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Highest Radiation Level Ever, Lethal In 20 Minutes, Recorded Outside Fukushima Reactor | Zero Hedge

December 7, 2013 7:03 pm / Leave a comment

Highest Radiation Level Ever, Lethal In 20 Minutes, Recorded Outside Fukushima Reactor | Zero Hedge.

With all the excitement about Japan’s soaring stock market (if plunging wages), crashing non-digital currency (leading to soaring energy prices), recent passage of an arbitrary secrecy bill (“Designed by Kafka & Inspired By Hitler“), and ongoing territorial spat with China, it is almost as if the Abe administration is desperately doing everything in its power, including some of the most ridiculous decisions taken by a government in recent history, to hide some key development behind the scenes. Such as this one perhaps: NHK reported today that TEPCO said radiation levels are extremely high in an area near a ventilation pipe at the crippled Fukushima Daiichi nuclear power plant. TEPCO found radiation of 25 sieverts an hour on a duct, which connects reactor buildings and the 120-meter-tall ventilation pipe.

Putting this number in context the estimated radiation level is the highest ever detected outside reactor buildings. People exposed to this level of radiation would die within 20 minutes.

The exhaust pipe in question was used to release radioactive gases following the outbreak of the accident 2 years ago.

TEPCO says radioactive substances could remain inside the pipes. Given TEPCO’s safety record, they could also leak outside of the pipes. And given the company’s “credibility” the world would be sure to learn about this… anywhere between 2 and 3 years after the fact.

In the meantime, we urge Japan to follow the bouncing, and so pleasantly distracting, Topix and Nikkei 225 balls, while sticking its head in the glow in the dark sand and completely ignore the radioactive monster in the closet.

From NHK:

… Which reminds us: on Thursday the following headline hit the Bloomberg tape:

  • FUKUSHIMA RADIATION TO REACH U.S. COAST AT SAFE LEVEL: NRC

We are sure it is nothing, and the NRC is telling the truth.

 

GHOST OF 1929 « The Burning Platform

December 7, 2013 4:32 pm / Leave a comment

GHOST OF 1929 « The Burning Platform.

Ghost of 1929 crash reappears

Commentary: Pay attention to the signals

By Anthony MIrhaydari


Library of Congress

Crowd of people gather outside the New York Stock Exchange following the Crash of 1929.

They say those who forget the lessons of history are doomed to repeat them.

As a student of market history, I’ve seen that maxim made true time and again. The cycle swings fear back to greed. The overcautious become the overzealous. And at the top, the story is always the same: Too much credit, too much speculation, the suspension of disbelief, and the spread of the idea that this time is different.

It doesn’t matter whether it was the expansion of railroads heading into the crash of 1893 or the excitement over the consolidation of the steel industry in 1901 or the mixing of speculation and banking heading into 1907. Or whether it involves an epic expansion of mortgage credit, IPO activity, or central-bank stimulus. What can’t continue forever ultimately won’t.

The weaknesses of the human heart and mind means the swings will always exist. Our rudimentary understanding of the forces of economics, which in turn, reflect ultimately the fallacies of people making investing, purchasing, and saving decisions, means policymakers will never defeat the vagaries of the business cycle.

So no, this time isn’t different. The specifics may have changed, but the themes remain the same.

In fact, the stock market is right now tracing out a pattern eerily similar to the lead up to the infamous 1929 market crash. The pattern, illustrated by Tom McClellan of the McClellan Market Report, and brought to his attention by well-known chart diviner Tom Demark, is shown below.

Excuse me for throwing some cold water on the fever dream Wall Street has descended into over the last few months, an apparent climax that has bullish sentiment at record highs, margin debt at record highs, bears capitulating left and right, and a market that is increasingly dependent on brokerage credit, Federal Reserve stimulus, and a fantasy that corporate profitability will never again come under pressure.

On a pure price-analogue basis, it’s time to start worrying.

Fundamentally, it’s time to start worrying too. With GDP growth petering out (Macroeconomic Advisors is projecting fourth-quarter growth of just 1.2%), Americans abandoning the labor force at a frightening pace, businesses still withholding capital spending, and personal-consumption expenditures growing at levels associated with recent recessions, we’ve past the point of diminishing marginal returns to the Fed’s cheap-money morphine.

All we’re doing now is pushing on the proverbial string. Trillions in unused bank reserves are piling up. The housing market has stalled after the “taper tantrum” earlier this year caused mortgage rates to shoot from 3.4% to 4.6% between May and August. The Treasury market is getting distorted as the Fed effectively monetizes a growing share of the national debt. Emerging-market economies are increasingly vulnerable to a currency crisis once the taper finally starts.

The Fed knows it. But they’re trapped between these risks and giving the market — the one bright spot in the post-2009 recovery — serious liquidity withdrawals.

But the specifics of the run up to the 1929 crash provide true bone-chilling context for what’s happening now.

The Bernanke-led Fed’s enthusiasm for avoiding the mistakes that worsened the Great Depression—- a mistimed tightening of monetary conditions — has led him to repeat the mistakes that caused it in the first place: Namely, continuing to lower interest rates via Treasury bond purchases well into an economic expansion and bull market justified by low-to-no inflation.

(Side note here: As economist Murray Rothbard of the Austrian School wrote in America’s Great Depression, prices dropped then, as now, because of gains in productivity and efficiency.)

Here’s the kicker: The Fed (mainly the New York Fed under Benjamin Strong) was knee deep in quantitative easing in the late 1920s, expanding the money supply and lowering interest rates via direct bond purchases. Wall Street then, as now, was euphoric.

It ended badly.

Fed policymakers felt like heroes as they violated that central tenant of central banking as outlined in 1873 by Economist editor Walter Bagehot in his famous Lombard Street: That they should lend freely to solvent banks, at a punitive interest rate in exchange for good quality collateral. Central-bank stimulus should only be a stopgap measure used to stem panics, a lender of last resort; not act as a vehicle of economic deliverance via the printing press.

It’s being violated again now as the mistakes of history are repeated once more. Bernanke will be around to see the results of his mistakes and his misguided justification that quantitative easing is working because stock prices are higher, ignoring evidence that the “wealth effect” isn’t working.

Strong died in 1928, missing the hangover his obsession with low interest rates and credit expansion caused after bragging, in 1927, that his policies would give “a little coup de whisky to the stock market.”

How Big Food Creates an Illusion of Choice at the Supermarket | EcoWatch

December 7, 2013 2:33 pm / Leave a comment

How Big Food Creates an Illusion of Choice at the Supermarket | EcoWatch.

A new analysis shows that the top four or fewer food companies control a substantial majority of the sales of each item, and they often offer multiple brands in each type of grocery, giving consumers the false impression they are choosing among competing products.

The in-depth analysis, released by Food & Water Watch on Thursday, illustrates the consolidation of the grocery industry and the range of impacts it has on the food chain.

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Grocery Goliaths: How Food Monopolies Impact Consumers examines 100 types of grocery products and found that as food companies and supermarket chains have consolidated over the last few years, the illusion of choice among brands has coincided with increasingly expensive grocery bills.

“You might think you’re a savvy shopper, supporting independent businesses when you buy a product from the organic foods aisle of your grocery store, but chances are you’re really being duped by a small handful of grocery industry Goliaths hiding behind an array of brands and pretty packaging,” saidWenonah Hauter, executive director of Food & Water Watch.“The largest mega-retailers and manufacturers control more of what we eat than you thought. And they’re not only costing shoppers, but farmers and small food companies too.”

Report findings came from the latest available grocery industry data (primarily from 2011 and 2012) and accounts for mergers, acquisitions and spin-offs through October 2013. Highlights include:

  • In 2012, 53.6 percent of the money that Americans spent on groceries went to the four largest retailers: Walmart, Kroger, Target and Safeway. Walmart alone sold almost a third (28.8 percent) of all groceries in 2012.
  • The top four or fewer grocery manufacturing companies controlled, on average, 63.3 percent of the sales of 100 types of groceries. For 32 grocery items, the biggest firms controlled more than 75 percent of sales and for six items, the top companies accounted for more than 90 percent of sales in things like infant formula and microwave dinners.
  • Consumers are led to believe they are choosing among competitors, when many different products are actually made by the same firm. For example, ConAgra sells six varieties of popcorn. This is true even for healthful foods; Kellogg’s owns both Kashi and Bear Naked brands, though their packaging and websites make them seem independent.
  • Some major retailers charge food producers a fee to place their products in the most profitable shelf locations, making it almost impossible for small food producers to compete.
  • Top food producers are manipulating the shopping experience. In 2012, the top four grocery retailers spent $4.4 billion on advertisements and the top food manufacturers spent $8.4 billion. Ninety-one percent of the foods advertised on children’s Saturday morning television programs were high in fat, added sugars and sodium, and low in nutrients, based on federal nutrition standards.

Intense consolidation throughout the grocery industry limits not just where consumers can shop, but what they can buy, according to Food & Water Watch. The number of mergers and acquisitions has increased as the economy emerges from the recession. The report contends the growing and significant consolidation puts small competitors at a disadvantage and denies shoppers transparency and consumer choice.

The analysis points to the ripple effects of grocery consolidation across the food chain. While grocery prices are rising and the share farmers receive is decreasing, the profits of major food retail companies and food manufacturers remain strong.

Food & Water Watch suggests that the Federal Trade Commission (FTC), the agency responsible for protecting the grocery industry from mega consolidation, should enact a national moratorium on grocery chain mergers and reject mergers of food companies and brands. Food & Water Watch further demands Congress grant the FTC proper authority to effectively regulate food marketing.

“This isn’t a problem we can just shop our way out of. These mega-mergers encompass so much of the food chain that it’s extremely difficult to always know who produced what we buy and where our dollars are going,” Hauter said. “People are fed up with not having real choice and transparency when they are trying to feed themselves and their families. It’s time for the FTC to prioritize protecting shoppers over protecting the profits of a shrinking handful of corporations.”

The analysis of grocery industry data builds upon Hauter’s book, Foodopoly: The Future of Food and Farming in America, which examines big business of the food supply and the increasing amount of control monolithic food companies have over consumers and small food producers.

 

My Home is a Dystopia | Collapse of Industrial Civilization

December 7, 2013 2:30 pm / 1 Comment on My Home is a Dystopia | Collapse of Industrial Civilization

My Home is a Dystopia | Collapse of Industrial Civilization.

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As media spin and political rhetoric of the corporatocracy diverge further and further from reality, modern society appears more and more to have been lifted from the pages of dystopian fiction. While the majority of the population succumbs to a serial-bubble economy, a disintegrating social safety net, and extreme weather, The elite are wasting scarce resources in an effort to hold together the cracking and buckling foundation of our sprawling industrial civilization. It’s in the short-term interest of the elite to construct a police state that will protect the gamed system they have created for themselves even though we know such short-sightedness sets us all up for a more spectacular fall. Capitalism has enslaved the world to the lifelong pursuit of little bits of paper and metal in order to buy the mass-produced products and food that have become essential to the survival of billions of people. Money and the illusion of material wealth are now perceived as more important than preserving the habitability of the planet. We live in a pathological dystopia of money worship.

Oil

Punch-drunk on fossil fuels, humans have been more destructive than a bull in a china shop; the true cost of fossil fuels continues to be externalized and downplayed as ever-more ecological debt racks up, revealing itself in anincreasingly destabilized biosphere and collapsing web of life. Sadly, the ‘climate emergency‘ has become yet another excuse for the elite to accelerate their looting by treating CO2 emissions as one more capitalist market tool — tax/trading policies as well as the costly and impractical capture and storage of carbon. In the end, any such market schemes will fail due primarily to the harsh consequences of human ecological overshoot and the complexity trap modern civilization has created for itself.

“…Societies struggling with the dilemmas of complexity are vulnerable from two directions. First, systems that are too tightly coupled or too efficient are fragile; they lack resilience. Thus they risk being toppled by a cascade of failure. That is how region-wide electrical outages propagate. The failure of one sector brings down another and another until the grid itself fails, and once down it takes a heroic effort to get it up and running again.

Second, they are exposed to simultaneous failure. When formerly separate problems coalesce into a problematique, a nexus of interlocking problems, the society does not face one or two discrete challenges, as in simpler times, but instead a swarm of simultaneous challenges that can overwhelm its capacity to respond, thereby provoking a general collapse.

Take climate change as a current example. To address this overall problem will require us to surmount a host of challenges in many different sectors (e.g., agriculture, forestry, public health, energy production, infrastructure and so on) not only in one country or economy but in every country—to varying degrees…”

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In the geological blink of an eye — 20, 40, 60, or 80 years from now, ghostly ruins will be all that remains of the most technologically advanced civilization that once spanned the globe. I don’t believe there will appear any sort of Hail Mary invention to solve the gauntlet of problems facing mankind — peak fossil fuels, climate change, ocean acidification, keystone species extinction, water scarcity, peak antibiotics, chemical pollution, nuclear proliferation, overpopulation, capitalism, and the complexity trap. Just a few weeks ago, a drill was conducted between Canada, the U.S., and Mexico in order to simulate a large-scale electric grid failure:

“…The vulnerability of our power grid due to solar flares or electromagnetic pulse (EMP) is getting new attention. Our system of interconnected power generation, transmission facilities, and distribution facilities are more vulnerable to cyber attacks than ever before. It would cost $3.6 trillion to fix everything, and would not be completed until 2020.

Smart grid systems make the power grid more accessible to cyber hackers so the upgrade can increase the risk. Electric car charging stations are essentially an accessible computer that cyber hackers can access the power grid. Right now, America has relatively few electric car charging stations, but we will be seeing a significant increase in government and privately funded vehicle charging station projects…

…It is estimated that a long-term failure of the power grid would likely be so catastrophic to society that casualties would be in excess of 60% of the population, according to the Chairman of the EMP Commission. With the grid vulnerable to solar flares, cyber attacks, EMP’s and weather related events it is important that we have supplies in stock to reduce the waiting time for overseas shipments and manufacturing delays. Currently we lack the inventory.

When, not if, the power grid fails, not only will the citizens of the U.S.A. be at risk of interrupted supplies of water, fresh food, fuel and the shut down of communications, but our very own military will suffer the same affects. Civil unrest would inevitably overwhelm the police department’s ability to respond…”

Back in August of this year, Outgoing DHS Director, Janet Napolitano said the following:

“A massive and “serious” cyber attack on the U.S. homeland is coming, and a natural disaster, the likes of which the nation has never seen is also likely and on its way.”

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Of course the extreme weather events of climate change are also a factor in the fragility of the power grid. And ironically, converting to ‘green energy’ to supply power to the grid could compound the problem:

…”Energy officials worry a lot these days about the stability of the massive patchwork of wires, substations and algorithms that keeps electricity flowing. They rattle off several scenarios that could lead to a collapse of the power grid — a well-executed cyberattack, a freak storm, sabotage.

But as states, led by California, race to bring more wind, solar and geothermal power online, those and other forms of alternative energy have become a new source of anxiety. The problem is that renewable energy adds unprecedented levels of stress to a grid designed for the previous century.

Green energy is the least predictable kind. Nobody can say for certain when the wind will blow or the sun will shine. A field of solar panels might be cranking out huge amounts of energy one minute and a tiny amount the next if a thick cloud arrives. In many cases, renewable resources exist where transmission lines don’t.

“The grid was not built for renewables,” said Trieu Mai, senior analyst at the National Renewable Energy Laboratory.

The frailty imperils lofty goals for greenhouse gas reductions.Concerned state and federal officials are spending billions of dollars in ratepayer and taxpayer money in an effort to hasten the technological breakthroughs needed for the grid to keep up with the demands of clean energy”…

The electric grid truly is the Achilles heel of industrial civilization:

…”Outside of the electricity industry, few fully understand the centrality of the grid to life in America today. The most graphic realizations occur when the grid goes down. It’s not just a matter of light and comfort in our homes. Without electricity, citizens may have no access to potable water, sewage treatment, safe food, fuel supplies, traffic control, or health care…

…Not only is the electrical grid central to modern life, but the grid also has multiple vulnerabilities that make keeping it safe a very difficult task. Weather outages are common, although some, such as an ice storm, can do enormous damage. A January 1998 ice storm destroyed much of Hydro-Québec’s massive 765-kV transmission system, blacking out more than 3 million Canadians, causing 30 fatalities, and leaving many customers in the dark for weeks. Tropical storms, such as 2005’s Hurricane Katrina, can also cause long-term and widespread destruction.

Human error can also take down the grid in a hurry, as was the case with the massive August 2003 blackout that turned off power for 55 million people in the Northeast, Midwest, and Canada…

…The 2003 blackout also highlighted another chilling aspect of grid failure: the propensity of the system to suffer from a cascading failure. Because of the grid’s interconnectedness, grid failures can spread quickly, concatenating across the system. This same effect occurred during the 1965 blackout that slammed most of the eastern U.S., an event that began with a simple hardware failure in Canada.”…

And lastly, without electricity for an extended period, we would have hundreds of Fukushima nuclear disasters unfolding all over the planet:

…”Unfortunately, the world’s nuclear power plants, as they are currently designed, are critically dependent upon maintaining connection to a functioning electrical grid, for all but relatively short periods of electrical blackouts, in order to keep their reactor cores continuously cooled so as to avoid catastrophic reactor core meltdowns and fires in storage ponds for spent fuel rods….

What do extended grid blackouts have to do with potential nuclear catastrophes? Nuclear power plants are designed to disconnect automatically from the grid in the event of a local power failure or major grid anomaly; once disconnected, they begin the process of shutting down the reactor’s core. In the event of the loss of coolant flow to an active nuclear reactor’s core, the reactor will start to melt down and fail catastrophically within a matter of a few hours, at most. In an extreme GMD [geomagnetic disturbance], nearly every reactor in the world could be affected…

If an extreme GMD were to cause widespread grid collapse (which it most certainly will), in as little as one or two hours after each nuclear reactor facility’s backup generators either fail to start, or run out of fuel, the reactor cores will start to melt down. After a few days without electricity to run the cooling system pumps, the water bath covering the spent fuel rods stored in “spent-fuel ponds” will boil away, allowing the stored fuel rods to melt down and burn [2]. Since the Nuclear Regulatory Commission (NRC) currently mandates that only one week’s supply of backup generator fuel needs to be stored at each reactor site, it is likely that, after we witness the spectacular nighttime celestial light show from the next extreme GMD, we will have about one week in which to prepare ourselves for Armageddon.”…

The Energy Skeptic reports that Russia is on a crusade to spread these ticking time bombs all around the world.

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Nine Inch Nails – Leaving Hope (HD)

Nine Inch Nails – Leaving Hope (HD)

 

NSA considered spying on Canadians without this country’s consent, top-secret directive says | National Post

December 7, 2013 12:51 pm / Leave a comment

NSA considered spying on Canadians without this country’s consent, top-secret directive says | National Post.

OTTAWA — The U.S. National Security Agency considered spying on Canadians without the knowledge or consent of its intelligence partners in this country, according to a top-secret draft NSA directive.

The 2005 memo, leaked to The Guardian newspaper by former NSA contractor Edward Snowden, details how the NSA considered “unilaterally” targeting the citizens and communication systems of Canada, Australia and New Zealand. The countries are part of the “Five Eyes” intelligence-gathering pact that also includes the U.S. and United Kingdom. The directive refers to partner nations as “second-party” countries.

“Under certain circumstances, it may be advisable and allowable to target second party persons and second party communications systems unilaterally when it is in the best interests of the U.S. and necessary for U.S. national security,” says the directive, classified as “NF” for No Foreign and is titled Collection, Processing and Dissemination of Allied Communications.

“Such targeting must be performed exclusively within the direction, procedures and decision processes outlined in this directive.”

The document states the proposed U.S. spying on its Five-Eyes partners can take place even when the partner government has explicitly denied the U.S. permission to do so, says The Guardian. “The memo makes clear that partner countries must not be informed about this surveillance, or even the procedure itself.”

In a later part of the draft cleared for release to the Five-Eyes countries, the document suggests there may be circumstances in which Canada, Australia and New Zealand should co-operate to allow the U.S. to target their citizens.

The public release of the directive is part of a series of calculated leaks over the past year in which Snowden has exposed a vast campaign by the NSA, assisted by Five-Eyes partners, to snoop on U.S. and global electronic communications in the name of counter-terrorism.

“The slow release of secret documents by Snowden [via journalist Glenn] Greenwald is having a cumulative effect which may reach a tipping point,” says Tom Quiggin, an Ottawa security and intelligence expert.

“The NSA runs the risk of losing the confidence of its allies and forcing allied agencies into distancing themselves from the NSA and the U.S. government.”

Meanwhile, U.S. Internet and telecommunications companies such as Cisco are now reporting slipping international sales directly attributable to the drip-drip-drip of Snowden’s unauthorized disclosures.

Microsoft moved this week to assure international customers by pledging to fight in court any attempt by U.S. intelligence agencies to seize its foreign customers’ data under American surveillance laws, one of a series of steps aimed at reassuring nervous users abroad.

Microsoft general counsel Brad Smith told Reuters the company will dramatically increase the amount of encryption it uses for internal traffic, following similar moves by Google and Yahoo after reports the NSA had illicitly tapped into their facilities overseas.

The NSA runs the risk of losing the confidence of its allies and forcing allied agencies into distancing themselves from the NSA and the U.S. government

The Five-Eyes coalition was formed under the 1946 UKUSA Agreement, which was believed to limit the ability of the partner countries to spy on each other. Ottawa’s Communications Security Establishment Canada (CSEC), the country’s premier intelligence agency, maintains a close partnership with the NSA.

The original 1946 UKUSA agreement between the U.S. and Britain was previously designed only for “foreign intelligence” operations. The draft directive appears to indicate that the agreement has changed, according to The Guardian.

“(The 1946 UKUSA) agreement has evolved to include a common understanding that both governments will not target each other’s citizens/persons” says the directive. “However, when it is in the best interest of each nation, each reserved the right to conduct unilateral Comint (communications intelligence) action against each other’s citizens/persons.”

In a later part of the draft cleared for release to the Five-Eyes countries, the document suggests there may be circumstances in which Canada, Australia and New Zealand should co-operate to allow the U.S. to target their citizens.

International law does not provide much guidance on transnational peacetime spying, says Craig Forcese, a leading expert on national security law at the University of Ottawa.

“International law rules pertaining to spying are best described as a checkerboard of principles,” he wrote in a recent blog posting. “The clearest principle is a simple expression of sovereignty preoccupations: don’t spy on the territory of another state, in violation of its laws.

“Beyond that, there is no simple rule governing the international legality of spying. This may not be a happy situation, but it is fair to say that this is the world that states have quite clearly set out to create. After all, all states spy at one time or another.”

In the long run, the real damage may be to U.S. society, concludes Quiggin.

“Ironically, it was similar spying and information collection activities of the British Crown that lit the fires of revolution in America in the 1760s. Using a new law called the ‘Writs of Assistance,’ the King’s men were able to search the homes, papers and belongings of anyone without warning and seize all information and goods,” in pursuit of smuggled contraband.

 

Yannos Papantoniou warns that the widening economic gap between the eurozone’s northern and souther members could lead to the monetary union’s collapse. – Project Syndicate

December 7, 2013 12:09 pm / Leave a comment

Yannos Papantoniou warns that the widening economic gap between the eurozone’s northern and souther members could lead to the monetary union’s collapse. – Project Syndicate.

ATHENS – As the eurozone debt crisis has steadily widened the divide between Europe’s stronger northern economies and the weaker, more debt-laden economies in the south (with France a kind of no man’s land economy in between), one question is on everyone’s mind: Can Europe’s monetary union – indeed, the European Union itself – survive?

While the eurozone’s northern members enjoy low borrowing costs and stable growth, its southern members face high borrowing costs, recession, and deep cuts in incomes and social spending. They have also suffered substantial output losses, and have far higher unemployment rates than their northern counterparts. Unemployment in the eurozone as a whole averages about 12%, compared to more than 25% in Spain and Greece (where youth unemployment now stands at 60%). Indeed, while aggregate per capita income in the eurozone remains at 2007 levels, Greece has been pushed back to 2000 levels, and Italy today finds itself somewhere in 1997.

Europe’s southern economies owe their deteriorating circumstances largely to excessive austerity and the absence of measures to compensate for demand losses. Currency devaluation – which would boost the competitiveness of domestic industry by lowering export prices – obviously is not an option in a monetary union.

But Europe’s stronger economies have resisted pressure to undertake more expansionary fiscal policies, which would lift demand for its weaker economies’ exports. The European Central Bank did not follow the lead of other advanced-country central banks, such as the US Federal Reserve, in pursuing a more aggressive monetary policy to cut borrowing costs. And no financing has been offered for public-investment projects in the southern countries.

Moreover, fiscal and financial measures aimed at strengthening eurozone governance have been inadequate to restore confidence in the euro. And Europe’s troubled economies have been slow to undertake structural reforms; improvements in competitiveness reflect wage and salary cuts, rather than productivity gains.

While these policies – or lack thereof – have impeded recovery in the southern countries, they have yielded reasonable growth and very low unemployment rates for the northern economies. In fact, by maintaining large trade surpluses, Germany is exporting unemployment and recession to its weaker neighbors.

As Europe’s north-south divide widens, so will interest-rate differentials; as a result, conducting a single monetary policy will become increasingly difficult. In the recession-afflicted south, continued fiscal consolidation will demand new austerity measures – a prospect that citizens will reject. Such impasses will lead to social tension and political crisis, or to new requests for financial assistance, which the northern countries are certain to resist. Either way, financial and political instability could lead to the common currency’s collapse.

As long as the eurozone establishes a kind of wary equilibrium, with the weaker economies stabilizing at low growth rates, current policies are unlikely to change. Incremental intergovernmental solutions will continue to prevail, and Europe’s economy will soldier on, steadily losing ground to the US and emerging economies like China and India.

For now, Germany is satisfied with the status quo, enjoying stable growth and retaining control over domestic economic policy, while the ECB’s limited powers and strict mandate to maintain price stability ease fears of inflation.

But how will Germany react when the north-south divide becomes large enough to threaten the euro’s survival? The answer depends on how Germans perceive their long-term interests, and on the choices of Chancellor Angela Merkel. Her recent election to a third term offers room for bolder policy choices, while forcing her to focus more on her legacy – specifically, whether she wishes to be associated with the euro’s collapse or with its revival.

Two outcomes now seem possible. One scenario is that the economic and political crisis in the southern countries spreads, inciting fears in Germany that the country faces a long-term threat. This could drive Germany to withdraw from the eurozone and form a smaller currency union with other northern countries.

The second possibility is that the crisis remains relatively contained, leading Germany to pursue closer economic and fiscal union. This would entail the mutualization of some national debt and the transfer of economic-policy sovereignty to supranational European institutions.

Of course, such a move would carry considerable political costs in Germany, where many taxpayers recoil at the notion of assuming the debts of the fiscally profligate southern countries, without considering how much Germany would benefit from a stable and dynamic monetary union. But a new grand coalition between Merkel and the Social Democrats could be sufficient to make this shift possible.

Even so, there could be victims. Indeed, the continued failure of smaller countries like Greece and Cyprus to fulfill their commitments reinforces the impression that they will forever be dependent on financial assistance. The exit of one or two of these “undisciplined” countries could be a requirement for the German public to agree to such a policy shift.

Europe’s north-south divide has become a time bomb lying at the foundations of the currency union. Defusing it will require less austerity, more demand stimulus, greater investment support, deeper reforms, and meaningful progress toward economic and political union. One hopes that modest recovery in the south, aided by strong German leadership in the north, will steer Europe in the right direction.

 

 

Potentially damaging Jackpine oilsands mine expansion OK’d by Ottawa – Edmonton – CBC News

December 7, 2013 9:23 am / Leave a comment

Potentially damaging Jackpine oilsands mine expansion OK’d by Ottawa – Edmonton – CBC News.

Shell Canada’s Jackpine oilsands mine expansion plan has received the go-ahead from Ottawa, despite the environment minister’s view that it’s “likely to cause significant adverse environmental effects.”

In a statement late Friday, environment Minister Leona Aglukkaq concluded that the effects from the 100,000-barrel-per-day expansion are “justified in the circumstances.”

The nearby Athabasca Chipewyan First Nation has said the project will violate several federal laws covering fisheries and species at risk, as well as treaty rights.

They said they had received so little information on how Shell plans to live up to conditions imposed on it by a federal-provincial panel that they asked Ottawa for a 90-day delay on the decision – originally expected Nov. 6 – to work some of those issues through.

They were granted a 35-day delay, but Friday’s decision didn’t even wait until that period was up.

Allan Adam, chief of the Athabasca Chipewyan First Nation, was outraged that the federal decision came as the government was still supposed to be in talks with the band about how the project’s effects were to be mitigated.

“They just kept us in the loop and strung us along and played games with us,” he said. “To them it’s all a game.”

Although all 88 conditions the review panel placed on the project are now legally binding, Adam said neither the government nor the company has explained how those conditions will be met.

Adam said the government’s move to go ahead despite the serious environmental consequences of the project leave the band little choice.

edm-allan-adamAllan Adam, chief of the Athabasca Chipewyan First Nation, says the government’s decision has left the band with few options. ((CBC))

“This government has to realize we’ll be holding them accountable,” he said. “We’ll be looking at legal action and we’ll pursue this through legal action.”

Greenpeace speaks out against expansion

Greenpeace Canada issued a statement accusing the Harper government of putting the short term interests of oil companies ahead of environmental protection and First Nations treaty rights.

“Canada would be much better off diversifying its economy, investing inrenewables, green jobs and projects that get us out of this madness not deeper into it,” the statement said.

“How many more extreme weather events will it take till our Prime Minister realizes this is one problem he can’t mine his way out of?”

The Jackpine expansion would allow Shell to increase its bitumen output by 50 per cent to 300,000 barrels a day.

“We’re reviewing the recommendations and proposed conditions attached to the approval,” said Shell spokesman David  Williams.

Williams added Shell must consult with the minority partners in  the project – Chevron and Marathon – before making a formal decision to proceed.

Review panel suggests compensation for ‘irreversible damage’

A review panel concluded last July that the project was in the public interest but warned that it would result in severe  and irreversible damage so great that new protected areas should be created to compensate.

The review concluded that the project would mean the permanent loss of thousands of hectares of wetlands, which  could harm migratory birds, caribou and other wildlife and wipe out traditional plants used for generations.

It also said Shell’s plans for mitigation are unproven and warned that some impacts would probably approach levels that the  environment couldn’t support.

Shell has said Alberta’s new management plan for the oilsands area will provide more concrete data to assess and mitigate environmental impacts.

The company has purchased about 730 hectares of former cattle pasture in northwestern Alberta to help compensate for the 8,500 hectares of wetland that would be forever lost.

 

A Short History of Long-Term Trends

December 7, 2013 9:17 am / Leave a comment

A Short History of Long-Term Trends.

As a distant but interested observer of history and investment markets I am fascinated how major events that arose from longer-term trends are often explained by short-term causes. The First World War is explained as a consequence of the assassination of Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne; the Depression in the 1930s as a result of the tight monetary policies of the Fed; the Second World War as having been caused by Hitler; and the Vietnam War as a result of the communist threat.

Similarly, the disinflation that followed after 1980 is attributed to Paul Volcker’s tight monetary policies. The 1987 stock market crash is blamed on portfolio insurance. And the Asian Crisis and the stock market crash of 1997 are attributed to foreigners attacking the Thai Baht (Thailand’s currency). A closer analysis of all these events, however, shows that their causes were far more complex and that there was always some “inevitability” at play.

Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses…

Take the 1987 stock market crash. By the summer of 1987, the stock market had become extremely overbought and a correction was due regardless of how bright the future looked. Between the August 1987 high and the October 1987 low, the Dow Jones declined by 41%. As we all know, the Dow rose for another 20 years, to reach a high of 14,198 in October of 2007.

These swings remind us that we can have huge corrections within longer term trends. The Asian Crisis of 1997-98 is also interesting because it occurred long after Asian macroeconomic fundamentals had begun to deteriorate. Not surprisingly, the eternally optimistic Asian analysts, fund managers , and strategists remained positive about the Asian markets right up until disaster struck in 1997.

But even to the most casual observer it should have been obvious that something wasn’t quite right. The Nikkei Index and the Taiwan stock market had peaked out in 1990 and thereafter trended down or sidewards, while most other stock markets in Asia topped out in 1994. In fact, the Thailand SET Index was already down by 60% from its 1994 high when the Asian financial crisis sent the Thai Baht tumbling by 50% within a few months. That waked the perpetually over-confident bullish analyst and media crowd from their slumber of complacency.

I agree with the late Charles Kindleberger, who commented that “financial crises are associated with the peaks of business cycles”, and that financial crisis “is the culmination of a period of expansion and leads to downturn”. However, I also side with J.R. Hicks, who maintained that “really catastrophic depression” is likely to occur “when there is profound monetary instability — when the rot in the monetary system goes very deep”.

Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses (expansionary monetary policies and/or fiscal policies leading to excessive credit growth and excessive speculation). The problem lies in timing the onset of the crisis. Usually, as was the case in Asia in the 1990s, macroeconomic conditions deteriorate long before the onset of the crisis. However, expansionary monetary policies and excessive debt growth can extend the life of the business expansion for a very long time.

In the case of Asia, macroeconomic conditions began to deteriorate in 1988 when Asian countries’ trade and current account surpluses turned down. They then went negative in 1990. The economic expansion, however, continued — financed largely by excessive foreign borrowings. As a result, by the late 1990s, dead ahead of the 1997-98 crisis, the Asian bears were being totally discredited by the bullish crowd and their views were largely ignored.

While Asians were not quite so gullible as to believe that “the overall level of debt makes no difference … one person’s liability is another person’s asset” (as Paul Krugman has said), they advanced numerous other arguments in favour of Asia’s continuous economic expansion and to explain why Asia would never experience the kind of “tequila crisis” Mexico had encountered at the end of 1994, when the Mexican Peso collapsed by more than 50% within a few months.

In 1994, the Fed increased the Fed Fund Rate from 3% to nearly 6%. This led to a rout in the bond market. Ten-Year Treasury Note yields rose from less than 5.5% at the end of 1993 to over 8% in November 1994. In turn, the emerging market bond and stock markets collapsed. In 1994, it became obvious that the emerging economies were cooling down and that the world was headed towards a major economic slowdown, or even a recession.

But when President Clinton decided to bail out Mexico, over Congress’s opposition but with the support of Republican leaders Newt Gingrich and Bob Dole, and tapped an obscure Treasury fund to lend Mexico more than$20 billion, the markets stabilized. Loans made by the US Treasury, the International Monetary Fund and the Bank for International Settlements totalled almost $50 billion.

However, the bailout attracted criticism. Former co-chairman of Goldman Sachs, US Treasury Secretary Robert Rubin used funds to bail out Mexican bonds of which Goldman Sachs was an underwriter and in which it owned positions valued at about $5 billion.

At this point I am not interested in discussing the merits or failures of the Mexican bailout of 1994. (Regular readers will know my critical stance on any form of bailout.) However, the consequences of the bailout were that bonds and equities soared. In particular, after 1994, emerging market bonds and loans performed superbly — that is, until the Asian Crisis in 1997. Clearly, the cost to the global economy was in the form of moral hazard because investors were emboldened by the bailout and piled into emerging market credits of even lower quality.

…because of the bailout of Mexico, Asia’s expansion was prolonged through the availability of foreign credits.

Above, I mentioned that, by 1994, it had become obvious that the emerging economies were cooling down and that the world was headed towards a meaningful economic slowdown or even a recession. But the bailout of Mexico prolonged the economic expansion in emerging economies by making available foreign capital with which to finance their trade and current account deficits. At the same time, it led to a far more serious crisis in Asia in 1997 and in Russia and the U.S. (LTCM) in 1998.

So, the lesson I learned from the Asian Crisis was that it was devastating because, given the natural business cycle, Asia should already have turned down in 1994. But because of the bailout of Mexico, Asia’s expansion was prolonged through the availability of foreign credits.

This debt financing in foreign currencies created a colossal mismatch of assets and liabilities. Assets that served as collateral for loans were in local currencies, whereas liabilities were denominated in foreign currencies. This mismatch exacerbated the Asian Crisis when the currencies began to weaken, because it induced local businesses to convert local currencies into dollars as fast as they could for the purpose of hedging their foreign exchange risks.

In turn, the weakening of the Asian currencies reduced the value of the collateral, because local assets fall in value not only in local currency terms but even more so in US dollar terms. This led locals and foreigners to liquidate their foreign loans, bonds and local equities. So, whereas the Indonesian stock market declined by “only” 65% between its 1997 high and 1998 low, it fell by 92% in US dollar terms because of the collapse of their currency, the Rupiah.

As an aside, the US enjoys a huge advantage by having the ability to borrow in US dollars against US dollar assets, which doesn’t lead to a mismatch of assets and liabilities. So, maybe Krugman’s economic painkillers, which provided only temporary relief of the symptoms of economic illness, worked for a while in the case of Mexico, but they created a huge problem for Asia in 1997.

Similarly, the housing bubble that Krugman advocated in 2001 relieved temporarily some of the symptoms of the economic malaise but then led to the vicious 2008 crisis. Therefore, it would appear that, more often than not, bailouts create larger problems down the road, and that the authorities should use them only very rarely and with great caution.

Regards,

Marc Faber

WTO deal aims to boost global commerce – Asia-Pacific – Al Jazeera English

December 7, 2013 8:54 am / Leave a comment

WTO deal aims to boost global commerce – Asia-Pacific – Al Jazeera English.

Critics warn the new WTO deal could wipe out industries and cause job losses around the world [AFP]
Commerce ministers from around the world have approved a World Trade Organisation agreement to lower trade barriers that they hailed as a “historic” boost for the trade body.

The agreement reached on Saturday in Bali, Indonesia, falls far short of WTO’s vision of dismantling global trade barriers through the 12-year-old Doha Round of talks.

But the accord reached on the Indonesian resort island of Bali nevertheless marks the first global agreement struck by the Geneva-based body since its 1995 founding.

“For the first time in our history, the WTO has truly delivered,” Roberto Azevedo, WTO director-general, told a closing ceremony.

We’re back in business … Bali is just the beginning.

Roberto Azevedo, WTO chief

“We’re back in business … Bali is just the beginning.”

Al Jazeera’s Step Vaessen, reporting from Jakarta on Saturday, said reaching the agreement was “very difficult.”

She said India resisted part of the deal covering agriculture, and Cuba walked away from the meeting at the last minute.

“But everything came together at the last minute and it is now a historic deal. It was a very, very tough negotiation.”

The pact includes commitments to facilitate trade by simplifying customs procedures.

The Washington-based Peterson Institute for International Economics estimated in a report this year the customs measures could create $1tn in economic activity and 21 million jobs if properly implemented.

WTO officials have conceded, however, that uncertainty surrounded how effectively the measures would be implemented, especially in underdeveloped countries.

Analysts say the hard-fought nature of the talks indicates how difficult it could be for the body to make real progress on the Doha Round, launched in Qatar in 2001.

Days of haggling

The agreement was reached after more than four days of haggling in Bali that stretched past the conference’s Friday deadline and overnight.

Gita Wirjawan, Indonesia’s trade minister, called the accord “historic”.

Azevedo said it had important symbolic value for Doha.

“The decisions we have taken here are an important stepping-stone toward the completion of the Doha Round,” he said, adding the WTO would soon get to work on a “road map” for reviving Doha.

The Doha Round aims to remove hurdles to commerce and establish a globally binding framework of trade rules fair to both rich and poor countries.

But protectionist disputes among the WTO’s 159 members have foiled agreement.
WTO trade deal could leave India’s poorest without support from welfare programme in the name of food security.

Azevedo has expressed concern over the rise of alternative regional trading pacts that he fears could render the WTO obsolete if the Geneva-based body did not start clinching major worldwide agreements.

The Bali negotiations teetered repeatedly on the brink of collapse due to various differences.

India – which aims to stockpile and subsidise grain for its millions of poor – had demanded that such measures be granted indefinite exemption from WTO challenge.

The US, which implements large farm supports of its own, and others had said India’s grain policy could violate WTO limits on subsidies.

A later hurdle emerged as four Latin American countries objected to the removal in the accord’s text of a reference to the US embargo on Cuba.

Compromise wording smoothed over those hurdles.

Job losses feared

Critics say the sudden reduction of import taxes may wipe out industries, causing job losses in both rich and poor countries, our correspondent said.

The agreement will come as a major personal victory for the Brazilian Azevedo, who took the organisation’s helm in September and injected a sense of urgency into the talks.

“With this landmark accord on trade facilitation and other issues, the WTO has re-established its credibility as an indispensable forum for trade negotiations,” the US Chamber of Commerce said in a statement released in Washington.

The package also included pledges to limit agricultural subsidies, and policies to aid least-developed countries.

As the Doha Round has faltered, alternative regional pacts have emerged between major trading nations, such as the 12-country Trans-Pacific Partnership (TPP) spearheaded by the US.

TPP negotiators hold their latest meeting in Singapore starting on Saturday as they work to figure out the outlines of that trade alliance.

Azevedo has said such alliances could have “tragic” consequences on poor nations by denying them a place at the trade-rules table.

 

U.S. Military Changes Drone Rules to Make Targeting of Civilians Easier | A Lightning War for Liberty

December 7, 2013 8:40 am / Leave a comment

U.S. Military Changes Drone Rules to Make Targeting of Civilians Easier | A Lightning War for Liberty.

The drone issue is just another topic in which President Barrack Obama has proven himself to be a world-class liar and master of deception. Despite his claims that drone strikes do little damage to civilian populations, in July we discovered that “of the 746 people killed in drone strikes in Pakistan from 2006-2009, an incredible 20% were civilians and 94 (13% of the total) were children.”

I suppose that number just isn’t good enough, because The Pentagon has decided to change the rules of engagement when it comes to drone strikes, now making iteasier to target civilians. From The Washington Times:

The Pentagon has loosened its guidelines on avoiding civilian casualties during drone strikes, modifying instructions from requiring military personnel to “ensure” civilians are not targeted to encouraging service members to “avoid targeting” civilians.

Hey cops, how about you “try to avoid” beating the shit out of people and violating their constitutional rights for no reason. Yeah, because that’ll work.

In addition, instructions now tell commanders that collateral damage “must not be excessive” in relation to mission goals, according to Public Intelligence, a nonprofit research group that analyzed the military’s directives on drone strikes.

Administration officials say the strikes are legal because the U.S. is at war with al Qaeda and its associates. They also insist there is a wide gap between the government’s civilian casualty count and those of human rights groups.

Right, we are at “war with al Qaeda,” when it is convenient to be at war with them. When it is convenient to be allies with al Qaeda, we will do that too.

Despite Mr. Obama’s pledge for more transparency on drone strikes, the administration “continues to answer legitimate questions and criticisms by saying, ‘We can’t really talk about this,’” said Naureen Shah, advocacy adviser at Amnesty International.

Can’t. Make. This. Stuff. Up.

Full article here.

In Liberty,
Mike

 

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