The death of the dollar is coming, and it will probably be China that pulls the trigger. What you are about to read is understood by only a very small fraction of all Americans. Right now, the U.S. dollar is the de facto reserve currency of the planet. Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars. More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it. As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world. Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.
As I mentioned above, nations all over the globe use U.S. dollars to trade with one another. This has created tremendous demand for U.S. dollars and has kept the value of the dollar up. It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.
The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars…
Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary. For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this. This has created tremendous demand for U.S. government debt and has helped keep interest rates super low. So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates…
And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system. For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.
Our entire way of life in the United States depends upon this game continuing. We must have the rest of the world use our currency and loan it back to us at ultra low interest rates. At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn’t be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.
If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.
Does 8 percent sound crazy to you?
It shouldn’t. 8 percent was considered to be normal back in the year 2000.
Are you starting to get the picture?
We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.
Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency. In particular, China is leading the call for a “de-Americanized” world. The following is from a recent article posted on the website of France 24…
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback’s role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China’s official Xinhua news agency called for a “de-Americanised” world.
It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.
So why should the rest of the planet listen to China?
Well, China now accounts for more global trade than anyone else does, including the United States.
China is also now the number one importer of oil in the world.
At this point, China is even importing more oil from Saudi Arabia than the United States is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun…
Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuanrise dramatically…
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping. For example, China just recently signed a major currency agreement with the European Central Bank…
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
“It’s a way of promoting European and Chinese trade, but not doing it with the U.S. dollar,” said Brooks. “It’s a bit like cutting out the middleman, all of a sudden there’s potentially no U.S. dollar risk.”
And as I have written about previously, we have seen a bunch of other similar agreements being signed all over the planet in recent years…
1. China and Germany (See Here)
2. China and Russia (See Here)
3. China and Brazil (See Here)
4. China and Australia (See Here)
5. China and Japan (See Here)
6. India and Japan (See Here)
7. Iran and Russia (See Here)
8. China and Chile (See Here)
9. China and the United Arab Emirates (See Here)
10. China, Brazil, Russia, India and South Africa (See Here)
But do you hear about any of this on the mainstream news?
Of course not.
They would rather focus on the latest celebrity scandal.
Right now, the global move away from the U.S. dollar is slow but steady.
At some point, some trigger event will likely cause it to become a stampede.
When that happens, demand for U.S. dollars and U.S. debt will disintegrate and interest rates will absolutely skyrocket.
And if interest rates skyrocket that will throw the entire U.S. financial system into chaos. At the moment, there are about 441 trillion dollars worth of interest rate derivatives sitting out there. It is a financial time bomb unlike anything the world has ever seen before.
There are four “too big to fail” banks in the United States that each have more than 40 trillion dollars worth of total exposure to derivatives. The largest chunk of those derivatives is made up of interest rate derivatives. In case you were wondering , those four banks are JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.
A huge upward surge in interest rates would absolutely devastate those banks and cause a financial crisis that would make 2008 look like a Sunday picnic.
Right now, the leader in global trade seems content to use U.S. dollars for most of their international transactions. China also seems content to hold more than a trillion dollars of U.S. government debt.
If that suddenly changes someday, the consequences for the U.S. economy will be absolutely catastrophic and every single American will feel the pain.
The standard of living that all of us are enjoying today depends largely upon China. They can bring down the hammer at any moment and they know it.
Removal of 1,300 spent fuel rods deemed “humankind’s most dangerous moment since Cuban Missile Crisis”
Regulators with Japan’s Nuclear Regulation Authority gave the final OK Wednesday for the operator of the crippled Fukushima Daiichi nuclear power plant to begin to remove the 1300 spent fuel rods from the badly damaged Unit 4 pool, thus initiating a decommissioning process which anti-nuclear activist Harvey Wasserman describes as “humankind’s most dangerous moment since the Cuban Missile Crisis.”
According to Associated Press, the NRA announced that the proposal to manually remove the radioactive rods put forth by the plant operator, Tokyo Electric Power Co. or TEPCO, was “appropriate” and that the removal “can start in November as planned, following an on-site inspection by regulators.”
TEPCO estimates that the complete decommissioning process will last decades. Detailing the process, AP reports:
TEPCO has prepared a massive steel structure that comes with a remote-controlled crane to remove the fuel rods, which will be placed into a protective cask and transferred to a joint cooling pool inside a nearby building. To make room for the Unit 4 fuel rods, the company has been moving those already in the joint pool to safer storage in dry casks at a separate plant location.
The utility plans to empty the Unit 4 pool by end of 2014, and remove fuel rods from other pools at three other wrecked reactors over several years before digging into their melted cores around 2020.
However, according to nuclear engineer Arnie Gundersen, the spent fuel rods in the Unit 4 core are “bent, damaged and embrittled to the point of crumbling.” And NRA chairman Shunichi Tanaka warned that removing the rods would be difficult because of the risk posed by debris that fell into the pool during the explosions triggered by the 2011 earthquake, tsunami and subsequent three reactor meltdowns at the plant.
“It’s a totally different operation than removing normal fuel rods from a spent fuel pool,” Tanaka said during the news conference Wednesday. “They need to be handled extremely carefully and closely monitored. You should never rush or force them out, or they may break.”
Wasserman warns that there are “some 400 tons of fuel in that pool [that] could spew out more than 15,000 times as much radiation as was released at Hiroshima.”
Wasserman, Gundersen and other nuclear watchdogs have warned that neither TEPCO nor the Japanese government has the “scientific, engineering or financial resources to handle” the job and that the situation instead demands a “coordinated worldwide effort of the best scientists and engineers our species can muster.”
Over 100,000 people have thus far signed a petition echoing that call. “The impending removal of hugely radioactive spent fuel rods from a pool 100 feet in the air presents unparalleled scientific and engineering challenges,” caution the signatories, who are calling on President Obama and UN Secretary General Ban Ki-Moon to intercept the Japanese authority’s process. “We ask the world community…to take control of this uniquely perilous task.”
– Lauren McCauley, Common Dreams
Submitted by Peter Tchir of TF Market Advisors,
A Pseudoscience Stuck in Place
I am growing more concerned by the day by the actions of the central banks. It isn’t just that markets popped and dropped dramatically before and after Draghi’s rate cut, or that any policy seems particularly bad, just that the policies don’t seem to be working great, and are leaving a changed landscape that will need to be corrected, somehow, in the future. I am quite simply concerned that too much faith is being placed in untested theories that may or may not work, or may or may not even be correct.
Here are a few things that concern me the most
1. Central Bankers seem to rely on economic theories that have remained largely unchanged for years
2. Central Bankers seem of an age that they aren’t willing to incorporate theories that might change their favored models or might make those models too complex to be easily understood by those in charge (the Nobel prize committee has given out multiple awards for work in behavioral economics, yet central bank models seem to rely on pretty basic econometric models where behavior doesn’t rapidly change based on policies)
3. Central Bankers seem focused on domestic issues without really considering the ramifications and ripple effects that they potentially create
From Newton to Bohr
I liked Newtonian physics. I could do the math easily and it was intuitive. It was so easy that I took physics 101 right along with econ 101 because I needed some easy A’s.
But physics has changed. The relatively simple world of Newtonian physics turned out to be inadequate to explain what was needed to propel science forward. As comforting as it was to know that “each and every action has an equal and opposite reaction” that just doesn’t cut it in high end physics.
Personally, I started to lose interest and any real intuitive skills in physics around the time we learned that light is both a wave and a particle. The math was getting more complex, but I could muddle my way through that. What I lost was any instinctive or intuitive feel for what was being modeled. I tended to focus on areas that I felt comfortable with, hampering any potential for intellectual growth.
Quantum mechanics really revolutionized physics. It was a new paradigm and you either had to adapt, understand it, or get some intuitive feel because brute force math might be enough to be adequate in the field, but not enough to excel.
I wonder why economics hasn’t had its “quantum mechanics” moment?
Did Keynes and Hayek really discover all there is to know? Is Yellen’s beloved “Taylor rule” really the epitome of the “scientific” advancement of economics? I realize there have been advances, but most seem to be “more of the same”. No one seems to have challenged the central tenants of macroeconomics.
In physics, once Newtonian physics failed to explain the world, brilliant minds concocted experiments to test hypothesis. This is what led to quantum mechanics. The old theory was failing in that it couldn’t explain some observed phenomena, so it was ultimately supplanted by a new, much more complex theory, but one that explained much more of what was observable.
Why is that not happening in economics? Personally, I don’t think economics has done a great job in explaining the world, otherwise we shouldn’t have so many periods of boom and bust globally.
Maybe it is the inability to experiment? This is potentially a bigger issue than it seems at first. We do experiment in economics, but it is a small group of elite, and mostly collegial economists who get to experiment. Actually they get to put their beliefs into practice and then argue that the situation is better than if they hadn’t been allowed to implement their theories. While costs and access can stop scientific progress, there certainly was a time that it was more readily available. Hypothesis could be tested and failures catalogued and successes expanded on AND verified by repetition. This capability just doesn’t exist in macroeconomics. There are NO TWO economies that are identical except for the policies implemented.
Young professors could and did challenge the system in the hard sciences. It is probably no co-incidence that most scientific Nobel prizes are awarded for work “conceived of” when the person was in their 20’s and “performed” in their 30’s. That might be a generalization, but it isn’t entirely inaccurate.
Maybe economics is failing to attract good new people? There may be something to this. To some extent the economists that I know and respect the most (yes, I do like and respect some economists) had strong quantitative skills but an interest in business. The didn’t want to be a “math” geek and liked working with the “real world”. I am willing to make the conjecture that as computer science grew and the opportunities there grew, it was an even better match for many quantitative students who wanted something other than pure math, or physics, or chemistry, than economics. Maybe even as MBA’s started looking for more “quants” even more people who would be the new economists didn’t pursue that?
Or maybe economists just ignore their own? I have read a little about “behavioral economics”. My take is that it demonstrates that people don’t always do what would produce the best “expected outcome”. That the “rational man” that economic models are built on may not exist, and what is rational on a purely “economic” level might not be applicable on an overall evaluation. We tend to hate losses more than we like winning. How is that incorporated into the econometric global macro models used by the Fed? The Fed runs the treasury/dividend yield model. Yeehaw, except for the graphs that is nothing a good old fashioned HP12C couldn’t handle. Why aren’t we incorporating some new techniques? Maybe, because just like I hit the wall in physics at a certain point, the economists in charge have no interest in trying to incorporate things into their models that they don’t intuitively understand, might call into question their own body of “prestigious” work, and where quite frankly they might not have the technical expertise needed to incorporate them?
The Observer Effect. Science understands that the act of observation can actually impact whatever is being observed. Attempting to measure something affects the measurement. First, I question how that plays into anything that is a “survey” or that is “subjective” in the first place. How many purchasing managers hoping for better year-end bonuses say things are better than they are because they know their boss will like it, and at this point, they know the stock market will like it. What about the “household survey” for non farm payrolls that we will get tomorrow. Does it make a difference how you respond depending on your political party? Does it amaze you that we still conduct door to door surveys to figure out how many Americans are working? This is all a relatively minor effect, yet probably real, and as far as I can tell, largely ignored at the “policy” level.
Learned Behavior. Humans learn over time. We are pretty adept and maximizing return while minimizing risk. This is where I think economics does the worst job of integrating its own new theories. QE seems based on a pretty simplistic model. Provide more money, take risky investments out of the market, and the market will take that money and be encouraged to take more risk. It will create asset price inflation which will encourage further real risk taking. What if it turns out it is easier not to take the risk but end up with a pretty darn good reward? How many companies took risk and a lot better off for it? But how many have decided it is easier to do some financial engineering and let QE take care of their stock price? How is that accounted in the models? It probably isn’t and is probably too complicated, but we don’t try and predict the weather by licking our finger and sticking it in the air, yet economists seem in many ways content to run their policy on little more than that.
Equal and Opposite Reactions. Such a basic concept. It extends beyond science. If you punch someone in the face, you can reasonably expect a certain reaction. You might be able to qualify even that reaction based on the size and personality of the person you punch in the face. Then why don’t we seem to use that in economics? We live in a global economy apparently some of the time, but inflation is local wage driven only? Hmm. Bernanke, who claims protectionism was part of the problem with the Great Depression, basically told the Emerging Market countries (through lackey’s in Jackson Hole) that we will do what we need and they can worry about themselves. Draghi cut rates today. What does that to their currency? Does that help or hurt what we have been trying to work on? Central bankers all too often seem to act as though they are playing golf when the game is really chess.
Kasparov to Big Blue
Which brings us to chess.
Maybe the central bankers are aware that they are playing chess. Maybe Bernanke is aware that each of his moves will cause another move by his “opponent” which he will then have to react to. The problem is that if he is playing chess, and he is “thinking a few moves ahead” he is assuming too much, and making a classic mistake of expecting his opponent to fall into his “traps”
In the early days of “computer” chess, a modestly better than average human player could beat most computers after a few matches. That was because of how computers evaluated the chess board. There were far too many moves for a computer to analyze all the possibilities. So they used “heuristics” to “score” boards. They found ways to estimate how strong or weak a position was. They could then “truncate” paths that lead to weak positions and explore only “strong” paths. The trick was figuring out what the computer was doing incorrectly. To take it down a path that looked “strong” for several moves that could be then turned around. The computer literally “fell for the trap”.
But “Big Blue” changed that. It literally was so fast that it didn’t have to “truncate” paths early. It could play out 200 million positions in a second and ultimately beat Kasparov. That was back in 1997.
It was a sad day for many since it turned something that was elegant with a certain flair where imagination was respected and turned it into a brute force mechanical process.
I am not arguing that economics is something that is purely brute force, but I do think there are two lessons to be drawn from this:
1. Computer power and the evolution and development of computer power to analyze complex systems is useful and I am not sure we do enough of that, and
2. Don’t expect people to make the moves you want them to make, expect them to make the moves that they think are in their own best interest
That latter point is critical, especially as we now have rates at 0% in Europe, Japan, and the U.S. We have QE programs in the U.K., the U.S., and Japan. We have who knows what in China. But each of these actions is causing other actions that may actually be the reason nothing seems to be working as well as it should in theory.
Do companies and executives really respond to QE the way the models predict or is their reaction different? Maybe their reaction produces a better outcome for the company than the reaction the central bankers want and need out of those executives?
Too much of policy seems to assume certain moves will be made by other players when it is far from clear that those moves are either optimal for those other participants from their overall perspective.
As our balance sheet grows, as we create negative real rates, are we really sure we aren’t doing more harm than good, and what will the world look like 10 moves from now, or 50 moves or 100 moves?
Sadly, I don’t think anyone honestly knows.
What Does this Mean?
Mostly it lets me get this off my chest. Somehow this topic has been bothering me a lot lately so I feel better having written about it.
But on a serious note, I think it is another reason to scale back positions. Liquidity already seems abysmal, and this is a market largely supported by the faith that central bankers can continue to support it. It is circular because the central bankers do keep getting forced to support it. The longer this goes on, the greater the risk that we find that there is a problem, and that this “circularity” has been distorting values to the detriment of the economy and that the market loses this crucial element of support.
I find more and more people questioning the usefulness of central bank policy. While I can see that the most likely path is a continued grind higher/tighter/better, it seems to me that there is growing doubt that the policies are working and any shift away from a full on love affair with central bankers is likely to be disruptive in a negative way. I still think that is a low probability event, but that risk is growing and at this stage of the year, with so little liquidity, keeping risk low and even slightly bearish now is the right trade.
Greenhouse gas reduction called threat
Alberta’s proposed oil and gas regulations are too ambitious and will hobble the Canadian industry’s ability to compete, says the industry association in Alberta government documents obtained through provincial freedom of information laws.
The industry group says the proposed regulations won’t buy any goodwill and the government should delay their introduction.
The 200-page trove of memos, correspondence and reports offers a rare glimpse behind boardroom doors at the negotiations between industry and government to craft rules to reduce greenhouse gas emissions.
The Canadian Association of Petroleum Producers offers blunt assessments of Alberta’s plan to introduce rules that would demand industry reduce greenhouse gases by 40 per cent per barrel and charge $40 per tonne of CO2 above that level.
Alberta already has a carbon pricing scheme that costs CAPP members about 10 cents per barrel of oil. The new plan could cost industry up to 94 cents per barrel.
“Proposed 40/40 is 9 fold increase over current. Why such a dramatic step?” writes David Daly, CAPP’s manager of fiscal policy. The average price that a barrel of western Canadian bitumen fetched in 2013 was about $75, so the carbon-pricing increase would represent about a one per cent increase in the cost of a barrel oil.
That is just one quote from a file titled, CAPP Concerns and Questions for Alberta and Consultants. It tells the tale of an industry afraid that strong oil and gas regulations will rob it of what little competitive edge it has.
Strikingly candid comments
The candour is striking:
- “Will higher stringency requirements impact production and revenue? Very likely.”
- “GHG policies should be done in concert with other jurisdictions. US has no carbon tax. Why be so far out in front of them? What is that based on?”
- “Will higher stringency requirements [oil and gas regulations] deliver greater GHG reductions? Unlikely. The challenge with the oil sands is that current technology is not yet available for deployment.”
In the end, the industry’s prescription is to delay putting the regulations into effect.
“Major policies like this one should not be fast-tracked. Adequate time is required for study analysis and consultation,” writes Daly.
That suggestion irks environmentalists, who point out that negotiations over oil and gas regulations between industry and the federal and provincial governments have been going on for over two years.
“This is not a case where we need more research. We need more action and that’s what hasn’t been happening,” argued Clare Demerse of the Pembina Institute, an environmental think-tank.
The industry defends itself by pointing out that the documents provide just a snapshot in the middle of negotiations and that nothing is final yet.
“What we want to ensure is that we’ve got a competitive industry in Canada that can continue to grow, but also, very importantly, can continue to invest in the technologies that are going to be extremely important in driving down greenhouse gas emissions,” said David Collyer, CAPP’s president, in an interview with CBC News.
In the documents, the CAPP plan calls for a 20 per cent intensity reduction and $20 per tonne of CO2.
That is half of what the Alberta government’s plan is and only marginally stronger than the regulations now — 12 per cent and $15, said Demerse.
But the CAPP document explains the association’s approach.
“Will higher stringency requirements ‘secure’ social license [public support] and forestall negative policy action elsewhere? Unlikely,” writes Daly.
Demerse, on the other hand, believes that weak regulations are just going to make doing business harder for the oil and gas industry.
“The customers of the oilsands are asking very tough questions. Right now, the sector does not have good answers to give. When they continue to ask for what is essentially the weakest possible regulation, I don’t think that is working for their real best interest.”
If last year it was the East Coast’s turn to suffer a freak super storm, this year it is the already battered Philippines, which suffered a 7.2 magnitude earthquake last month, turn as Super Typhoon Haiyan, the equivalent of a Category 5 hurricane, slammed into the Philippines today after forcing thousands of people to evacuate. With sustained winds of 315 kph (195 mph) and gusts as strong as 380 kph (235 mph), Haiyan was probably the strongest tropical cyclone to hit land anywhere in the world in recorded history. “If it maintains its strength, there has never been a storm this strong making landfall anywhere in the world,” said Jeff Masters, founder of Weather Underground in Ann Arbor, Michigan. “This is off the charts.” Not taking chances, the local government has ordered over 125,000 people from 22 provinces to evacuate.
But while luckily human lives will be saved, little else may be. As Bloomberg reports, “Haiyan may inundate rivers, create mudflows and cause storm surges as high as 6 meters (20 feet), Aquino said. Three air force cargo planes, 2 navy ships, helicopters and relief boats are on standby, the president said. About 78,000 families were evacuated in Albay province, Governor Joey Salceda said on his Facebook account. Masters said Tacloban, the capital of the Philippine province of Leyte, would take a direct hit and winds of at least 130 mph may sweep as far as 100 miles inland. “There isn’t much built on the Philippines that can withstand winds like that,” Masters said.
Moments ago Bloomberg just blasted that up to half of the island chain’s sugar cane may be destroyed as a result of the Typhoon, which will wreak havoc on logistic and supply chains globally across numerous commodities. However, it is the human damange that is the biggest threat.
Heavy rains from storms usually cause the highest death tolls on the Philippines, Masters said. Flooding may not be the worst threat this time because Haiyan is moving fairly fast. The high winds and storm surge have the potential to cause catastrophic damage, he said.
“We’re swamped with calls for help,” Southern Leyte Governor Roger Mercado said in an interview over DZMM radio. Strong wings uprooted trees in the province, he said.
About 2,000 passengers, 50 vessels and 557 rolling cargoes are now stranded in various seaports, the disaster agency said today. Cebu Air Inc. (CEB), the nation’s largest budget carrier, canceled 122 domestic flights and 4 international flights from today to Nov. 9, it said yesterday. Philippine Airlines Inc., in its Facebook account, said 26 local flights and three international flights have been canceled today.
Putting the size of the storm in perspective: “Haiyan was so large in diameter that at one point, its clouds were affecting two-thirds of the country, which stretches more than 1,850 kilometers (1,150 miles). Tropical-storm-force winds extended 240 kilometers from the typhoon’s center.
The wide angle shot below by EUMETSAT shows just how massive the typhoon truly is:
In short a record superstorm:
The true power of Haiyan isn’t known because reconnaissance planes haven’t flown into it, Masters said. The strongest tropical cyclone on record was Super Typhoon Nancy in 1961 with top winds of 215 mph. He said many believe the estimated wind speeds of storms between the 1940s to 1960s was too high.
Since 1969, only three storms have been as powerful as Haiyan, Masters wrote on his blog. They were Super Typhoon Tip in 1979 in the Pacific and Atlantic hurricanes Camille in 1969 and Allen in 1980.
The strongest storm to hit land was Camille, which went ashore in Mississippi with winds near 195 mph, Master said. While there are some estimates that Camille’s winds were closer to 200 mph, the exact speed is unknown because the instruments were destroyed, according to the U.S. National Hurricane Center.
This is just the beginning. After it is done with the Philippines, Haiyan is expected to strike Vietnam in several days, according to the Japanese Meteorological Agency. “It is going to be a huge problem for Vietnam and Laos,”Masters said. As much as a foot of rain may fall there, he said.
If there is a silver lining to all the imminent destruction and tragedy, it is that Q4 GDP in the region will be off the charts. Just as Krugman.
- National › Fukushima plant prepares for dangerous fuel rod removal (japantoday.com)
- Fukushima’s fuel rod removal plan (bbc.co.uk)
Telephone lines appeared down as it was difficult to get through to the landfall site 650 kilometres southeast of Manila where Typhoon Haiyan slammed into the southern tip of Samar island before barrelling on to Leyte Island.
Two people were electrocuted in storm-related accidents, one person was killed by a fallen tree and another was struck by lightning, official reports said.
Nearly 720,000 people evacuated
Close to 720,000 people had been evacuated from towns and villages in the typhoon’s path across the central Philippines, the National Disaster Risk Reduction and Management Council said. Among them were thousands of residents of Bohol who had been camped in tents and other makeshift shelters after a magnitude 7.2 earthquake hit the island province last month.
Southern Leyte Gov. Roger Mercado said 31,000 people were evacuated in his landslide-prone mountainous province before the super typhoon struck, knocking out power, setting off small landslides that blocked roads in rural areas, uprooting trees and ripping roofs off houses around his residence.
The dense clouds and heavy rains made the day seem almost as dark as night, he said.
“When you’re faced with such a scenario, you can only pray, and pray and pray,” Mercado told The Associated Press by telephone, adding that his town mayors have not called in to report any major damage.
“I hope that means they were spared and not the other way around,” he said. “My worst fear is there will be many massive loss of lives and property.”
Television images from Tacloban city on Leyte Island showed a street under knee-deep floodwater carrying debris that had been blown down by the fierce winds. Tin roofing sheets ripped from buildings were flying above the street.
Visibility was so poor that only the silhouette of a local reporter could be seen through the driving rain.
‘Catastrophic damage’ feared
Weather officials said that Haiyan had sustained winds at 235 kilometres per hour, with gusts of 275 km/h when it made landfall. That makes it the strongest typhoon this year, said Aldczar Aurelio of the government’s weather bureau.
Gener Quitlong, another weather forecaster, said the typhoon was not losing much of its strength because there is no large land mass to slow it down since the region is comprised of islands with no tall mountains.
The typhoon — the 24th serious storm to hit the Philippines this year — is forecast to blow toward the South China Sea on Saturday, heading toward Vietnam.
Jeff Masters, a former hurricane meteorologist who is meteorology director at the private firm Weather Underground, said the storm had been poised to be the strongest tropical cyclone ever recorded at landfall. He warned of “catastrophic damage.”
But he said the Philippines might get a small break because the storm is so fast moving that flooding from heavy rains — usually the cause of most deaths from typhoons in the Philippines — may not be as bad.
As it approached the Philippines, the storm was one of the strongest on record.
The U.S. Navy’s Joint Typhoon Warning Center said shortly before the typhoon made landfall that its maximum sustained winds were 314 km/h, with gusts up to 379 km/h. Those measurements are different than local weather data because the U.S. Navy centre measures the average wind speed for 1 minute while local forecasters measure average for 10 minutes.
Hurricane Camille, a 1969 storm, had wind speeds that reached 305 km/h at landfall in the United States, Masters said.
Officials in Cebu province have shut down electric service to the northern part of the province to avoid electrocutions in case power pylons are toppled, said assistant regional civil defence chief Flor Gaviola.
President Benigno Aquino III assured the public of war-like preparations, with three C-130 air force cargo planes and 32 military helicopters and planes on standby, along with 20 navy ships.
With files from The Associated Press