much they cost the public each time – (and they are built in – I explained one aspect of this in the last part of the Securitization series. (For completeness here are parts 1 and 2.)  This series is my take on the same logic than Minsky had of course already come to before and more fully) – it is clear how much ‘growth’ is going to be based on public debt. So the debt will grow.

But while it does, other parts of the economic system and their political friends will complain about the size of the debt. So there will continue to be a pressure to stop the debt ‘getting out of control’. How to sqaure this idiot’s circle? The answer is already here only in its infant form. Public Debt created to back private debts will be ‘required’ to grow. Public debt for other things will therefore be under pressure to be cut. So far what has been cut has been the easy and the small beer.

The sums ‘saved’ have been tiny in comparison with the sums created in order to ‘help’ the financial system, even though the misery created in cutting them has been huge. But who cares about miserable poor people when you’re a rich happy one? Nevertheless the sums saved through ‘austerity’ are not going to be sufficient over even the medium term of the next decade. The ‘savings’ need to be orders of magnitude greater. For that the only option is to target the long term, ‘unfunded commitments of health, state pension and long term welfare. These are what the bankers will target when people have been softened up and the next bust hits.

The option I think they will go for is complete privatization of health, welfare and state pension.

All these long term ‘unfunded obligations’ as they are called appear in public debt accounts as future liabilities, future debts. But as soon as the same obligations are shifted to the private sector they become future profits rather than future debts. No matter that people might not be able to pay for them – accountants are not paid to worry about such details. To you and me it might seem daft to think that by moving things from one column to another , from public to private that this will suddenly make things better. And of course it won’t. The private sector will argue it will be ‘better’ because they are so much more ‘efficient’. Believe that if you like.  But the main thing is the acounting exercise will make the number in the public debt column go down.

The important thing for any discussion of public debt levels, is that removing these ‘obligations’ from the public account suddenly cuts the future public debt. Freeing up all that now uncommitted future debt to be available for pumping into the private financial sector . Which it would suddenly make ‘good economic sense’ to help, given the now very buoyant future demand for private health, pensions and welfare provision.

Public debt is always seen by the financial world as a drain, an obligation. The same obligations re-cast as serivces are seen as a source of future profit. Thus I think we will see in the next few years an all out attack on every aspect of public service provision.  Libertarians amoung you might cheer at this point. I think you will not cheer when you see what is going to replace what you currently dislike.

I believe the era of the Nation-State is coming to an end not because of attack from outside enemies but because Nation-States are being dismantled from the inside – by the  State itself.  But the State has no itention of losing power. It is simply changing jobs and employer. The big welfare state is being dismantled but in its place is going to come an even bigger and certainly more repressive Corporate State.

But the End of the Nation-State and the emergence of a global system of  Technocratic, Managed rather than democratic Corporate-States is a larger discussion I am still writing.

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Tory anti-environment advocacy protects corporate, not public, interests | Nafeez Ahmed | Environment | theguardian.com

October 26, 2013 10:42 am / Leave a comment

Tory anti-environment advocacy protects corporate, not public, interests | Nafeez Ahmed | Environment | theguardian.com. (source)

Conservative MP Jacob Rees-Mogg’s Telegraph screed supports Cameron’s contempt for green policies at our expense

Cuadrilla fracking site at Balcombe

Cuadrilla has doubled the height of its security fences and installed razor wire at its Balcombe site. Photograph: Wpa Pool/Getty Images

Yesterday Jacob Rees-Mogg, member of parliament for North East Somerset, wrote an article in the Telegraph claiming that the fundamental cause of the UK’s “high energy prices” is “climate changealarmism.” His piece coincided with Prime Minister David Cameron‘sannouncement that to tackle rocketing gas and electricity bills he would “roll back” green levies on energy bills and subject Britain’s “Big Six” energy giants to a “competition test.”

Even the Tory’s own lead environmentalist MP, Zac Goldsmith, was appalled. “In 2010, leaders fought to prove they were the greenest”, he said. “Three years on, they’re desperately blaming their own policies on the other. Muppets.”

But Rees-Mogg’s piece illustrates the insidious nature of the anti-environment economic ideology that has been so influential in the Tory party, and that has derailed the potential for meaningful environmental policy. Energy companies have announced prices rises against the background of government regulation and “green taxes”, he writes, because concern over climate change has led to unjustifiable opposition to coal and fracking:

“In the 2010s it is not the price of bread that is falsely and unnecessarily inflated by obstinate politicians but that of energy. There are cheap sources of energy either available or possible but there is a reluctance to use them. Coal is plentiful and provides the least expensive electricity per megawatt, while fracking may provide a boon of shale gas.”

He is wrong on both counts – laughably so. A number of recent scientific studies in major journals such as Fuel, Energy, the International Journal of Coal Geology – to name just a few – have projected that a peak in world coal production is only a few years away, followed by production declines and spiraling prices.

As for fracking, its capacity to provide cheap shale gas has beenquestioned by leading independent experts who point to steep production declines at wells, along with overinflated industry reserve estimates that have led to a “bubble” that could burst in the next five years.

At the core of Rees-Mogg’s obfuscation on energy is an ideology that paints corporations as the key to prosperity for all:

“As the Government has made the price higher so the energy companies put a margin on top. High prices are almost expected.”

But this is also false. The fundamental cause of the high energy prices consistently dampening prospects for economic growth is the peak and plateauing of cheap conventional oil production since around 2005, which has ramped up oil prices and compelled a deepening dependence on increasingly expensive unconventional sources like tar sands, oil shale and shale gas. This is not particularly controversial – even Shell’s CEO has warned that shale gas will not reduce prices, and evidence submitted to the House of Lords Economic Affairs Committee by Bloomberg New Energy Finance shows that shale gas “will not be a panacea for bringing down gas and electricity bills” as costs will be “50% to 100% higher than in the US.”

Rees-Mogg then flirts unabashedly with climate denialism, arguing that the effect of carbon dioxide emissions on the climate “remains much debated”, and that climate models are inaccurate because it was “computer modelling” that led to the 2008 global banking collapse of 2008. Notwithstanding the obvious fact that climate models are completely different from the quantitative models that justified the reckless debt-expansion behind the global financial crisis, the former are only inaccurate in being too conservative – whereas the latter wererigged by financiers to maximise profits at taxpayer’s expense.

Rees-Mogg’s other case for inaction is that we are not responsible for climate change. Britain emits only “2 per cent” of the world’s CO2. What he ignores here is that the UK is still in the top ten of global emitters – and that if every country decided on inaction because it only contributes by itself a small percentage of emissions, then what we have is a recipe for abject failure.

Rees-Mogg would have us believe he is motivated by the plight of the poor, whom he says are “most particularly” punished as a “matter of choice not of necessity…. This can be stopped by ending the environmentalist obsession and delivering cheap energy.” But one might be forgiven for concluding that his real concern is corporate profiteering. The solution to high energy prices, he says, is “to free the market” – the same “free” market that led to the 2008 crash, the Eurozone crisis, and so on – “not to control prices which will simply reduce supply.”

This is hardly surprising. Rees-Mogg is a founding partner at Somerset Capital Management (SCM), a global asset management fund where hecurrently works as a macro specialist while also being an MP. Among its many investments, SCM specialises in emerging markets, including in the energy industry. Its largest holdings include oil majors such as the China National Offshore Oil Corporation (CNOOC) – which for instance is spearheading multibillion dollar deals to access the North American shale gas market – and Russia’s OJSC Rosneft Oil Company.

According to its interim report published in March this year, the fund pulled out of some energy projects on the basis of declining rates of profitability “due to the rising cost of production”, but viewed CNOOC’s recent ventures to exploit US fracking as “favourable.” In other markets such as India, China and Brazil, economic prospects were mixed as “both domestic consumption and exports put in lacklustre performances.” The overall assessment was uncertain, with the report noting that emerging market economies are “cooling”, and that “The market has periodic rallies but these show no real conviction.”

While Rees-Mogg’s firm profits from fracking abroad, Rees-Mogg himself uses his own parliamentary privilege to advocate fracking at home, while promoting a kind of free market extremism. In a speech last month during a Private Member’s Bill proposing amendments to the Deep Sea Mining (Temporary Provisions) Act 1981, Rees-Mogg reportedly urged for greater deregulation to permit British companies to explore the potential for off-shore and deep sea resources:

“That’s what this is really about: exploring these resources that could add to the wealth not only of the nation but of the globe at large; because as we’ve seen the emergence of the new economies – China, India, Brazil and of Russia – so we have seen demand for resources grow extraordinarily.”

“I would urge the Bill to have a more deregulatory ambition within it”, he added.

“It’s obviously wise to extend it purely for metals to include gas and to include liquids, because there may be all sorts of exciting things at the depths of the sea. There may be endless supplies of gas, there may be oils spurting out as if Saudi Arabia is on the seabed.”

Ironically, these are precisely the sorts of policies that could indirectly benefit corporate players like Somerset Capital Management, its holdings, and its clients in emerging markets and beyond. Indeed, SCM’s own indifference to environmental challenges is plainly stated on its website, where it declares:

“… we makes [sic] no claim to using environmental, social and governance concerns as tenets of ethics in the fashioning of investment returns.”

That might be all quite acceptable in its own context, but when this cavalier attitude becomes evident in public advocacy by our so-called political representatives, it’s time to start asking questions about the extent to which politics is being hijacked in the name of unaccountable corporate power.

Dr Nafeez Ahmed is executive director of the Institute for Policy Research & Development and author of A User’s Guide to the Crisis of Civilisation: And How to Save It among other books. Follow him on Twitter @nafeezahmed

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The Federal Reserve Can Only Fail | Peak Prosperity

October 26, 2013 10:26 am / Leave a comment

The Federal Reserve Can Only Fail | Peak Prosperity. (source)

The Fed Can Only Fail

And we’ll all lose
by Chris Martenson
The basic predicament we are in is that the current crop of leaders in the halls of monetary and political power does not appear to understand the dimensions of our situation.

The mind-boggling part about all this is that it’s not really all that hard to grasp.

Our collective predicament is simply this: Nothing can grow forever.

Sooner or later, everything must cease growing, or it will exhaust its environs and thereby destroy itself.  The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be “normal.”

But the problem is – or the predicament, I should more accurately say – is that the recent past was not normal.  You’ve probably all seen this next chart.  It shows total debt in the U.S. as a percent of GDP:


(Source)

Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail.

It is simply not possible to grow your debts faster than your income forever. However, that’s been the practice since 1980, and every current politician and Federal Reserve official developed their opinions about ‘how the world works’ during the 33-year period between 1980 and 2013.

Put bluntly, they want to get us back on that same track, and as soon as possible. The reason?  Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement during that period. And, frankly, a huge number of financial firms and political careers will melt away if/when that credit expansion finally stops.

And stop it will; that’s just a mathematical certainty. It’s now extremely doubtful that the Fed or D.C. will willingly cease the current Herculean efforts towards reviving this flawed practice of borrowing too much, too fast. So we have to expect that it will be some form of financial accident that finally breaks the stranglehold of failed thinking that infects current leadership.

The Math

As a thought experiment, let’s explore the math a little bit to see where it leads us. After all, I did just say that a poor end to all of this is a “mathematical certainty,” so let’s test that theory a bit. I think you’ll find this both interesting and useful.

To begin, Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing.  So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It’s pretty much everything debt-related.

What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities. So the Social Security shortfalls are not in there, nor are the underfunded pensions at the state or corporate levels. TCMD is just debt, plain and simple.

As you can see in this next chart, since 1970, TCMD has been growing exponentially and almost perfectly, too. (The R2 is over 0.99, for you science types):

I’ve pointed out the tiny little wiggle that happened in 2008-2009, which apparently nearly brought down the entire global financial system. That little deviation was practically too much all on its own.

Now debts are climbing again at a quite nice pace. That’s mainly due to the Fed monetizing U.S. federal debt just to keep things patched together.

As an aside, based on this chart, we’d expect the Fed to not end their QE efforts until and unless households and corporations once more engage in robust borrowing. The system apparently ‘needs’ this chart to keep growing exponentially, or it risks collapse.

Okay, one could ask: Why can’t credit just keep growing? 

Here’s where things get a little wonky. But if you’ll bear with me, you’ll see why I’m nearly 100% certain that the future will not resemble the past.

Let’s start in 1980, when credit growth really took off. This period also happens to be the happy time that the Fed is trying to (desperately) recreate.

Between 1980 and 2013, total credit grew by an astonishing 8% per year, compounded. I say ‘astonishing’ because anything growing by 8% per year will fully double every 9 years.

So let’s run the math experiment as ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That’s all. Nothing fancy, simply the same rate of growth that everybody got accustomed to while they were figuring out ‘how the world works.’

What happens to the current $57 trillion in TCMD as it advances by 8% per year for 30 years?  It mushrooms into a silly number: $573 trillion. That is, an 8% growth paradigm gives us a tenfold increase in total credit in just thirty years:

For perspective, the GDP of the entire globe was just $85 trillion in 2012. Even if we advance global GDP by some hefty number, like 4% per year for the next 30 years, under an 8% growth regime, U.S. credit would betwice as large as global GDP in 2043 (!)

If that comparison didn’t do it for you, then just ask yourself: Why, exactly, would U.S. corporations, households, and government borrow more than $500 trillion over the next 30 years? The total mortgage market is currently $10 trillion, so might the plan include developing an additional 50 more U.S. residential real estate markets?

More seriously, can you think of anything that could support borrowing that much money? I can’t.

So perhaps the situation moderates a bit, and instead of growing at 8%, credit market debt grows at just half that rate. So what happens if credit just grows by 4% per year?

That gets us to $185 trillion, or another $128 trillion higher than today – a more than 3x increase:

Again, What might we borrow (only) $128 trillion for, over the next 30 years? 

When I run these numbers, I am entirely confident that the rate of growth in debt between 1980 and 2013 will not be recreated between 2013 and 2043. With just one caveat: I’ve been assuming that dollars remain valuable. If dollars were to lose 90% or more of their value (say, perhaps due to our central bank creating too many of them?), then it’s entirely possible to achieve any sorts of fantastical numbers one wishes to see.

Think it could never happen?

Conclusion (to Part I)

This is the critical takeaway from all of the math above: For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a lot of value. I truly believe this is the Fed’s grand plan, if we may call it that, and it has nothing to do with what’s best for the people of this land. Instead, it’s entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.

That is, the Fed is beholden to a broken system; not anything noble.

In Part II: The Near Future May See One of the Biggest Wealth Transfers in Human History, we dive fully into the logic why GDP growth is very unlikely to support the rate of credit expansion that the Federal Reserve wants (or, more accurately, needs). And what will happen if it indeed doesn’t? A lot of painful, awful things – but central among them is a currency crisis.

Amidst the ensuing unpleasantness will be an awakening within today’s hyper-financialized markets to the huge imbalance now existing between paper claims and ownership of real things. A massive wealth transfer from those with ‘paper wealth’ (stocks, bonds, dollars) to those owning tangible assets (the productive value of which can’t easily be inflated away) will occur – and quickly, too.

Suggesting the key objective for today’s investor is answering: How do I make sure I’m on the right side of that wealth transfer?

Click here to access Part II of this report (free executive summary; enrollment required for full access).

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Carol Browner: Keystone XL Will Be Rejected By Obama Administration

October 26, 2013 9:54 am / Leave a comment

Carol Browner: Keystone XL Will Be Rejected By Obama Administration. (source)

keystone xl
President Barack Obama will reject the contentious Keystone XL pipeline, a former White House climate and energy czar says.

Carol Browner said “there will be some twists and turns” in the political debate over the pipeline, but “at the end of the day [Obama] is going to say no,” according to The Hill.

Browner served as head of the Environmental Protection Agency during the Clinton administration and headed the Office of Energy and Climate Change Policy for two years under Obama.

She made the comments at a Washington, D.C., meeting of the Center for American Progress, where she was joined on a panel by Van Jones, an environmental advocate with links to Obama, and Tom Steyer, a billionaire who has been on an anti-Keystone XL crusade.

Her comments come as Washington finds itself in the crossfire of the Keystone debate.

Prime Minister Stephen Harper said last month that he would not “take no for an answer” on the pipeline.

Posters calling Canada “the dirty old man” of environmental issues have been popping up around Washington, part of artist Franke James’ campaign to stop oil sands shipments.

Meanwhile, the Harper government is running a $16.5-million ad campaign extolling the virtues of Canada’s natural resources.

But the ads failed to impress those south of the border, according to a new report, and even left people puzzled over assertions that Canada is America’s best friend.

A government-commissioned Harris-Decima pre-testing report on the ad blitz earlier this year found that focus groups in Washington were befuddled by the campaign’s original tagline — “America’s best friend is America’s best energy solution.”

“Few would immediately assume this means Canada, despite certainly considering Canada to be a good friend,” says the $58,000, taxpayer-funded report, posted Wednesday on Library and Archives Canada.

“Some indicated that claiming you are one’s best friend comes across as something one does when one is about to ask for a huge favour.”

Others took issue with the word “solution” because it suggested “America had a problem that needed solving.” In a similar vein, “virtually all objected to the reference to Canada’s ban on dirty coal as it seemed to imply that Canada is doing more than the U.S.,” the report noted.

The U.S. advertising offensive has included promotions and ads in influential publications and a website for American viewers, gowithcanada.ca. The ads shine a job-friendly and environmentally sensitive light on a cross-section of Canadian resource industries.

TransCanada, which is building the Keystone XL pipeline from Alberta’s oil sands to an oil terminal in Cushing, Okla., says it expects a decision on the pipeline by March of next year.

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New environmental review rules anger oilsands critics – Technology & Science – CBC News

October 26, 2013 9:49 am / Leave a comment

New environmental review rules anger oilsands critics – Technology & Science – CBC News. (source)

A Suncor oilsands mine facility seen from the air near Fort McMurray, Alta., on Sept. 19, 2011. In-situ oilsands developments, which involve melting oil directly out of the ground rather than being mined and then processed later, will not be required to undergo federal environmental assessments.
A Suncor oilsands mine facility seen from the air near Fort McMurray, Alta., on Sept. 19, 2011. In-situ oilsands developments, which involve melting oil directly out of the ground rather than being mined and then processed later, will not be required to undergo federal environmental assessments. (Jeff McIntosh/Canadian Press)

Many oilsands projects will not have their potential environmental impacts reviewed by the federal government under updated rules announced today, environmentalists warn.

The Canadian Environmental Assessment Agency released lists Friday outlining changes to the types of resource development and infrastructure projects that will routinely require a federal environmental assessment. The federal review is intended to look at possible environmental impacts under federal jurisdiction, such as impacts on waterways or greenhouse gas emissions.

One concern that environmentalists have with the new rules is they won’t require environmental reviews for a growing type of oilsands development.

CANADIANNATURAL/
Canadian Natural Resources Ltd.’s Primrose Lake facility near Cold Lake, Alta., is an in-situ oilsands development. (Reuters)

In-situ oilsands developments — projects where the oil is melted directly out of the ground rather than being mined and then processed later — were not specifically addressed in the previous list of projects requiring federal environmental assessments, said Keith Stewart, climate and energy campaign coordinator and energy policy analyst for the environmental group Greenpeace. And now, they are not included in the new list of projects requiring them.

The Canadian Environmental Assessment Agency’s announcement lists the types of projects that once required a federal environmental assessment that no longer do, including:

  • Groundwater extraction facilities.
  • Heavy oil and oilsands processing facilities, pipelines (other than offshore pipelines) and electrical transmission lines that are not regulated by the National Energy Board.
  • Potash mines and other industrial mineral mines (salt, graphite, gypsum, magnesite, limestone, clay, asbestos).
  • Industrial facilities (pulp mills, pulp and paper mills, steel mills, metal smelters, leather tanneries, textile mills and facilities for the manufacture of chemicals, pharmaceuticals, pressure-treated wood, particle board, plywood, chemical explosives, lead-acid batteries and respirable mineral fibres).

The government also released a list of projects that did not specifically require a federal environmental assessment before but now do, including:

  • Diamond mines.
  • Apatite mines.
  • Railway yards; international and interprovincial bridges and tunnels.
  • Bridges that cross the St. Lawrence Seaway.
  • Offshore exploratory wells.
  • Oil sands mine expansions.

Focus on ‘major projects’

The government said the changes were made so that the agency’s work is focused on “major projects” that have the “greatest potential” to generate negative environmental impacts under federal jurisdiction, such as impacts on waterways, and other projects would not be “unduly burdened” with extra work.

CANADIANNATURAL/
A leak at the Primrose Lake oilsands project had released an estimated 1.5 million litres of bitumen into the environment as of the end of September. (Reuters)

The federal government heard from a wide range of stakeholders, including industry and environmental groups, before deciding what would be covered under the new rules.

Stewart said that while the government acknowledged environmental groups’ concerns, it did not make changes based on those concerns.

Most notably, he said Greenpeace is concerned about the lack of routine environmental assessments of in-situ oilsands developments. He noted that this type of project is the source of a huge bitumen leak Northern Alberta. As of the end of September, the leak near Cold Lake had already released 1.5 million litres of bitumen – a mixture of oilsands, heavy crude and water into the environment. The Alberta government has ordered the project operator, Canadian Natural Resources Ltd., to drain two-thirds of a lake in an effort to stop the leak.

Stewart said 80 per cent of known oilsands deposits are so deep that they are only accessible with in-situ technology.

“Yesterday, Environment Canada released report which projected that by 2020, this type of oilsands development will be generating more greenhouse gas emissions than all of the Maritime provinces put together today,” he added.

“They’re exempting themselves from environmental oversight over what’s going to be the biggest source of new pollution in the country in coming decades.”

The group that represents oilsands producers said developments will still face provincial environmental reviews.

“The province still has a mandate to do an assessment, so this eliminates two layers of doing the same thing — the provincial government will still do its review and it will be equally as comprehensive,” said Geraldine Anderson from the Canadian Association of Petroleum Producers.

While acknowledging that provincial environmental assessments will still be required for some projects, Stewart calls the permitting process for in-situ oilsands development in Alberta “a rubber stamp.”

In 2012, the federal government announced a major overhaul of the federal environmental assessment program, introducing fixed timelines for major projects and reducing the number of departments and agencies that can do environmental reviews from 40 to just three.

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Tens of thousands flee southeast India floods – Central & South Asia – Al Jazeera English

October 26, 2013 9:46 am / Leave a comment

Tens of thousands flee southeast India floods – Central & South Asia – Al Jazeera English. (source)

Villages in Andhra Pradesh were inundated and crops were being ruined in the so-called Rice Bowl of India [AP]
Days of torrential rains in southeast India have unleashed floods that have blocked roads, halted trains and forced the evacuation of nearly 70,000 people from hundreds of low-lying villages.

The Press Trust of India on Saturday cited Andhra Pradesh state officials as saying that 39 people had died in flood-related incidents since the rains began Monday.

Villages were inundated and crops were being ruined in the so-called Rice Bowl of India. Many drowned when swept away by surging waters or were killed when weakened walls collapsed onto them.

Railway services have also been suspended along routes where tracks were damaged.

The local Disaster Management Department said evacuated residents were sheltering in 178 camps, while relief workers in boats and helicopters were working to help or rescue hundreds of thousands stranded by floods that have swamped both coastal and inland regions along rivers.

The region was hit earlier this month by a powerful cyclone that prompted authorities to evacuate nearly a million people in Andhra Pradesh and Orissa states.

India’s Meteorological Department on Saturday forecast the rains to continue for at least another day.
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