Harris & Ewing The Fall of Washington: Smokestacks on the Mall Sep 17 1935
And now for something completely different. Occasionally, I go through analytical stats for The Automatic Earth, to see who links to us. A few days ago, there were a bunch of links to my July 27 article US and EU Lose Major Energy Battle in Ukraine (I find it hard to believe nobody else has jumped on the ‘heart’ of that article: the Ukraine parliament voting down the sale of Naftogaz to western interests; if that’s not big enough for you, what is?).
The links were from a site that I think is Ukrainian, though I don’t know which ‘side’ in Ukraine, since I can’t read either the Cyrillic or the Roman contents. I do have an idea, though, of the ‘side’: in the same thread as the link to my article, someone posted an article from May 2, 1998, written by Thomas Friedman (or, as he calls him: Tomasa Fridmana) for the New York Times. The article is an interview with George Kennan, with Friedman comments.
I don’t want to waste words on Friedman, we all -should – know – of – his love of globalization and a few other hobby horses that would just lead me too far off track at this point. Suffice it to say, Tomasa thinks ‘The World is Flat’, and I totally believe his personal world indeed is. In my view, Glenn Greenwald’s description of Friedman a few years ago is pretty much all you need to know (see Wikipedia for sources):
“His status among American elites is the single most potent fact for understanding the nation’s imperial decline.”
George Kennan deserves a few more words. Once described by Foreign Policy as “the most influential diplomat of the 20th century”, Kennan was instrumental in defining US post WWII policy with regards to Russia. Born in 1904, he joined the US State Dept. in 1926(!), first began working in the US embassy in Moscow in 1933, and became America’s no 1. expert on Russia, though there were always, throughout his career, many voices who contested this, simple because they didn’t like what he said.
Kennan was instrumental in establishing the principle of “containment”, the Truman Doctrine and the Marshall Plan. In 1947, he anonymously, as “X”, wrote “The Sources of Soviet Conduct” in Foreign Affairs magazine, in which he said the Soviet regime was inherently expansionist and its influence had to be “contained”.
But while according to Kennan, this containment should be primarily political and economic, others ran away with his ideas and turned them into the military principles that started the Cold War. Kennan was now famous, but because he strongly opposed this ‘erosion’ of his ideas in the late 1940s, his career became a bumpy roller coaster. He ran in and out of favor with various administrations.
He did not at all like what he saw inside Russia between 1933 and the end of WWII, but he thought the subsequent arms race was preposterous, since Russia had lost up to 30 million people in the war and was flat on its back in 1945. Later, he said: “the general effect of Cold War extremism was to delay rather than hasten the great change that overtook the Soviet Union”.
He didn’t like the establishment of NATO (though he played a role in it), and later turned against Clinton and W. for the invasions of Kosovo and Iraq. And he was fiercely opposed to NATO expansion after 1990, which he labeled a “strategic blunder of potentially epic proportions”. He summed up his views this way:
Anyone who has ever studied the history of American diplomacy, especially military diplomacy, knows that you might start in a war with certain things on your mind as a purpose of what you are doing, but in the end, you found yourself fighting for entirely different things that you had never thought of before …
In other words, war has a momentum of its own and it carries you away from all thoughtful intentions when you get into it. Today, if we went into Iraq, like the president would like us to do, you know where you begin. You never know where you are going to end.
Kennan died in 2005, 101 years old. What a life. And what a man.
Here’s Friedman’s 1998 article on him. I’m sure you’ll see why I wanted to bring it up.
His voice is a bit frail now, but the mind, even at age 94, is as sharp as ever. So when I reached George Kennan by phone to get his reaction to the Senate’s ratification of NATO expansion it was no surprise to find that the man who was the architect of America’s successful containment of the Soviet Union and one of the great American statesmen of the 20th century was ready with an answer.
”I think it is the beginning of a new cold war,” said Mr. Kennan from his Princeton home. ”I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else.
This expansion would make the Founding Fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a light-hearted action by a Senate that has no real interest in foreign affairs.”
”What bothers me is how superficial and ill informed the whole Senate debate was,” added Mr. Kennan, who was present at the creation of NATO and whose anonymous 1947 article in the journal Foreign Affairs, signed ”X,” defined America’s cold-war containment policy for 40 years.
”I was particularly bothered by the references to Russia as a country dying to attack Western Europe. Don’t people understand?
Our differences in the cold war were with the Soviet Communist regime. And now we are turning our backs on the very people who mounted the greatest bloodless revolution in history to remove that Soviet regime.
”And Russia’s democracy is as far advanced, if not farther, as any of these countries we’ve just signed up to defend from Russia,” said Mr. Kennan, who joined the State Department in 1926 and was U.S. Ambassador to Moscow in 1952. ”It shows so little understanding of Russian history and Soviet history.
Of course there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are – but this is just wrong.”
One only wonders what future historians will say. If we are lucky they will say that NATO expansion to Poland, Hungary and the Czech Republic simply didn’t matter, because the vacuum it was supposed to fill had already been filled, only the Clinton team couldn’t see it.
They will say that the forces of globalization integrating Europe, coupled with the new arms control agreements, proved to be so powerful that Russia, despite NATO expansion, moved ahead with democratization and Westernization, and was gradually drawn into a loosely unified Europe. If we are unlucky they will say, as Mr. Kennan predicts, that NATO expansion set up a situation in which NATO now has to either expand all the way to Russia’s border, triggering a new cold war, or stop expanding after these three new countries and create a new dividing line through Europe.
But there is one thing future historians will surely remark upon, and that is the utter poverty of imagination that characterized U.S. foreign policy in the late 1990’s. They will note that one of the seminal events of this century took place between 1989 and 1992 — the collapse of the Soviet Empire, which had the capability, imperial intentions and ideology to truly threaten the entire free world. Thanks to Western resolve and the courage of Russian democrats, that Soviet Empire collapsed without a shot, spawning a democratic Russia, setting free the former Soviet republics and leading to unprecedented arms control agreements with the U.S.
And what was America’s response? It was to expand the NATO cold-war alliance against Russia and bring it closer to Russia’s borders.
Yes, tell your children, and your children’s children, that you lived in the age of Bill Clinton and William Cohen, the age of Madeleine Albright and Sandy Berger, the age of Trent Lott and Joe Lieberman, and you too were present at the creation of the post-cold-war order, when these foreign policy Titans put their heads together and produced . . . a mouse.
We are in the age of midgets. The only good news is that we got here in one piece because there was another age – one of great statesmen who had both imagination and courage.
As he said goodbye to me on the phone, Mr. Kennan added just one more thing: ”This has been my life, and it pains me to see it so screwed up in the end.”
One last thing. I’m pretty sure I know what George Kennan would have thought of the role the US plays in Ukraine. But I’m not sure about Tom Friedman.
U.S. stocks on Friday built on the week’s losses, leaving the S&P 500 with its biggest weekly drop in two years. Friday’s flurry of economic data only briefly lifted the stock market. Instead, Thursday’s selloff, sparked in part by signs of rising wages, continued as investors remained fearful that the Federal Reserve might raise interest rates sooner than expected. The S&P 500 fell 5.52 points, or 0.3% to end at 1,925.15, though it finished off its session low. The benchmark endured a weekly loss of 2.7%, its largest percentage drop since the week ended June 1, 2012. It’s now off 3.2% from its July 24 record close.
The Dow dropped 69.93 points, or 0.4%, to finish at 16,493.37 on Friday. The blue-chip gauge recorded a weekly tumble of 2.8%, its biggest decline since the week ended Jan. 24. Friday’s generally positive economic data keeps pressure on the Federal Reserve to reduce its stimulus measures that have helped stock prices, said Colin Cieszynski, chief market strategist at CMC Markets. “Good news for the economy is bad news for the market, because it means they’ll have to take way the liquidity that’s boosted stocks eventually,” Cieszynski told MarketWatch.
Ambrose is on a prolific roll.
The Third Taper Tantrum has been postponed, perhaps. It has not been averted. The US Federal Reserve is preparing to tighten. Dallas Fed chief Richard Fisher said today that rates may rise early next year: “we are closer to lift-off than the market assumed we were, sometime late in 2015. I believe we moved that forward significantly,” he told CNBC. Nomura, Morgan Stanley and HSBC all think the dollar is poised for a long secular rally. This will expose which EMU crisis states have really recovered, and which emerging markets have genuinely progressed beyond boom-bust credit cycles. This is the most important development in global finance today. All else depends on it, including China’s post-bubble denouement, and Russia’s hopes of muddling through under sanctions. A powerful dollar rally threatens to turn the world upside down.
[..] When the Fed finally decides that it cannot create more jobs without stoking inflation – when the Phillips Curve trade-off turns malign – it will not show much mercy for markets. The Board is longing to prove that it is not a captive of Wall Street. It may well be especially tough to demonstrate central banking purity. Nor does the Fed pay as much attention as it should to the interlocking forces of world finance. It has a closed economy macro-model. The IMF is afraid that it may tighten stubbornly into an emerging market storm, precipitating a brutal dollar squeeze. Data from the Bank for International Settlements shows that 70% of global cross-border lending is still in dollars, whether or not the banks are American. Emerging markets have raised a further $2 trillion on the global bond markets in foreign currencies – mostly dollars – lately at a real rate of just 1%.
Dollar loans to Chinese companies through Hong Kong may have reached $1.2 trillion, a carry trade to match the subprime and Alt-A bubble in the US before Lehman blew up. It is this that will be tested. As the BIS has been warning, global debt ratios are at record levels both in emerging markets (175% of GDP) and in the rich countries (275%). They are therefore more sensitive than ever before to any rise in borrowing costs. Suddenly the world we have all know for the last five years is swivelling into reverse. The US will soon stop leaking emergency liquidity into the world economy, stoking asset bubbles everywhere.
US car sales? What a cheatin’ mess. Subprime loans, uber-creative accounting, and then a crash.
July was another hot month for car sales, with today’s data releases showing the market remains on track to set a new post-recession high of almost 17 million units this year. Longer loan terms, lower lending standards and growing lease rates have the new car market racing toward its redline, and there’s talk of a bubble forming in car sales. That concern is well-founded. Like a well-tuned engine, the car market’s performance upgrade must be matched with better safeguards against overheating and misfiring. Unfortunately, the quality of car sales data in the U.S. has not been improved to meet the specifications of our hopped-up market. Even to those who regularly cover it, the U.S. auto-sales reporting system remains dauntingly, and unnecessarily, complex and opaque (note the major correction on this “insider’s guide to auto sales reporting”).
Here’s what U.S. car sales are not: registration numbers. In other mature auto markets such as Europe and Japan, every new car “sale” reported monthly is backed by a registration. Not so in the U.S., where a gap of almost 1 percent between the sales reported by dealers and the number of new vehicles registered is tolerated as normal. Last year, more than 140,000 new cars were officially sold to U.S. retail customers but never entered the fleet. This became an issue when Mercedes accused BMW of inflating its 2012 sales, running up a gap between sales and registration by including cars sold to dealers for loaner fleets. BMW’s defenses only highlighted the depth of the problem. In response to discussion of cash discounts dealers received in July 2012 to purchase vehicles for loaner fleets, the CEO of BMW North America argued, “everyone does it.” The subtext: These data discrepancies are in the short-term interest of every executive who occasionally finds himself a few hundred (or thousand) units short of a bonus at month’s end.
Only in the high-stakes, hyper-image-conscious luxury car game does self-policing of these volume-dumping tactics actually take place. Perhaps even more troublesome was a defense that BMW’s spokesman gave by e-mail in February 2013: “State-provided registration data, as reported by Polk, can lag 60 or even 90 days after an especially strong sales month. Throw in a holiday and the delay is inevitable. That’s what is playing out here.” [..] Short-term incentives for dealers and manufacturers to squeeze extra volume through various loopholes in the auto-sales reporting system are enormous, but the law of supply and demand can only be evaded for so long. With the size of the U.S. fleet failing to keep pace with gaudy sales numbers and the average vehicle age rising to more than 11 years, the market fundamentals don’t suggest endless growth beyond the approximately 800 car per 1,000 people level.
And you thought Fannie Mae and Freddie Mac were dead. Or contained. Or civilized.
Prices of a new type of U.S. mortgage bonds are plunging this month, teaching investors a lesson on the risks to markets wrought by the growing constraints on Wall Street banks. The $8.2 billion of risk-sharing securities sold in the last year by government-controlled Fannie Mae and Freddie Mac can shift their losses from homeowner defaults to bond buyers. One slice of a deal issued in May traded at 95.7 cents on the dollar yesterday, down from 99.7 cents at the end of last month, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
While JPMorgan Chase & Co. analysts say they fail to see “any fundamental reason” for the tumble, investors from CQS U.K. LLP to Calvert Investment Management Inc. are speculating that the drop is mainly about the growing amount of the debt running into limits created by new regulations on bond dealers’ ability to smooth trading by building up their inventories. “It could be symbolic of what could happen more broadly in a real ‘risk-off’ environment,” Bill Murray, a New York-based money manager at $14 billion hedge-fund firm CQS, said in an interview.
Too big to fail.
After a devastating day in the stock markets for Portugal’s troubled lender Banco Espirito Santo (BES), analysts are weighing up whether the country’s central bank could step in and bail out the bank. Turmoil at the group which owns BES has embroiled the lender for months with top officials being suspended this week over suspected “harmful management.” BES shares lost around 40% on Thursday after Portugal’s largest listed lender by assets posted a first-half net loss of €3.58 billion ($4.8 billion). This effectively wiped out the €2.1 billion capital buffer it previously stated it had available. Then Friday came news from Reuters that Espirito Santo Financial Group, which owns BES, had announced that its Luxembourg-based division, ESFIL, had filed for creditor protection in Luxembourg.
Bill Blain, a senior fixed income strategist at Mint Partners believes that a state bailout of BES would convince him that “too-big-to-fail” lives on, adding that the whole issue of the unholy incestuous relationship between states and banking would reignite. “BES is not a one-off. There will be others equally mismanaged,” he said in a morning note. “If Portugal bites the bullet and leaves the bank unsupported, it at least demonstrates some credibility about restoring the bank/sovereign divide and separating the problem components.”
If Elliott is found to have lied in court about its swaps holdings, this could take a nice turn. By the way, ISDA decides whether there’s a default or not. And who’s in ISDA? “The 15-member group includes representatives from Bank of America, Elliott, Morgan Stanley and JPMorgan”.
Argentine bonds posted the biggest two-day loss since 2012 as a committee ruled that the failure to pay interest will trigger $1 billion of credit-default swaps. The International Swaps & Derivatives Association’s determinations committee made the ruling on the contracts in response to a question posed by Swiss bank UBS AG after the government missed a July 30 payment deadline on $539 million of notes. Argentina is the first nation to trigger the insurance since Greece restructured its debt in 2012. While Argentina says there was no default since it made the payment to the trustee for the bond, a U.S. judge’s ruling bars it from passing the money to holders without a resolution of the nation’s dispute with hedge funds led by Elliott Management Corp., which won an order for full repayment on defaulted debt from 2001.
“It’s a clear default, despite the rhetoric of the Argentine authorities,” Juan Carlos Rodado, the head of Latin America research at Natixis, said in an e-mail. Following the credit event ruling, the trades will be settled at an auction, ISDA said in a statement. The process sets a value for the defaulted bonds and then creators of the contracts pay buyers face value in exchange for the underlying securities or the cash equivalent determined at the auction administered by Markit Group Ltd. and Creditex Group. [..] Many bond buyers own credit swaps as protection against losses. The dual roles can skew incentives because creditors will sometimes stand to profit more from a swaps payout than an issuer actually meeting its debt obligations.
Argentina will investigate whether the holdouts’ failure to reach agreement on the debt case was part of a “maneuver” to profit from payouts on the credit-default swaps, the Economy Ministry said in an e-mailed statement on Aug. 1. Local regulators will ask the U.S. Securities and Exchange Commission to help the country establish if hedge funds, either by themselves or through third parties, benefited from the triggering of CDS, according to the statement. Elliott last year denied in a U.S. court that it owned default swaps for Argentina. [..] ISDA’s determinations committee was formed in 2009 and makes binding decisions for the market on whether contracts can be triggered. The 15-member group includes representatives from Bank of America, Elliott, Morgan Stanley and JPMorgan.
The gist: India refuses to stop feeding its poor. The west won’t let them.
The future of the World Trade Organisation has been thrown into doubt after eleventh-hour attempts to salvage a global trade deal collapsed. Talks broke down after India’s refusal to back a deal unless it included concessions allowing developing countries freedom to subsidise and stockpile food. An agreement on the deal, centred on loosening global customs rules, had been reached in Bali in December, with a deadline of midnight on Thursday to ratify it. But it was scuppered after the WTO’s 160 members failed to reach agreement over India’s demands. It would have been the first global trade deal reached by the Geneva-based institution since it was founded almost two decades ago. The last-minute failure to reach agreement prompted questions over the very existence of the WTO and how it will survive the deadlock.
Admitting defeat, Roberto Azevêdo, the director general, was candid about the challenges facing WTO. Despite intense negotiations, disagreement between members had not been resolved, he said. “We have not been able to find a solution that would allow us to bridge that gap. We tried everything we could. But it has not proved possible,” he said. “The fact we do not have a conclusion means that we are entering a new phase in our work – a phase which strikes me as being full of uncertainties.” Speaking about the future of the organisation, Azevêdo said: “What this means for the WTO will be in the hands of the members. I think we should take the time to reflect and come back in September.”
‘Lies, hypocrisy and propaganda.’
Moscow has upped the ante in its growing confrontation with Washington after releasing an incendiary statement, accusing the US of spinning and distorting facts to allege that Russia is testing a new cruise missile, banned by a landmark Cold War treaty. “Once again the US is trying (and again rather clumsily) to act as a mentor, for some reason pretending to possess the truth in the last instance and have the right to judge others. Claims are made with little to no evidence and based on warped logic, in other words presented not with further experts’ analyses in mind,” opens the lengthy tirade by the Russian Foreign Ministry, in response to the allegations detailed in the State Department report released on Tuesday. “The purpose seems to be to create a wall of information noise to incite other countries, and to boil up a propagandist brew for the media. Or does the US administration still sincerely deceive itself that the world can take Washington’s word?”
The US report never specified how exactly Russia violated the treaty, instead offering a vague finding that: “The United States has determined that the Russian Federation is in violation of its obligations under the INF Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.” This would be a direct violation of the Intermediate-Range Nuclear Forces Treaty (INF) signed by Ronald Reagan and Mikhail Gorbachev in 1987, which banned missiles that could carry nuclear warheads in the range of 500-5,500 km. The White House described the supposed transgression as a “very serious matter” of which it has been aware since 2008, again not naming the suspect. The media in the meantime were quick to allege the missile in question was the R-500 cruise missile with an officially stated range of 500km, which some believe can be easily modified for greater ranges.
Russia previously issued a brief response to the allegations that was dismissive, but called for further dialogue. The latest diatribe, however, makes no attempt to seek common ground, and takes pot shots at the entirety of the US approach to international treaties – repeatedly accusing Washington of duplicity and bad faith. “American officials cite classified intelligence, when questioned about their findings. The value of such intelligence has been amply proven by the ‘Iraqi weapons of mass destruction’ myth. Such undercover research becomes even less trustworthy, with regular leaks of obviously untrue and provocative pieces of information about the conflict in eastern Ukraine, while data coming from sources beyond US control gets ignored. Years pass, but the Americans have learned nothing.”
How long till they revolt?
The West is tightening the financial screws on Moscow, but German companies are already feeling the kickback of a slowing Russian economy and weakening ruble. Russia is Europe’s third-largest trading partner, so a spluttering Russian economy, exacerbated by the Ukraine crisis, is seriously affecting German companies. In 2013, Germany exported €36 billion worth of goods to Russia. A higher value ruble and inflation risk consumer spending in the region, and are cutting German involvement in the market accordingly. German sports retailer Adidas lowered financial targets for the next two years, citing conditions in Russia as a major stumbling block. “The recent trend change in the Russian ruble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia/CIS,” the company’s financial outlook said.
In response, Adidas says it will speed-up efforts to close stores in the Russian and CIS markets in 2014 and 2015, as well as reduce inventory in the marketplace. A shrinking car market in Russia is dragging down demand for Renault, Peugeot Citroen, GM, and Ford, which all produce cars locally. Europe’s largest carmaker, Volkswagen, reported an 8% decline in Russian sales in the first two quarters compared to last year, citing emerging market volatility. The company is facing tougher trading conditions in other developing markets such as Brazil, China, and India, where currency fluctuations sway buyers away from European manufacturers. Inflated currencies in emerging markets dissuade buyers from expensive European imports, and have the potential to strengthen demand for local products.
Seems fine in summer, but that’s over in 2 months time.
As natural gas supplies are tightly squeezed, from Friday, manufacturing and municipalities in Ukraine are officially getting 30% less gas. This reduction is expected to help the country live through the winter without imported Russian gas. The savings plan was announced by the deputy head of Naftogaz Alexander Todiichuk on Ukrainian TV in mid–July. “The saving regime is being forced in Ukraine and it’ll officially come into operation as of August 1,” he said. The ‘regime of gas saving’ includes cutting the use of gas by 30% in manufacturing and municipalities, while consumers that rely on government funding, such as schools and hospitals, would have to cut gas consumption by 10%. The measure are expected to save about 150 million cubic meters of gas per month, which will be pumped into underground storage, said Todiichuk, adding that the volume should increase starting from August.
Coming into the winter, Ukraine has 16-17 billion cubic meters of natural gas saved up in underground storage. The government in Kiev estimates Ukraine needs to import 7.23 billion cubic meters of gas in the next eight months through to March in order to keep economic activity stable, especially during the high-demand winter season. Supplies from Russia were cut (link) in June after Kiev failed to pay a$5.3 billion gas bill and as Ukrainian and Russia sides squabbled over a fair price. Ukraine’s Energy Minister Yuri Prodan said reverse gas flow supplies from Slovakia could begin in August, if not September. The US government has considered starting gas exports to Europe, but there is a lack of infrastructure.
Superbugs known as CRE — called “nightmare bacteria” by federal health officials because they are deadly and virtually untreatable — are skyrocketing in the Southeastern USA, new research shows. Experts fear a growing national problem, and some say the spread of such superbugs may portend a “post-antibiotic era.” Cases of the antibiotic-resistant CRE rose fivefold in community hospitals in the region from 2008 to 2012, researchers at Duke University Medical Center found, and they said those rates are likely underestimates. “We’re trying to sound the alarm. This is a problem for all of us in health care,” said Deverick J. Anderson, senior author of the study and an associate professor of medicine at Duke. “These (bacteria) are just about as bad as it gets.”
CRE, short for carbapenem-resistant Enterobacteriaceae, are a family of bacteria that have over time become resistant to last-resort antibiotics. They prey mostly on vulnerable, hospitalized patients and kill nearly half who get bloodstream infections. CRE are the worst of the worst in a growing sea of pernicious germs resistant to antibiotics that take hold in sick patients in health care settings. According to the U.S. Centers for Disease Control and Prevention, one in 25 hospitalized patients has at least one health care-associated infection on any given day. Two of the more common superbugs are C. difficile, which is rising steeply and is linked to about 14,000 American deaths each year, and MRSA, which has been a problem in hospitals for decades. Researchers point to a recent decrease in invasive MRSA infections but estimate there were still more than 80,000 in 2011. MRSA has spread beyond hospitals into communities.
Nice studies, fast evolving. Lots of dinosaurs with feathers.
For decades, paleontologists have been uncovering the remarkable evolutionary relationships between fearsome, two-legged, meat-eating dinosaurs and birds. A new study suggests that the pace of the transition from one to the other was quick by dinosaur standards. In the 50 million years preceding the appearance of the first birds some 163 million years ago, the size and weight of theropods along the direct line of descent to birds shrank one group after another – slowly at first, but going into free fall during the final 10 to 15 million years once Maniraptors took the evolutionary baton from their direct ancestors, the Coelurosaurs. The skeletal changes taking place during the 50-million-year dinosaur-to-bird transition were occurring four times faster than for dinosaurs as a whole, according to the analysis, conducted by an international team of researchers led by Michael Lee, with the South Australia Museum in Adelaide.
Rapid rates of change in body size have appeared before in the fossil record. Following a mass extinction at the end of the Cretaceous period some 65 million years ago, an event that drove non-avian dinosaurs extinct, the size and diversity of mammals exploded over a 15-million-year period, researchers say. This came as mammals began to fill ecological niches vacated by the late, great dinosaurs. The interplay between evolution and ecological niches was likely at work for the ancestors to birds as well – in this case, the Great Escape. Some researchers surmise that the changes in body size and skeletal structures that led to the first birds, particularly during the phase of accelerated change, could have occurred as the now-smaller theropods moved into trees to escape becoming another animal’s meal or to take advantage of new sources of food.
The continuing reduction in size needed to succeed as tree dwellers would have triggered a cascade of evolutionary changes, suggests University of Bristol paleontologist Mike Benton. These changes would have improved vision, improved the aerodynamics of forelimbs to allow for increasingly ambitious leaps from tree to tree, or encouraged the evolution of feathers to insulate the new tree dwellers. “Being smaller and lighter in the land of giants, with rapidly evolving anatomical adaptations, provided these bird ancestors with new ecological opportunities,” Dr. Lee said in a prepared statement. Past studies of animal sizes in the run-up to birds had looked at individual branches of the avian ancestral tree or used trees that used physical traits to establish relationships, but no dates. Lee and colleagues were able to take advantage of the explosion of small feathered theropod fossils coming out of China since the mid-1990s, known collectively as Paraves. These animals were trying to exploit various ways of getting from tree to tree – jumping, gliding, or parachuting …