Did you know that financial institutions all over the world are warning that we could see a “mega default” on a very prominent high-yield investment product in China on January 31st? We are being told that this could lead to a cascading collapse of the shadow banking system in China which could potentially result in “sky-high interest rates” and “a precipitous plunge in credit“. In other words, it could be a “Lehman Brothers moment” for Asia. And since the global financial system is more interconnected today than ever before, that would be very bad news for the United States as well. Since Lehman Brothers collapsed in 2008, the level of private domestic credit in China has risen from $9 trillion to an astounding $23 trillion. That is an increase of $14 trillion in just a little bit more than 5 years. Much of that “hot money” has flowed into stocks, bonds and real estate in the United States. So what do you think is going to happen when that bubble collapses?
The bubble of private debt that we have seen inflate in China since the Lehman crisis is unlike anything that the world has ever seen. Never before has so much private debt been accumulated in such a short period of time. All of this debt has helped fuel tremendous economic growth in China, but now a whole bunch of Chinese companies are realizing that they have gotten in way, way over their heads. In fact, it is being projected that Chinese companies will pay out the equivalent ofapproximately a trillion dollars in interest payments this year alone. That is more than twice the amount that the U.S. government will pay in interest in 2014.
Over the past several years, the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have all been criticized for creating too much money. But the truth is that what has been happening in China surpasses all of their efforts combined. You can see an incredible chart which graphically illustrates this point right here. As the Telegraph pointed out a while back, the Chinese have essentially “replicated the entire U.S. commercial banking system” in just five years…
Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire U.S. commercial banking system in five years,” she said.
The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.
As with all other things in the financial world, what goes up must eventually come down.
And right now January 31st is shaping up to be a particularly important day for the Chinese financial system. The following is from a Reuters article…
The trust firm responsible for a troubled high-yield investment product sold through China’s largest banks has warned investors they may not be repaid when the 3 billion-yuan ($496 million)product matures on Jan. 31, state media reported on Friday.
Investors are closely watching the case to see if it will shatter assumptions that the government and state-owned banks will always protect investors from losses on risky off-balance-sheet investment products sold through a murky shadow banking system.
If there is a major default on January 31st, the effects could ripple throughout the entire Chinese financial system very rapidly. A recent Forbes article explained why this is the case…
A WMP default, whether relating to Liansheng or Zhenfu, could devastate the Chinese banking system and the larger economy as well. In short, China’s growth since the end of 2008 has been dependent on ultra-loose credit first channeled through state banks, like ICBC and Construction Bank, and then through the WMPs, which permitted the state banks to avoid credit risk. Any disruption in the flow of cash from investors to dodgy borrowers through WMPs would rock China with sky-high interest rates or a precipitous plunge in credit, probably both. The result? The best outcome would be decades of misery, what we saw in Japan after its bubble burst in the early 1990s.
The big underlying problem is the fact that private debt and the money supply have both been growing far too rapidly in China. According to Forbes, M2 in China increased by 13.6 percent last year…
And at the same time China’s money supply and credit are still expanding. Last year, the closely watched M2 increased by only 13.6%, down from 2012’s 13.8% growth. Optimists say China is getting its credit addiction under control, but that’s not correct. In fact, credit expanded by at least 20% last year as money poured into new channels not measured by traditional statistics.
Overall, M2 in China is up by about 1000 percent since 1999. That is absolutely insane.
And of course China is not the only place in the world where financial trouble signs are erupting. Things in Europe just keep getting worse, and we have just learned that the largest bank in Germany just suffered ” a surprise fourth-quarter loss”…
Deutsche Bank shares tumbled on Monday following a surprise fourth-quarter loss due to a steep drop in debt trading revenues and heavy litigation and restructuring costs that prompted the bank to warn of a challenging 2014.
Germany’s biggest bank said revenue at its important debt-trading division, fell 31 percent in the quarter, a much bigger drop than at U.S. rivals, which have also suffered from sluggish fixed-income trading.
If current trends continue, many other big banks will soon be experiencing a “bond headache” as well. At this point, Treasury Bond sentiment is about the lowest that it has been in about 20 years. Investors overwhelmingly believe that yields are heading higher.
If that does indeed turn out to be the case, interest rates throughout our economy are going to be rising, economic activity will start slowing down significantly and it could set up the “nightmare scenario” that I keep talking about.
But I am not the only one talking about it.
In fact, the World Economic Forum is warning about the exact same thing…
Fiscal crises triggered by ballooning debt levels in advanced economies pose the biggest threat to the global economy in 2014, a report by the World Economic Forum has warned.
Ahead of next week’s WEF annual meeting in Davos, Switzerland, the forum’s annual assessment of global dangers said high levels of debt in advanced economies, including Japan and America, could lead to an investor backlash.
This would create a “vicious cycle” of ballooning interest payments, rising debt piles and investor doubt that would force interest rates up further.
So will a default event in China on January 31st be the next “Lehman Brothers moment” or will it be something else?
In the end, it doesn’t really matter. The truth is that what has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years.
It is just a matter of time.
The Business Unit
Don Pittis has been a Fuller Brush man, a forest fire fighter and an Arctic ranger before discovering journalism. He was principal business reporter for Radio Television Hong Kong before the handover to China and has produced and reported for CBC and BBC News. He is currently senior producer at CBC’s business unit.
Janet Yellen, soon to be the new head of the world’s most powerful central bank, sure seems like a nice person. In some circles, being nice is an insult. Some Americans say Canadians are too nice – we even thank our bank machines, goes the joke. But despite all that, JanetYellen does seem nice.
Not that the outgoing chair of the U.S. Federal Reserve, Ben Bernanke, is a bad man. And surely the one before that, Alan Greenspan, meant well when he kept cutting interest rates to keep the stock and property boom alive – long past the moment when, most now agree, they should have been allowed to take a rest.
But Janet Yellen – soft-spoken, seemingly concerned about America’s disenfranchised as much as she is about stock market growth – exudes character. With Yellen assuming the role of Fed chair on Feb. 1, the question is, what does the character of a central banker mean for the economic future of the U.S., the world… and Canada?
- 5 key facts about incoming U.S. fed chair Janet Yellen
- Janet Yellen cleared to become next chair of U.S. Federal Reserve
For all the supposed clout of the U.S. central bank, the chair of the Fed does not have the power of a dictator. In a rare foray into central bank humour, comedian Rick Mercer reminds us that the levers of that power are subtle.
There is no question that Yellen is smart. That will count in her job of swinging the 19 members of the committee that makes interest rate decisions toward consensus. But it will also be helped by the feeling that she is motivated by the best intentions for the entire U.S.
Central bankers a product of their time
It may be that each of the recent central bankers was perfectly suited to their times. Greenspan, who trained at the knee of Ayn Rand, presided during the era of Greed Is Good, when everyone in the world was supposed to be fighting to get to the top of the heap.
When the house of cards suddenly collapsed, it was the turn of Ben Bernanke, a man who has made a career studying the economic mistakes that turned a 1929 market collapse into the Great Depression. He wanted to prevent the same thing from happening again, at all costs.
Now, we are in a different era. It appears that Bernanke’s strategy managed to avert a disruptive economic collapse. But one of the results of the Fed’s emergency measures was to give a giant handout to the people who Greenspan had allowed to climb to the top of the heap, creating a class divide not seen since before the Great Depression.
Like almost everyone else in the upper echelons of U.S. government, Yellen is elite, with elite friends. As she said in a revealing interview in the early 2000s with fellow University of California, Berkeley economist Kenneth Train, when she voted in favour of interest rate hikes in the 1990s, she says she felt pressure in social circles.
“Higher interest rates are things that people really don’t like,” she told Train. “I would go to parties and meet people [and people would say,] ‘I’m losing money because you’re raising interest rates and what you’re doing is harming me.'”
She goes on to say that while it drove home her personal responsibility for making rate decisions, she had to put the interests of the wider economy before those of her friends.
An easing of quantitative easing?
Yellen’s job now could have even more of an impact on her well-off friends. As I have said before, the distorting effect of Bernanke’s quantitative easing (or QE) – buying bonds to stimulate the economy when interest rates could go no lower – has been great for the stock market. But there are growing doubts that the extra injection of cash is making it into the hands of the poorer Americans who need it most.
Yellen knows she will have to cut QE eventually. But it is a scary process. You may argue whether or not QE really worked. But if buying bonds stimulated the economy, then ending the buying of bonds will definitely de-stimulate it. As with plans to halt fiscal spending in 2010,stopping a strong stimulant is effectively indistinguishable from taking a strong depressant.
As the Fed said in recently released minutes, even if reducing QE does not have a huge, direct impact on Main Street, it might cause an “unintended tightening of financial conditions if a reduction in the pace of asset purchases was misinterpreted as signaling that the Committee was likely to withdraw policy accommodation more quickly than had been anticipated.”
That’s Fed-speak for bond and mortgage markets taking fright, sending interest rates shooting up. It’s not just hypothetical. It happened once last year, just because people thought policy would change. And that wouldn’t just be bad for Americans. World bond and mortgage rates are set in the U.S., and the Canadian housing market might be severely hurt by such a shock.
If you believe, as I do, that QE is hurting a majority of Americans and Canadians, and maybe doing long-term damage to the entire society by increasing the disparity of rich and poor, Yellen has a balancing act ahead of her. Her feat must be to reduce QE as quickly as possible without scaring the markets into thinking she is doing it too quickly.
Thankfully, Yellen is appropriately humble.
“Macroeconomics, I think it’s a very useful set of tools for thinking about the economy,” she said in her interview with Train. “But in terms of our ability to know the future and forecast where things are going, that’s a very difficult thing to do. There are a lot of imponderables.”
If Yellen succeeds, it will not be a feat of strength. It will be a feat of wisdom. It will be a feat of experience. And it will depend on being nice. Nice as a Canadian. With luck, Yellen, like Greenspan and Bernanke, will be the right person for her time. The world needs a little nice.
With China increasingly in the news involving some new diplomatic or geopolitical escalation, a new territorial claim, the launch of a brand new aircraft carrier, or just general chatter of military tensions surrounding the aspirational reserve currency superpower, it is time for yet another update of the complete “military and security developments involving the people’s republic of China”, courtesy of the annual report to Congress discussing precisely this issue.
The only Org Chart that matters:
China Sovereignty Claims:
Chinese Ground Forces:
Chinese ground force distribution map:
Chinese airforce distribution map:
China Taiwan Strait and SRBM Coverage:
China Conventional Strike Capabilities:
Chinese Missile balance:
China Precision Strike capabilities:
Chinese ICBM reach capabilities:
The full report link – pdf.
Published in 2010 by Signs of the Times, first posted on GR on June 27, 2013
by Press Core
In 1975, during the Church Committee hearings, the existence of a secret assassination weapon came to light. The CIA had developed a poison that caused the victim to have an immediate heart attack. This poison could be frozen into the shape of a dart and then fired at high speed from a pistol. The gun was capable of shooting the icy projectile with enough speed that the dart would go right through the clothes of the target and leave just a tiny red mark. Once in the body the poison would melt and be absorbed into the blood and cause a heart attack! The poison was developed to be undetectable by modern autopsy procedures.
Can you give a person cancer?
If cancer in animals can be caused by injecting them with cancer viruses and bacteria, it would certainly be possible to do the same with human beings!
In 1931, Cornelius Rhoads, a pathologist from the Rockefeller Institute for Medical Research, purposely infects human test subjects in Puerto Rico with cancer cells; 13 of them died. Though a Puerto Rican doctor later discovers that Rhoads purposely covered up some of the details of his experiment and Rhoads himself gives a written testimony stating he believes that all Puerto Ricans should be killed, he later goes on to establish the U.S. Army Biological Warfare facilities in Fort Detrick Maryland (origin of the HIV/AIDS virus, the Avian Flu virus and the Swine Flu / A-H1N1 virus), Utah and Panama, and is named to the U.S. Atomic Energy Commission, where he begins a series of radiation exposure experiments on American soldiers and civilian hospital patients.
The answer to the question – Can you give a person cancer – is yes. After nearly 80 years of research and development there is now a way to simulate a real heart attack and to give a healthy person cancer. Both have been used as a means of assassination. Only a very skilled pathologist, who knew exactly what to look for at an autopsy, could distinguish an assassination induced heart attack or cancer from the real thing.
Is death by heart attack, burst aneurysm, of cerebral hemorrhage a “natural cause”? Not if government agencies have found a way to influence your heart rate, blood pressure, or vascular dilatation. Neurological research has found that the brain has specific frequencies for each voluntary movement called preparatory sets. By firing at your chest with a microwave beam containing the ELF signals given off by the heart, this organ can be put into a chaotic state, the so-called heart attack. In this way, high profile leaders of political parties who are prone to heart attacks can be killed off before they cause any trouble. Jack Ruby died of cancer a few weeks after his conviction for murder had been overruled in appeals court and he was ordered to stand trial outside of Dallas – thus allowing him to speak freely if he so desired. There was little hesitancy in Jack Ruby killing Lee Harvey Oswald in order to prevent him from talking, so there is no reason to suspect that any more consideration would have been shown Jack Ruby if he had posed a threat to people in the US government who had conspired to murder the president of the United States – John F Kennedy.
Matt Simmons, an oil industry expert, was assassinated for turning whistle blower over the Obama administration coverup of the BP Gulf Oil Spill. Investment banker Matt Simmons, who died suddenly, was an energy industry insider and presidential adviser whose profile soared when he wrote that Saudi Arabia is running out of oil and world production is peaking. Simmons, 67, died at his vacation home in Maine. An autopsy by the state medical examiner’s office concluded Monday that he died from accidental drowning “with heart disease as a contributing factor.”
His 2005 best-selling book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, brought him a wider audience. The book argued that Saudi Arabia vastly overstated the size of its oil reserves and that the world was on the verge of a severe oil shortage as the largest oil fields become depleted. This revelation is backed up by Iran. Iran knows the Middle East oil supply is quickly drying up and for that reason it is now focusing on building nuclear reactors. Once the oil runs out Iran will be the only country in the Middle East that will be energy self-sufficient. All of the other Middle Eastern countries, including Saudi Arabia will become Third World impoverished states.
Former Yugoslav President Slobodan Milosevic was also assassinated. He was found dead in the detention center at The Hague tribunal. Mr Milosevic faced charges of war crimes and crimes against humanity for his alleged central role in the wars in Bosnia, Croatia and Kosovo during the 1990s. He also faced genocide charges over the 1992-95 Bosnia war, in which 100,000 people died.
Milosevic wrote a letter one day before his death claiming he was being poisoned to death in jail. An autopsy verified his claim as it showed that Milosevic’s body contained a drug that rendered his usual medication for high blood pressure and his heart condition ineffective, causing the heart attack that led to his death.
Former MI6 agent Richard Tomlinson told reporters that he saw documents in 1992 that discussed assassinating Milosevic by means of a staged car accident, where the driver would be blinded by a flash of light and remote controlled brake failure enacted to cause the crash. This exact same technique was utilized for real in the murder of Princess Diana.
If Milosevic was murdered, who would ultimately be responsible? NATO.
Because, though the ICTY (or ‘Hague Tribunal’) presents itself to the world as a UN body, NATO officials have themselves made clear, in public, that it really belongs to NATO. NATO appointed the prosecutors, and the judges who ruled out investigating any war crimes accusations against NATO. It follows that Slobodan Milosevic, who was a prisoner of the Hague Tribunal’s Scheveningen prison when he died, was a prisoner of NATO. NATO had both motive and opportunity to kill him.
In March 2002, Milosevic presented the NATO controlled Hague tribunal with FBI documents proving that both the United States government and NATO provided financial and military support for Al-Qaeda to aid the Kosovo Liberation Army in its war against Serbia. This didn’t go down too well at the Pentagon and the White House, who at the time were trying to sell a war on terror and gearing up to justify invading Iraq.
During Milosevic’s trial for war crimes NATO alleged that the Serbs had committed a massacre of Albanian civilians in the Kosovo town of Racak. Evidence presented in the court showed that NATO’s claim was a hoax. This is especially embarrassing because the allegation of a massacre at Racak was the excuse that NATO used to begin bombing the Serbs on 24 March 1999 (the carpet bombing were done by the United States Air Force -authorized by then president Bill and Hillary Clinton). Then NATO claimed that the Serbs had supposedly been murdering 100,000 Albanian civilians. However, NATO’s own forensics reported that they could not find even one body of an Albanian civilian murdered by Milosevic’s forces. The failure to find any bodies eventually led to NATO’s absurd claim that the Serbs had supposedly covered up the genocide by moving the many thousands of bodies in freezer trucks deep into Serbia (while Bill Clinton was carpet bombing the place) without leaving a single trace of evidence. But the Hague tribunal showed these accusations to be entirely fraudulent as well.
Milosevic made several speeches in which he discussed how a group of shadowy internationalists had caused the chaos in the Balkans because it was the next step on the road to a “new world order.”
During a February 2000 Serbian Congressional speech, Milosevic stated,
“Small Serbia and people in it have demonstrated that resistance is possible. Applied at a broader level, it was organized primarily as a moral and political rebellion against tyranny, hegemony, monopolism, generating hatred, fear and new forms of violence and revenge against champions of freedom among nations and people, such a resistance would stop the escalation of modern time inquisition. Uranium bombs, computer manipulations, drug-addicted young assassins and bribed of blackmailed domestic thugs, promoted to the allies of the new world order, these are the instruments of inquisition which have surpassed, in their cruelty and cynicism, all previous forms of revengeful violence committed against the mankind in the past.”
Evidence linking Milosevic to genocides like Srebrenica, in which 7,000 Muslims died, was proven to be fraudulent. In fact, Srebrenica was a ‘UN safe zone’, yet just like Rwanda, UN peacekeepers deliberately withdrew and allowed the massacre to unfold, then blamed Milosevic. Milosevic’s exposure of UN involvement in the Srebrenica massacre was another reason why tribunal transcripts were heavily edited and censored by NATO, and another contributing factor for NATO to murder him while he was in their custody.NATO’s Hague Tribunal was clearly a kangaroo court whose sole purpose was to convince ordinary people all over the world that NATO’s destruction of Yugoslavia was justified. Since NATO failed to show this in its own court (a total absence of evidence did make this difficult), there is indeed a powerful NATO motive to murder Milosevic – to prevent his acquittal. In this way, NATO can continue to claim that Milosevic was guilty, and nobody would begin to look into the mountain of evidence that showed that it was NATO leaders (particularly US president Bill Clinton) who committed war crimes, crimes against humanity and genocide in Yugoslavia.
So many people have been done in by cancer at a convenient time in history that it is now time to ask the question “who is assassinating people by giving their target cancer or inducing a massive heart attack”? Who ordered the hits and why?
Mr. Charles Senseney, a CIA weapon developer at Fort Detrick, Maryland, testified before the Senate Intelligence Committee in September 1975 where he described an umbrella poison dart gun he had made. He said it was always used in crowds with the umbrella open, firing through the webing so it would not attract attention. Since it was silent, no one in the crowd could hear it and the assassin merely would fold up the umbrella and saunter away with the crowd.
Video footage of the assassination of John F Kennedy shows this umbrella gun being used in Dealey Plaza. Video evidence of the events of November 22, 1963 shows that the first shot fired on the fateful day had always seemed to have had a paralytic effect on Kennedy. His fists were clenched and his head, shoulders and arms seemed to stiffen. An autopsy revealed that there was a small entrance wound in his neck but no evidence of a bullet path through his neck and no bullet was ever recovered that matched that small size.
Charles Senseney testified that his Special Operations Division at Fort Detrick had received assignments from the CIA to develop exotic weaponry. One of the weapons was a hand-held dart gun that could shoot a poison dart into a guard dog to put it out of action for several hours. The dart and the poison left no trace so that examination would not reveal that the dogs had been put out of action. The CIA ordered about 50 of these weapons and used them operationally.
Senseney said that the darts could have been used to kill human beings and he could not rule out the possibility that this had been done by the CIA.A special type of poison developed for the CIA induces a heart attack and leaves no trace of any external influence unless an autopsy is conducted to check for this particular poison. The CIA revealed this poison in various accounts in the early 1970s. The CIA even revealed the weapon that fired those darts that induces a heart attack at a congressional hearing.
The dart from this secret CIA weapon can penetrate clothing and leave nothing but a tiny red dot on the skin. On penetration of the deadly dart, the individual targeted for assassination may feel as if bitten by a mosquito, or they may not feel anything at all. The poisonous dart completely disintegrates upon entering the target. The lethal poison then rapidly enters the bloodstream causing a heart attack. Once the damage is done, the poison denatures quickly, so that an autopsy is very unlikely to detect that the heart attack resulted from anything other than natural causes.
A former CIA agent disclosed that the darts were made of a frozen form of the liquid poison. She disclosed that the dart would melt within the target and would only leave a very tiny red dot at the entry point – the same type of small entrance wound that was found during the autopsy of John F Kennedy.For over 50 years assassinations have been carried out so skillfully as to leave the impression that the victims died from natural causes. Details of some of the techniques used to achieve this were brought to light in 1961 when professional KGB assassin Bogdan Stashinskiy defected to the West and revealed that he had successfully performed two such missions. In 1957 he killed Ukrainian emigré writer Lev Rebet in Munich with a poison vapor gun which left the victim dead of an apparent heart attack. In 1959, the same type of weapon was used on Ukrainian emigré leader Stepan Bandera, although Bandera’s death was never fully accepted as having been from natural causes.
Among the witnesses, important people and conspirators who might have been eliminated by induced heart attack and cancer are: Jack Rudy (died of a stroke due to an undiagnosed form of aggressive cancer, just weeks after he agreed to testify before Congress about the JFK assassination), Clay Shaw, J. Edgar Hoover, Earlene Roberts (Oswald’s land-lady), Marlyn Monroe, Slobodan Milosevic, Kenneth Lay (former CEO of ENRON – the largest political campaign contributor of George W Bush and Dick Cheney), Matt Simmons, Mark Pittman (a reporter who predicted the financial crisis and exposed Federal Reserve misdoings. Pittman fought to open the Federal Reserve to more scrutiny), Elizabeth Edwards (suddenly diagnosed with cancer while her husband was campaigning against Barack Obama and Hillary Clinton for the presidency of the United States.
During a campaign speech to the Council on Foreign Relations in May 2007, Edwards called the War on Terrorism a slogan that was created for political reasons and that it wasn’t a plan to make the United States safe. He went further to compare it to a bumper sticker and that it had damaged the US’s alliances and standing in the world.), … enter here the names of every politically outspoken person, whistle blower or witness who died unexpectedly of a heart attack or who quickly died of an incurable cancer.
Once Manhattan is under water, the northern Canadian city of Yellowknife could become North America’s city of the future. Photo: Hyougushi.
As scientists continue to revise their climate predictions for the worse, it’s clear that the time has passed for the world to avoid serious consequences from global warming.
With superstorms and floods competing with droughts and wildfires to break records somewhere around the world year-round, the weather is already getting pretty weird. So now, the real question is how best to prepare for even weirder weather in the future.
Should you move to someplace safer or should you stay where you already have family, friends and connections to the community?
Everybody seems to agree that, if you live in Miami, you should move just about anyplace else except New Orleans, Bangladesh or Kiribati as soon as you can.
In a Rolling Stone piece provocatively titled “Goodbye Miami,” Jeff Goodell writes that “by century’s end, rising sea levels will turn the nation’s urban fantasyland into an American Atlantis. But long before the city is completely underwater, chaos will begin.”
But if you live elsewhere, you’ve got a harder decision to make.
Choose hipsters or get hip-waders
Environmental blog Grist offers ten cities that it predicts will be spared the worst impacts of climate change.
Topping the list is Seattle, whose eco-awareness could cancel out the vulnerability to sea-level rise and storms of its coastal location. “Higher tides and a redrawn coastline will requirecoastal cities to adapt, but unlike a lot of U.S. burgs, Seattle is taking it seriously, developing a comprehensive climate action plan [PDF] and working to bolster food security and general resilience for changing times,” writes author Jim Meyer. With tongue-in-cheek, Meyers adds that “Plus, while models foresee flooding [for Seattle], they don’t project the hipster inundation to reach Portlandic levels. And in a worst-case scenario, the Space Needle serves as an escape pod.”
Meyer thinks that climate action plans will also help make coastal cities Homer, Alaska and San Francisco safer than New York, San Diego and of course Miami that are on Grist’s companion list of “screwed” cities that remain unprepared for superstorm hell and high water.
Inland cities including Detroit, Cleveland and Nashville as well as mountain town Leadville, Colorado also score well as climate-safe cities. Not only are they far from rising seas and coastal storms but they also have ample water supplies, a big bonus in a climate where many dry areas will get even drier.
By contrast, desert boomtowns like Phoenix or Las Vegas or even the whole state of Texas are already starting to become uninhabitable as rain disappears, wells dry up, topsoil blows away and wildfires consume brittle forests. And talk about screwed — gas fracking in dry areas is just going to make already stressed water supplies collapse more quickly.
Doomed to wander
A real climate doomer may tell you that we’re all screwed. Since climate change effects on local weather are unpredictable, you can’t predict which places will be winners and losers in a chaotic future either.
Global climate is a system too complex for us to say for sure what will happen in any one place. For example, before it disappears under rising seas, New York City could develop the hot, humid climate of Charleston. Or, if warming seas turn off the Gulf Stream, Manhattan could instead be buried under a glacier, as in the 2004 climate disaster flick The Day After Tomorrow. In climate chaos, all bets are off.
The only certainty for the climate doomer is that most places will become more dangerous. So, the best chance of survival lies in becoming a permanent nomad, ready to move as climate conditions change.
North to survival
But a slightly less doomerish eye seems to have settled on the frozen North as humanity’s last redoubt.
Six years ago, James Lovelock, of Gaia-hypothesis fame, grimly predicted that “before this century is over billions of us will die and the few breeding pairs of people that survive will be in the Arctic where the climate remains tolerable.”
Since then, Lovelock has backed off, calling his previous view “alarmist” while explaining that “the climate is doing its usual tricks. There’s nothing much really happening yet. We were supposed to be halfway toward a frying world…[The temperature] has stayed almost constant, whereas it should have been rising – carbon dioxide is rising, no question about that.”
American Exodus: Climate Change and the Coming Flight for Survival by Giles Slade, New Society, 270pp, $19.95.
Writer Giles Slade is not reassured. In American Exodus: Climate Change and the Coming Flight for Survival, he contends that, unless you already live in northern Canada, you should be afraid-very-afraid of what climate change will do to the place where you live.
“Because we regularly deny or underestimate the reality of climate change’s existence, ” Slade warns, “climate change will, by definition, come sooner than we expect.”
Slade reminds us that history is filled with migrations of peoples across vast stretches of territory. And he contends that many of the most famous migrants, from the Asians who crossed the Bering Straight land-bridge into North America during the last ice age to the Okies of the 1930s Dust Bowl, were actually refugees from climate change crises of the past.
Today, Slade already sees desertification driven by climate change creeping north from Mexico into Texas, California and the Great Plains, destroying farms, stressing local economies and sending waves of environmental refugees to wetter areas.
Coincidentally, California’s governor recently declared a drought emergency in the state.
With rising sea levels and storms set to pummel both East and West Coasts in coming years, Slade worries that his own hometown — painfully eco-friendly Vancouver — may only have a decade or two of glory days left.
Certainly, climate change and economic collapse will drive outmigration from the continental United States into Canada. People will flee for their lives, just as 100,000 Africa-Americans fled the south when the boll weevil changed Dixieland’s cotton-economy. Just as with Mexican migration to the United States, the number of people in motion will be so large it will be impossible to stem the tide.
So, rather than trying to fortify its 5,525 miles of unprotected border with the U.S., Canada should just get used to the idea that it may soon be overrun by millions of Yankees. Indeed, Slade thinks that both nations should start preparing to transfer North American civilization to the one place where it will be safe from the ravages of climate change — inland northwestern Canada.
“The safest places,” Slade writes, “will be significant communities in the north that are not isolated, that have abundant water, that have the possibility of agricultural self-sufficiency, that have little immediate risk of forest fires, that are well elevated, and that are built on solid rock.”
The top candidates?
The obvious choices are the larger towns of Dawson, Whitehorse and Yellowknife because they are accessible, and because western portions of northern Canada will experience less severe temperature rise during the coming century. Most importantly, however, precipitation in the Mackenzie and Yukon River basins will increase by 30 or 40% in the coming years, and winter will remain sufficiently cold to kill off the mountain pine beetles (MPBs) annually (for a few decades, at least).
Eager to get started but not quite ready to go straight to Yellowknife, the capital of Canada’s Northwest Territories?
Slade advises would-be migrants to acclimatize themselves to the culture and weather of the Great White North via Vancouver and Edmonton before settling for good in the place that the Canadian government has dubbed its “coldest, sunniest city,” where winter days regularly dip below -40º F with windchill.
Stay put and take root
Madeline Ostrander thinks you’ll have a better chance to survive climate chaos if you stay home.
She writes in YES! Magazine that “sense of place, community, and rootedness aren’t just poetic ideas. They are survival mechanisms.”
Being rooted in a place can make it easier to survive the kinds of weather disasters that will be more common nearly everywhere due to climate change. “Place attachment is one of several factors that can help a community recover from, and individuals cope with, the kinds of social and environmental crises that are becoming ever more common — like climate change-related disasters, large-scale job layoffs, or political turmoil.”
In two separate studies, for instance, individuals who reported higher levels of concern about place were more likely to take steps to prepare for wildfires (in the United States) or floods (in a monsoon-prone region of India). The damage caused by a disaster can be more stressful for individuals who were attached to that place, but those feelings can also motivate people to put the broken place back together, according to a recent book by social workers Michael John Zakour and David F. Gillespie.
While Ostrander concedes that not everybody will be able to stay put — “disasters like drought and flooding that devastate some places and force people to move” — places with strong community will fare better than those with transients in a future of climate chaos.
“As we face this kind of world,” Ostrander writes, “some communities might endure precisely because people have dug in, rooted themselves, and developed the kinds of generosity, adaptiveness, and foresight that come from knowing where they are.”
– Erik Curren, Transition Voice
The announcement came less than 24 hours after UN chief Ban surprised the US and others by inviting Iran to the Syria peace talks [AP]
|The UN secretary-general has withdrawn his invitation to Iran to join this week’s Syria peace talks, saying he is “deeply disappointed” by Iran’s statements on Monday.
A spokesman for Ban Ki-moon announced the withdrawal less than 24 hours after Ban surprised the US and others by saying he had invited Syria’s closest regional ally.
The withdrawn invitation came shortly after Iran’s UN ambassador declared the Islamic Republic wouldn’t join the Syria talks if required to accept 2012 Geneva roadmap.
“The statement today in Tehran by the foreign ministry spokesperson fell short by some measure of what the secretary-general expected to hear,” said UN spokesman Martin Nesirky, adding that the UN has been in close contact with the US and Russians over the weekend.
Nesirky said senior Iranian officials had assured Ban that Iran understood the terms of his invitation.
“The Secretary-General is deeply disappointed by Iranian public statements today that are not at all consistent with that stated commitment,” Nesirky said.
“He continues to urge Iran to join the global consensus behind the Geneva Communiqué.”
The talks are set to begin Wednesday in the Swiss city of Montreux, with delegations from the United States, Russia and close to 40 other countries attending. Face-to-face negotiations between the Syrian government and its opponents, the first since the three-year civil war began, start Friday in Geneva.
‘Return to focus’
But Ban’s announcement on Sunday night that Iran was invited to Montreux angered Syria’s main Western-backed opposition group, which over the weekend had announced it would join the talks after intense international pressure.
The United States said on Monday it was hopeful after the UN withdrew Iran’s invitation and that all parties could refocus their efforts to end the Syrian civil war.
“We are hopeful that, in the wake of today’s announcement, all parties can now return to focus on the task at hand, which is bringing an end to the suffering of the Syrian people and beginning a process toward a long overdue political transition,” State Department spokeswoman Jen Psaki said in a statement.
Psaki said the purpose of the conference was to implement a 2012 plan to establish a political transition in Syria.
|China’s economy registered a flat growth of 7.7 percent last year, maintaining for the second year its slowest expansion in more than a decade as the government warned of “deep-rooted problems” including a mountain of local authority debt.
Gross domestic product (GDP) expansion for the October-December quarter also came in at 7.7 percent, the National Bureau of Statistics (NBS) said, slowing from 7.8 percent in the previous three months.
The 2013 GDP figure was the same as that for 2012, which was the worst rate of growth since 1999. It was still higher than the government’s growth target for the year, which was 7.5 percent.
“Generally speaking China’s economy showed good momentum of stable and moderate growth in 2013, which is (a) hard-earned achievement,” NBS chief Ma Jiantang told reporters.
“However, we should keep in mind that the deep-rooted problems built up over time are yet to be solved in what is a critical period for China’s economy,” Ma said.
Since the 1980s, China has shaken off the lethargy of the Communist command economy with market reforms that brought it years of blistering growth, making its GDP second only to the US and establishing it as the world’s biggest trading power in goods.
But the country is widely expected to face slower expansion in the years ahead.
Its leaders under President Xi Jinping say they are committed to transforming China’s growth model to one where consumers and other private actors play the leading role, rather than huge and often wasteful state investment.
“Judging from the data, our outlook for 2014 remains that China’s economy will continue slowing down in the first half,” Wendy Chen, Shanghai-based analyst for Nomura International, told AFP.
Within the past decade Chinese growth was regularly in double digits, but it has been on a slowing trend and the 2013 result shows GDP growth in single figures for three consecutive years for the first time since 2002.
Ma of the NBS said China faces problems including dealing with burgeoning local government debt.
“The foundation of economic growth remains to be consolidated, the internal driving forces of economic expansion need to be further fostered, the risk of local government debt should be prevented and greater efforts are to be made to weed out out-dated production capacity,” he said.
Besides shifting the growth emphasis, China’s leaders are also concerned about the country’s financial system including “shadow banking” and government debt, particularly at the regional level.
China late last month announced the results of a long-awaited debt audit, revealing that liabilities carried by local governments had ballooned to $2.95 trillion as of the end of June, up 67 percent from the end of 2010.
Local authorities have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable.
While few see the problem as a systemic threat, the debt issue is considered to be a serious potential drag on China’s economy unless steps are taken to rein it in.
Analysts also say that shadow banking — non-transparent, less regulated credit — can stoke asset bubbles and threaten stability.
oftwominds-Charles Hugh Smith: After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects
The fundamentals of demographics, stagnant household income and an overbuilt retail sector eroded by eCommerce support only one conclusion: commercial real estate in the U.S. will implode as retail sales and profits weaken.
© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. http://www.rcanalytics.com Used by permission.
These three graphs of relative prices show that in CRE the “core” is doing better than the “periphery”. The gap in relative price performance of major metro CRE over smaller cities and towns has approximately doubled from where it was in 2008.
And as with residential real estate, some CRE sub-sectors and cities are obtaining far greater benefit from bailout, stimulus and quantitative easing programs than other areas:
© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. http://www.rcanalytics.com Used by permission.
Commercial real estate has a more complex structure than residential real estate. There is greater specialization in function. For instance strip shopping centers and indoor malls are generally not exchangeable with warehouse facilities.
We can simplify this a bit by classifying CRE by consumer sector and function. Industrial real estate will not be considered in detail. Current industrial construction spending is near a record high. But the value of current industrial CRE can still be depressed due to existing plant obsolescence and rapid shifts in activity location.
This leaves us to consider consumer retail and consumer service CRE.
Consumer Retail Spending & Retail CRE
The value of commercial real estate is driven by the revenues and profits earned by the businesses occupying CRE. This relationship is similar to the relationship between residential real estate prices and average household income.
The Two Drivers of Consumer Spending: Population Size and Average Household Income:
These two parameters show continuously increasing population size and declining average household incomes. The subsequent data shows this is resulting in a small increase in total consumer spending and also large shifts in spending patterns.
Real inflation adjusted total retail spending has increased slightly over its peak in 2007.
Essentially all of this increase has occurred in food spending. (A smaller portion has gone into clothing). And this is the only reasonable expectation given the twin conditions of an increasing total population and a declining average income per consumer. We can also note that “food” is a minuscule part of eCommerce. The retail food trade occurs almost entirely in neighborhood groceries, markets and convenience stores. The other non-food retail sectors are flat to declining. But within these sectors there is a large zero-sum game being played out between eCommerce and local bricks ‘n mortar stores:
The Rise of eCommerce
Since 2008 eCommerce retail sales have nearly doubled. But as we just saw, the entire increase in total consumer spending since 2008 is accounted for by the increased food sales which occur at local markets. “eCommerce” is therefore taking sales away from other local retail sectors. And the biggest single loser is:
Local Retail Department Stores
This macroeconomic data is well-supported by the current financials of both Sears and JC Penney. Sears’ trailing twelve month (ttm) earnings per share are – $14.11. This loss will increase once Sears reports its fourth quarter earnings at the end of February, 2014. Sears is widely expected to lose one billion dollars in 2014. J.C. Penney meanwhile is currently reporting ttm losses of -$7.32 per share.
One or both of these chains will be in bankruptcy by 2015 even if the current “recovery” continues. And outright liquidation of one or both companies is at least as likely as reorganization. There is little reason to believe either of these companies would be more viable following mere debt reduction.
The third major department store chain is Macy’s, which is still reporting profits. Oddly enough Macy’s management celebrated their 2013 holiday season by announcing 2,500 permanent layoffs from their local retail department stores. This was paired with a mid-December announcement of an increase of 1,500 employees in a new eCommerce fulfillment center in Oklahoma.
In these circumstances it is unsurprising that retail CRE prices are showing weak recovery.
© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. http://www.rcanalytics.com Used by permission.
The Coming Implosion of the Regional Indoor Shopping Mall
(and adjacent strip shopping centers)
There are approximately 1,100 indoor shopping malls in the USA. Sears has about 2,000 stores. JC Penney’s has almost exactly 1,100 stores. There are very few malls that don’t have at least one of these chains. The vast majority of malls have both as major anchor stores. Macy’s is typically the third major anchor now. A regional department store chain or two round out the large anchor stores.
A virtual stroll down the typical mall concourse will reveal plenty of other money losing chain retailers with names like Radio Shack et al. Adjacent strip shopping centers
This should not be surprising. The regional indoor mall is a middle class income institution. It grew up with the post-WWII rise in average incomes. As middle class incomes now disappear so are the former favorite shopping venues of the middle class.
Every time a mall store closes shoppers lose another reason to go to the mall. “Dead mall” syndrome will soon afflict most of this sector.
In addition to decaying tenant revenues the mall owning Real Estate Investment Trusts are dangerously overleveraged with low-cost to free ZIRP and QE funding. Now that the Federal Reserve is tapering QE their financing costs will be rising as commercial balloon mortgages come due and have to be rolled over. And since the typical commercial mall mortgage does carry a large balloon payment at the end they have to be refinanced. Assuming honest loan underwriting a higher risk premium will also be attached due to the deteriorating retail fundamentals of the tenants.
General Growth Properties (GGP) is probably in the best condition. This is because GGP just exited a Chapter 11 reorganization in 2010. It was placed into involuntary bankruptcy in 2009 by two mortgagors holding matured recourse balloon mortgages. GGP was understandably unable to refinance these balloons in the spring of 2009.
This entire sector will collapse when the next recession appears.
And since history hasn’t ended, the next recession will appear at some point. It may be appearing already. At the beginning of October, 2013 the analyst consensus for retail profit growth for the strongest October – December holiday quarter was 5.5%. At the beginning of the reporting cycle in January expectations were down to 0.5% profit growth. That is a 90% reduction in analyst expectations in just three months.
Barring a turnaround, many retail chains still reporting profits will be reporting quarter-on-quarter profit declines in April. And by the end of the third quarter more will start reporting outright losses.
Part 3 will examine the other major part of local consumer oriented CRE. These are consumer services like neighborhood banking, investment, insurance and other services. Experience to date demonstrates that in the next few years the internet, expert software systems and robotics/automation will eliminate 50% and more of the jobs formerly associated with these businesses. These same trends will also shift most of the surviving positions away from the traditional storefront strip center and local office park locations.
“Prosperity” based on serial asset bubbles and near-zero interest rates is neither real nor sustainable.
Longtime readers know I have been covering residential housing since mid-2005.In those 8+ years, housing has proceeded through a cycle of bubble-bust-echo-bubble: now the echo bubble is crumbling, for all the same reasons the 2006-7 bubble burst: a prosperity based on asset bubbles and low interest rates is a phantom prosperity that cannot last.
Correspondent Mark G. has written a three-part series on the current state of the residential and commercial real estate (CRE) markets. Part 1 addresses residential real estate.
The broad context of this analysis is straightforward: an economy based on ever-rising consumption falters when real household incomes stagnate or decline. Real income for the bottom 90% has been stagnant for forty years, and has declined since 1999.
The only way to keep consumption rising when incomes are stagnant is to boost the borrowing power (i.e. collateral and creditworthiness) of households by inflating asset bubbles that create temporary (i.e. phantom) collateral and by lowering interest rates so the stagnant income can support more debt.
This is why the Federal Reserve and the other agencies of the Central State have been reduced to blowing serial assets bubbles: there is no other way to keep a consumption-based economy from imploding.
But “prosperity” based on serial asset bubbles and near-zero interest rates is neither real nor sustainable: real prosperity is based on rising real incomes, not debt leveraged on phantom collateral.
Here is Part 1 of Mark’s series on U.S. real estate.
PCE = Personal Consumption Expenditures. GDP = Gross Domestic Product. The ratio of these numbers times 100 produces the percentage figure.
PCE includes food, entertainment, residential housing, automobiles, clothes and iPads. The consumer broadly has two ways to obtain the money needed to support this spending. The first method is to earn it and the second method is to borrow it.
Since 1999 average real household income in the USA has declined by 10%. This real decline was only temporarily reversed during the peak bubble years. From 2000 to 2008 the full effects of this decline were masked by a vast expansion of household debts of all kinds, a collapse in mortgage and consumer lending standards and a concurrent decline in household net worth.
Exactly which 90% of the population is bearing the brunt of this collapse, and why it is occurring, is beyond the scope of this overview.
This trend culminated in the financial crisis of 2007 – 2009. This began in the subprime mortgage sector, spread to the entire residential real estate market and progressively engulfed commercial real estate, banking, the stock markets, commodity markets and finally all of international trade.
In response the Federal Reserve multiplied its balance sheet five times from $800 billion to $4 trillion dollars. And the US Government concurrently ran peak fiscal deficits up to $1.8 trillion. The US Government also extended many trillions more in direct guarantees of minimum prices of financial assets of all kinds.
US Residential Real Estate
The observed result of all this monetary and fiscal stimulus, combined with the lowest mortgage interest rates in the post World War II era, was to only slow the rate of decline of median US household income. In the combined residential US real estate market this set of policies had the following results:
Existing Home Sales
The rate of existing home sales has yet to recover to the levels of the mid-1990s. Since the most recent decline in sales rate is paralleling the upward spike in mortgage rates it is reasonable to believe they probably will not recover.
The average sales price of existing homes has recovered to approximately 2003 levels.
(Note: Whether increasing average home prices for a population still experiencing declining real average household incomes is an intelligent public policy goal is a second question. This question deserves far more critical discussion than it currently receives.)
New Home Sales: (This time it really is different)
Those interested in detailed numbers for single and multifamily housing construction can find them here:
The National Association of Homebuilders (NAHB) announced in mid-December 2013 that new starts in single and multi-family housing had finally exceeded an annualized rate of 1 million units. In other words, the actual 2013 new construction number will be approximately 935k.
Prior to 2008 these sub 1 million total new build numbers were only seen in the six years of 1991,1981, 1980, 1975, 1966 and 1960. They have subsequently occurred six straight years in a row from 2008-2013. It will not be known for another year whether new builds will finally exceed 1 million in 2014.
Note that US population has been continuously increasing over the entire time period. Therefore the present era represents the lowest per capita rate of new construction on record for six decades.
Near Term Prospects
There are two primary reasons that residential real estate has not recovered more that it has. These are very straightforward:
1. Real US household incomes continue to decline.
2. Residential mortgage lending standards have been significantly tightened since 2007.
These charts represent averages and sums across most of a continent. Within this expanse some areas are already experiencing new record bubbles while many others continue to fall deeper into local depressions.
There are several other factors that have affected and will continue to affect the residential real estate recovery.
Factor One: Habitable Vacant Dwellings
“As of the first quarter of 2013, there are just over 133 million housing units in America and 10.7 percent of them — more than 14. 2 million — are vacant all year round for some reason or another, according to the Census Bureau.”
To this 14.2 million empty dwellings we can add several million additional vacation homes that are only occupied for a few months a year.
Factor Two: Cultural Shift To Multigenerational Households
At least one person is required to create a household and occupy a dwelling. A related question is, what is the average number of empty bedrooms per occupied dwelling in the US? It is at least 1.0 and very probably much higher.
During recent years there has been an increase in average household size and a corresponding drop in the total number of households. This is the result of adult children and grandchildren moving back in with the “folks” to weather the economic storm. Whenever this occurs, two households become one household and residential housing demand is sensibly reduced.
A related trend is adult children who are economically unable to ever leave their parents household. To the extent these shifts are permanent trends rather than temporary expedients this will permanently reduce the per capita demand for residential housing.
Based on results the decline in real household incomes has proven insensitive to a variety of economic theories and policies. Neither the Republican-Bush era tax rate cuts nor the Democratic-Obama Keynesian pump priming at fire hydrant pressures has succeeded in reversing this long term trend. Nor has anything appeared recently to suggest an abrupt reversal is at hand in this key trend of average household income.
In these circumstances the only other possibility for further residential real estate “recovery” would be for government regulators to foster another bubble by effectively relaxing residential mortgage lending standards again.
Three Possible Future Outcomes For U.S. Residential Real Estate
In order, these are: go up further, stay the same or resume declining.
1. Up. The Federal Reserve has already begun withdrawing from its bond buying program, albeit at a slow rate of ‘taper’. This has accordingly led to mortgage rate increases which were accompanied by a prompt decline in existing home sales. It is mathematically impossible for a population with declining real household incomes to propel residential real estate markets higher in the face of higher interest costs.
2. Steady State. At a minimum, this outcome requires that average household income cease declining and that mortgage rates not rise significantly. Neither of these outcomes is likely. The following review of commercial real estate will examine clearly visible economic trends that make further household income declines a certainty.
If we cannot go up and even staying the same becomes doubtful this leaves;
3. Down Again.