Charlotte Brooks Duke Ellington at bat near segregated motel in Florida April 1955
You can hurt a few handfuls of Putin’s people for a few days with sanctions like closing their Visa accounts. But if you threaten to buy less Rosneft oil and Gazprom gas, why should they really care? It’s not as if there’s a glut of either available. Any pain will be short lived. Moreover, it’s all but certain that such actions will drive Russia and China closer together, and is that such a dream scenario for America and Europe?
Of course there’s plenty of folk in the US Senate and in Brussels who relish the prospect of some sort of limited warfare with Russia, but they’re mostly fossilized entities, whether physically and/or mentally. There will be some such voices in Russia too, and there are many in Ukraine, where long festering hatred, by the looks of it, is still one of the main reasons people get out of bed in the morning.
Yulia Tymoshenko, former PM and prime candidate for prime minister again, was caught on tape uttering some real ugly threats against ethnic Russians, like nuking all 8 million of them. And that’s the kind of person the west is preparing to help back in the saddle by unleashing more sanctions and further isolating Putin? Really, we’d rather go there then seek common ground and peaceful solutions?
It would seem that many of the older Senators and EU career bureaucrats are under the impression that all that has changed since the cold war is that Russia was weakened. But if you take one look at what happened to western economies, debt levels and growth rates since then, it would be obvious to what extent the west, too, is considerably weaker.
It’s nice to draw up plans to be less independent on Russia for energy, but there would have to be alternative sources of supply for such plans to work. And they don’t seem to be available, or even if they are, at least 5-10 years away. How much more can bankrupt Europe afford to pay for its oil and gas delivery in the meantime, especially given the fact that it will also have to invest heavily in the infrastructure for the so far almost exclusively theoretical new energy streams?
Is all the chest thumping truly in the best interest of the average European or American? Or is this just the pursuit by a bunch of wrinkled demi-psychopath wannabees, of a faded dream of times gone by, still shot in black and white, that “we” have a god-given right to rule the entire planet and suck up all its resources for our own pleasure, swiping a few scraps off our tables for the rest of humanity? Do the not yet wrinkled rest of us still want to pursue that dream?
At the height of the cold war, if you recall, America still had a middle class, and the majority of the population looked forward and worked hard to achieve a better life for their children. Want to try poll Americans on that now? Want to try ask the Greeks and Italians how they see their children’s futures? The only reason the western elites care enough about reviving growth to risk going to – economic or actual – war over it, is to strengthen their own positions, not those of the increasingly downtrodden they purport to represent.
In China, the government and banking world worry, among an obvious slew of other issues, about the slowing pace of urbanization.
“The pace of migration of rural Chinese to cities, a dynamic hailed by Premier Li Keqiang as key to the nation’s development, is set to slow by a third in coming years …” [..] “In the past 30 years we turned farmers into factory workers, triggering massive gains in productivity and hence growth …”.
One would like to add: yeah, and pollution. What’s wrong with people living in the country side, with less pollution? It hurts economic growth numbers, that’s what’s wrong. But isn’t pollution one of the spear points in Chinese government policy too? Yes, it is, but like the west, China wants to have the growth first, and then clean up the mess afterwards. Whether that’s at all possible is much less of a concern. The leadership prefers a dirty world where it can maximize its hold on power to a cleaner one where it has less. It’s the same story wherever and whenever you look.
The financial world lives in hopeful expectation of more stimulus in China and Europe, stimulus that if it comes will originate only in lousy economic numbers. It’s not a mistake by central banks that lies at the origin of these stimulus measures, they simply serve the interests of the people who actually do benefit from the measures, not the ones who pay for them. That QE et al cannot lift an economy out of the doldrums is as clear to central bankers as it is to any single working neuron. But it is a great way to transfer wealth from the bottom to the top.
In China, the people’s view of economics is much less obfuscated than it is in the west. When real estate prices and trust investments start falling, the Chinese will take to the streets demanding the government give them what they feel they deserve after having moved to smog filled cities to do mind numbing jobs. But while China’s development model is as much of a bubble as ours, after the smoke has cleared, the country will rise up again under different leadership to take on a much bigger role in the world than it’s ever had in modern times.
Are we still going to be chest thumping by then? Or will we have learned to recognize the traits that make the leaders handpicked for us to vote for, unfit to represent out interests? I think that the poorer we get, and that process will forcibly continue, the more likely we are to pick the less competent ones. As long as they use the right words to promise us better days, and they look like they could work in TV, they got the job.
And they can get into another cold war with China and Russia and whoever else challenges our broken black and white dreams by then.
But granted, that’s the future. Here’s a great graph depicting where we are today, courtesy of IceCap:
Guess maybe our bubbles are not big enough yet?
Great piece with great graph. Should perhaps be everybody’s screensaver.
• Connecting The Bubbles The Fed Blows (IceCap)
Reading down IceCap’s memory lane, you’ll recall our November 2012 “Salma Hayek” publication which described how world leaders had two choices in the way to manage the global economy. The first option was based upon economic theory by Friedrich Hayek who claimed that the economy couldn’t be and shouldn’t be managed on an acute basis. Mr. Hayek believed that governments should simply ensure there was enough money available. That was about it. If only our leaders had listened.
Instead, the financial world we enjoy today chose the second option which was built entirely on the mislead belief of John Maynard Keynes, that man could in fact control or better still eliminate the business cycle by changing interest rates, changing tax rates, and spending more money than you own. In theory, this approach works beautifully. Then it meets reality. From our perspective, reality arrives when there are no more interest rates to cut, no more taxes to cut, and no more money to spend.
Chart 1 shows the success enjoyed by the US central bank’s interest rate policy over the years. In 1997, the Asian crisis followed by the Russian crisis followed by the collapse of a gigantic hedge fund, allowed the American central bank to plant the seeds for the next crisis which turned out to be the tech bubble.
At the time, both financial pundits and the big banks with their balanced funds proclaimed that the world had indeed entered a different financial and economic era – yes, this time it was different. Of course 4,000 Dow Jones Industrial and NASDAQ points later, the sheep started to lazily admit that perhaps this new post-Y2K economy wasn’t all that it was cracked up to be.
Not to worry, once again the American central bank mounted their ponies and rode the global economy straight into several years of ultra-low interest rates. The hope (there’s that word again) was that really cheap money would encourage people, companies and governments to borrow and spend again. And borrow and spend they did – right smack into the biggest housing bubble in economic history. Day traders became passé, and the newest game in town was flippin’ houses.
Rich people flipped mansions, plumbers and teachers flipped suburban homes and even Vegas strippers got in on the act and flipped condos among other things. By the time it was over, the entire world was flipped upside down – courtesy of the US Federal Reserve and their interest rate machine. And this brings us to the next global crisis, which we assure you is on its way. After all, Chart 1 proves it is crystal clear that every time the US Federal Reserve acts to “save us” from one crisis, it directly sows the seeds for an even bigger crisis in the future.
• China’s Urbanization Loses Momentum as Growth Slows (Bloomberg)
The pace of migration of rural Chinese to cities, a dynamic hailed by Premier Li Keqiang as key to the nation’s development, is set to slow by a third in coming years, deepening economic-growth concerns. A government report released this month projected a 6.3 percentage-point rise in the share of people living in cities from 2013 to 2020 – down from a 9.4-point gain the previous seven years. Nomura Holdings Inc. estimates that slower urbanization will slice as much as half a percentage point from annual gross domestic product growth over the next half decade.
“In the past 30 years we turned farmers into factory workers, triggering massive gains in productivity and hence growth,” said Ken Peng, Asia Pacific investment strategist at Citigroup Inc.’s private-bank business in Hong Kong. “Now those gains are diminishing.”
Li, who asked an arm of China’s cabinet to work with the World Bank on an urban-planning strategy released today, is under increasing pressure to take steps to address weakening economic expansion. A private report yesterday indicated a fifth straight slowdown in manufacturing in the world’s second-largest economy. The premier, who has advocated an urbanization-growth strategy for two decades, is up against a shrinking pool of rural workers, rising local-government debt and unhealthy air pollution in almost all big cities. Diminishing returns from urbanization make it tougher to achieve economic goals including this year’s 7.5% expansion target.
Today’s report from the World Bank and the State Council’s Development Research Center, which helped inform the government’s plan, recommends changes including on land use to spur more-efficient and denser cities. That can save China $1.4 trillion from a projected $5.3 trillion in infrastructure spending over the next 15 years, World Bank Chief Operating Officer Sri Mulyani Indrawati said in a speech today. “You cannot go on with the same urbanization model,” Sri Mulyani said in a separate interview.
Big Risk for Big Oil. But they’re in such bad shape they’re going for the jugular: get rid of Putin and take it all.
• Kremlin Partnership Places BP at Risk in Russia Crisis (Bloomberg)
No business has as much at stake as BP, as the crisis in the West’s relations with Russia escalates. The British oil company, whose shares are down 6.2% since Putin deployed troops in Crimea, holds the single biggest foreign investment in Russia – a 20% stake in OAO Rosneft (ROSN) it acquired last year. U.S. sanctions last week against oil-trading billionaire Gennady Timchenko showed willingness to target Russia’s most important industry and Vladimir Putin’s closest associates.
That’s a concern for BP because Rosneft links it directly to Putin’s regime: the state owns 70% of Russia’s largest oil producer and it’s run by Igor Sechin, a confidant of Putin for two decades. While current sanctions won’t harm BP’s ability to do business in Russia, analysts said they worry about the long-term prospects for the Rosneft investment against a background of worsening relations between the West and Moscow. “Tight sanctions would impact BP more than peers given Russia is their second-largest contributor to earnings and production after the U.S.,” said Brian Youngberg, an analyst at Edward Jones in St. Louis. “BP’s placed a big bet on Russia and something like this shows the risk in doing so.”
Since the start of the month, BP’s shares have dropped more than any of the 30 members of the Dow Jones Oil & Gas Titans index apart from Russian gas exporter OAO Gazprom. On a March 4 conference call, one day after the value of London-based BP’s deal tumbled $850 million as investors sold Russian stocks in response to the Ukrainian crisis, Chief Executive Officer Bob Dudley summed up the importance of Rosneft for a company still trying to recover from 2010’s Gulf of Mexico disaster.
“And then there is our unique investment in Russia’s growing energy industry,” he said. “Russia is, of course, one of the world’s largest oil and gas producers and a country where BP has a long and successful track record. Through our investment in Rosneft, we have created a unique position.” While the company is monitoring the situation, it remains fully committed to its investment in Russia, said Toby Odone, a BP spokesman. Rosneft declined to comment.
True colors shining through.
• Former Ukraine PM Tymoshenko: Time To Grab Guns And Kill Damn Russians (RT)
Ukrainians must take up arms against Russians so that not even scorched earth will be left where Russia stands; an example of former Ukrainian PM Yulia Tymoshenko’s vitriol in phone call leaked online. Tymoshenko confirmed the authenticity of the conversation on Twitter, while claiming that a section where she is heard to call for the nuclear slaughter of the eight million Russians who remain on Ukrainian territory was edited. She tweeted “The conversation took place, but the ‘8 million Russians in Ukraine’ piece is an edit. In fact, I said Russians in Ukraine – are Ukrainians. Hello FSB 🙂 Sorry for the obscene language.”
The former Ukrainian PM has not clarified who exactly she wants to nuke. The phone conversation with Nestor Shufrych, former deputy secretary of the National Security and Defense Council of Ukraine, was uploaded on YouTube on Monday by user Sergiy Vechirko. Shufrych’s press service flatly contradicted Tymoshenko, slamming the tape as fake. The press release reads “The conversation didn’t take place,” as quoted by korrespondent.net. The leaked phone call took placed on March 18, hours after the Crimea & Sevastopol accession treaty was signed in the Kremlin.
While Shufrych was “just shocked,” Tymoshenko was enraged by the results of the Crimean referendum . “This is really beyond all boundaries. It’s about time we grab our guns and kill go kill those damn Russians together with their leader,” Tymoshenko said. The ex-PM declared if she was in charge “there would be no f***ing way that they would get Crimea then.”
Shufrych made the valid point that Ukraine “didn’t have any force potential” to keep Crimea. But Tymoshenko, who plans to run in Ukraine’s presidential election, expressed confidence that she would have found “a way to kill those a*****es.” “I hope I will be able to get all my connections involved. And I will use all of my means to make the entire world raise up, so that there wouldn’t be even a scorched field left in Russia,” she promised. Despite being incapacitated by spinal disc hernia the ex-PM stressed she’s ready to “grab a machine gun and shoot that m*********er in the head.”
These moves have been under consideration for a long time. All the plans are drawn up.
• Russian Oil Seen Heading East Not West in Crimea Spat (Bloomberg)
The Crimean crisis is poised to reshape the politics of oil by accelerating Russia’s drive to send more barrels to China, leaving Europe with pricier imports and boosting U.S. dependence on fuel from the Middle East. China already has agreed to buy more than $350 billion of Russian crude in coming years from the government of President Vladimir Putin. The ties are likely to deepen as the U.S. and Europe levy sanctions against Russia as punishment for the invasion of Ukraine.
Such shifts will be hard to overcome. Europe, which gets about 30% of its natural gas from Russia, has few viable immediate alternatives. The U.S., even after the shale boom, must import 40% of its crude oil, 10.6 million barrels a day that leaves the country vulnerable to global markets. The alternatives to Russia also carry significant financial, environmental and geological challenges. Canada’s oil sands pollute more than most traditional alternatives, while Poland’s promising shale fields have yet to be unlocked. The biggest oil finds of the past decade are trapped under the miles-deep waters offshore Brazil and West Africa.
“You’re going to see the Russians go out and try to sell and you’re going to see the Asian buyers drive hard bargains with Russia,” said Philip Verleger, an energy economist at PKVerleger LLC in Carbondale, Colorado, suggesting European countries will feel the most pain in the form of higher gas prices as they struggle to reduce their dependence on Russia. As world leaders gathered in The Hague to discuss nuclear security issues, U.S. President Barack Obama sought to encourage Chinese criticism of Russia on Ukraine. Chinese President Xi Jinping in turn pressed Obama about a reported U.S. breach of the servers of China’s largest phone-equipment maker.
China has always held a “just and objective attitude” toward the Ukraine crisis, Xi said in the meeting with Obama, according to a report yesterday from China’s official Xinhua news agency. The world’s biggest energy user, China abstained from the United Nations Security Council resolution that declared the Crimean succession referendum illegal. Russia vetoed it.
China imported a record amount of Russian crude last month, 2.72 million metric tons, about a supertanker full every three days. The total more than tripled in a decade, and Russia now represents 12% of China’s crude imports, customs data show, among the highest levels in the past seven years.
“It’s always been assumed Russia reorienting its shipments toward China would be a long-term objective; originally it was considered something of a leverage point for Russia,” said Robert Kahn, a senior fellow at the Council on Foreign Relations in Washington. “Now people may see it as a reaction to the possible loss of a European market.”
Hilarious. Nothing US infighting can’t make worse.
• Senate Republicans Seek to Void IMF Money in Ukraine Aid (Bloomberg)
A partisan dispute over the International Monetary Fund will be at the center of the U.S. Senate debate this week on legislation providing aid to Ukraine and imposing sanctions on Russia. After a Senate vote yesterday, 78-17, to advance the bill, Republicans say they’ll try to strike language boosting the U.S. share, or quota, at the IMF and implementing a 2010 international agreement giving rising economies more voice. “If the IMF reform is in there, you’re not going to have that strong show of unity from the Congress,” said Senator Ron Johnson, a Wisconsin Republican, who said he would offer an amendment to eliminate the language. “Hopefully we can strip that out so that we have as singular a voice coming from Congress as possible.”
The IMF provision has slowed Senate consideration of legislation that otherwise has drawn broad bipartisan support. The Senate measure, which Majority Leader Harry Reid said yesterday he wants to complete this week, would provide about $1 billion in loan guarantees and authorize $150 million in direct assistance to Ukraine. Senators could begin considering amendments as soon as today. In addition to removing the IMF provision, Republicans will seek to boost U.S. natural gas exports to countries that are members of the North Atlantic Treaty Organization.
Senator Ted Cruz, a Texas Republican, told reporters yesterday that the IMF changes Democrats are seeking “would decrease America’s influence at the IMF and perversely would increase Russia’s influence in the IMF.” “These provisions have no business in a Ukraine aid package,” Cruz said, adding that taking out the IMF language would be the “easiest way” to quickly pass the legislation. Significantly, Cruz said he wouldn’t try to block a final vote on the underlying bill as long as Republicans are given a vote on their amendment to remove the IMF provision.
Delay “sends a very weak message” to Moscow, said Reid, who blamed Republicans for slowing action, noting that Russia moved to annex Crimea while Congress was on a week-long break that ended yesterday. “It’s impossible to know whether events would have unfolded differently if the United States had responded to this Russian aggression with a strong, unified voice, which we did not do,” Reid said.
• Why The EU Won’t Annex Ukraine (RT)
Hysterical 24/7 Western spin conveys the impression Ukraine will be annexed by a (mostly bankrupt) EU tomorrow. No so fast! The final deal will be just an association agreement; afterwards there would be a long and winding road towards EU admission (which, by the way, the absolute majority of EU member-nations don’t want.) Article 7.2. of the association agreement states that Ukraine will have to comply with the common foreign and security policy (CFSP) and the European security and defense policy (ESDP).
The obscure – even for most Europeans – ESDP happens to be the key European pillar of NATO. Translation: it details how the EU is subordinated to the US (which controls NATO). For instance, the EU may only act in a determined case if NATO first declines to. Additionally, the March 2003 Berlin-plus agreement allows the EU to use NATO’s hardware and software for military operations if NATO declines to. What this essentially means is that Ukraine is on the road to become legally bound to NATO’s overall project. Along with other independent analysts, I’ve argued from the start that this whole geopolitical drama is first and foremost about NATO annexing Ukraine.
The NATO-Ukraine twisted love affair started in the early 2000s. After some soul-searching, it was decided NATO or no NATO should be the subject of a national referendum in the future. In the 2008 Bucharest summit NATO opened its arms, stating that Ukraine could join as soon as it met the criteria. In 2010 Yanukovich announced Ukraine was not interested anymore. Still, Ukraine remains quite a muscular member of NATO’s innocent-sounding Partnership for Peace (PfP).
No wonder NATO is now in overdrive selling the notion that Ukraine is “under threat” – and should join as soon as possible. NATO’s secretary-general – the astonishingly mediocre American poodle, Anders Fogh Rasmussen – said we’re living the most serious threat to Europe’s security since the end of the Cold War: “This is a wake-up call. For the Euro-Atlantic community. For NATO. And for all those committed to a Europe whole, free and at peace.’’ He forgot to add: a Europe under free and peaceful submission to the Pentagon.
Weidmann is Bundesbank. Bundesbank is enemy no. 1 of EU QE.
• ECB’s Weidmann Says QE Not Out Of The Question (Reuters)
Bundesbank President Jens Weidmann said it was not ‘out of the question’ for the European Central Bank to buy bank assets to fight deflation, in a softening of the German central bank’s strict stance on the issue. Quantitative easing (QE) is when a central bank buys loans or other assets from banks and would represent a radical departure for the ECB, which has so far, not least under pressure from Germany, refused to make such a move.
Weidmann, who is a member of the European Central Bank Governing Council told MNI in an interview published on Tuesday that the scope of the ECB’s conventional tools, such as changes to the interest rates, was limited. “The unconventional measures under consideration are largely uncharted territory. This means that we need a discussion about their effectiveness and also about their costs and side-effects,” Weidmann said in the interview, conducted on Friday. “This does not mean that a QE program is generally out of the question,” Weidmann said. “But we have to ensure that the prohibition of monetary financing is respected.”
Yay! More vampires. Guess that means China’s ready to play in the big leagues.
• China Banks Drained by Internet Funds Called Vampires (Bloomberg)
It has been labeled a “blood-sucking vampire” by a prominent commentator on state-run television. Executives at China’s largest banks have called for regulators to curb its rapid expansion.
The focus of this ire is Internet financing, specifically Yu’E Bao, the fund pioneered nine months ago by Alibaba Group Holding Ltd.’s online-payment affiliate Alipay. Its ease of use, involving a few taps on a smartphone, has drawn deposits from 81 million customers, more than the population of Germany, as they chase returns higher than China’s banks can offer. The total exceeded 500 billion yuan ($80 billion) as of Feb. 28, according to the official Xinhua news agency, double the amount reported by Alipay in mid-January.
At least six other technology firms, including Baidu Inc. and Tencent Holding Ltd., have embraced Internet financing with similar products offering returns as high as 10% and threatening to drain more cash from China’s banking system. Bank executives, unable to stop the outflow of their cheapest source of funding because interest rates on comparable deposits are fixed by the government at 0.35%, are calling for more regulation, saying that lack of oversight and risks related to account security, yield volatility and liquidity management threaten China’s financial stability.
“Now it’s time to step up regulation for the industry’s own good,” Yang Kaisheng, a former president of Industrial & Commercial Bank of China Ltd. and now an adviser to the China Banking Regulatory Commission, said in an interview this month at the National People’s Congress in Beijing. “The emergence of Internet financing is inevitable in China because it serves the grassroots better, but whoever is engaging in financial services, no matter online or off-line, must comply with regulations. If someone stays out of oversight for too long, the chances of it disrupting financial stability will increase significantly.” [..]
“Why is all the money going into Yu’E Bao? Because banks fail to pay what savers deserve. You can’t fool them,” Ma Weihua, a former president of China Merchants Bank Co., said during a group discussion at the National People’s Congress. “Yu’E Bao is forcing banks to face up to the challenges of interest-rate deregulation.” The drain from the banks prompted Niu Wenxin, a managing editor and chief commentator at China Central Television, to attack Yu’E Bao in his blog on Feb. 21, drawing 11.5 million views and sparking nationwide debate.
“Yu’E Bao is a vampire sucking blood out of the banks and a typical financial parasite,” Niu wrote. “It didn’t create value. Instead it makes a profit by pushing up the whole society’s borrowing costs. By passing some teeny-weeny benefit to the public, it makes massive profit for itself and lets the entire society foot the bill.”
• Credit Problems To Rattle China Economy: New Zealand FinMin (CNBC)
The Chinese economy will continue to face more volatility as the country wrestles with credit problems, says New Zealand’s Finance Minister Bill English. “There’s clearly a will [in China] to allow some defaults to try and work through the credit build up,” English told CNBC Asia’s “Squawk Box” on Tuesday. “As an economy selling into China, we’re expecting more volatility in the economy in general, but still reasonably solid consumer demand,” he added.
The stability of China’s financial sector has been in focus in recent months after a near high-profile failure of a trust product, which was marketed by local lender ICBC, in January. Earlier this month, China experienced its first domestic bond default when Shanghai Chaori Solar Science & Technology Co was unable to make an 89 million yuan ($14.5 million) interest payment. In addition, recent economic data has pointed to slowing growth momentum. This has raised speculation that authorities may provide monetary or fiscal stimulus to support growth. “I think we’ve had an artificially smooth growth profile out of China because of the extent of their intervention. They can’t keep doing that,” said English.
China is New Zealand’s biggest export destination, with dairy products accounting for roughly half of the $10 billion worth of goods the country dispatched to the mainland in 2013. Last week, China and New Zealand signed a currency deal to allow the direct conversion of the New Zealand dollar with the Chinese renminbi or yuan. The deal aims to reduce costs for exporters and importers by removing the necessity for transactions to be settled in two foreign exchange trades via a third currency – typically the U.S. dollar.
True enough, Moody’s, but only the worst handful have to go down to create mayhem.
• China’s Local Government Debt Burden Varies Widely: Moody’s (CNBC)
Concerns over high levels of debt among local governments in China have mounted in recent months, but the quality and quantity of that burden varies widely by province, Moody’s said. “The provinces all show varying degrees of credit risk as their indebtedness levels differ significantly, from moderate to high,” credit rating service Moody’s Investor Service said in a report on Tuesday. China’s state auditor said in a report in December that local governments owe almost $3 trillion in outstanding debt as of the end of June last year, up 67% from the last audit in 2011.
The debt pile is viewed as one of the biggest threats facing the country’s economy and there are worries that much of it cannot be repaid as it was used to fund non-profitable projects. Among the top 31 upper-tier local governments reporting government-related debt on their websites, indebtedness ranged from 69% to 156% of revenues, with the median at 108%, Moody’s said. The median debt for all the provinces was 31% of their gross domestic products (GDP), but the levels ranged from 79% of GDP for Guinzhou province to 13% for Shandong.
“While higher levels of debt are typically credit negative, the credit quality implications also depend on economic strength, budget flexibility, access to financing, and ability to repay,” Moody’s said. “In addition to the debt figures, we need to understand an entity’s ability to mobilize resources to repay its debt and the extent to which government-related entities have projects that generate streams of revenue sufficient to repay debt.”
Moody’s said it was concerned about a lack of information on which financing vehicles and other entities are generating enough revenue to repay their debt without tapping the local government. It cited Beijing Infrastructure, which operates the capital’s subway system, as an example of a company unable to operate without heavy subsidies.
• China Demands End To US Spying Activities After New Snowden Leak (RT)
China has demanded that the US stop the snooping activities of its National Security Agency against Chinese officials and companies. Beijing has also asked Washington to explain the reports on the illegal spying. Chinese foreign ministry spokesman, Hong Lei, said on Monday that China is “extremely concerned” about allegations that the US National Security Agency (NSA) infiltrated the servers of Chinese telecom giant, Huawei, targeting the Chinese Trade Ministry, national banks, leading telecommunications companies and the country’s top officials.
“China has already lodged many complaints with the United States about this. We demand that the United States makes a clear explanation and stop such acts,” the spokesman stressed. Hong cited media reports on “eavesdropping, surveillance and stealing of secrets by the United States of other countries, including China,” which were based on the revelations of the former NSA contractor, Edward Snowden.
The Snowden leaks published by The New York Times and Der Spiegel on Sunday exposed the details of the NSA’s activities in China, which allegedly involved spying on the former Chinese President Hu Jintao. China’s reaction comes amid the European trip of Chinese President Xi Jinping, who met US President Barack Obama in The Hague on Monday.
The US first lady, Michelle Obama, on Saturday addressed college students in Beijing, saying that open access to online information is a “universal right.” However, the two countries’ governments clearly had a different understanding of “open access” to the global net. “We consistently believe internet communication technologies should be used to develop a country’s economy in a normal way, and not be used in stealing secret information, phone-tapping and monitoring,” Hong said.
Oh, it’s coming, alright.
• Dying Memphis Neighborhood Foretells Next U.S. Crisis (Bloomberg)
When Rebecca Black bought the three-bedroom house at 698 Hazelwood Road in southwest Memphis in May 2005 and moved in with her two teenage sons, it was a quiet community. Children played in the street and neighbors tended their yards. She could afford the $57,000 mortgage if she skipped oil changes for the car and served the boys store-brand groceries. Then trouble came.
Her next-door neighbor died, and his family lost the house. Across the street, there were two foreclosures. One morning, the abandoned house three doors down had gang graffiti spray-painted on the side. A girl in the neighborhood pulled a gun on Black’s son. In 2010, it was Black’s turn to go. She’d gotten one of those 2–28 mortgages that slowly strangled so many borrowers – two years of a low, fixed interest rate followed by 28 years of rising payments – and she’d reached her limit. “I was crazy about that house, and so proud of it,” said Black, a U.S. Army veteran. “I just didn’t have enough money.”
She got a letter from her mortgage company saying it was starting the foreclosure process, and rather than hear a knock on the door one morning from a sheriff’s deputy ordering her to get out, Black packed whatever she could fit into her Chevy Astro and left the home she loved so well. By 2011, the property two doors down had sold for $3,000, and Black was in bankruptcy.
If homes are living things, sustaining their inhabitants and contributing to the vitality of their communities, then Hazelwood Road is dying. On nine of the fifteen parcels on Black’s side of the street, houses sit empty, have been bulldozed flat, or the lots have reverted to a tangle of sumac and poison ivy.
In the hottest part of 2012, four years after bad mortgages triggered a meltdown in the world’s most resilient economy, the biggest banks were reporting record profits and government agencies were trumpeting statistics showing that a robust recovery from the worst hard times since Dorothea Lange’s Great Depression photo “Migrant Mother” was just around the corner.
Though Hazelwood Road was never a paradise – a place where Black could buy a three-bedroom house for $57,000 couldn’t be described as anybody’s ideal of “location, location, location” – conditions there indicated that something essential about America had shifted in the aftermath of the 2008 financial crisis. Hope for advancement was that much tougher for most people to sustain after 2008. And just as the crisis was no accident but rather a tragic convergence of stupidity and poor oversight, so too were its consequences a result of calculation.
Just about all the behavior by the biggest banks and their Washington regulators described in this book occurred after the 2008 financial crisis. The book is divided into seven chapters, each corresponding to one of Catholicism’s seven deadly sins. Wall Street’s seven sins – size, secrecy, regulatory capture (when government supervisors identify more with the industry they police than with the people they’re supposed to protect), excessive pride, complexity, impunity, and a predatory greed – risk the second avoidable economic cataclysm of the baby boom era.
• Long-Term Unemployed on the Margins of the Labor Market (Brookings)
In “Are the Long-Term Unemployed on the Margins of the Labor Market?” Alan B. Krueger, Judd Cramer, and David Cho of Princeton University find that even after finding another job, reemployment does not fully reset the clock for the long-term unemployed, who are frequently jobless again soon after they gain reemployment: only 11% of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.
Long-term unemployment has remained a persistent problem post-Great Recession – a somewhat new issue for the U.S., as compared to Europe. Despite declining over the last 4 years, the share of the unemployed who have been out of work for more than 6 months still exceeds its previous peak reached in 1981-82, and is well above its average in the last recovery, the authors note. Yet, measures of short-term unemployment are close to their average rates in the last recovery. As a result, overall unemployment remains elevated because of the large number of people who have been unemployed long term.
The long-term unemployed are spread throughout all corners of the economy, with a majority previously employed in sales and service jobs (36%) and blue collar jobs (28%), they find. In addition, the authors find that when long-term unemployed workers do return to work, there is a tendency to return to jobs in the same set of industries and occupations from which the workers were displaced.
The authors present a calibrated model that shows that the collapse in job vacancies, coupled with a decline in labor force withdrawal rates, accounts for the sharp rise in the number of long-term unemployed workers in 2009-13 and the overall rise in the unemployment rate. Furthermore, the authors show that the historically slower rate of reemployment for long-term unemployed workers can account for the apparent shift in the relationship between the unemployment rate and job vacancies. Their model predicts that the unemployment-vacancy relationship will return to its original position as the long-term unemployed continue to exit the labor force.
• Fracking Won’t Crack UK Dependence On Russian Gas Imports (Guardian)
As tensions with Russia intensify, government ministers and conservative commentators have increasingly sought to capitalise on the crisis to sell fracking to the electorate. Over the weekend, Conservative energy minister Michael Fallon argued that the UK should reduce its reliance on gas imports by fracking for shale gas in the UK. The foreign minister, William Hague, wrote in the Telegraph that we need to “develop indigenous European energy supplies … such as shale gas”, while commentators including Matt Ridley argued that if it wasn’t for “the greens in suits, rather than kaftans” we could have a fully fledged fracking industry up and running already.
The chutzpah of these attempts to build support for an increasingly unpopular fracking industry is astonishing. These are the same people who were arguing the case for the construction of up to 40 gas power stations. This would have left us even more dependent on imported gas. The Crimean crisis should be a catalyst for a rethink about whether the government’s “dash for gas” is the wisest energy policy for a country with dwindling North Sea resources. But rather than admit that we should be reducing our dependence on gas, its proponents prefer to blame the green groups that have for decades been arguing for a reduced reliance on finite energy sources.
Claims that fracking offers a panacea to dependence on Russian gas don’t even stack up. A study for the oil and gas industry by consultants Pöyry, found that European supplies wouldn’t even come on stream at scale for at least a decade. The study also shows that while the EU’s dependency on gas imports could be reduced by up to 18% depending on the success of EU shale gas extraction, it is actually supplies of liquefied natural gas from Qatar that would be displaced by shale gas. Supplies that are deemed “secure” by Fallon. Even a shale gas boom will have no impact on Russian imports until well into the next decade, by which point demand for gas should be falling sharply in the EU as efforts to limit climate change bear fruit.
It is, in fact, our efforts to tackle climate change that will reduce the UK’s and Europe’s exposure to energy imports. The EU has set a target of 80%-95% emissions reductions by 2050. In the UK, the government’s independent climate advisers have suggested that we will need to largely remove gas from the power sector in the coming decades. Yet the government, including the energy minister, is opposing measures that could make this ambition a reality by blocking nationally binding EU targets for both renewables and energy efficiency. The European commission’s assessment of the impacts of these targets found that they could cut net energy imports by more than half by 2050.
What did I call it again? The gift that keeps on taking.
• TEPCO Fails To Restart Fukushima Water Decontamination Process (RT)
The water decontamination process at the crippled Fukushima nuclear power plant has once again been halted, only about six hours after the plant’s operator TEPCO announced it was resuming the purification process following a previous failure. Six days ago, Tokyo Electric Power Co. (TEPCO) detected a failure in what is known as the Advanced Liquid Processing System (ALPS). The company said that up to 900 tons of water, which had not been sufficiently cleaned in the ALPS equipment, flowed into a network of 21 tanks that were holding 15,000 tons of treated water. Not only have the 21 tanks been rendered unusable, but all 15,000 tons of previously cleaned water has to be retreated.
TEPCO said it restarted two of three lines used to clean toxic water at around 04:00 GMT on Monday. A third line remained offline while crews examined a filter defect, AFP reported. Yet shortly before 10:00 GMT, TEPCO suspended the ALPS of the two units after finding about a half liter of leaked water at a tank designed to measure levels of radioactive materials in the processed water, according to Jiji Press. TEPCO said in a press release that there were no new leaks outside the system, though. The difficulties only mark the latest challenges TEPCO has faced since March 2011, when a 9.0 megathrust earthquake triggered a subsequent tsunami that resulted in a badly-damaged Fukushima Daiichi nuclear power plant.
The ALPS system was developed to dramatically curb the radiation level of highly contaminated water that is accumulating at the plant. The ALPS consists of 14 steel cylinders through which the contaminated water is filtered. After the filtering, waste materials like the absorbent and remaining sludge are transferred to high-integrity containers (HICs) that are transported to a temporary storage facility.
The ALPS can remove 62 different types of radionuclides, including strontium and cobalt, from contaminated water. While the system cannot remove tritium – a radioactive isotope of hydrogen – the purification of water through the system is expected to reduce damage levels if water leaks from storage tanks.
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