Still unsure about the differences between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP)?
The fact is it’s all about the tax. Here’s a quick refresher of the tax-free registered savings account:
How much can I put into my TFSA? Since the beginning of 2013, you can now contribute up to $5,500 a year. Your annual contribution limit will appear on your Notice of Assessment after your tax return has been processed. At the end of the year, any remaining balance will be added to your contribution limit in the following year. One great TFSA advantage is that there usually isn’t a minimum deposit required to open an account, which makes it easy to pay yourself first. And you can easily access your funds if you’re in a tight financial spot. It’s also worth noting that your withdrawals won’t compromise your eligibility to receive federal benefits like the Guaranteed Income Supplement, Employment Insurance or the Canada Child Tax Benefit. Any withdrawals you make can be replaced in the following year.
It’s a great retirement savings tool: If you’ve successfully reached your RRSP contribution limit, continue to make deposits to your TFSA, keeping in mind your annual limits. Remember, these deposits are tax-free and tax-receipt-free. In other words, deposits you make to a TFSA won’t reduce your taxable income, you won’t receive a tax receipt for your deposits nor will your withdrawals be taxed like an RRSP. By contrast, any deposits you make to an RRSP are deducted dollar for dollar from your taxable income in that tax year. For example, if you make $40,000 a year and contribute $2,000 to an RRSP, the tax on your income would be calculated on $38,000 only. However, any withdrawal you make from your TFSA will be tax-free and the funds are not declared as income.
Don’t forget to diversify: Consider shaking things up with a little diversification. You can choose investment options like stocks, bonds, mutual funds and guaranteed investment funds (GIFs). Also, you now have the option of borrowing your full contribution limit. However, unlike other investment loans, the interest paid on this loan cannot be used as a tax write-off. If you could afford to, contributing to each year’s maximums in both plans would be ideal. Of course, it comes down to finding a balance between creating a strong nest-egg and paying off debts. But, these tax considerations can certainly help you meet your long-term financial goals.
AS the world’s population continues to grow, so does its thirst for water and energy. Unfortunately, not every nation is able to get an equitable share of the precious water and energy resources. If we look into the history of the prolonged Middle Eastern conflicts, we will see that many of them are related to access to water and energy. Patricia Wouters, professor of international water law at the University of Dundee in UK, considers that water scarcity is on the global agenda. She opined: “There is so much happening in the Middle East that a conflict over water could push everything over the edge.”
Demand for water in the emerging economies, including China and India, is expected to exceed supplies in less than 20 years. Although China, the most populous nation, possesses the fourth largest freshwater reserves in the world, it has the second lowest per capita water holdings. Experts feel that the rapidly developing China (the second largest economy of the world) is potentially facing the problem of water scarcity, which may challenge its economic growth. Water resource demand in India is expected to double and exceed 1.4 trillion cubic meters by 2050, while Pakistan faces the greatest water crunch with only around 1,000 cubic meters available per head per year.
Published statistics suggest that 40% of the global population and 145 states fall within 263 international river basins that account for 60% of global river flow. The World Bank says that global energy consumption will increase by 35% while water use for energy will go up 85% by 2035. For the first time last year, the International Energy Agency’s World Energy Outlook included a section on water, and warned that water constraints “can challenge the reliability of existing operations and the viability of proposed projects.”
It is interesting to note that there are alternative forms of energy, but there is no substitute for water. And, as the indispensible ingredient for life, it naturally becomes a source of power. According to InterAction Council (IAC) approximately 3,800 cubic kilometers of fresh water are drawn from lakes, rivers and wells globally every year. In 2025, world population is expected to reach about one billion, and to feed it agriculture will require another 1,000 cubic kilometers of water per year, equivalent to the annual flow of 20 Nile Rivers.
World Bank sources suggest that 70% of the world’s fresh water is currently used for agriculture purposes. As populations and economies grow, more water will be required for energy, industries and for urban systems. Prominent world leaders, including former US President Bill Clinton and former President of South Africa Nelson Mandela, warned that the looming water crisis threatens political stability and economic development in a number of developing nations, which has implications for global peace and stability. However, optimists tend to believe that conflicts over water right should stimulate cooperation among the countries.
South Asian countries are linked by trans-boundary rivers, many of which are bound by treaties. India and Pakistan share the Indus; India and Bangladesh share the Ganges and Brahmaputra rivers; Nepal and India share Kosi, Mahakali and several others. Pakistan and Afghanistan share nine important rivers, including the Kabul River. Iran has more than 40 tributaries and rivers crossing into Iraq, while Turkey exerts tight control over the Tigris-Euphrates basin. Nine of the ten major rivers in South Asia emerge from Tibet. Almost all sources of energy, including many renewable ones, require large amounts of water to produce. India wants to expand its grid to the third of the rural population that has no access to power. The existing power production facilities in India are often criticised for their poor water management efficiency. A year ago, the state of Maharashtra had to shut down all six units of a 1,130 MW thermal power plant as the water in the dams fell to critically low levels.
And it is not only fossil fuel plants that need water for their cooling processes. Of the renewable sources, only wind power and photovoltaics use negligible amounts of water. Solar energy generation plants require large amount of water to keep the mirrors clean. The Guardian published a report on February 6 suggesting that lower water supply threatens electric energy generation in many countries in the world. The World Bank’s senior economist, Diego Rodriguez of the institute’s water unit, says: “In the US, several power plants have had to rein-in production due to low water flows or water temperatures too high to cool plant. France is periodically forced to cut back nuclear power production, and hydropower production in Sri Lanka, China and Brazil has been compromised by lower water levels caused by drought.”
Regional cooperation is essential if countries are to adapt to the growing need for resources, and to harness maximum benefits of the natural resources like energy and water for the people of the region. And for attaining the sustained cooperation and mutual sharing of benefits there is no other way but to understand each other’s concerns with water and energy resources, and share and work jointly to address them.
The writer is a mining engineer.
Published: 12:00 am Monday, February 24, 2014
With a growing population and improving diets there is a need to double our food supply by 2050. Identify three measures you would take to meet this demand. Identify one of your measures from your list and post your solution into the discussion – be prepared to defend your choice!
That is a big question to throw in a climate change course. I am presently doing an online course – Climate Change: Challenges and solutions – offered by the University of Exeter (UK). So please indulge me as I also use this blog for some climate course work. This article is for week 6, section 6.5 of the course on ‘Tackling food security’.
Food security is one helluva big area to try and come to terms with. Earth’s population is just over 7 billion people. It is projected by the United Nations in a June 2013 report on global population to reach 9.6 billion people by 2050, although some commentators like David Merkel think it may peak at 8.5 billion around 2030 due to officials underestimating the fall in the fertility rate.
Currently, at least one billion people are constantly hungry or living under the threat of hunger.
Agricultural productivity of the last century has been brought about by the energy input from fossil fuels. There is a strong recent correlation between soaring food costs and soaring oil costs. With Peak oil, energy costs can expect to increase much further, placing further costs on food production. A FAO 2011 report says: “Commodity prices tend to be linked with global energy prices. As energy prices fluctuate and trend upwards, so do food prices”.
”Feeding a growing world population will require a 60 percent increase in food production by 2050, but we are not going to be able to meet that goal the way we did during the Green Revolution, relying on fossil fuels,” said Alexander Müller, FAO Assistant Director-General for Natural Resources and the Environment. “A very different approach is required.”
The food sector accounts for around 30 percent of the world’s total energy consumption and
accounts for around 22 percent of total Greenhouse gas emissions according to the UN Food and Agriculture Organisation (FAO).
Most of the big productivity gains of the Green revolution ocurred due to substantial intensification of energy inputs into agriculture through fossil fuels. From non-organic fertilisers, pesticides, mechanisation of farming practices, increased processing, refrigeration, packaging and transport to more distant markets and more urbanised consumers.
Ten measures to increase food production sustainably
So I sat down and brainstormed ten measures to increase food production, keeping in mind the increasing problem of peak oil and need to reduce greenhouse gas emissions for climate change. Yes, I know, the course only wanted me to list three and argue for one! I got carried away.
We are now facing the prospect of increasing productivity to feed a growing global population, reducing greenhouse gas emissions to combat climate change, and fossil fuels becoming progressively more expensive due to peak oil. The large easily accessed oil fields are now in decline, and to maintain production we are more reliant on fossil fuels both harder to access and more expensive such as Arctic oil, deep sea oil, coal seam gas and tight shale oil. Some of the methods of accessing fossil fuels are either far more polluting, risk chemical contamination of groundwater and can impact agricultural productivity.
So here is my quick list of 10 measures we should be implementing to tackle food security and reducing fossil fuel use in the food sector:
- 1. Reduce reliance on fossil fuel energy for agricultural production to counter the threat of peak oil and reduce agricultural production of carbon emissions. Reduce non-organic fertilizers and pesticides by adopting integrated pest and weed management techniques, and shifting to crop varieties and animal breeds that require fewer inputs.
- 2. Reduce ruminants for food and emphasise health importance of a dietary change to less red meat, enabling increased water efficiency and crop production for human consumption. This also reduces agricultural methane production.
- 3. Reduce food waste (About one third of food produced each year – 1.3 billion tonnes – is wasted) Better logistics and energy efficiency in food manufacturing, processing, packaging and transport would help to reduce this, but increased regulation and prevention of food dumping and waste practices in the food chain from producer to end retailer needs to be enacted. Composting food waste by consumers needs to be encouraged to reduce decomposition and methane production in landfill sites.
- 4. Encourage consumption from local production rather than long distance and out of season imports (Awareness of food miles), which reduces transport CO2 emissions. Encourage Urban agriculture.
- 5. Natural Water retention and water storage needs to be enhanced to enable greater crop productivity. The health of river ecosystems needs to be carefully managed and not over allocated for agriculture, especially wetlands which provide important ecological services especially in times of drought as a biodiversity refuge. Ground water aquifers need to be protected from contamination or water table alteration by mining (eg open cut coal mining, fracking for coal seam gas or tight oil deposits)
- 6. Adopt more intensive organic and agroecological practices, including greater permaculture, companion planting practices, agroforestry, crop rotation and land for wildlife.
- 7. Reduce monoculture practices and boost support to small farmers as recomended by UN Conference on Trade and Development (UNCTAD) in the Trade and Environment report 2013 (PDF)(media release):
- 8. Encourage preservation and production of heritage plant species for their genetic diversity, enabling the crossbreeding for producing new varieties tolerant to specific threats in the future.
- 9. Develop closed cycle aquaponics for intensive horticultural production and aquaculture to supply fish protein.
- 10. Greater emphasis on soil carbon farming to both enrich soils and act as a carbon storage sink. Reduce soil erosion. See FAO on Greater focus on soil health needed to feed a hungry planet
None of these will be easy to do, but I suspect all will need to be done to lift agricultural productivity while reducing fossil fuel energy input.
Transitioning industrial agriculture to organics and agroecology
In my search for some answers and solutions I stumbled upon a seminar held by the Swedish Society for Nature Conservation (SSNC) on 25th April 2012 in Stockholm: 100 % Agroecology Can Feed the World. The presentations were videoed and the powerpoint slides published.
Johanna Björklund, Teaching Professor of Agroecology, Örebro University, argues in her presentation that “To feed an increasing global population and in the same time cope with climate change and ecosystem degradation the large-scale, low productive and extensive mode of food production in industrial countries needs to be abandoned.”
Björklund puts forward some Non negotiable demands on the future food system:
- More food with less use of water and without fossil fuels
- Agricultural areas needs to sequestrer carbon
- Drastically reduced input of new nitrogen fertilizers
- No more phosphorus which ends up in the oceans
- Extinction of species need to be halter to at least 10 per cent of today
- Decreased meat consumption in developed countries
Björklund presentation on The potential of a productive, fossil fuel free agriculture based on ecosystem services is worthwhile watching on Youtube or below. Slide Presentations are also available for viewing. She also emphasised that urban agriculture can play an important part of ensuring food security.
At the same session in Stockholm Hans Herren, Director of the Millenium Institute, gave a presentation on Action plan for changing course in agriculture in which he outlined the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) global assessment report – Agriculture at a Crossroads. This report was prepared by the UN Environment Program (UNEP) by the Division of Early Warning and Assessment. Watch the video, or slide presentation:
Herren has done agricultural modelling to show that transitioning our industrial agriculture to more organic and sustainable agro-ecological methods is possible to feed a larger population with increased productivity, greater employment, increased soil quality, reduced water use, reduced deforestation, providing a more than adequate calorie supply to each person on the planet. A matter of changing agricultural policies and methods and consumer behaviour.
In 2013 Dr. Hans R. Herren, and Millenium Institute partner Biovision Foundation, were selected as a recipient of the Right Livelihood Award, “for his expertise and pioneering work in promoting a safe, secure and sustainable global food supply.”
One of the concerns with organic methods of agriculture is that yields are substantially less than conventional agricultural methods, although often this is made up in social, ecosystem and biodiversity benefits. On the same day as the symposium in Stockholm Natasha Gilbert outlined in a news article in Nature magazine that Organic farming is rarely enough with Conventional agriculture giving higher yields under most conditions. This article draws upon the research by Verene Seufert et al (2012) in Nature who say in their study – Comparing the yields of organic and conventional agriculture:
Our analysis of available data shows that, overall, organic yields are typically lower than conventional yields. But these yield differences are highly contextual, depending on system and site characteristics, and range from 5% lower organic yields (rain-fed legumes and perennials on weak-acidic to weak-alkaline soils), 13% lower yields (when best organic practices are used), to 34% lower yields (when the conventional and organic systems are most comparable). Under certain conditions—that is, with good management practices, particular crop types and growing conditions—organic systems can thus nearly match conventional yields, whereas under others it at present cannot. To establish organic agriculture as an important tool in sustainable food production, the factors limiting organic yields need to be more fully understood, alongside assessments of the many social, environmental and economic benefits of organic farming systems.
FAO: Energy Smart agriculture needed
Since the 2011 UN Durban Climate change conference the UN Food and Agriculture Organisation (FAO) has been pushing for Energy-smart agriculture to escape the fossil fuel trap.
“There is justifiable concern that the current dependence of the food sector on fossil fuels may limit the sector’s ability to meet global food demands. The challenge is to decouple food prices from fluctuating and rising fossil fuel prices,” said an FAO paper published during the Durban UN Conference on Climate Change in 2011.
According to the report, the food sector (including input manufacturing, production, processing, transportation marketing and consumption) accounts for around 95 exa-Joules (1018 Joules), approximately 30 percent of global energy consumption, and produces over 20 percent of global greenhouse gas emissions.
On-farm direct energy use amounts to around 6 exa-Joules per year, if human and animal power are excluded — just over half of that is in OECD countries. On farms, energy is used for pumping water, housing livestock, cultivating and harvesting crops, heating protected crops, and drying and storage. After harvest, it is used in processing, packaging, storing, transportation and consumption.
“The global food sector needs to learn how to use energy more wisely. At each stage of the food supply chain, current practices can be adapted to become less energy intensive,” said FAO Assistant Director-General for Environment and Natural Resources, Alexander Mueller.
At the farm level this includes more fuel efficient engines, use of compost and precision fertilizers, irrigation monitoring and targeted water delivery, adoption of no-till farming practices and the use of less-input-dependent crop varieties and animal breeds says the FAO report.
After food has been harvested, more efficient transport and logistics, better insulation of food storage facilities, reductions in packaging and food waste, and more efficient cooking devices offer help to reduce energy use in the food sector.
Losses and wastage in the food system presently amount to around one-third of all food produced, which includes the energy that is embedded in it. Reducing this loss also saves substantial energy.
Agriculture also has some potential for providing some of it’s own energy through processing wastes to produce biogas which can supplement solar, wind, hydro, geothermal or biomass energy resources where they exist.
“Using local renewable energy resources along the entire food chain can help improve energy access, diversify farm and food processing revenues, avoid disposal of waste products, reduce dependence on fossil fuels and greenhouse gas emissions, and help achieve sustainable development goals,” the FAO report says.
The FAO energy smart food for people and climate program is based on three pillars:
- (i) providing energy access for all with a focus on rural communities;
- (ii) improving energy efficiency at all stages of the food supply chain; and
- (iii) substituting fossil fuels with renewable energy systems in the food sector.
Watch a September 2013 youtube video of Peter Holmgren from the UN Food and Agriculture Organisation on climate smart agriculture
Food miles and food transport
We live in a globalised economy where food is often transported over long distances, often to places where it is out of season. But this uses transport which utilizes primarily fossil fuel energy. Much food is transported over long distances by road, rail and shipping. The FAO report says “Air transport is costly in terms of energy intensity and economic costs, therefore rarely used. For example, only 0.5 percent of the fresh fruit imported to the USA is shipped by air (Bernatz, 2010).
Globalization in the past two decades appears to have increased the average distance travelled by food products by 25 percent.” This has lead many aware consumers in the developed world to look at ‘food miles’, although some point out that Food miles can mislead and total carbon footprinting may be more important for analysing the food we buy.
The report does suggest better labelling on retail food packaging to display the energy used in the production, processing, packaging and distribution of the product so that consumers could consider the energy and GHG implications when making purchases. But this would require development of international standards for measuring energy consumption using standardized Life Cycle Assessment methodologies to assess each stage of the food chain.
“The key question at hand is not, ‘If or when we should begin the transition to energy-smart food systems?’ but rather ‘how can we get started and make gradual but steady progress?” said Mueller in the 2011 FAO media release.
There is at least one example of a country being forced to make the transition to low fossil fuel input into agriculture: Cuba.
Cuba’s transition to permaculture with early onset of peak oil
When the Berlin wall fell and the Soviet Union reduced it’s fossil fuel subsidies to Cuba in the 1990s we saw a taste of what Peak Oil might mean for a fossil fuel dependant economy. Cuba embarked on fuel rationing which entailed transforming their energy and agricultural systems. The film The power of Community. How Cuba Survived peak Oil provides lessons for us all when the oil starts running out. Watch the Youtube video below
The impact of reduced availability of fossil fuels on Cuban life was transformative. It entailed a major shift in agricultural practices to organic and permaculture methods with much more labour intensive small farm activity, along with urban permaculture. Transport was also shaken up with more emphasis on living locally, using public transport and cycling. It wasn’t an easy transition to make for most people.
Are we ready for such a transition? The earlier we start, the more preparation we make, the easier it will be on the communities we live within. The threat of peak oil and climate change has sparked theTransition Towns movement, a global movement to build community resilience and sustainability to the threats posed by climate change and peak oil. Another small part of the solution.
- David Merkel, 1 December 2012, Business Insider Australia – Analyst: World Population Will Peak At 8.5 Billion In 2030
- Joseph Dancy, 14 May 2012, Financial Sense – Food Prices Mirror Oil Prices: The Crude Oil – FAO Food Price Index Price Correlation
- UN FAO, 14 June 2012, UN Conference on Sustainable Development – Road to Rio: Improving energy use key challenge for world’s food systems
- UN FAO, 29 November 2011 media release – Energy-smart” agriculture needed to escape fossil fuel trap
- UN FAO Report (2011) – Energy-Smart Food for People and Climate (PDF)
- UN FAO Policy Brief (2011) – Policy Brief: The Case for Energy Smart Food Systems
- UN FAO, 5 December 2013 – Greater focus on soil health needed to feed a hungry planet
- Verena Seufert, Navin Ramankutty & Jonathan A. Foley, Nature 25 April 2012 –Comparing the yields of organic and conventional agriculture (abstract), Nature 485, 229–232 doi:10.1038/nature11069
Another blast of freezing air is forecast for the central and eastern U.S. this week as two storms threaten to bring disruptive snow to the Northeast.
“Arctic air looks to make a return to the Northeast and Midwest this week following some of the warmest weather the regions have had so far this year,” AccuWeather Inc. said on its website. “Much of the Northeast and Midwest will be dry and noticeably colder on Monday.”
Milder weather across the Northeast over the weekend pushed temperatures into the 60s Fahrenheit (16 degrees Celsius) inWashington and Philadelphia and the 50s in New York City and Boston, AccuWeather said. Highs today will be 10 to 20 degrees colder, the State College, Pennsylvania-based forecaster said. Low temperatures in New York are forecast at 22 Fahrenheit tonight, according to the National Weather Service.
Temperatures are dropping as the polar vortex, a mass of cold air that is usually kept above the Arctic Circle by strong winds, drops southward. They may slide to a record low in the High Plains, the upper Midwest and Great Lakes, according to the weather service.
Natural gas futures rose to their highest in more than five years. Gas for March delivery climbed as much as 5.6 percent to trade at $6.478 per million British thermal units in electronic trading on theNew York Mercantile Exchange.
“A series of quick-hitting disturbances” will spread some snow across the Midwest and Northeast through Feb. 25, AccuWeather said on its website. Meteorologists are monitoring whether a storm moving through the Midwest meets with another traveling across the South, potentially bringing “disruptive” snow to the Northeast starting Feb. 26, the forecaster said.
“If the storms remain separate until reaching Atlantic Canada, the snow will remain on the lighter side across the Northeast and will only be a nuisance to motorists on Wednesday,” it said. “Steadier and heavier snow would unfold if the storms begin to combine over the Northeast.”
Frigid air will dive south and east from the Northern Plains throughout the week, the Weather Service said in a bulletin on its website.
“By Wednesday, most of the Great Lakes will have single digit high temperatures and parts of the Tennessee Valley will struggle to rise above freezing,” it said.
To contact the editor responsible for this story: Claudia Carpenter firstname.lastname@example.org
Russia Awakes: Accuses Ukraine’s New Government Of “Armed Mutiny”, Says It Poses “Real Threat To Our Interests, Citizens” | Zero Hedge
The Olympics are now over, which means that Russia can finally start taking steps toward making good on its warning from last week, spoken by a senior government official to the FT, that “If Ukraine breaks apart, it will trigger a war,” adding that “they will lose Crimea first [because] we will go in and protect [it], just as we did in Georgia.” And while there have been photos (so far unconfirmed) of Russian military vehicles heading into the Ukraine, for the time being Russia has kept a surprisingly low profile. Until now.
- MEDVEDEV SAYS RUSSIANS IN UKRAINE FACE THREAT IN UKRAINE: RIA
- MEDVEDEV SAYS RUSSIAN INTERESTS UNDER THREAT IN UKRAINE: RIA
- MEDVEDEV QUESTIONS LEGITIMACY OF UKRAINE’S INSTITUTIONS: IFX
- MEDVEDEV HAS NO INFORMATION IF AZAROV IS IN RUSSIA: RIA
Prime Minister Dmitry Medvedev on Monday said Russia had grave doubts about the legitimacy of those in power in Ukraine following President Viktor Yanukovich’s ouster, saying their recognition by some states was an “aberration”.
“We do not understand what is going on there. There is a real threat to our interests and to the lives of our citizens,” Medvedev was quoted by Russian news agencies as saying.
“There are big doubts about the legitimacy of a whole series of organs of power that are now functioning there.”
Finally, from the AP:
Dmitry Medvedev said Monday, according to Russian news agencies, that the new authorities have come to power as a result of “armed mutiny,” so their legitimacy is causing “big doubts.”
All this is happening as (insolvent) Europe is scrambling to obtain the tens of billions it needs to make good on a topping overbid for the Ukraine, something which Russia appears to be largely laughing about, and certainly something which Gazprom, which incidentally holds the fate of all of Europe, and not just Ukraine, in its hands. Literally.
As we have said since the Ukraine coup became official: keep an eye on the Russian response. Right now it is all that matters.
CP | By Yuras Karmanau And Maria Danilova, The Associated PressPosted: 02/24/2014 3:46 am EST | Updated: 02/24/2014 6:59 am EST
SIMFEROPOL, Ukraine – Ukraine’s acting government issued a warrant Monday for the arrest of President Viktor Yanukovych, last seen in the pro-Russian Black Sea peninsula of Crimea, accusing him of mass crimes against protesters who stood up for months against his rule.
Calls are mounting in Ukraine to put Yanukovych on trial, after a tumultuous presidency in which he amassed powers, enriched his allies and cracked down on protesters. Anger boiled over last week after snipers attacked protesters in the bloodiest violence in Ukraine’s post-Soviet history.
The turmoil has turned this strategically located country of 46 million inside out over the past few days, raising fears that it could split apart. The parliament speaker is suddenly nominally in charge of a country whose economy is on the brink of default and whose loyalties are torn between Europe and longtime ruler Russia.
Ukraine’s acting interior minister, Arsen Avakhov, said on his official Facebook page Monday that a warrant has been issued for the arrest of Yanukovych and several other officials for the “mass killing of civilians.” At least 82 people, primarily protesters, were killed in clashes in Kyiv last week.
Avakhov says Yanukovych arrived in Crimea on Sunday and relinquished his official security detail then drove off to an unknown location.
After signing an agreement with the opposition to end a conflict that turned deadly, Yanukovych fled the capital for eastern Ukraine. Avakhov said he tried to fly out of Donetsk but was stopped, then went to Crimea.
Tensions have been mounting in Crimea, where pro-Russian protesters raised a Russian flag on a city hall in one town and scuffled with police. Russia maintains a big naval base in the Crimean port of Sevastopol that has tangled relations between the countries for two decades.
Yanukovych set off a wave of protests by shelving an agreement with the EU in November and turning toward Russia, and the movement quickly expanded its grievances to corruption, human rights abuses and calls for Yanukovych’s resignation.
“We must find Yanukovych and put him on trial,” said protester Leonid Shovtak, a 50-year-old farmer from the western Ivano-Frankivsk region who came to Kyiv’s Independence Square to take part in the three-month protest movement. “All the criminals with him should be in prison.”
The speaker of parliament assumed the president’s powers Sunday, even though a presidential aide told the AP on Sunday that Yanukovych plans to stay in power.
The speaker, Oleksandr Turchinov, said top priorities include saving the economy and “returning to the path of European integration,” according to news agencies. The latter phrase is certain to displease Moscow, which wants Ukraine to be part of a customs union that would rival the EU and bolster Russia’s influence. Russia granted Ukraine a $15 billion bailout after Yanukovych backed away from the EU deal.
U.S. Ambassador Geoffrey Pyatt said the U.S. is ready to help Ukraine get aid from the International Monetary Fund.
The European Union, meanwhile, is reviving efforts to strike a deal with Ukraine that could involve billions of euros in economic perks. EU foreign policy chief Catherine Ashton is visiting Kyiv on Monday and Tuesday.
The protest movement has been in large part a fight for the country’s economic future — for better jobs and prosperity.
Ukraine has struggled with corruption, bad government and short-sighted reliance on cheap gas from Russia. Political unrest has pushed up the deficit and sent exchange rates bouncing, and may have pushed the economy back into a recession.
Per capita economic output is only around $7,300, even adjusted for the lower cost of living there, compared to $22,200 in Poland and around $51,700 in the United States. Ukraine ranks 137th worldwide, behind El Salvador, Namibia, and Guyana.
Ukraine has a large potential consumer market, with 46 million people, an educated workforce, and a rich potential export market next door in the EU. It has a significant industrial base and good natural resources, in particular rich farmland.
With iron-ore stockpiles at record highs in China amid the escalating cash-for-steel financing debacles, one can only imagine the squeeze that is about to occur on the banks of a nation that is almost entirely economically dependent on said iron-ore mining production… which made us think when we saw this sign “justifying” holding low cash amounts in an Aussie bank ATM…
So no need for a withdrawal halt per se when you simply make it impossible for customers to get their money out…
For 50 years or so the federal government has deliberately and to an increasing extent misstated probable future budget deficits. Democrats and Republicans are guilty. The White House is guilty. And so is Congress. Private firms that deliberately misrepresent their financial statements in this fashion would be guilty of a crime… The magnitude of the misrepresentation is breathtaking.
– Former St. Louis Federal Reserve Bank President William Poole, writing in the Wall Street Journal last April
We’re guessing he was especially miffed with the annual budget outlook released by the CBO on February 5th.
Consider that Poole favored the “alternative scenario” that can sometimes be found deep within CBO reports and spreadsheets. This scenario corrects for at least a few of the absurd assumptions in the primary budget projections (the “baseline scenario”) that receive 99% of the media’s attention. Poole called the alternative scenario “the only truly honest and useful effort in town.”
Alas, the alternative scenario is no more – the CBO removed it from their annual outlook. Taxpayers can no longer find meaningful budget projections anywhere in the CBO’s work.
Let’s see if we can fill in the gap.
We’ll start with the baseline from this month’s report:
The chart shows a shrinking deficit over the next couple of years, but don’t get too excited. Apart from other issues we’ll discuss, this is explained by a long-standing prediction for a robust economic recovery, which hasn’t yet come to pass. It’s not so much a budget outlook as a hopeful forecast.
After the supposed economic boom levels off in 2018/19 (according to the assumptions), the figures no longer hide our deteriorating finances. But the deterioration is likely to be much worse than the chart suggests, as we’ll explain below. To create a more realistic outlook, we’ll adjust the baseline scenario for four different types of deficiencies in the CBO’s approach:
Step #1: We deal with dishonest lawmakers
One of the challenges in budget forecasting is that tax and spending laws are full of provisions that are all but guaranteed to be reversed before they take effect. These dead-on-arrival provisions only exist to create the appearance of fiscal rectitude. And the deception works because the CBO is required by governing statutes to build the phony provisions into its baseline, which the media then endorses as an authoritative view of public finances.
Fortunately, though, the CBO’s new report provides data we can use to neutralize some of the lawmakers’ tricks, as explained in Table 1 below:
Step #2: We get real with the economy
The good news in the CBO’s latest report is that they made a few needed changes to the underlying economic assumptions. The bad news is that they have much more to do – the economic outlook remains unrealistic.
Once again, though, we can use data in the report (Appendix E, in this case) to improve the projections. We explained our adjustments in detail in “Why Mr. Smith Has More Work To Do,” and they’re summarized in Table 2 below.
Note that we’ve accepted the CBO’s strongly optimistic outlook for the next four years, not because we like it but because it’s easier to show inconsistencies and come up with a more realistic scenario in later years (after the assumed recovery reaches historic extremes).
Step #3: We put on our actuarial hats
It doesn’t take much business experience to know that budget plans are regularly thrown off track by unexpected events, and the federal budget is no different. In fact, the CBO always acknowledges the risks of such setbacks. Yet, its governing statutes don’t permit accounting for most types of unexpected events in the baseline scenario.
In any case, the CBO doesn’t provide sensitivity analysis estimating their possible effects. Here’s what we had to say about this in an earlier post:
[M]any events are deemed too unpredictable to be estimated – an excuse that defies both collective knowledge and common practice. Actuaries, accountants and financial risk managers are all trained to place numeric estimates on unforeseen risks. Insurance premiums, credit loss provisions and investment decisions are all based on these numeric estimates.
The key is that any positive number is better than nothing. We can see the problem with nothing just by noticing that the debt debate almost never gets around to the risks of recessions, financial crises, wars, natural disasters, and so on. Political leaders and pundits habitually ignore the CBO’s warnings that these events will occur from time to time, relying instead on its incomplete projections.
In the same post, we explained our approach to adjusting budget projections for unforeseen events. One of our recommendations, which accounts for the effects ofautomatic stabilizers and doesn’t violate the CBO’s statutes, was implemented by the CBO for the first time in this month’s report. The other adjustments are summarized in Table 3 below:
Step #4: We recognize that debt owed to trust funds is, indeed, debt
The question of whether to look at gross debt (including obligations to trust funds such as the Social Security and Medicare hospital insurance funds) or net debt (excluding those obligations and other intra-governmental holdings) is a tired subject. It’s probably fair to say that net debt advocates don’t care much about debt to begin with, while those who point to gross debt do care. We offered our two cents here. Among other points, we described the paradox that fiscally profligate governments can lower net debt (but not gross debt) by merely expanding certain types of entitlement programs, even if the expansions are fiscally unsustainable. In fact, America’s current financial position shows that this is exactly what we’ve done. For this reason and others, trust fund debt should be added back to the net figures highlighted by the CBO.
Putting it all together
Note that the figures in the tables above exclude debt service costs. After breaking the baseline into components and making our adjustments, we then create new projections that include recalculation of debt service.
The Steps 1 and 3 adjustments are combined into a projection that we call “Congress does what it usually does,” while the Step 2 adjustment is blended into our “and the economy does what it usually does” projection. The Step 4 adjustment is shown in the “and trust fund debt counts” projection in the final chart.
Here are our results, for deficits first and then debt:
While the charts speak for themselves, we’ll turn again to Poole’s op-ed to sum up America’s finances:
U.S. fiscal policy is in a chaotic state. Policy decisions are wrapped around the convoluted budget accounting that Congress and the White House use to obfuscate, dissemble and hide what is really being done. That is a tragedy, and our democracy is worse for it.
(Click here for an appendix to this post containing the year-by-year added deficits for each of our adjustments, in dollars.)
LONDON, Feb 23 (Reuters) – Britain warned Russia on Sunday against intervening in Ukraine’s “complex” crisis, saying London wanted to contribute to an international economic programme aimed at shoring up the “desperately difficult” situation of the Ukrainian economy.
In comments that may anger Moscow, British Foreign Secretary William Hague said his government was in regular contact with the Russian government to try to persuade it that closer ties between Ukraine and the European Union should not worry it.
“If there’s an economic package, it will be important that Russia doesn’t do anything to undermine that economic package and is working in cooperation and support of it,” Hague told BBC TV.
When asked if he was worried that Russia might “send in the tanks” to defend the interests of Russian-speakers in eastern Ukraine, Hague warned against what he called “external duress” or Russian intervention.
“It would really not be in the interests of Russia to do any such thing. We have to keep up the communication with Russia as we are doing … so that the people of Ukraine can choose their own way forward. There are many dangers and uncertainties.”
Ukraine’s parliament voted to remove President Viktor Yanukovich on Saturday after three months of street protests, while his arch-rival Yulia Tymoshenko hailed opposition demonstrators as “heroes” in an emotional speech in Kiev after she was released from jail.
The crisis began as protests against Yanukovich’s decision to abandon a trade agreement with the European Union in favour of closer ties with Russia, which promised to lend Ukraine $15 billion euros. Ukraine needs the money — foreign investment inflows fell by almost half last year, to a net $2.86 billion from $4.13 billion in 2012
Britain has so far assumed a lower profile on Ukraine than countries such as Germany and Poland, though Prime Minister David Cameron spoke to Russian President Vladimir Putin last Thursday about the situation there and Hague said he’d be talking to Russian Foreign Minister Sergei Lavrov on Monday.
Hague said the priority was to persuade Moscow that the fate of Ukraine – a country that was part of the Soviet Union and has been within Russia’s sphere of influence for decades – was not what he called “a zero-sum game” and that closer ties with the EU were not a bad thing.
“It’s in the interests of the people of Ukraine to be able to trade more freely with the EU. It’s the interests of the people of Russia for that to happen as well.”
He said he didn’t know what Russia’s “next reaction” would be, but he pushed the Ukrainian opposition to move urgently to form a government of national unity, agree arrangements for new elections, and to crack on with shoring up the economy.
“While all this has been happening, the Ukrainian economy is in a desperately difficult situation,” Hague said. “And they need an economic programme that the rest of us, through the International Monetary Fund and other institutions, can support so that they can stave of an even more serious economic situation.”