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A system doomed to fail

In the broadest sense, there are three types of systems in the world.The first are simple systems which are characterized by only a few variables or agents, and which can be described by perhaps a handful of equations (or even one).

The second are systems which are characterized by disorganized complexity. These may consist of huge numbers of agents or variables, and their interactions cannot be described by simple equations; yet the overall system is well-described statistically through averages and can be described as being stochastic. Such systems are typically characterized by a stable equilibrium, provided there are no external shocks to the system. They are incapable of generating internal shocks or surprises. For example, you might consider the distribution of air molecules in a room. You may not be able to predict the motion of any particular air molecule, but you can be reasonable certain that the global population won’t do anything unexpected (like all move into one side of the room leaving a vacuum on the other side).

The third type of system is characterized by organized complexity. As the systems above, one may consist of many variables or agents, each of which is simple, but the system’s behaviour does not lend itself to statistical description because instead of the activities of each component dissolving into a background equilibrium, large-scale (even global scale) structure “emerges” instead of seething chaos. Along with these “emergent properties”, common features of such a system include multiple equilibria, adaptive behaviour, and feedbacks. There is no simple way to describe its behaviour, as much of the system’s history is bound up in its behaviour (what economists call “long memory”).

Complex systems, for all their unpredictability are remarkably resilient. The resilience arises from the way in which this type of system interacts with its environment–through the individual actions of its simple components, the system is able to gather information about its environment and modify its operations to adapt. Yet this adaptation and evolution all occur in the absence of central control.

The above descriptions–and characterizations of three types of systems–go back to 1948. Unfortunately it appears that Dr. Weaver was too optimistic when he recommended science develop an understanding of the third type of system “over the next 50 years”. Here we are 65 years later and we have made only basic improvements in our understanding of such systems.

What has gone wrong? I think it is partly due to the limitations of the Newtonian paradigm on which science has rested over the past few hundred years.

Back to Weaver. He asks,

How can currency be wisely and effectively stabilized? To what extent is it safe to depend on the free interplay of such forces as supply and demand? To what extent must systems of economic control be employed to prevent the wide swings from prosperity to depression? These are also obviously complex problems, and they too involve analyzing systems which are organic wholes, with their parts in close interrelation.

The Fed has answered.

Sixty-five years ago, economics was known to be a complex, organized system. Yet today, the Fed continues to set policy as if the economy were a stochastic system that could be sledgehammered into whatever equilibrium state is deemed politically expedient. I would further argue that the Fed has not managed to succeed even in hammering the economy into a desirable equilibrium, but rather has mastered the ability to create artificial statistics to “justify” its actions.

The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its individual components. We do not observe resilient complex systems with central control. Yet central control is the dominant ideology of our present political and economic systems. Total control, with a vanishingly thin veneer of democracy, ephemeral as the morning dew.

A Comedy Of IMF Forecasting Errors: Global Trade Growth Tumbles More Than 50% From IMF’s 2012 Prediction | Zero Hedge

January 21, 2014 1:13 pm / Leave a comment

A Comedy Of IMF Forecasting Errors: Global Trade Growth Tumbles More Than 50% From IMF’s 2012 Prediction | Zero Hedge.

The comedy of errors that are IMF forecasts is well known: it was covered most recently in “Hilarious Charts Of The Day: IMF’s “Growth Forecasts” Over Time.” Moments ago we got the IMF’s first forecast update for 2014 which also included the Fund’s first 2015 forecasts for growth around the world. Not surprisingly, they were largely higher across the board except for China which has seen its 2014 projected GDP growth collapse from 8.5% a year ago to 7.5% now, and is expected to drop modestly to 7.3% in 2015. The charts showing the progression of said hilarious forecasts are shown in their entirety below, about which one thing can be said with certainty: whatever the GDP growth rate in the world is in 2014 and 2015 it will be anything but what the IMF predicts it to be.

But perhaps the most notable feature of today’s set of numbers is the IMF’s forecast of world trade. In a word: it is crashing. Consider that 2013 world trade was expected to grow by 5.6% in April 2012. Now: it is more than 50% lower at just 2.7%!

Yet what is truly hilarious and certainly head scratching, is that somehow the IMF now anticipates a pick up in global growth in 2014 from its previous forecast of 3.6% to 3.7%, even as global trade is revised lower once more to the lowest prediction for 2014, and currently stands at just 4.5% compared to 4.9% in October 2013 and 5.5% a year ago (it goes without saying that the final global trade number for 2014 will be well lower than the IMF’s optimistic forecast).

How global GDP is expected to grow on the margin compared to previous forecasts even as trade contracts is anyone’s guess…

Behold the IMF’s revision to global growth forecasts: how does one spell error bars.

And here are the GDP growth forecasts for the rest of the world.

Global:

US:

Eurozone:

China:

US Army colonel: world is sleepwalking to a global energy crisis

January 21, 2014 12:30 pm / Leave a comment

US Army colonel: world is sleepwalking to a global energy crisis.

by Nafeez Mosaddeq Ahmed, originally published by The Guardian Earth Insight blog | TODAY

A conference sponsored by a US military official convened experts in Washington DC and London warning that continued dependence on fossil fuels puts the world at risk of an unprecedented energy crunch that could inflame financial crisis and exacerbate dangerous climate change.

The ‘Transatlantic Energy Security Dialogue‘, which took place on 10th December last year, was co-organised by a US Army official, Lieutenant Colonel Daniel L. Davis, operating in a private capacity, in association with former petroleum geologist Jeremy Leggett, covener of the UK Industry Taskforce on Peak Oil and Energy Security.

Participants, who addressed one another via video link, consisted of retired military officers, security experts, senior industry executives, and politicians from the main parties – including two former UK ministers. According to US Army colonel Daniel Davis, a veteran of four tours of duty in Afghanistan and Iraq, and regular contributor to the Armed Forces Journal:

“We put the event together because the prevailing idea that we have a bright future of increasing oil and gas production that can sustain our current way of life indefinitely is based on a selective appraisal of the data. We brought together experts from across the spectrum, and with a wide range of opinions, to have a comprehensive look at all the relevant data. When you only look at certain things, like the very real resurgence of US oil and gas production, the picture looks fine. But when you dig deeper into the data, it becomes clear that this is only part of the picture. And the big picture proves that our current course cannot continue without significant risks.”

The dialogue opened with a presentation by Mark C. Lewis, former head of energy research at Deutsche Bank’s commodities unit, who highlighted three interlinked problems facing the global energy system: “very high decline rates” in global production; “soaring” investment requirements “to find new oil”; and since 2005, “falling exports of crude oil globally.”

Lewis told participants that the International Energy Agency’s (IEA) own “comprehensive” analysis in its World Energy Outlook of the 1,600 fields providing 70% of today’s global oil supply, show “an observed decline rate of 6.2%” – double the IEA’s stated estimate of future decline rate out to 2035 of about 3%.

The IEA report also shows that despite oil industry investment trebling in real terms since 2000 (an increase of around 200-300%), this has translated into an oil supply increase of just 12%. Lewis said:

“That is a very striking number and one I think that should be ringing alarm bells. It indicates to me that something has fundamentally changed in the economics of the oil industry and that you’re having to invest more and more for diminishing incremental production.”

Lewis also referred to US Energy Information Administration (EIA) data showing that although global crude oil exports increased “year on year from 2001 to 2005”, they “peaked in 2005 and have been trending down since 2009.” Lewis attributed this trend to rapidly rising populations in the Middle East which has led to escalating domestic oil consumption, effectively eating into the quantity of oil available to export onto world markets.

OPEC (Organisation of Petroleum Exporting Countries) populations since 2000 have increased at twice the rate of the world as a whole. This has driven them to increase their oil consumption four times faster, or by 56%, relative to the rest of the world.

Such increases in domestic consumption, curtailing global exports, have been enabled by a corresponding increase in domestic subsidies, said Lewis. Fossil fuel subsidies have increased to $544 billion, nearly half of which amounted to oil subsidies dominated by Saudi Arabia and Iran.

Against this consistent trend of rapidly declining oil exports, Lewis questioned the IEA’s projection of an increase in global crude oil exports and imports from 35 to 38 million barrels a day out to 2035. He pointed out that if such domestic subsidies are removed by OPEC to facilitate increased exports, this would increase “the risk of greater domestic stress and social disorder”, as already seen since the ‘Arab spring’.

Lewis’ presentation was complimented by geoscientist David Hughes, formerly of the Geological Survey of Canada, who cited a wealth of official data demonstrating that shale oil production is likely to peak around 2016-17. Similarly, US shale gas production has sustained a plateau for the last year that is unlikely to retain long-term sustainability due to spectacularly high decline rates, and because the vast majority of production comes from just two or three plays.

The upshot is that continued dependence on fossil fuels is becoming increasingly expensive, with oil prices continuing to rise for the foreseeable future, impinging evermore on global economic growth. At worst, declining global exports point to a risk of an oil crunch that could, in turn, trigger another financial crash.

Co-convener of the conference Leggett, author of the new book, The Energy of Nations, said:

“It should not be forgotten that only a very few people warned that the financial incumbency had their particular comforting narrative catastrophically wrong, until the proof came along in the shape of the financial crash.” According to Leggett, a global energy crisis is unlikely to “erupt fully until 2015 at the earliest.”

According to Lt. Col. Davis, scepticism of the oil industry’s bullishness about future production is growing amongst senior Pentagon officials:

“A lot of high-ranking officials are starting to ask exactly these hard questions about the sustainability of the current energy system. You’ve got to remember that for the military, it doesn’t matter what you want to do. What matters is what you can do, and it’s our top priority to make sure we understand potential limits to our operational capability. Even the EIA is forecasting that we could see a peak of shale production by 2018 followed by a plateau and decline, and the Pentagon knows this. But our transport infrastructure is totally dependent on liquid fuels. How are we going to sustain that infrastructure with these decline rates? That’s why serious questions are being asked by high level US military officials as to what exactly the Army, as well as American society in general, is going to do to address this challenge.”

IMF set to upgrade UK growth forecasts as global economy expands | Business | The Guardian

January 21, 2014 12:27 pm / 1 Comment on IMF set to upgrade UK growth forecasts as global economy expands | Business | The Guardian

IMF set to upgrade UK growth forecasts as global economy expands | Business | The Guardian.

IMF managing director Christine Lagarde says optimism is in the air, with growth forecasts for the global economy and the UK raised, Photograph: Paul J Richards/AFP/Getty Images

The International Monetary Fund is widely expected to raise its outlook for the UK on Tuesday, pushing up the country’s growth forecasts by more than for any other major economy.

The Washington-based fund has been a critic of the UK’s over-dependence on consumers as well as the government’s Help to Buy housing market scheme. But it will bring a welcome boost to chancellor George Osborne when it updates its World Economic Outlook from last October’s forecasts.

Back then it predicted UK national output would rise 1.9% in 2014 but is now expected to predict growth of 2.4%, according to a Sky News report. The IMF said it did not comment on leaks.

The fund is also expected to upgrade its outlook for the global economy, which in October it said would expand by 3.6% this year. That would reflect the cautiously optimistic tone in a New Year’s speech from its managing director, Christine Lagarde, last week.

“This crisis still lingers. Yet optimism is in the air: the deep freeze is behind, and the horizon is brighter. My great hope is that 2014 will prove momentous … the year in which the seven weak years, economically speaking, slide into seven strong years,” she said.

If confirmed, the substantial upgrade to the UK is likely to be seized on by Osborne as further proof the coalition’s “economic plan is working” – an oft-used phrase in recent weeks as indicators have largely pointed to growth picking up.

The fund has in the past been highly critical of the coalition’s austerity drive. In a damning indictment of the British chancellor’s economic policies last year, the IMF’s chief economist Olivier Blanchard warned Osborne would be “playing with fire” unless he eased the pace of budget cuts.

The IMF has also echoed other economists, including experts at the UK’s own Office for Budget Responsibility, who said that the UK remains over-dependent on debt-fulled household spending to grow.

The latest crop of official data underscored those concerns, with weaker outturns for construction and manufacturing and a jump in Christmas retail sales.

Economists generally feel, however, that overall growth will pick up this year and the IMF is just the latest of a string of forecasters to raise the UK’s outlook.

The business group CBI has pencilled in 2014 growth of 2.4%, theBritish Chambers of Commerce expects 2.7% and the OBR forecasts 2.4%.

A report from EY Item Club on Monday forecast UK economic growth would pick up to 2.7% this year from 1.9% in 2013. It too warned the recovery was not built on solid foundations, however, due largely to the pressure on household incomes.

Peter Spencer, chief economic adviser to the EY ITEM Club said: “It is hard to find another episode in time where employment has been rising and real wages falling for any significant period of time. The weakness of real earnings is proving to be the government’s Achilles heel and could prove to be the weak spot in the recovery.

“Consumers have reduced the amount they save to fund their spending sprees. But they cannot continue to drive growth for much longer without an accompanying recovery in real wages or a rise in their debt to income ratio.”

There have also been warnings that the recovery is not being felt throughout the UK, and is instead largely benefiting London and the south-east.

A study by the TUC trade unions group on Monday said the recent recovery in jobs had failed to reach the north-east, the north-west, Wales and the south-west, leaving them in the same situation or worse at providing jobs than they were 20 years ago.

The overall unemployment rate for the UK has been coming down faster than policymakers and most other forecasters had expected. Official data on Wednesday are expected to give a jobless rate of 7.3% for November, down from 7.4% the previous month.

Many economists expect the continuing drop in unemployment will prompt the Bank of England to tweak its forward guidance. At the moment, the BoE’s guidance is that, barring various exceptions, it will not consider raising interest rates from their current 0.5% until a threshold of 7% unemployment is reached. The Bank may well lower that threshold for considering a hike to 6.5% unemployment, economists say.

Drought Emergency Declared in California as Residents Urge Halt to Fracking

January 21, 2014 10:20 am / Leave a comment

Drought Emergency Declared in California as Residents Urge Halt to Fracking.

The state of California formally declared a drought emergency today due to a lack of winter rainfall and water reserves at only 20 percent of normal levels. This is the third year of dry conditions across California, which poses a threat to the state’s economy and environment.

In addition to concerns about having an adequate water supply for food production, Californians are worried about Gov. Brown’s plan to increase fracking as oil companies are gearing up to frack large reservoirs of unconventional shale oil in the Monterey Shale. Photo credit: National Oceanic and Atmospheric Administration

Last year was declared the driest year in recorded history in California and Gov. Jerry Brown recently described the state’s current condition as “a mega-drought.”

“The current historically dry weather is a bellwether of what is to come in California, with increasing periods of drought expected with climate change,” said Juliet Christian-Smith, climate scientist in the California office of the Union of Concerned Scientists. “Because increasing demand and drought are straining our water resources, we need to adopt policies that address both the causes and consequences of climate change.”

With the drought declaration in place, the state can ease certain environmental protections and create more flexibility within the system to allow for changes in water diversions based on critical needs. The declaration also raises public awareness about the urgent need to conserve water.

“The entire Southwest U.S. is gripped in an extended drought, including Southern California, all of which depends on flows from the Colorado River,” said Gary Wockner at Save the Colorado River Campaign. “If this is the ‘new normal’ of climate change, then we need to develop a likewise ‘new normal’ of water conservation and efficiency that also focuses on keeping our rivers—as well as our communities—healthy and thriving.”

This week, the U.S. Department of Agriculture (USDA) designated portions of 11 western and central states as primary natural disaster areas because of a drought, including 27 California counties. The disaster designation allows eligible farmers to qualify for low-interest emergency loans from the USDA.

“The Governor’s drought declaration should be the final straw for fracking in the state. To frack for oil in California is to deny the facts of climate change, which tell us we have to leave this oil in the ground if we want a safe future,” said David Turnbull, campaigns director for Oil Change International and the BigOilBrown.orgcampaign. ”Our state cannot afford to waste more water digging up oil causing the very climate changes that will lead to more droughts like these in the future.”

Fracking wells generally consume between 2 and 10 million gallons of water in their lifetime. If every potential well in California identified by the U.S. Energy Information Agency were to be fracked, some 5 billion gallons of water would be required, according to Oil Change International.

Polls show Californians oppose expanded fracking in the Golden State and 65 percent of Californians say the state should act immediately to cut greenhouse gas emissions.

“While Governor Brown cannot make it rain, he can prevent wasteful and harmful use of our water by placing an immediate moratorium on fracking and other extreme methods of oil and gas extraction,” said Adam Scow, Food & Water Watch California campaign director.

Thailand declares Bangkok state of emergency – Asia-Pacific – Al Jazeera English

January 21, 2014 10:13 am / Leave a comment

Thailand declares Bangkok state of emergency – Asia-Pacific – Al Jazeera English.

Protesters have occupied several government buildings in the capital, Bangkok [Reuters]

The Thai government has declared a state of emergency in the capital Bangkok and surrounding areas to cope with protests aimed at forcing the prime minister, Yingluck Shinawatra, from power.Chalerm Yubumrung, Thailand’s labour minister, announced on Tuesday that the restrictions would come into force after midnight and last 60 days.

“We need it because the protesters have closed government buildings, banks and escalated the situation, which has caused injuries and deaths. The government sees the need to announce the emergency decree to keep the situation under control,” Yubumrung said.

The decree will allow security agencies to impose curfews, detain suspects without charge, censor media, ban political gatherings of more than five people and declare areas off-limits.

Yingluck said police, not the military, would mainly be used and her government had no intention of confronting the protesters.

“We will use peaceful negotiations with the protesters in line with international standards … We have told the police to stick with international standards, to be patient with the protesters,” she said on Tuesday.

Recent violence

The state of emergency follows increasing attacks at protest sites for which the government and the protesters blame each other. These include grenade attacks and drive-by shootings.

On Sunday, 28 people were wounded when two grenades were thrown at one of several protest sites set up in Bangkok.

Another grenade attack on a protest march last Friday killed one man and wounded dozens. No arrests have been made in either attack.

The protesters have been demanding Yingluck’s resignation to make way for an appointed government to implement reforms to fight corruption.

The protesters say that Yingluck’s government is carrying on the practices of Thaksin Shinawatra, her billionaire brother who was prime minister from 2001 to 2006, by using the family fortune and state funds to influence voters and cement its power.

Yingluck called elections for February 2, but the protesters want them postponed. The opposition Democrat Party, closely aligned with the protesters, is boycotting the polls.

The announcement of the emergency decree said the elections would proceed as planned.

Growth is good for kids but not always for society — Transition Voice

January 21, 2014 10:08 am / Leave a comment

Growth is good for kids but not always for society — Transition Voice.

Photo: Lending Memo.

In the Western World, growth is our mantra. Our schools, our religions, our governments, our businesses, all our institutions bombard us with the same message that to be all that we are meant to be means we have to grow.

Growth in and of itself can be a good thing, but unfortunately the growth that can be our doom is material growth, which has limits.

Falling Upward: A Spirituality for the Two Halves of Life by Richard Rohr, Jossey-Bass, 240 pp, hardcover, $19.95.

So instead of thinking for ourselves – we take these messages literally and we over feed our bodies and become obese; we fill our cities with ever expanding populations, we produce more and more babies filling our planet with people; and to try and meet our never ending demand for more and more stuff, our economies drive us to consume more and more resources. As a result, there is little space left for anything else but the material expansion of the human race.

This pure focus on material growth however leaves most of us feeling empty, lonely, hurt, angry, and numbed. So how did we get this way, why have we forgotten how to think for ourselves?

Falling Upward: A Spirituality for the Two Halves of Life by Father Richard Rohr, a Franciscan priest, provides a good explanation of why we are stuck in a meaningless pattern of growth. The book points out how healthy cultures value two halves of life, but in our postmodern culture we discourage people from growing up.

So immature

In the first half of life, our external laws, traditions, customs, boundaries, and morality form a container that helps to shape who we will become. They also provide us with the friction we need to move on and develop our own inner guidance systems that lead us beyond these simple, limited guidelines appropriate to the first half of life but that fall apart when applied to our complex world later on.

As we move through life and experience the struggles that life throws at us – our brushes with the law, our failed relationships, and our other failures – we begin to realize that simple rules and regulations, or escapes, do not isolate us from the struggles in life, or the pain they bring us.

It is by embracing these falls – these failures – that we begin to see the limits of first-half-of-life thinking. We learn to live in tension, instead of searching for ways to avoid it. We learn to transition from conditional love based on compliance, into an unconditional love based on connection. Instead of repeating mistakes over and over again, we embrace our mistakes and learn to try new ways.

That is how real growth occurs – not by clinging to old ways, old rules, or old moralities. That is how we move beyond the limits of our egocentric first half of life.

Our institutions and the people who make them up are stuck in first-half-of-life management methods. They discourage real growth by imposing rigid rules designed to keep people stuck, to keep systems in place, to keep certain people in places of power.

Yet, by now, it might just be that the friction that all this control produces is reaching a point where the resulting heat can melt down these immature structures of hierarchy. And from the ashes we can rise up to reclaim our second half of life – to really grow up.

As Rohr reminds us,

No one can keep you from the second half of your own life except yourself. Nothing can inhibit your second journey except your own lack of courage, patience, and imagination. Your second journey is all yours to walk or to avoid…some falling apart of the first journey is necessary for this to happen, so do not waste a moment of time lamenting poor parenting, lost job, failed relationship, physical handicap, gender identity, economic poverty , or even the tragedy of any kind of abuse. Pain is part of the deal. If you don’t walk into the second half of your own life, it is you who do not want it.

This piece originally appeared on Ecological Leadership.

– Tom Jablonski, Transition Voice

Peace Talks In Chaos As Greeks Refuse To Refuel Syrian Flight | Zero Hedge

January 21, 2014 10:03 am / Leave a comment

Peace Talks In Chaos As Greeks Refuse To Refuel Syrian Flight | Zero Hedge.

The Syrian peace talks – much heralded by investors and politicians worldwide as a brave step towards a better future – are on the ropes this morning. Following the UN acquiescence to the US demand that they rescind Iran’s invite to the so-called Geneva II conference,and yet another suicide bombing in Lebanon, this morning’s incredible SNAFU is thanks to the Greeks:

GREECE REFUSES TO REFUEL SYRIAN GENEVA TEAM AIRCRAFT: SYRIA TV
SYRIAN AIRCRAFT DELAY CANCELS MEETING WITH UN’S BAN: STATE TV

The peace accord set to begin tomorrow will be delayed and are in further jeopardy as CNN reports further evidence of Syrian President al-Assad systematically killing and torturng around 11,000 people.

Via Reuters,

…

U.N. Secretary-General Ban Ki-moon’s unexpected, last-minute decision on Sunday to invite President Assad’s main foreign backer Iran – only to withdraw the invitation a day later – proved a diplomatic fiasco, undermining talks that are already given little chance of success.

…

The peace conference set to begin on Wednesday will include the first talks between Assad and his opponents. But hopes of a breakthrough are negligible at a time when fighting has escalated and neither side shows any sign of retreating from its demands or being able to end the war with a victory.

…

It has been 18 months since a previous international peace conference in Geneva ended in failure, and all other diplomatic initiatives have also proven fruitless.

“At best, Geneva 2 will reconfirm agreements made during the first Geneva conference, call for ceasefires, maybe prisoners swap and so on,” said one Western diplomat.

“At the same time, those taking part in the talks are de facto giving legitimization to Damascus. They are talking to Assad’s government on the other side of the table

“And so the show would go on while Assad stays in power.”

Via The Times of India,

Former international prosecutors said Tuesday they have evidence from a defector proving that the regime of Syrian President Bashar al-Assad has systematically killed and tortured around 11,000 people.

A report by three top investigators commissioned by Qatar, which backs the Syrian rebels, examined thousands of pictures said to have been smuggled out by a former military police photographer.

The report, which was first released in Guardian and on CNN, shows evidence of starvation, strangulation and beatings, and features pictures of emaciated corpses with livid wounds.

So amid all of this one has to wonder if those warships that the US moved into position to “rescue stranded US citizen if a Sochi even happened” is nothing more than cover for a build up in front of Syria.

China and Russia may hold joint naval drill in the Mediterranean — RT News

January 21, 2014 9:59 am / Leave a comment

China and Russia may hold joint naval drill in the Mediterranean — RT News.

Image from mod.gov.cn / Li Xiao and Hu Quanfu

Geithner Warned S&P Chairman US Would Retaliate For Downgrade | Zero Hedge

January 21, 2014 9:54 am / Leave a comment

Geithner Warned S&P Chairman US Would Retaliate For Downgrade | Zero Hedge.

Who can forget Tim Geithner’s historic interview from April 2011, in which he said:

Peter Barnes “Is there a risk that the United States could lose its AAA credit rating? Yes or no?”

Geithner’s response: “No risk of that.”

“No risk?” Barnes asked.

“No risk,” Geithner said.

Considering that the US was downgraded by S&P just 4 months later, one person who certainly will never forget his idiotic preannouncement, is the former Treasury secretary, Tim Geithner. And being the sore loser that everyone suspected he was (although one hopes his recent well-paid move to Warburg Pincus will help soothe his sensitivity) it will come as no surprise that Geithner told the Chairman of embattled rating agency Standard & Poor’s, that its downgrade of the US from AAA to AA+ “would be met by a response.”

From Bloomberg:

S&P filed a declaration of McGraw yesterday in federal court in Santa Ana, California, as part of a request to force the U.S. to hand over potential evidence the company says will support its claim that the government filed a fraud lawsuit against it last year in retaliation for its downgrade of the U.S. debt two years earlier.

In his court statement, McGraw said Geithner called him on Aug. 8, 2011, after S&P was the only credit ratings company to downgrade the U.S. debt. Geithner, McGraw said, told him that S&P would be held accountable for the downgrade. Government officials have said the downgrade was based on an error by S&P.

“S&P’s conduct would be looked at very carefully,” Geithner told McGraw according to the filing. “Such behavior would not occur, he said, without a response from the government.”

The Justice Department last year accused S&P of lying about its ratings being free of conflicts of interest and may seek as much as $5 billion in civil penalties. The government alleged in its Feb. 4, 2013, complaint that S&P knowingly downplayed the risk on securities before the credit crisis to win business from investment banks seeking the highest possible ratings to help sell the instruments.

None of this somces as a surprise, and it has been well-known for a long time that the only reason the US Department of Injustice targeted only S&P and not Moody’s or Fitch for their crisis era ratings of mortgages is precisely due to Geithner’s vendetta with S&P. Of course, this kind of selective punishment simply means that nobody else will dare to touch the US rating ever again, or speak badly against the sovereign in a public medium for fears of retaliation.

Naturally, while this means that the credibility of the rating agencies is now non-existent even among the head in the sand groupthink, what is worse is observing the US’ slide into the kind of totalitarian, 1st Amendment quashing tactics that worked out so well for all previous fascist regimes.

Olduvaiblog: Musings on the coming collapse

Daily Archives: January 21, 2014

The World Complex: A system doomed to fail

A system doomed to fail

A Comedy Of IMF Forecasting Errors: Global Trade Growth Tumbles More Than 50% From IMF’s 2012 Prediction | Zero Hedge

US Army colonel: world is sleepwalking to a global energy crisis

IMF set to upgrade UK growth forecasts as global economy expands | Business | The Guardian

Drought Emergency Declared in California as Residents Urge Halt to Fracking

Thailand declares Bangkok state of emergency – Asia-Pacific – Al Jazeera English

Growth is good for kids but not always for society — Transition Voice

So immature

Peace Talks In Chaos As Greeks Refuse To Refuel Syrian Flight | Zero Hedge

China and Russia may hold joint naval drill in the Mediterranean — RT News

Geithner Warned S&P Chairman US Would Retaliate For Downgrade | Zero Hedge

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Daily Archives: January 21, 2014

A system doomed to fail

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