The eye of Hurricane Irma grazed the Turks and Caicos Islands on Thursday, rattling buildings after it smashed a string of Caribbean islands as one of the most powerful Atlantic storms in a century, killing 14 people on its way to Florida. With winds of around 185 miles per hour (290 km per hour), the storm the size of France has ravaged small islands in the northeast Caribbean in recent days, including Barbuda, Saint Martin and the British and U.S. Virgin Islands, ripping down trees and flattening homes and hospitals. Winds dipped on Thursday to 165 mph as Irma soaked the northern coasts of the Dominican Republic and Haiti and brought hurricane-force winds to the Turks and Caicos Islands. It remained an extremely dangerous Category 5 storm, the highest designation by the National Hurricane Center (NHC).
Irma was about 55 miles (85 km) south of Great Inagua Island and is expected to bring 20-foot (6-m) storm surges to the Bahamas, before moving to Cuba and ploughing into southern Florida as a very powerful Category 4 on Sunday, with storm surges and flooding due to begin within the next 48 hours. Across the Caribbean authorities rushed to evacuate tens of thousands of residents and tourists. On islands in its wake, shocked locals tried to comprehend the extent of the devastation while simultaneously preparing for another major hurricane, Jose, now a Category 3 and due to hit the northeastern Caribbean on Saturday.
The quake struck late on Thursday, and was recorded as a magnitude 8.4 on the Richter scale according to Mexico’s National Seismological Service. Government officials said that at least five people died in the country’s south. The US Tsunami Warning Center has cautioned that widespread, devastating tidal waves were possible on Mexico’s coast, as well as in Guatemala, El Salvador, Costa Rica, Nicaragua, Panama, Honduras and Ecuador. Shortly thereafter, authorities reported a tsunami was indeed headed towards the coast, fortunately only 0.7 meters (2.3 feet) tall. While there were no immediate reports of major damage, Mexico’s civil protection agency reported that it was the strongest tremor to hit the country since a 1985 earthquake that killed thousands and destroyed entire buildings.
Its epicenter was about 123 km (76 miles) south of the town of Pijijiapan in Chiapas state, but the shock was felt as far away as Mexico City, sending residents fleeing swaying buildings and knocking out electricity in parts of the city. The quake was also felt in much of Guatemala, which borders Chiapas. Civil Defense officials wrote on Twitter that their personnel were patrolling the streets in Chiapas aiding residents and looking for damage. They also issued a warning for aftershocks, several of which themselves registered a 5.0 magnitude according to the US Geological Survey (USGS). Chiapas Governor Manuel Velasco told broadcaster Televisa some homes had been damaged and a shopping center had collapsed in the town of San Cristobal. “Homes, schools and hospitals have been affected,” Velasco said.
Equifax, as a consumer credit bureau, collects financial, credit, and other data on every US consumer. It has names, birth dates, social security numbers, driver’s license numbers, bank account numbers, credit card numbers, mortgage data, and payment history data, including to utilities, wireless service providers, and the like. It collects data on bank balances, loan balances, credit card balances, credit card purchases, and myriad personal details. It has massive digital dossiers on every consumer in the US and in some other countries. And it sells this data to other companies, such as banks, credit card companies, car dealerships, retailers, and others, as a routine part of its business model. That’s how it makes money. But when someone breaks in and steals this data without paying Equifax for it, well, that’s a huge deal. And it is.
Turns out, Equifax got hacked – um, no, not today. Today it disclosed that it had discovered on July 29 – six weeks ago – that it had been hacked sometime between “mid-May through July,” and that key data on 143 million US consumers was stolen. There was no need to notify consumers right away. They’re screwed anyway. But it gave executives enough time to sell 2 million shares between the discovery of the hack and today, when they crashed 13% in late trading. Given the quantity and sensitivity of the stolen data, it may well be the biggest and worst breach in US history. That stolen data “primarily includes”:• Names • Social Security numbers • Birth dates • Addresses • “In some instances,” driver’s license numbers.
In addition, the stolen data includes: • Credit card numbers of around 209,000 US consumers • “Certain dispute documents with personal identifying information” of around 182,000 US consumers. • “Limited personal information for certain UK and Canadian residents.” This is the kind of information with which identities can be stolen and money can be borrowed in your name. Those data points are the crown jewels for hackers.
Under more normal circumstances rising consumer credit would mean more consumption. The rise in consumption should, in theory, led to stronger rates of economic growth. I say, in theory, only because the data doesn’t support the claim. Prior to 1980, when the amount of debt used to support consumption was fairly stagnant, the economy, wages, and personal consumption expanded. However, as I noted previously, that all changed with financial deregulation in the early 80’s which fostered three generations of debt driven excesses. In the past, if they wanted to expand their consumption beyond the constraint of incomes they turned to credit in order to leverage their consumptive purchasing power. Steadily declining interest rates and lax lending standards put excess credit in the hands of every American. (Seriously, my dog Jake got a Visa in 1999 with a $5000 credit limit) .
This is why during the 80’s and 90’s, as the ease of credit permeated its way through the system, the standard of living seemingly rose in America even while economic growth rate slowed in America along with incomes. Therefore, as the gap between the “desired” living standard and disposable income expanded it led to a decrease in the personal savings rates and increase in leverage. It is a simple function of math. But the following chart shows why this has likely come to the inevitable conclusion, and why tax cuts and reforms are unlikely to spur higher rates of economic growth.
The continued low interest environment in key markets such as Europe, the U.S. and the U.K. is a “major source of concern”, according to Felix Hufeld, the president of the German financial regulatory authority. Alluding to the results of a recent survey, the authority over which he presides carried out alongside staff at Germany’s central bank, the Bundesbank, Hufeld described the effect on domestic banks. “The impact is massive and is creeping into the balance sheets more and more. The longer it continues, the higher the risk for a change of interest rates is increasing as well,” he warned, speaking from the Handelsblatt annual banking summit in Frankfurt on Thursday. His wariness comes despite his acknowledgment that the banking system has become much more solid than it was 10 years ago when the financial crisis broke out.
“Both the amount as well as the quality of capital has been massively increased. Risk management procedures have been improved, governance procedures have been improved. Remuneration has been curbed – so all sorts of things – a very wide range of things have been done,” he explained before sounding a note of caution. “But one thing should be clear – no regulatory system and no financial market in the world is invulnerable. There can be and there will be new crises coming up somewhere in the future,” Hufeld declared, pointing to real estate as the most notable cause for concern. The BaFin president’s comments echoed those of fellow Handelsblatt summit participants such as Deutsche Bank CEO John Cryan and Goldman Sachs’s CEO Lloyd Blankfein. Cryan joined Hufeld in warning of the possibility of bubbles forming in certain asset classes, adding, “If you look at the higher risk end of the market, I don’t think you get the right reward for the risk you’re taking right now.”
Japan’s economic growth in the second quarter was much slower than seen in a stellar preliminary reading, government data showed on Friday, confounding hopes for a long awaited pick-up in domestic demand. The downgrade was widely expected after data used to revise gross domestic product figures showed capital spending in April-June rose at a slower annual pace than the previous quarter. While the disappointing data may weaken confidence in the government’s economic policies and the business outlook, analysts still expect the economy to sustain a steady recovery as robust global demand underpins exports and a tightening job market improves the prospects for higher wages.
Japan’s economy, the world’s third largest, expanded at an annualized rate of 2.5% in the April-June quarter, less than the initial estimate of annualized 4.0% growth, Cabinet Office data showed. That was also lower than a median market forecast for a revision to a 2.9%. On the quarter, the economy grew a revised 0.6% in real, price-adjusted terms, against a preliminary reading of a 1.0% increase and the median estimate of a 0.7% expansion. Capital expenditure, a key component of GDP, rose 0.5% for the quarter, marked down from the preliminary estimate of a 2.4% increase.
“North Korea has already beaten the world to the punch. They’ve been building up their strategic oil reserves. What that means is they have an estimated year’s worth of held in reserve and China has played a role in these things in the past.” “The area that would be effective for a reactionary measure would be for the United States to exclude the People’s Bank of China, the Industrial and Commercial Bank of China and some of the other major Chinese banks from within the U.S dollar payment systems. The U.S could completely shut down the U.S operations.” “Ultimately, the Chinese are facilitating the North Korean finance. The move would be a kind of sanction with bite behind it. My expectation would be that China wouldn’t necessarily put pressure on North Korea. In reaction we could see escalation of further sanctions from the Chinese against the United States leaving for a trade and financial war without solving the North Korean situation.”
“Currently, North Korea is in what is classified as a ‘break out.’ Under typical nuclear development phases, we’ve normally seen countries that are cheating on nuclear development programs complete their operations in baby steps. In the process they proceed gradually and when they do draw attention will stall programs until beginning again at a later date. North Korea has put that pattern aside and is in complete breakout.” “To give a U.S football comparison, they’re in the red zone and the quarterback is simply about to throw a pass into the end zone. The leader of North Korea is going for it and not hiding anything. The leadership in North Korea is hoping that the United States is bluffing and that they will be able to get a serviceable intercontinental ballistic missile (ICBM) with a hydrogen bomb that could threaten or destroy Los Angeles before the U.S could do anything. The United States is facing a six month window to act and I believe they will.”
Theresa May is poised to make an unprecedented attempt to fix the parliamentary system, allowing her to grab sweeping powers ahead of Brexit, The Independent can reveal. A late-night Commons vote to secure the Conservatives the muscle to use so-called “Henry VIII powers” to make new laws – behind the backs of MPs – will be staged next week. The move has been disguised on the Commons order paper under the innocuous description of “motions relating to House business”, but will be a decisive act in the Brexit process. It will allow the Tories to pack a crucial Commons committee with their own MPs, in defiance of Parliament’s rules, in order to carry out the power grab. To win the vote, the Conservatives will need the backing of the Democratic Unionist Party (DUP), under the much-criticised “cash-for-votes” deal that props up Ms May in power.
Opposition parties immediately accused the Prime Minister of a bid to “sideline Parliament and grant ministers unprecedented powers” – despite promises to restore sovereignty to MPs. “This is an unprecedented power grab by a minority government that lost its moral authority as well as its majority at the general election,” Valerie Vaz, Labour’s Shadow Commons Leader, told The Independent. And Alistair Carmichael, the Liberal Democrat chief whip, said: “The Tories seem determined to ram through their destructive hard Brexit even though they have no mandate for it.” The bid to seize control of the Committee of Selection comes despite unequivocal advice from parliamentary officials that the Tories must not do so, after losing their Commons majority at the election. Without the fix, it would be impossible to force through up to 1,000 “corrections” to EU law as intended through the EU (Withdrawal) Bill – the reason for the accusations of a power grab.
Standing at a Greek site where democracy was conceived, French President Emmanuel Macron called on members of the European Union to reboot the 60-year-old bloc with sweeping political reforms or risk a “slow disintegration.” Macron, on a visit on Thursday to Athens, urged EU nations to carry out six-month national reviews on EU reforms before imposing them — signaling his distance with the German-backed approach based on fiscal discipline within the eurozone. “It would be a mistake to abandon the European ideal,” Macron said. “We must rediscover the enthusiasm that the union was founded upon and change, not with technocrats and not with bureaucracy.” Elected by a landslide in May, the 39-year-old Macron has vowed to back efforts for closer integration in the EU, which has been rattled by a financial crisis, migration issues, a populist backlash and Britain’s decision to leave.
His proposal found enthusiastic support in bailout-stricken Greece, which considers France a vital ally and counterweight to fiscally hawkish Germany in its efforts to ease the stringent terms of its international rescue loans. Reinforcing his message, Macron urged the IMF to step back from its role in European bailouts — breaking with a widely accepted policy adopted when Greece sought international help seven years ago. “I don’t think it was the right method for the IMF to supervise European programs and intervene in the way it did,” he said. “Let’s work within Europe and not turn to outside agencies.” The eurozone rescue fund, the European Stability Mechanism, should play the lead role in financial rescue within the euro currency zone, he said. France, Europe’s No. 2 economy, had previously backed Germany’s insistence in involving the IMF to enforce austerity measures that came with bailout programs in Greece and other rescued economies including Ireland, Portugal and Cyprus.
Asian shares stumbled and the US dollar was on the defensive on Wednesday amid signs investors were becoming spooked by polls narrowing the gap between US presidential nominees Donald Trump and Hillary Clinton. Market anxiety has deepened over a possible Trump victory given uncertainty on the Republican candidate’s stance on issues including foreign policy, trade relations and immigration, while Clinton is viewed as a candidate of the status quo. Stocks across Asia Pacific saw a broad selloff on Wednesday with the Nikkei in Japan down by 1.8% at 4am GMT. There were also steep falls in Australia where the ASX/S&P 200 benchmark index was down almost 1.5%, with falls of 1.3% in South Korea and Hong Kong as markets took a lead from a sharp drop on Wall Street overnight.
The main European markets were also expected to begin the day in the red when they open later, according to futures trading. The tumultuous presidential race appeared to tighten after news that the FBI was reviewing more emails as part of a probe into Clinton’s use of a private email server. While Clinton held a five-percentage-point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, other polls showed Trump ahead by 1-2 %age points. That pushed the US S&P500 Index down to a four-month closing low on Tuesday. The CBOE volatility index, often seen as an investors’ fear gauge, briefly rose to a two-month high, above 20%.
In the currency market, traders sold the dollar partly as they suspect Trump would prefer a weaker dollar given his protectionist stance on international trade. The euro rose to a three-week high of $1.1069, up about 2% from its seven-and-a-half-month low of $1.0851 hit just over a week ago. Against the yen, the dollar slipped to 104.03 yen from three-month high of 105.54 yen set on Friday. Koichi Yoshikawa at Standard Chartered Bank said: “If you had a long dollar position on the view that the dollar would gain because Clinton would win, you would surely close that position because her victory is less certain.”
Iron ore’s eye-catching rally to the highest since April is probably due to the weakening of the yuan, according to Goldman Sachs, which said that China’s currency may decline further against the dollar and help to sustain prices of the raw material. Prices surged last month as losses in the yuan prompted some local investors to move into dollar-linked assets, including iron ore, analysts Hui Shan, Amber Cai and Christian Lelong said in a report received Wednesday. Should the Federal Reserve raise interest rates by the end of the year, there’s scope for further yuan weakness, they wrote in the Nov. 1 note. Iron ore has rallied even as signs of robust supply multiply, including a buildup in stockpiles at ports in China.
While some analysts have sought to explain the jump by pointing to higher coal prices as a driver, Goldman said that didn’t stack up as a reason, targeting the yuan’s drop instead. The Chinese currency has sagged as local policy makers signaled they are willing to allow greater currency flexibility amid a slump in exports and rise in the dollar. “By our estimates, about 60% of the iron ore price rally in October can be explained by the yuan depreciation,” the analysts said. Iron ore may be the first in line to benefit from onshore investment flows into commodities as the “futures curve is almost always backwardated, making long iron ore a positive-carry trade,” they said, referring to bets on gains.
A.P. Moller-Maersk, owner of the world’s largest container line, reported a 43% decline in third-quarter profit as the shipping industry suffers from overcapacity. Net income fell to $429 million in the third quarter compared with $755 million in the same period a year earlier, the Copenhagen-based company said in a statement Wednesday. That missed the average estimate of $501 million in a Bloomberg survey of 15 analysts. “The result is unsatisfactory, but driven by low prices,” Chief Executive Officer Soren Skou said in the statement. “We generally perform strongly on cost and volume across businesses.” Maersk said its underlying profit for 2016 will be “below” $1 billion. Previously, the company had said the full-year result would be “significantly” below 2015’s $3.1 billion.
An excess of vessels and weak trade growth have driven container lines to try to under-bid each other on the rates they offer clients. The climate has proven lethal for some industry members, with South Korea’s biggest line Hanjin Shipping Co. filing for bankruptcy protection in August. Earlier this week, Japan’s three biggest container lines said they plan to merge their operations in an efforts to return to profit. Maersk’s response has been to cut costs. On Wednesday it said costs at Maersk Line declined 14% in the quarter, but that was outpaced by a 16% decline in freight rates. The shipping line reported a net operating loss after tax of $116 million compared with a profit by the same measure of $264 million a year earlier as freight rates fell 16%.
At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate. Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden. The figures are clear. In 2013, two years after a property tax was introduced (previously, real estate tax revenue came mainly from transfers or conveyance taxes), 29,200 people declined to accept their inheritance, according to the Justice Ministry. In 2015, the number had climbed to 45,627, an increase of 56% in two years.
Reports from across the country suggest that this year, too, large numbers of people are refusing to inherit. “This can be very painful,” said Giorgos Voukelatos, a lawyer. “People may lose their family home. Because if the father or mother had debts, the child might be unemployed and unable to carry this weight as well.” The growing aversion to property is evident in the drop in business at notaries public. The national statistics service, Elstat, reported in July that in 2014 there were 23,221 deeds in which living parents transferred property to their children, down from 90,718 in 2008. The number of wills drawn up or notarized has been steady through the crisis, at around 30,000 annually, suggesting that many inheritances being rejected were not part of formal wills. (More than 120,000 people die each year.)
The desire to inherit used to be so great that some took it upon themselves to give fortune a hand. Greeks were stunned in 1987 when the police uncovered a gang that had killed at least eight rich elderly people after forging their wills. The plot’s leader was a lawyer and former mayor of an Athens suburb; accomplices included a notary public and a gravedigger. Murder Inc., as the news media called it, was seared into popular consciousness as an instance in which criminals acted out a common desire. Today, people are more likely to run away from real estate than be tempted to kill for it.
The collapse of the real estate market shows why. The total number of transactions dropped by 74% from 2004 to 2014. People once hoped that if they came into property they could sell it and live easier; now they fear that they will be unable to sell it and the taxes will drag them down. If they did find a buyer, they would be unlikely to gain much, as prices of apartments have fallen by 41% since 2008, according to the Bank of Greece. Construction of homes has collapsed, dropping by 95% from 2007 to 2016. With no end to the crisis in sight, people will continue to dread coming into property.
We don’t know whether the reopening of the FBI probe of Hillary Clinton’s emails will cost her the election. It may be that she will still emerge the winner after next Tuesday’s vote, or that Donald Trump’s momentum from the Wikileaks emails, Obamacare’s failures, and Clinton’s flawed candidacy were going to carry him to victory in any case. What we do know is that whoever wins, we are in for a fiasco in politics that will make even this fiasco of a campaign pale by comparison. There is hardly any scenario that is too far-fetched. Even if the polls are right and Clinton’s lead translates into an electoral victory, she will be so damaged going into office that her chances of getting anything done will be virtually nil. In this sense alone, Trump’s claim that this scandal is “worse than Watergate” could prove to be true.
As an incumbent, Richard Nixon at least had an administration in place when he won re-election in 1972, though it took nearly another two years before he was forced to resign under threat of impeachment. Clinton is likely to be stymied from the start, especially if the ongoing investigations into her email practices and the Clinton Foundation lead to further damaging disclosures. For one thing, we now have the precedence of Watergate, and Republicans, who are sure to retain the House and now probably the Senate, will not let go. There is hardly a chance that it will all end well for Clinton and that she will be exonerated because what is already known has many Republicans convinced that she is guilty at the very least of mishandling classified documents and perhaps obstruction of justice.
While the immediate attention in the wake of last week’s disclosure about reopening the email investigation has focused on FBI Director James Comey, the real conundrum in all this concerns his boss, Attorney General Loretta Lynch. Lynch fatally compromised her position by meeting with former President Bill Clinton just days before the original investigation was closed without a grand jury ever considering the evidence. And now her failure to block Comey’s disclosure — while leaking that she wanted to — is another ethical lapse. Other reports indicate that she attempted to quash the investigation into the Clinton Foundation. It is hard to see how she can remain in office even if Clinton wins and wants to keep her. Her resignation — or even impeachment — seems inevitable with Republicans out for blood.
The damage done to the whole Clinton entourage through the machinations exposed in the Wikileaks emails means that many of them – Huma Abedin, Cheryl Mills, John Podesta, Neera Tanden – will be virtually untenable in any position of responsibility in a new Clinton administration. And this is the best-case scenario for Clinton. We all know what the worst-case scenario is.
Hilarious. 370 economists making Trump’s case for him: “The economists object to Mr. Trump for questioning the legitimacy of economic data produced by institutions such as the Bureau of Labor Statistics.” Everybody questions the BLS. Except for 370 economists?!
A group of 370 economists, including eight Nobel laureates in economics, have signed a letter warning against the election of Republican nominee Donald Trump, calling him a “dangerous, destructive choice” for the country. Signatories include economists Angus Deaton of Princeton University, who won the economics Nobel last year, and Oliver Hart of Harvard University, who was one of the two Nobel winners this year. The letter is notable because it is less partisan or ideological than such quadrennial exercises, and instead takes issue with Mr. Trump’s history of promoting debunked falsehoods.
“He misinforms the electorate, degrades trust in public institutions with conspiracy theories and promotes willful delusion over engagement with reality,” said the signatories, which also include Paul Romer, the new chief economist at the World Bank, and Kenneth Arrow, the 1972 Nobel winner. The economists object to Mr. Trump for questioning the legitimacy of economic data produced by institutions such as the Bureau of Labor Statistics. They say he hasn’t proposed credible solutions to reduce budget deficits and that he has promoted misleading claims about trade and tax policy. They also chide Mr. Trump for failing to “listen to credible experts” and for promoting “magical thinking and conspiracy theories over sober assessments of feasible economic policy options.”
[..] Peter Navarro, a Trump adviser and professor at the University of California, Irvine, said the economics profession has been so wrong about the impact of trade deals, including both the North American Free Trade Agreement in 1994 and the accession of China to the World Trade Organization in 2001, that it has little standing to criticize Mr. Trump’s position on those pacts. Tuesday’s letter “is a headline, whatever, and then they wind up being just so horribly wrong,” Mr. Navarro said. “You shouldn’t believe economists or Nobel Prize winners on trade.”
“You don’t need a Ph.D. in economics to know Trump’s plan to cut taxes, reduce regulation, increase oil, gas, and clean coal production, and eliminate our trade deficit by increasing exports and reducing imports will significantly increase growth, boost wages and generate trillions in new tax revenues,” he said. “This new letter is an embarrassment to an economics profession which continues to insist bad trade deals are good for America—a classic case of reality running roughshod over textbook trade theory.”
“Not only was Bill Clinton’s wife under an FBI investigation at the time [..] but his own charitable foundation was also under investigation, a fact that was unknown at the time to the public and the media.
Current and former FBI officials have launched a media counter-offensive to engage head to head with the Clinton media machine and to throw off the shackles the Loretta Lynch Justice Department has used to stymie their multiple investigations into the Clinton pay-to-play network. Over the past weekend, former FBI Assistant Director and current CNN Senior Law Enforcement Analyst Tom Fuentes told viewers that “the FBI has an intensive investigation ongoing into the Clinton Foundation.” He said he had received this information from “senior officials” at the FBI, “several of them, in and out of the Bureau.” That information was further supported by an in-depth article in the Wall Street Journal by Devlin Barrett. According to Barrett, the “probe of the foundation began more than a year ago to determine whether financial crimes or influence peddling occurred related to the charity.”
Barrett’s article suggests that the Justice Department, which oversees the FBI, has attempted to circumvent the investigation. The new revelations lead to the appearance of wrongdoing on the part of U.S. Attorney General Loretta Lynch for secretly meeting with Bill Clinton on her plane on the tarmac of Phoenix Sky Harbor International Airport on the evening of June 28 of this year. Not only was Bill Clinton’s wife under an FBI investigation at the time over her use of a private email server in the basement of her New York home over which Top Secret material was transmitted while she was Secretary of State but his own charitable foundation was also under investigation, a fact that was unknown at the time to the public and the media.
The reports leaking out of the FBI over the weekend came on the heels of FBI Director James Comey sending a letter to members of Congress on Friday acknowledging that the investigation into the Hillary Clinton email server was not closed as he had previously testified to Congress, but had been reopened as a result of “pertinent” emails turning up.
The extent to which Hillary Clinton’s key advisers are now the focus of major FBI investigations is becoming clear. The Clintons’ long-term inner-circle – some of whom stretch back in service to the very first days of Bill’s White House – are being examined in at least five separate investigations. The scale of the FBI’s interest in some of America’s most powerful political fixers – one of them a sitting governor – underlines just how difficult it will be for Clinton to shake off the taint of scandal if she enters the White House. There are, in fact, not one but five separate FBI investigations which involve members of Clinton’s inner circle or their closest relatives – the people at the center of what has come to be known as Clintonworld.
The five known investigations are into: Anthony Weiner, Huma Abedin’s estranged husband sexting a 15-year-old; the handling of classified material by Clinton and her staff on her private email server; questions over whether the Clinton Foundation was used as a front for influence-peddling; whether the Virginia governor broke laws about foreign donations; and whether Hillary’s campaign chairman’s brother did the same. The progress of the Clinton Foundation investigation and that into McAuliffe was first reported by the Wall Street Journal. The FBI does not generally comment on investigations, so it is entirely possible there are more under way. Here are the advisers and consiglieri – and how the FBI is looking at them:
The Justice Department official in charge of informing Congress about the newly reactivated Hillary Clinton email probe is a political appointee and former private-practice lawyer who kept Clinton Campaign Chairman John Podesta “out of jail,” lobbied for a tax cheat later pardoned by President Bill Clinton and led the effort to confirm Attorney General Loretta Lynch. Peter Kadzik, who was confirmed as assistant attorney general for legislative affairs in June 2014, represented Podesta in 1998 when independent counsel Kenneth Starr was investigating Podesta for his possible role in helping ex-Bill Clinton intern and mistress Monica Lewinsky land a job at the United Nations.
“Fantastic lawyer. Kept me out of jail,” Podesta wrote on Sept. 8, 2008 to Obama aide Cassandra Butts, according to emails hacked from Podesta’s Gmail account and posted by WikiLeaks. Kadzik’s name has surfaced multiple times in regard to the FBI’s investigation of Democratic presidential nominee Hillary Clinton for using a private, homebrewed server. After FBI Director James Comey informed Congress on Thursday the FBI was reviving its inquiry when new evidence linked to a separate investigation was discovered, congressional leaders wrote to the Department of Justice seeking more information. Kadzik replied. “We assure you that the Department will continue to work closely with the FBI and together, dedicate all necessary resources and take appropriate steps as expeditiously as possible,” Kadzik wrote on Oct. 31.
Hillary Clinton began her presidential campaign by promising to do what it takes to rein in Wall Street. Boosted by Wall Street’s toughest critics, U.S. senators Bernie Sanders and Elizabeth Warren, the Democratic candidate has declared “the deck is still stacked in favor of those at the top” and said she would raise bank fees and tighten banking regulations. She has encouraged regulators to break up too-risky banks. And yet, Wall Street appears unperturbed by the prospect of a Clinton presidency. In fact, the banking industry has supported Clinton with buckets of cash and stocks have sold off on days when the Clinton campaign stumbles. Privately, bankers say that they trust her to remain a pragmatist who will keep the current regulatory regime laid down by the Dodd-Frank Wall Street reform legislation passed in 2010.
“I don’t think Clinton wakes up thinking about Wall Street,” one senior banking industry lobbyist said. There are hints in apparently leaked email discussions among Clinton’s campaign staff that bankers are not far off the mark when they count on her to tread lightly. Pressed during the campaign by progressive Democrats to call for a revival of the Glass-Steagall Act that would require separation of commercial and investment banking, Clinton ultimately refused. She also weighed another progressive favorite – a tax on financial transactions- but instead recommended a far narrower plan to tax only canceled orders by high speed traders. Ultimately, what bankers most like about Clinton is that she is not Donald Trump.
Many financiers fear her unorthodox Republican rival could disrupt global trade, damage geopolitical relationships and rattle markets, industry analysts and participants say. “Those are the kind of things that corner offices think about,” said Karen Shaw Petrou of Federal Financial Analytics, whose firm advises financial firms about U.S. regulatory policy. “The overriding concern about Trump has dominated people’s thinking.” [..] People who work for hedge funds and private equity firms have contributed more than $56 million to Clinton’s presidential campaign and the supporting groups that face no legal cap on donations. Trump’s campaign and related groups received just $243,000 from donors in the same sector, according to data from the Center for Responsive Politics.
Aren’t you surprised that Hillary and the presstitutes haven’t blamed Putin for FBI director Comey’s reopening of the Hillary email case? But the presstitutes have done the next best thing for Hillary. They have made Comey the issue, not Hillary. According to US Senator Harry Reid and the presstitutes, we don’t need to worry about Hillary’s crimes. After all, she is only a political woman feathering her nest, just as political men have done for ages. Why all this misogynist talk about Hillary? The presstitutes’ cry is that Comey’s alleged crime is far more important. This woman-hating Republican violated the Hatch Act by telling Congress that the investigation he said was closed is now reopened. A very strange interpretation of the Hatch Act. During an election it is OK to announce that a candidate for president is cleared but it is not OK to say that a candidate is under investigation.
In July 2016 Comey violated the Hatch Act when he, on orders from the corrupt Obama Attorney General, announced Hillary clean. In so doing, Comey used the prestige of federal clearance of Hillary’s violation of national security protocols to boost her standing in the election polls. Actually, Hillary’s standing in the polls is based on the pollsters over-weighting Hillary supporters in the polls. It is easy to produce a favorite if you overweight their supporters in the poll questions. If you look at the crowds attending the two candidate’s public appearances, it is clear that the American people prefer Donald Trump, who is opposed to war with Russia and China. War with nuclear powers is the big issue of the election.
Hillary’s problem has the ruling American Oligarcy, for which Hillary is the total servant, concerned. What are they going to do about Trump if he wins? Will his fate be the same as John F. Kennedy, Robert Kennedy, Martin Luther King, George Wallace? Time will tell. Or will a hotel maid appear at the last minute in the way that the Oligarchy got rid of Dominique Strauss-Kahn? All of the American and Western feminists, progressives, and left-wing remnant fell for the obvious frame-up of Strauss-Kahn. After Strauss-Kahn was blocked from the presidency of France and resigned as Director of the IMF, the New York authorities had to drop all charges against Strauss-Kahn. But Washington succeeded in removing Strauss-Kahn as a challenge to its French vassal, Sarkozy.
If I had cornflakes for breakfast (which I don’t), I would have choked on them, reading Andrew Parker’s view of the threat posed by Russia, not just to the world at large – that is a commonplace of the “new cold war” discourse – but to the stability of the UK. With the majority vote for Brexit against the strong preference of Scotland and Northern Ireland for remain, we have shown ourselves quite capable of inflicting potentially fatal harm to our national stability all by ourselves. Why would we need Russia to do it for us? That was a knee-jerk reaction to the main thrust of the MI5 chief’s first national newspaper interview in the agency’s history. But a second, more substantial, response chased behind it in the form of a rather basic, and recurrent, question.
Why is the UK establishment in general, and UK intelligence in particular, so fixated on a supposed threat from Russia? The cold war is a quarter-century behind us. The Warsaw Pact was dissolved; the Soviet Union collapsed. Today’s Russia has three quarters of the territory but only half the population of the old Soviet Union. Its GDP, whether overall or per capita, is far below that of the US, or ours. Its 2015 military budget took 5% of that – $70bn in actual money – less than an eighth of the nearly $600bn spent by the US. “Tsar” Vladimir Putin may have played a weak hand magnificently, as judged by admirers and detractors alike, but a weak hand is still a weak hand.
If Russia really harbours ambitions to reconstitute an empire, its only success to date is the expensive (in every respect) reacquisition of Crimea, a contested no-man’s land of ragtag rebels in the rust belt of eastern Ukraine, and two miniature enclaves inside independent Georgia. That recent “show of force”, when the might of the Russian navy made its stately progress through the English Channel, demonstrated only the obsolescence of the erstwhile superpower’s fleet. In the same interview, Parker disclosed that there were around 3,000 “violent Islamic extremists in the UK, mostly British”, and that cyber, not just in Russia’s hands, was the threat of the future. So let me repeat the question: why does Russia remain bogeyman-in-chief?
Here are a few ideas. The first is that blaming Russia carries little cost. Russia is not China. Investment is not a big consideration. For all sorts of reasons, political relations have long been dire. Applying the same virulent rhetoric to terrorism conducted in the name of Islam, on the other hand, risks fomenting social and cultural strife here at home. A second reason, now as in the past, is that blaming Russia aligns us comfortably with the US, where stalwarts in Congress and at the Pentagon have never emerged from their old thinking about the threat. The Russia card has been played to exhaustion during this presidential campaign, to the point where it could swing the election – and I don’t mean in Donald Trump’s favour. A third factor is the consensus about a strong and malevolent Russia that still rules the “expert” community, and will probably do so for a few years yet – helped along by the hatchet-faced Putin.
The reputation of central banks has always had its ups and downs. For years, central banks’ prestige has been almost unprecedentedly high. But a correction now seems inevitable, with central-bank independence becoming a key casualty. Central banks’ reputation reached a peak before and at the turn of the century, thanks to the so-called Great Moderation. Low and stable inflation, sustained growth, and high employment led many to view central banks as a kind of master of the universe, able – and expected – to manage the economy for the benefit of all. The depiction of US Federal Reserve Chair Alan Greenspan as “Maestro” exemplified this perception. The 2008 global financial crisis initially bolstered central banks’ reputation further.
With resolute action, monetary authorities made a major contribution to preventing a repeat of the Great Depression. They were, yet again, lauded as saviors of the world economy. But central banks’ successes fueled excessively high expectations, which encouraged most policymakers to leave their monetary counterparts largely responsible for macroeconomic management. Such “expectational” and, in turn, “operational” overburdening has exposed monetary policy’s true limitations. In other words, central banks’ good reputation now seems to be backfiring. And “personality overburdening” – when trust in the success of monetary policy is concentrated on the person at the helm of the institution – means that individual leaders’ reputations are likely to suffer as well.
Yet central banks cannot simply abandon their new operational burdens, particularly with regard to financial stability, which, as the 2008 crisis starkly demonstrated, cannot be maintained by price stability alone. On the contrary, a period of low and stable interest rates may even foster financial fragility, leading to a “Minsky moment,” when asset values suddenly collapse, bringing down the whole system. The limits of inflation targeting are now clear, and the strategy should be discarded. Central banks now have to reconcile the need to maintain price stability with the responsibility – regardless of whether it is legally mandated – to reduce financial vulnerability. This will not be easy, not least because of another new operational burden that has been placed on many central banks: macro-prudential and micro-prudential supervision.
Managing Britain’s exit from the EU is such a formidable and complex challenge that it could overwhelm politicians and civil servants for years, senior academics have warned. Theresa May has announced she will trigger article 50 – the two-year process of negotiating a separation from the EU – by the end of March next year. The government will also publish a great repeal bill, which will transfer all EU-originated laws into British law, so that MPs can decide how much they want to discard. A report from The UK in a Changing Europe, an independent group of academics led by Prof Anand Menon of King’s College London, warns that this will only be the start of the process of extricating Britain from the EU and establishing new relationships with other member states.
“Brexit has the potential to test the UK’s constitutional settlement, legal framework, political process and bureaucratic capacities to their limits – and possibly beyond,” Menon said. The group of experts, commissioned by the Political Studies Association, found that identifying and transposing the legislation to be included in the great repeal bill – and then deciding what to keep and what to ditch – will be a daunting task for civil servants. They also warn that while article 50, as set out in the Lisbon treaty, concerns the terms of a divorce with the rest of the EU – including what share of EU liabilities the UK should take on, for example – it is unclear whether the process can allow for parallel negotiations on Britain’s future status. And they suggest the repatriation of decision-making in key policy areas including agriculture, the environment and higher education to Britain from Brussels could affect the balance of power between Westminster and the devolved parliaments – another major constitutional headache for politicians.
Several damaging Los Angeles-area earthquakes of the 1920s and 1930s, including the deadliest ever in southern California, may have been brought on by oil production during the region’s drilling boom of that era, US government scientists have reported. The findings of a possible link between oil extraction and seismic events in the LA basin do not apply to modern industry practices but suggest the natural rate of quake occurrences in the region may be lower than previously calculated, the scientists said. The study’s authors, Susan Hough and Morgan Page of the US Geological Survey, stressed a distinction between their results and separate research attributing a growing frequency of quakes in Oklahoma and elsewhere to underground wastewater injection associated with fossil fuel production.
The new study, published in the Bulletin of the Seismological Society of America, also noted that early 20th-century industry techniques differed greatly from today, so the findings “do not necessarily imply a high likelihood of induced earthquakes at the present time”. The report suggested four major Los Angeles-area quakes in 1920, 1929, 1930 and 1933 were triggered by early drilling methods in which oil was extracted without water being pumped into the ground to replace it, causing the ground to subside. This could have artificially placed more pressure on seismic faults near oilfields. The most devastating event was the so-called Long Beach earthquake of 10 March 1933, a 6.4-magnitude quake that ruptured the Newport-Inglewood fault along the coast, toppling scores of buildings and killing 115 to 120 people – the highest death toll on record from a southern California earthquake.
Turkey’s prime minister said he had no regard for Europe’s “red line” on press freedom on Tuesday and warned Ankara would not be brought to heel with threats, rejecting criticism of the detention of senior journalists at an opposition newspaper. Police detained the editor and top staff of Cumhuriyet, a pillar of the country’s secularist establishment, on Monday, on accusations that the newspaper’s coverage had helped precipitate a failed military coup in July. The United States and European Union both voiced concern about the move in Turkey, a NATO ally which aspires to EU membership. European Parliament President Martin Schulz wrote on Twitter that the detentions marked the crossing of ‘yet another red-line’ against freedom of expression in the country.
“Brother, we don’t care about your red line. It’s the people who draw the red line. What importance does your line have,” Prime Minister Binali Yildirim told members of his ruling AK Party in a speech in parliament. “Turkey is not a country to be brought in line with salvoes and threats. Turkey gets its power from the people and would be held accountable by the people.” Prosecutors accuse staff at Cumhuriyet, one of few media outlets still critical of President Tayyip Erdogan, of committing crimes on behalf of Kurdish militants and the network of Fethullah Gulen, a U.S.-based cleric blamed for orchestrating the July coup attempt. Journalists at the paper were suspected of seeking to precipitate the coup through “subliminal messages” in their columns before it happened, the state-run Anadolu agency said.
You may own your car, but you don’t own the software that makes it work— that still belongs to your car’s manufacturer. You’re allowed to use the software, but in the past, trying to alter it in any way (including fixing it by yourself when it breaks or patching security holes) was a form of copyright infringement. iFixit, Repair.org, the Electronic Frontier Foundation (EFF), and many others think this is ridiculous, and they’ve been lobbying the government to try to change things. A year ago, the U.S. Copyright Office agreed that people should be able to modify the software that runs cars that they own, and as of last Friday, that ruling came into effect. It’s good for only two years, though, so get hacking. The legal and technical distinction between physical ownership and digital ownership is perhaps most familiar in the context of DVD movies.
You can go to the store and buy a DVD, and when you do, you own that DVD. You don’t, however, own the movie that comes on it: Instead, it’s more like you own limited rights to watch the movie, which is a very different thing. If the DVD is protected by Digital Rights Management (DRM) software, the Digital Millennium Copyright Act (DMCA) says that you are not allowed to circumvent that software, even if you’re just trying to watch the movie on a different device, change the region restriction so that you can watch it in a different country, or do any number of other things that it really seems like you should be able to do with a piece of media that you paid 20 bucks for.
Cars work in a similar way. You own the car as a physical object, but you only have limited rights to the software that controls it, because the car’s manufacturer holds the copyright on that software. This prevents you from making changes to the software, even if those changes are to fix problems or counter obsolescence, as well as preventing you from investigating the security of the software, which can have very serious and direct consequences for you as the owner and driver. It’s also worth pointing out that (especially in older vehicles like the 1995 Volvo 940 Turbo belonging to a certain anonymous journalist) relatively simple computerized parts can cost a ridiculous amount of money to replace because there is no legal alternative besides buying a new one from the manufacturer, who hasn’t made them in 20 years and would much rather you just bought an entirely new car anyway.
Oil prices plunged on Monday after the world’s top producers failed to reach an agreement on capping output aimed at easing a global supply glut during a meeting in Doha. Hopes the world’s main producer cartel, OPEC, and other major exporters like Russia would agree to freeze output has helped scrape oil prices off the 13-year lows they touched in February. But crude tanked after top producer Saudi Arabia walked away from the talks, which many hoped would ease a huge surplus in world supplies, because of a boycott by its rival Iran. Oil tumbled in early Asian trade after the collapse of Sunday’s talks, with prices dropping as much as seven% in opening deals.
At around 0100 GMT, US benchmark West Texas Intermediate for May delivery was down $2.11, or 5.23%, from Friday’s close at $38.25 a barrel. Global benchmark Brent crude for June lost 4.71%, or $2.03, to $41.07. “Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson at IG Markets. “With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share.”
It was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests. Expectations for the meeting had been modest at best, with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia’s insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn’t countenance. From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome.
The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports. What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports. The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised. What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the OPEC or erstwhile ally Russia. Brent crude fell nearly 7% in early trade in Asia on Monday, before partly recovering to be down around 4%.
The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal. It’s likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in. This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance for the grouping to reach some sort of agreement. For the time being, OPEC’s credibility is shot, and won’t be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market. However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely.
The failure by the world’s biggest oil producers to agree on an output freeze spurred a selloff across emerging markets, with stocks halting a seven-day rally as Brent crude plunged as much as 7%. The ringgit led declines in developing-nation currencies as the disappointment stemming from the weekend meeting in Doha disrupted a recovery in commodity prices, putting pressure on Malaysian finances as a net oil exporter. Hopes an agreement would be reached had pushed Brent above $44 a barrel for the first time since December and spurred gains across asset classes in recent days. It’s now headed back toward $41 as the discussions to address a global oil glut stalled after Saudi Arabia and other Gulf nations wouldn’t commit to any deal unless all OPEC members joined, including Iran.
“We have seen a high correlation between oil, commodity prices and emerging assets this year and we have seen a strong run up, so the latest development on the failure to agree on an oil output freeze should spark profit-taking among investors,” said Miles Remington, head of equities at BNP Paribas Securities Indonesia. Energy-related companies fell the most among the 10 industry groups of the MSCI Emerging Markets Index, which dropped 0.7% and retreated from last week’s highest level since November. While that was the biggest decline since April 5, the energy component slid 1.4% and industrial stocks 1%.
The Canadian and Australian dollars dropped as crude tumbled after oil-producing nations failed to reach an accord to freeze output. The yen, used by investors as a haven, rose toward a 17-month high. The currencies of Australia, Canada, Malaysia and Norway all retreated at least 0.7% after negotiations in Doha ended without an agreement from OPEC and other oil producers to freeze supplies. Foreign-exchange traders sought the safety of Japan’s currency as the diplomatic failure threatens to send crude back toward the more than 13-year lows reached in February. World leaders at the end of last week signaled opposition to any efforts from Japan to directly halt the yen’s 11% climb this year.
“Lack of agreement from Doha has hit commodity currencies lower,” said Robert Rennie at Westpac Banking in Sydney. “The prospects of another near-term round of talks appear limited ahead of the June OPEC meeting.” The Aussie dropped 0.8% to 76.65 U.S. cents as of 7:01 a.m. London time, set for the largest decline since April 7. Canada’s loonie tumbled 1.1% to C$1.2962 against the greenback. Crude is the nation’s second-largest export. Malaysia’s ringgit slid 0.8% to 3.9348 per dollar. Oil futures fell as much as 6.8%, the biggest intraday drop since Feb. 1. “The oil price will reset lower and could even retest $30 over the next three months,”said James Purcell at UBS’s wealth-management business in Hong Kong.
“Short term, that will dampen enthusiasm for risk assets. However, markets are being slightly myopic. Economic data have improved in both China and the U.S. of late.” The lack of agreement at Doha highlights the deep divisions between OPEC members, and importantly, within Saudi Arabia, Westpac’s Rennie said. The Aussie should hold support from about 75.75 cents to 76 cents at least through the next day or so, he said. The yen jumped 0.7% to 107.96 per dollar, and touched 107.77. It reached 107.63 on April 11, the strongest since October 2014. Hedge funds and other large speculators pushed wagers on yen strength to a record last week as Japanese authorities appeared reluctant to intervene to reverse the strengthening currency.
All is calm. All is still. Share prices are going up. Oil prices are rising. China has stabilised. The eurozone is over the worst. After a panicky start to 2016, investors have decided that things aren’t so bad after all. Put your ear to the ground though, and it is possible to hear the blades whirring. Far away, preparations are being made for helicopter drops of money onto the global economy. With due honour to one of Humphrey Bogart’s many great lines from Casablanca: “Maybe not today, maybe not tomorrow but soon.” But isn’t it true that action by Beijing has boosted activity in China, helping to push oil prices back above $40 a barrel? Has Mario Draghi not announced a fresh stimulus package from the European Central Bank designed to remove the threat of deflation? Are hundreds of thousands of jobs not being created in the US each month?
In each case, the answer is yes. China’s economy appears to have bottomed out. Fears of a $20 oil price have receded. Prices have stopped falling in the eurozone. Employment growth has continued in the US. The International Monetary Fund is forecasting growth in the global economy of just over 3% this year – nothing spectacular, but not a disaster either. Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost. The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.
Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills. For a while, consumer spending was kept going because rock-bottom interest rates allowed auto dealers to offer tempting terms to those of limited means wanting to buy a new car or truck. In an echo of the subprime real estate crisis, vehicle sales are now falling. The hidden problem has been highlighted by Andrew Lapthorne of the French bank Société Générale. Companies have exploited the Federal Reserve’s low interest-rate regime to load up on debt they don’t actually need.
“The proceeds of this debt raising are then largely reinvested back into the equity market via M&A or share buybacks in an attempt to boost share prices in the absence of actual demand,” Lapthorne says. “The effect on US non-financial balance sheets is now starting to look devastating.” He adds that the trigger for a US corporate debt crisis would be falling share prices, something that might easily be caused by the Fed increasing interest rates.
BBG senior editor David Shipley displays the general fallacy: all that’s there are desperate attempts to go back to something that once was, only in a more centralized fashion. But there’s no going back.
The deeper the slump, economists used to say, the stronger the recovery. They don’t say that anymore. The effects of the crash of 2008 still reverberate, with the latest forecasts for global growth even more dismal than the last. The persistently stagnant world economy is more than just a rebuke to economic theory, of course; it exacts a human toll. And while politicians and central bankers – or economists, for that matter – can’t be faulted for their creativity, their remedies might have more impact if they were bolder and better-coordinated. By ordinary standards, to be sure, governments haven’t been timid. Without fiscal stimulus and aggressive monetary easing in the U.S. and other countries, things would look even worse. And yet, worldwide output is predicted to rise only 3.2% this year, falling still further below the pre-crash trend.
Simply doubling down on current strategies is unlikely to work. Large-scale bond-buying, or so-called quantitative easing, has run into diminishing returns. Negative interest rates, where they’ve been tried, haven’t revived lending, and central banks are unable or unwilling to cut further. What about new fiscal stimulus? Where possible, that would be good – but it’s hardest to do in the very countries that need it most, because that’s where public debt is already dangerously high. True, as the IMF’s new fiscal report says, almost all countries could become more growth-friendly by combining measures to curb public spending in the longer term (for instance, raising the retirement age) with steps to increase demand in the short term (cutting payroll taxes, raising employment subsidies and building infrastructure).
Getting fiscal policy right country by country would surely help – yet probably wouldn’t be enough: No single country can adequately deal with a global shortfall of demand. A finance ministry for the world isn’t happening any time soon. Still, it’s a pity that governments aren’t trying harder to coordinate their fiscal policies more intelligently, or indeed at all. The global slump persists partly because of international spillovers. Better coordination would take these into account: Countries that could safely deploy fiscal stimulus would give some weight to global as well as national conditions, and fiscal policy would be formed interactively. Even within the EU, where you’d expect economic coordination to be the norm, and where the single currency makes it essential, there’s no sign of it.
At the global level, in forums such as the IMF, you might expect the U.S. to take the lead in any such effort. So it should – but it will need to mend its shattered policy-making machinery first. If Washington can’t come to a decision on its own on taxes or spending, the question of coordination doesn’t arise. The last resort, if the slump goes on and governments can’t coordinate better, might be to combine monetary and fiscal policy in a hybrid known (unfortunately) as helicopter money. Governments would cut taxes and/or spend more, but meet the cost by printing money rather than by borrowing. In one variant, central banks might simply send out checks to taxpayers. That’s a startling idea, no doubt – but so was quantitative easing not long ago.
China’s growth rates for quarter-on-quarter and year-on-year GDP for the past year don’t match. That, combined with confirmation that 1Q output was underpinned by an unsustainable resurgence in real estate, tarnishes the newly acquired shine on the country’s economic prospects. The initial reaction to the 1Q GDP data, published Friday, was a sigh of relief. Growth at 6.7% year on year was in line with expectations and comfortably inside the government’s 6.5-7% target range. If anyone noticed that the normal quarter-on- quarter data was missing from the National Bureau of Statistics release, few thought anything of it. Then, on Saturday, the quarter-on-quarter data was published, and some of the relief turned to consternation.
Quarter-on-quarter growth in 1Q was just 1.1% – an annualized growth rate of 4.5%, and the lowest print since the data series became available in 2011. Worse, based on the accumulated quarter-on-quarter data over the last year, annual growth in 1Q was just 6.3% – substantially below the NBS’s 6.7% reading for year-on-year growth. Explaining the inconsistency between the two data points is tough to do. Accumulated quarter-on-quarter growth over four quarters should add up to year-on-year growth. In the past, it has. The divergence in the 1Q readings might reflect something as simple as difficulties with seasonal adjustment. Even so, against a backdrop of concerns about data reliability, it can only add to skepticism about China’s true growth rate.
China’s state-owned enterprises are likely to suffer more defaults over the next year as the government shows its readiness to shut companies in industries struggling with overcapacity, according to Standard & Poor’s. “In a major policy shift, the central government appears willing to close and liquidate struggling enterprises in the steel, mining, building materials, and shipbuilding industries,” S&P analyst Christopher Lee wrote in a report Monday. “We believe this stance will exacerbate the problems of companies in these cyclical and capital-intensive sectors, which are facing sluggish demand amid slowing investment growth.”
The warning follows S&P’s decision earlier this month to cut China’s sovereign rating outlook to negative from stable because economic rebalancing is likely to proceed more slowly than it had expected. Moody’s Investors Service also downgraded the outlook to negative in March, highlighting surging debt and the government’s ability to enact reforms. The revisions were biased, Finance Minister Lou Jiwei said in Washington on Friday. Premier Li Keqiang has pledged to withdraw support from so-called zombie firms that have wasted financial resources and dragged on economic growth, which is at the slowest in a quarter century. China’s central bank has lowered benchmark interest rates six times since 2014, underpinning a jump in debt to 247% of GDP.
China Railway Materials, a state-backed commodities trader, is seeking to reorganize debt and halted trading on 16.8 billion yuan ($2.6 billion) of bonds this month. Baoding Tianwei last year became the first government-backed company to renege on onshore bonds. Sinosteel defaulted on onshore debt in October. Leverage among the largest state-owned enterprises has reached a “critical” level, according to Lee. It is likely to worsen in 2016 as a weak top line is not fully offset by cost cuts and capital expenditure reductions, he wrote in the report.
China etched in details of plans to help workers laid off from the bloated coal and steel industries, saying assistance would include career counseling, early retirement and help in starting businesses, among other measures. New guidelines released by seven Chinese ministries over the weekend build on previously announced commitments to restructure the coal and steel industries, whose excess production is dragging on the economy, and to take care of an estimated 1.8 million workers who will be displaced. The new measures place priority on finding jobs and cushioning the transition to reduce the unemployment that the authoritarian government sees as a threat to social stability.
“Proper placement of workers is the key to working to resolve excess capacity,” said the document issued by the labor ministry, the top economic planning agency and others. It urged local governments to “take timely measures to resolve conflicts” and to “avoid ignoring the issue.” Unlike a far-reaching restructuring of state industries two decades ago, Beijing is taking a cautious approach this time around, prompting some economists to caution that the protracted pace may make the situation worse. Government data released Friday showed economic growth slowing slightly in the first quarter, buoyed by new loans, debt and investment in real estate and factories—methods that are likely to lengthen the transition to a more consumer-driven society from one driven by investment and manufacturing.
Western-style “restructuring is not on the horizon here,” said ING economist Tim Condon. “Rebalancing, forget that. That’s for another day.” Government plans call for reducing some 10% to 15% of the excess capacity in the steel and coal sectors over the next several years. That is less than half the portion analysts say is needed to bring supply closer in line with demand. And steel and coal are only two of numerous other industries plagued by overcapacity that haven’t been addressed. The large number of ministries that have signed off on the plan dated April 7 but released more than a week later underscore the sensitivity, importance and breadth of resources China is devoting to the unemployment problem.
[..] Germany, Austria, France and Sweden, among others, have reintroduced border checkpoints in some places. They are pressured by Europe’s biggest refugee crisis since World War II – about 1 million migrants arrived in Greece and Italy in 2015 – terrorist attacks, and the growth of anti-immigration movements. But the economic cost of dumping Schengen, at a time when growth across the continent is still weak, would be massive. A permanent return to border controls could lop €470 billion of GDP growth from the European economy over the next 10 years, based on a relatively conservative assumption of costs, according to research published by Germany’s Bertelsmann Foundation. That’s like losing a company almost the size of BMW AG every year for a decade.
The open borders power an economy of more than 400 million people, with 24 million business trips and 57 million cross-border freight transfers happening every year, the European Parliament says. Firms in Germany’s industrial heartland rely on elaborate, just-in-time supply chains that take advantage of lower costs in Hungary and Poland. French supermarket chains are supplied with fresh produce that speeds north from Spain and Portugal. And trans-national commutes have become commonplace since Europeans can easily choose to, say, live in Belgium and work in France. For many Europeans, passport-free travel is part of being, simply, European. For the company hiring driver Unczorg, the security checks increase costs in terms of delays, storage and inventory.
Permanent controls would destroy the business model of German industry, says Rainer Hundsdoerfer, chairman of EBM-Papst. “You get the products you need for assembly here in Germany just in time,” he said by phone. “That’s why the trucks go nonstop. They come here, they unload, they load, and off they go. The cost isn’t the only prime issue” in reinstating border checks. “It’s that we couldn’t even do it.” Nor could anyone else, he adds: “Nothing in German industry, regardless of whether it’s automotives or appliances or ventilators, could exist without the extended workbenches in eastern Europe.”
Britain would be “permanently poorer” if voters choose to leave the EU, George Osborne has warned, as a Treasury study claimed the economy would shrink by 6% by 2030, costing every household the equivalent of £4,300 a year. In the starkest warning so far by the government in the referendum campaign, the chancellor describes Brexit as the “most extraordinary self-inflicted wound”. Osborne will embark on one of the government’s most significant moves in the referendum campaign on Monday when he publishes a 200-page Treasury report which sets out the costs and benefits of EU membership. In a Times article the chancellor wrote: “The conclusion is clear for Britain’s economy and for families – leaving the EU would be the most extraordinary self-inflicted wound.”
Osborne warned that the option favoured by Boris Johnson – a deal along the lines of the EU-Canada arrangement – would lead to an economic contraction of 6% by 2030. Supporters of Britain’s EU membership say the EU-Canadian deal would be a disaster for the UK because it excludes financial services, a crucial part of the British economy. The chancellor asked whether this was a “price worth paying” as he said there was no other model for the UK that gave it access to the single market without quotas and tariffs while retaining a say over the rules. Osborne continued: “Put simply : over many years, are you better off or worse off if we leave the EU? The answer is: Britain would be worse off, permanently so, and to the tune of £4,300 a year for every household.”
“It is a well-established doctrine of economic thought that greater openness and interconnectedness boosts the productive potential of our economy. That’s because being an open economy increases competition between our companies, making them more efficient in the face of consumer choice, and creates incentives for business to innovate and to adopt new technologies.”
Brazilian president Dilma Rousseff suffered a crushing defeat on Sunday as a hostile and corruption-tainted congress voted to impeach her. In a rowdy session of the lower house presided over by the president’s nemesis, house speaker Eduardo Cunha, voting ended late on Sunday evening with 367 of the 513 deputies backing impeachment – comfortably beyond the two-thirds majority of 342 needed to advance the case to the upper house. As the outcome became clear, Jose Guimarães, the leader of the Workers party in the lower house, conceded defeat with more than 80 votes still to be counted. “The fight is now in the courts, the street and the senate,” he said. As the crucial 342nd vote was cast for impeachment, the chamber erupted into cheers and Eu sou Brasileiro, the football chant that has become the anthem of the anti-government protest.
Opposition cries of “coup, coup,coup” were drowned out. In the midst of the raucous scenes the most impassive figure in the chamber was the architect of the political demolition, Cunha. Watched by tens of millions at home and in the streets, the vote – which was announced deputy by deputy – saw the conservative opposition comfortably secure its motion to remove the elected head of state less than halfway through her mandate. There were seven abstentions and two absences, and 137 deputies voted against the move. Once the senate agrees to consider the motion, which is likely within weeks, Rousseff will have to step aside for 180 days and the Workers party government, which has ruled Brazil since 2002, will be at least temporarily replaced by a centre-right administration led by vice-president Michel Temer.
On a dark night, arguably the lowest point was when Jair Bolsonaro, the far-right deputy from Rio de Janeiro, dedicated his yes vote to Carlos Brilhante Ustra, the colonel who headed the Doi-Codi torture unit during the dictatorship era. Rousseff, a former guerrilla, was among those tortured. Bolsonaro’s move prompted left-wing deputy Jean Wyllys to spit towards him. Eduardo Bolsonaro, his son and also a deputy, used his time at the microphone to honour the general responsible for the military coup in 1964. Deputies were called one by one to the microphone by the instigator of the impeachment process, Cunha – an evangelical conservative who is himself accused of perjury and corruption – and one by one they condemned the president. Yes, voted Paulo Maluf, who is on Interpol’s red list for conspiracy. Yes, voted Nilton Capixiba, who is accused of money laundering. “For the love of God, yes!” declared Silas Camara, who is under investigation for forging documents and misappropriating public funds.
1986 may seem like a long time ago, but for Australian Treasurer Scott Morrison some of the parallels with his current budget balancing act are getting too close for comfort. Back then, Moody’s and Standard & Poor’s pulled their AAA ratings as weak commodity prices wrecked government income and external finances. With resources again in a funk and a widening funding gap, National Australia Bank and JPMorgan said last week Morrison needs to undertake repairs in his May 3 budget to safeguard the country’s top rankings. Moody’s warned Thursday that debt will grow without revenue-boosting measures. “Moody’s are understandably getting impatient,” said Shane Oliver at Sydney-based AMP Capital Investors.
“We’ve seen each successive budget update push out the return to surplus. This time around – like back in the middle of the ’80s when we did suffer downgrades – we again have a twin deficit problem.” Thirty years ago, then-Treasurer Paul Keating warned the country risked becoming a “banana republic” because of its reliance on resources and it took nearly 17 years to regain the two top credit scores. While Morrison’s language hasn’t been as strident, he has said Australia must live within its means and indicated a focus on reduced spending. The government expects Australia’s budget position to improve in coming years despite the environment for commodity prices as it controls expenditure growth, Finance Minister Mathias Cormann said Thursday in an e-mailed response to questions.
“The Government is committed to responsible budget management which protects our AAA credit rating,” he said. “Our public debt remains low internationally and consistent with our plan, the government is committed to stabilizing and reducing our debt over time.” Australia’s general government net debt is projected to peak at 19.9% in 2017, lower than any Group of Seven economy, according to the IMF’s fiscal monitor. That number has climbed from minus 0.6% in 2009. “One differentiating feature between Australia and other Aaa rated sovereigns is that, while government debt has increased markedly in Australia, it has been more stable for other Aaa sovereigns,” Marie Diron at Moody’s in Singapore wrote. “We expect a further increase in debt and will look at policy measures and the economic environment to review our analysis on this.”
Euro Pacific Capital’s Peter Schiff sat down with Alex Jones last week to discuss the state of the economy, and where he sees everything going from here. Here are some notable moments from the interview. Regarding how bad things are, and what’s really going on in the economy, Schiff lays out all of the horrible economic data that has come out recently, as well as making sure to take away the crutch everyone uses to explain any and all data misses, which is weather.
“It’s no way to know exactly the timetable, but obviously this economy is already back in recession, and if it’s not in a recession it’s certainly on the cusp of one” “We could be in a negative GDP quarter right now, and I think that if the first quarter is bad the second quarter is going to be worse” “The last couple years we had a rebound in the second quarter because we’ve had very cold winters. Well this winter was the warmest in 120 years so there is nothing to rebound from.”
On the Fed, and current policies, he very bluntly points out that nothing is working, nor has it worked, but of course the central planners will try it all anyway. He also takes a moment to agree with Donald Trump regarding the fact that the U.S. is flat out, undeniably broke.
“The problem for the Fed is how do they launch a new round of stimulus and still pretend the economy is in good shape.” “Negative interest rates are a disaster. It’s not working in Japan, it’s not working in Europe, it’s not going to work here. Just because it doesn’t work doesn’t mean we’re not going to do it, because everything we do doesn’t work and we do it anyway. It shows desperation, that you’ve had all these central bankers lowering interest rates and expecting it to revive the economy. And then when they get down to zero, rather than admit that it didn’t work, because clearly if you go to zero and you still haven’t achieved your objective, maybe it doesn’t work. Instead of admitting that they were wrong, they’re now going negative.”
“The United States, no matter how high inflation gets, we’ll do our best to pretend it doesn’t exist or rationalize it away because we have a lot more debt. America is broke, if you look at Europe and Japan even though there is some debt there, overall those are still creditor nations. The world still owes Europe money, the world still owes Japan money, but America owes more money than all of the other debtor nations combined. Trump is right about that, we are broke, we’re flat broke, and we’re living off this credit bubble and we can’t prick it. Other central banks may be able to raise their rates, but the Fed can’t.”
On how he sees everything unfolding from this point, Peter again points out that the economy is weak and it’s only a matter of time before this entire centrally planned manipulation is exposed for what it is, and becomes a disaster for the Federal Reserve. He likens how investors are behaving today to the dot-com bubble, and the beginning of the global financial crisis.
“Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes.” “..in six months we would have either a tax revolution or a startling contraction of the budget!”
[..] The public debt will fall due someday. It will have to be repaid or refinanced. If repaid, where would the money come from? It would come from you, naturally. The debt is ultimately a deferred tax. You can calculate your pro rata obligation on your smartphone. Just visit the Treasury website, which posts the debt to the penny, then the Census Bureau’s website, which reports the up-to-the-minute size of the population. Divide the latter by the former and you have the scary truth: $42,998.12 for every man, woman and child, as I write this. In the short term, the debt would no doubt be refinanced, but at which interest rate? At 4.8%, the rate prevailing as recently as 2007, the government would pay more in interest expense –$654 billion– than it does for national defense.
At a blended rate of 6.7%, the average prevailing in the 1990s, the net federal-interest bill would reach $913 billion, which very nearly equals this year’s projected outlay on Social Security. We always need protection against cockeyed economic experimentation. Once a national consensus on money and debt furnished this protective armor. Money was gold and debt was bad, Americans assumed. Most credentialed economists today will smile at these ancient prejudices. Allow me to suggest that our forebears knew something. Keynes himself would recoil at 0% bank-deposit rates, chronically low economic growth and the towering trillions that we have so generously pledged to one another. (All we have to do now is earn the money to pay them.) How do we escape from our self-constructed fiscal jail? According to the Government Accountability Office, unpaid taxes add up to more than $450 billion a year.
Even so, according to the Tax Foundation, Americans spend 6.1 billion hours and $233.8 billion each tax season complying with a federal tax code that runs to 10 million words. Are we quite sure we want no part of the flat-tax idea? An identical low rate on most incomes. No deductions, no H&R Block. Impractical? So is the debt. So is the spending (and the promises to spend more down the road). We need to stop the squandermania. How? By resuming the principled fight that Vivien Kellems waged against the IRS during the Truman Administration. It enraged Kellems, a doughty Connecticut entrepreneur, that she was forced to withhold federal taxes from her employees’ wages. She called it involuntary servitude, and she itched to make her constitutional argument in court. She never got that chance, but she published her plan for a peaceful revolution.
She asked her readers –I ask mine– to really examine the stub of their paycheck. Observe how much your employer pays you and how much less you take home. Notice the dollars withheld for Medicare, Social Security and so forth. If you are like most of us, you stopped looking long ago. You don’t miss the income that you never get to touch. Picking up where Kellems left off, I propose a slight alteration in payday policy. Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes. “Such a payroll policy,” wrote Kellems in her memoir, Taxes, Toil and Trouble, “is entirely legal and if it were universally adopted, in six months we would have either a tax revolution or a startling contraction of the budget!” Black ink, sound money and the spirit of Vivien Kellems are the way forward. “Make America solvent again” is my credo and battle cry. You can fit it on a cap.
The defining feature of each successive stage of global capitalism has been a shift in the boundary between economics and politics. In classical nineteenth-century capitalism, politics and economics were idealized as distinct spheres, with interactions between government and business confined to the (necessary) raising of taxes for military adventures and the (harmful) protection of powerful vested interests. In the second, Keynesian version of capitalism, markets were viewed with suspicion, while government intervention was assumed to be correct. In the third phase, dominated by Thatcher and Reagan, these assumptions were reversed: government was usually wrong and the market always right. The fourth phase may come to be defined by the recognition that governments and markets can both be catastrophically wrong.
Acknowledging such thoroughgoing fallibility may seem paralyzing – and the current political mood certainly seems to reflect this. But recognizing fallibility can actually be empowering, because it implies the possibility of improvement in both economics and politics. If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa. If the world is characterized by ambiguity and unpredictability, then the economic theories of the pre-crisis period – rational expectations, efficient markets, and the neutrality of money – must be revised. Moreover, politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions.
This includes not only financial deregulation, but also central bank independence, the separation of monetary and fiscal policies, and the assumption that competitive markets require no government intervention to produce an acceptable income distribution, drive innovation, provide necessary infrastructure, and deliver public goods. It is obvious that new technology and the integration of billions of additional workers into global markets have created opportunities that should mean greater prosperity in the decades ahead than before the crisis. Yet “responsible” politicians everywhere warn citizens about a “new normal” of stagnant growth. No wonder voters are up in arms. People sense that their leaders have powerful economic tools that could boost living standards.
Money could be printed and distributed directly to citizens. Minimum wages could be raised to reduce inequality. Governments could invest much more in infrastructure and innovation at zero cost. Bank regulation could encourage lending, instead of restricting it. But deploying such radical policies would mean rejecting the theories that have dominated economics since the 1980s, together with the institutional arrangements based upon them, such as Europe’s Maastricht Treaty. Few “responsible” people are yet willing to challenge pre-crisis economic orthodoxy. The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking. If responsible politicians refuse, “some rough beast, its hour come at last” will do it for them.
Japan has been worst hit by the tremors. The latest quake to hit the country yesterday, measuring 7.3 on the Richter scale, injured more than 1,000 and trapped people in collapsed buildings, only a day after a quake killed nine people in the same region. Rescue crews searched for survivors of a magnitude 7.3 earthquake that struck Japan’s Kyushu Island, the same region rattled by a 6.2 quake two days earlier. Around 20,000 troops have had to be deployed following the latest 7.3 earthquake at 1.25am local time on Saturday. Roads have also been damaged and big landslides have been reported, there are also 200,000 households without power. The death toll in the latest Kyushu earthquake is 16 people and a previous earthquake that struck the area on Thursday had killed nine people.
There have been other large earthquakes recorded in recent days, including a major one in southern Japan which destroyed buildings and left at least 45 people injured, after Myanmar was rocked on Wednesday. Japan’s Fire and Disaster Management Agency said 7,262 people have sought shelter at 375 centers since Friday in Kumamoto Prefecture. Prime Minister Shinzo Abe vowed to do everything he could to save lives following the disaster. He said: “Nothing is more important than human life and it’s a race against time.” On Thursday, The Japanese Red Cross Kumamoto Hospital confirmed 45 were injured, including five with serious injuries after a quake of magnitude 6.2 to 6.5 and a series of strong aftershocks ripped through Kumamoto city.
Several buildings were damaged or destroyed and at least six people are believed to be trapped under homes in Mashiki. Local reports said one woman was rescued in a critical condition Scientists say there has been an above average number of significant earthquakes across south Asia and the Pacific since the start of the year. The increased frequency has sparked fears of a repeat of the Nepal quake of 2015, where 8,000 people died, or even worse. Roger Bilham, seismologist of University of Colorado, said: “The current conditions might trigger at least four earthquakes greater than 8.0 in magnitude. “And if they delay, the strain accumulated during the centuries provokes more catastrophic mega earthquakes.”
Harris&Ewing Happy News Cafe, “restaurant for the unemployed”, Washington, DC 1937
This is another essay from our friend Dr. Nelson Lebo III in New Zealand. Nelson is a certified expert in everything to do with resilience, especially how to build a home and a community designed to withstand disasters, be they natural or man-made, an earthquake or Baltimore. Aware that he may rub quite a few people the wrong way, he explains here why he has shifted from seeing what he does in the context of sustainability, to that of resilience. There’s something profoundly dark in that shift, but it’s not all bad.
Nelson Lebo III: Sustainability is so 2007. Those were the heady days before the Global Financial Crisis, before $2-plus/litre petrol here in New Zealand, before the failed Copenhagen Climate Summit, before the Christchurch earthquakes, before the Trans Pacific Partnership Agreement (TPP)…the list continues.
Since 2008, informed conversations on the economy, the environment, and energy have shifted from ‘sustainability’ to ‘resilience’. There are undoubtedly many reasons for this shift, but I’ll focus on just two: undeniable trends and a loss of faith. Let me explain.
Since 2008, most of the pre-existing trends in income inequality, extreme weather events and energy price volatility have ramped up. Sustainability is about halting and reversing these trends, but there is essentially no evidence of that type of progress, and in fact the data shows the opposite.
Plenty of quantitative data exists for the last seven years to document these accelerated trends, the most obvious is the continually widening gap between rich and poor everyone else. The second wave of commentary on the Baltimore riots (after the superficiality of the mainstream media) has been about the lack of economic activity and opportunity in many of the largely African-American neighbourhoods.
Tensions have been simmering for years (decades) and overzealous police activity appears to have been just been the spark. This should come as no surprise to anyone who has read The Spirit Level, or any similar research on the correlation between wealth inequality and social problems.
You can only push people so far before they crack. For residents of Baltimore’s disadvantaged neighbourhoods the inequities are obvious. People are not dumb. We can see the writing on the wall, and know for the most part that government on every level has not taken significant steps to embrace sustainability be it economic, environmental or social . To me it seems we are running on the fumes of debt on all three: over-extended financially on nearly all levels; over-extended on carbon emissions (and post oil peak); and a powder keg of social unrest waiting for a tipping point.
Which brings me to my second point: a loss of faith.
For most of my adult life I have banged the drum for sustainability. I don’t anymore. Sustainability is about voluntarily balancing three factors: human needs, environmental health, and economic viability. My observation is that it has been a failed movement and that the conversation has naturally shifted to resilience.
These observations do not come casually. I have worked full-time in the environmental/sustainability/resilience field for twenty-five years and I have a PhD in science and sustainability education.
Dennis Meadows, a well-known scientist who has been documenting unsustainable trends for over 40 years, puts it this way:
The problem that faces our societies is that we have developed industries and policies that were appropriate at a certain moment, but now start to reduce human welfare, like for example the oil and car industry. Their political and financial power is so great and they can prevent change. It is my expectation that they will succeed. This means that we are going to evolve through crisis, not through proactive change.
This is not to say we cannot and should not be proactive. It is more about where we direct our ‘proactions.’ Being proactive about resilience means protecting one’s self, one’s family, and one’s community from the trends that make us vulnerable economically, socially and environmentally, as well as to sudden shocks to the system.
The recent earthquake in Nepal is another reminder of the critical importance of resilience. Before that it was Christchurch and Fukushima. In the wake of earthquakes we often hear about a lack of food and water in the effected area, along with disruptions to energy supplies in the wider region. In Nepal these have lead to significant social unrest.
Whether it is Kathmandu over the last month or New Orleans after Katrina, we know that we cannot count on “the government” for significant assistance in the immediate aftermath of natural disasters. Along the same lines, we cannot count on governments to protect us from unnatural disasters such as the TPP and TTIP.
Whether it is a potential earthquake or the next mega-storm and flood, the more prepared (ie, resilient) we are the better we will get through. Even rising energy prices and the probable effects of the TPP will siphon off money from our city and exacerbate social problems in our communities.
In most cases, the same strategies that contribute to resilience also contribute to a more ‘sustainable’ lifestyle. But where for most people sustainability is largely abstract and cerebral, resilience is more tangible. Perhaps that’s why more and more people are gravitating toward it.
Resilience is the new black.
A resilient home is one that protects its occupants’ health and wealth. From this perspective, the home would have adequate insulation, proper curtaining, Energy Star appliances, energy-efficient light bulbs, and an efficient heater. By investing in these things we are protecting our family’s health as well as future-proofing our power bills. Come what may, we are likely to weather the storm.
Beyond the above steps, a resilient household also collects rainwater, grows some of its own food, and has back-up systems for cooking and heating. When we did up an abandoned villa in Castlecliff, Whanganui, we included a 1,000 litre rain water tank, three independent heat sources, seven different ways to cook (ok, I got a little carried away), and a property brimming with fresh fruit and vege. These came on top of a warm, dry, home and a power bill of $27 per month. (We did it all for about half the cost of an average home in the city.)
A loss of power and water for two or three days would hardly be noticeable. A doubling of electricity or fresh vege prices would be a blip on the radar. During the record cold week in 2011 our home was heated for free by sunshine.
Sustainability may be warm and fuzzy, but resilience gets down to the brass tacks.
Above all else, I am deeply practical and conservative. The questions I ask are: does it work?; is it affordable?; can I fix it myself?; and, importantly, is it replicable? Over the last decade I have developed highly resilient properties in North America and New Zealand. All of these properties have been shared as examples of holistic, regenerative permaculture design and management. We have shared our experience locally using open-homes, workshops and property tours, as well as globally through the internet.
When the proverbial sh*t hits the fan, which all the trends tell us will happen, I know that I have done my best to help my family and community weather any storm be it a typhoon, an earthquake, rising energy prices, or the TPP.
This is an expanded version of my regular weekly column for the Wanganui Chronicle (NZ).
– Dr. Nelson Lebo designs low-input/high performance systems that are both resilient and cost-effective.
The U.S. job market had its best year of gains last year since 1999, and economic activity hit a whopping 5% in the third quarter – the best quarter since 2003. Three months later, the U.S. economy is looking a little tired. It’s losing momentum in puzzling ways. Hiring is still strong, but experts are starting to scale back their growth forecasts. Federal Reserve chair Janet Yellen summed it up well in a speech Friday: “If underlying conditions had truly returned to normal, the economy should be booming.” Economists say there are two main problems: Workers’ wages aren’t growing much, if at all. As a result, Americans aren’t going out and spending much. On top of that, many foreign economies are slowing down, which puts pressure on the U.S. The question going forward is whether we’re just in a blip or a bigger shift is taking place.
“The consumer really hasn’t kicked in at full speed ahead,” says Peter Cardillo, chief market economist at Rockwell Global Capital. “We’re going through a soft patch.” With March’s jobs report out on Friday, this economic head-scratcher will be in full focus this week. The U.S. added over half a millions jobs in the first two months of this year alone. That’s a 50% increase from the same two-month stretch a year ago when the Polar Vortex had much of America in a funk. Job gains have come across the board: health care, construction, the service sector and retail businesses have all seen strong pick up. The unemployment rate is down to 5.5%, its lowest mark in seven years. It would be a full-steam story on jobs except for one thing: wage growth. Hourly wages only grew 2% in February. That’s a marginal bump up, but it’s too little for most Americans to notice the recovery’s progress. It’s also well below the Federal Reserve’s roughly 3.5% goal. [..]
People don’t go out and spend unless they feel confident about the future. There was hope that cheap gas would spur people to feel better about the economy and their pocketbooks. A gallon of gas was $3.53 a year ago. Now it’s $2.42, according to AAA. But a lot of people are still holding onto that savings. Retail sales and construction on new homes both fell in February, missing estimates. The latest numbers on manufacturing are also weaker than hoped for. All this could just be a winter slowdown, but it’s raising red flags. “Most of it was due to the inclement weather we had…I think that kept a lot of shoppers at home,” says Bernard Baumohl at the Economic Outlook Group.
Construction in Greece has suffered one of the biggest declines to have been recorded by any professional sector within just a few years, as business activity in the domain has dropped as much as 80% since 2008, a study by the Foundation for Economic and Industrial Research (IOBE) showed on Monday. It added that more than a third of the economic contraction recorded from 2008 to 2013 in Greece is associated with the drop in investment in construction. Employment in the sector more than halved within five years, from 589,000 people in 2008 to 287,000 in 2013, the study revealed.
Former Fed Chairman Ben Bernanke unveiled a new blog on Monday and used his first post to defend his record from criticism that he kept rates artificially low and hurt savers. Bernanke said he was worried that his post was “very textbook-y” and with some reason. His blog is built around the concept of an “equilibrium real interest rate” which is the ideal level of rates minus inflation that would allow the economy to use all of its labor and capital resources. Fed Chair Janet Yellen discussed this concept in her policy speech last week. Underneath all the wonkiness in the post is a real passion to convince people that Bernanke was not “throwing seniors under the bus” as at least one of his legislative critics alleged.
During and after the financial crisis, Bernanke said, the equilibrium rate was low and even negative. If the U.S. central bank had pushed rates up to help savers, it would have likely led to an economic slowdown, Bernanke said. The best policy for the Fed is to set rates at the equilibrium rate, he added. So critics who argue that the he kept interest rates “artificially low” are also confused, Bernanke said. There is “absolutely nothing artificial” about setting the Fed rate at the equilibrium rate, he said.
What I’m about to tell you is not my own opinion or even analysis. It’s original data that comes from the United States Federal Reserve and national credit bureaus.
• 40 million Americans are now in debt because of their university education, and on average borrowers have four loans with a total balance of $29,000.
• According to the Fed, “Student loans have the highest delinquency rate of any form of household credit, having surpassed credit cards in 2012.”
• Since 2010, student debt has been the second largest category of personal debt, just after a home mortgage.
• The delinquency rate for student loans is now hovering near an all-time high since they started collecting data 12 years ago.
• Only 37% of total students loan balances are currently in repayment and not delinquent.
The rest—nearly 2 out of 3—are either behind on payments, in all-out default, or have entered some sort of deferral program to delay making payments, with a small percentage still in school. It’s pretty obvious that this is a giant, unsustainable bubble (more on this below). But even more important are the personal implications. University graduates now matriculate with tens of thousands of dollars worth of debt. Debt is another form of servitude. Like medieval serfs, debt keeps people tied to jobs they dislike in places they don’t want to be working for bosses they hate doing things that make them feel unfulfilled. Debt makes it very difficult to walk away and start fresh. In fact, ‘starting fresh’ is almost legally impossible when it comes to student debt. Even in US bankruptcy court, student debt cannot be discharged in almost all cases.
It is an albatross that hangs over you for a decade or more if you do make the payments, and it follows you around for the rest of your life if you do not. (I’m not suggesting anyone default on what they owed—simply pointing out that nearly every other form of debt can be discharged EXCEPT for student debt.) This kind of debt has a huge impact on people’s lives. Again, according to the Federal Reserve, “[G]rowing student debt has contributed to the recent decline in the homeownership rate and to the sharp increase in parental co-residence among millennials.” So the Fed’s own analysis shows that student debt is a cause for people in their 20s and 30s to live at home with their parents. Amazing.
Artificially low interest rates have cost U.S. savers $470 billion, according to a report released Thursday. The report, from reinsurer Swiss Re, argues against current high levels of so-called financial repression. Swiss Re came up with the $470 billion number by looking at rates from 2008 to 2013. The insurer argues that if the Fed had followed a policy based on the Taylor Rule — a mechanistic way of determining interest rates that some congressional Republicans advocate — the Fed funds target would have been 1.7%age points higher on average. That in turn would have boosted interest income by an average of $14,000 for the wealthiest 1%, and $160 for the bottom 90%. The report concedes that there are obvious beneficiaries of lower rates too, through lower mortgage rates, higher house prices and a rising stock market.
The boost to household wealth from house prices was an estimated $1 trillion and from the stock market was an estimated $9 trillion — dwarfing, then, the $470 billion hit on savings. The report points out, however, that since the rich are more likely to own stocks, and have pricier homes, this has aggravated inequality. Moreover, the report says it’s questionable whether there’s been a boost on actual consumption, since neither equity nor real estate gains are immediately translatable into cash. “As a result, the increase in financial and housing wealth has – at best – only marginally benefited the real economy,” the report says.
Swiss Re also has a natural, vested interest in higher interest rates. The report says U.S. and European insurers have lost around $400 billion in yield income due to financial repression. The financial repression index, shown in the chart above, is based on real government bond yields, the difference between actual yields and fair value, central bank asset purchases, the difference in policy rate vs. the Taylor rule, regulatory risk, asset encumbrance, the available of high-quality liquid assets and domestic debts holdings and capital flow. Most of the components represent an average for both the European Union and the U.S.
Forget about a strong start for the U.S. economy in 2015: Consumer spending barely rose in February after a decline in January, pointing to much slower growth in the first quarter. Consumer spending rose a scant 0.1% last month, the Commerce Department said Monday. Economists polled by MarketWatch were looking for a seasonally adjusted 0.3% gain. The small increase in spending in February and outright decline in January suggest the economy failed in early 2015 to match the pace of growth at the end of last year. Gross domestic product is forecast to expand just 1.4% in the first quarter, down from 2.2% in the fourth quarter and 5% in the third quarter. Harsh winter weather that kept people indoors and steered them away from car dealers and other retailers likely contributed to small gain in spending in February. Lower gasoline prices also were a factor in keeping spending down January and December.
Yet with the weather turning warmer and companies hiring at the fastest pace in 15 years, most economists predict the economy will accelerate in the spring. More American working will boost consumer spending, they say. A similar pattern played itself out in 2014. GDP shrank 2.1% in the first quarter but bounced back with an increase of 4.6% in the second quarter. What could also help this year are the first hints that wages are starting to rise, at least for some workers whose skills are in short supply. Personal incomes in February rose a solid 0.4% for the fourth time in five months. “Households are still flush with the money saved from the big drop-off in gasoline prices and, with the labor market still on fire, incomes should continue to increase at a solid pace,” said Paul Ashworth, chief U.S. economist at Capital Economics. “That provides the scope for a big gain in consumption in the second quarter.”
The supply of U.S. companies with junk-rated debt is rising just as investor demand for higher yields is climbing. Moody’s reports a two-year high in company debt rated B3 negative or worse—a.k.a. junk—as part of a trend that has seen the list of 184 companies grow by 26% over the period. The rise has been led by oil and gas firms, which accounted for 12 of the 28 additions to the junk list in February. What’s more, the roster would be even longer but for companies falling off the list due to reasons including filing for bankruptcy. Of the 18 issuers no longer rated, 39% filed either for bankruptcy protection or “distressed exchange, and 33% withdrew, with just 28% getting off the list due to upgrades.” “This is a reversal from the previous two quarters, when most companies left the list via ratings upgrades,” Moody’s said.
“If this reversal continues, it could signal tough times ahead for speculative-grade issuers.” Not so far, though. Fueled by low default rates and generally favorable credit conditions, investors in 2015 have been pouring money into funds that invest in high-yield debt. In fact, the previous six weeks before the most recent week had the highest level of flows to junk funds since the financial crisis in 2008 and 2009, according to Morningstar. Flows to junk-focused funds have taken in a net $12.2 billion so far in 2015 as part of a broader interest in fixed income amid a turbulent stock market, Bank of America Merrill Lynch reported. In addition to the big cash attraction to junk, high-grade bond funds have seen net inflows of $36.4 billion.
A letter published [Mar 26] in the Financial Times signed by 19 economists calls on the European Central Bank to adopt an alternative quantitative easing policy. The letter includes a call to distribute cash directly to citizens of the eurozone. As a response to the ECB plan to inject €60 bn a month for the next 18 months into the financial system, 19 economists have signed a letter to the Financial Times calling on the ECB to adopt a different approach which they consider a more efficient way to boost the eurozone economy. “The evidence suggests that conventional QE is an unreliable tool for boosting GDP or employment. Bank of England research shows that it benefits the well-off, who gain from increasing asset prices, much more than the poorest,” the letter reads. The signatories offer an alternative:
Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects); alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please. By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.
The idea of having central banks to distribute cash to citizens has often been called “quantitative easing for the people” – a term coined by Steve Keen, an Australian economist. Prof. Steve Keen signed the letter, along with 18 other economists, including several advocates for basic income such as BIEN’s cofounder Guy Standing, David Graeber, Frances Coppola and Lord Robert Skidelsky. Guy Standing recently wrote an article outlining a proposal for having the ECB to finance basic income pilot studies in Europe:
“Monthly payments could be provided to every man, woman and child in, say, four areas on a pilot basis, with the sole condition that they would only continue to receive them if they were residing in those areas. People would still be free to move. However, it would help them to be able to stay. Such payments could be made for a period of 12 or 24 months.”
International investors are cashing out of China’s world-beating equity rally Foreigners sold a net 1.7 billion yuan ($274 million) of Chinese shares via the Shanghai-Hong Kong exchange link in the week through Monday, while outflows from the two biggest Hong Kong exchange-traded funds tracking mainland shares totaled $622 million. Money flowed out of the link again on Tuesday as the Shanghai Composite Index touched a seven-year high on government plans to bolster the housing market. Global investors are losing faith in the rally even as mainland traders open stock accounts at the fastest pace on record and authorities endorse gains in equities that have doubled China’s market value over the past year to a record $6.5 trillion.
While locals are focused on the prospects for further stimulus, UBS says foreigners are concerned it hasn’t done enough to revive growth after a gauge of manufacturing contracted in March and measures of industrial output and investment trailed estimates in the first two months of 2015. “The A-share market is in a bubble stage,” said Wenjie Lu, a strategist at UBS in Shanghai. “It makes sense for foreign investors to take profits.”
The Bank of England is to impose a series of tests on large UK banks to establish whether they are able to withstand a dramatic slowdown in China, a contraction in the eurozone, the worst deflation since the 1930s or a fall in UK interest rates to zero. The Co-operative bank – which failed last year’s tests – is no longer included in the annual assessments of the industry’s financial strength as it is too small, leaving six banks and the Nationwide building society to be tested. The banks are Barclays, HSBC, Santander UK, Standard Chartered and the two bailed-out banks, Lloyds Banking Group and Royal Bank of Scotland. The Bank will give more weight to international scenarios, devised after talks with the IMF, than it did in the 2014 tests, which had a domestic emphasis.
Last year’s tests were designed to meet those imposed by the European Banking Authority, which is not conducting tests this year. The City is expecting this year’s tests to focus on the strength of HSBC and Standard Chartered, although a scenario for the UK is included, under which inflation is negative for seven consecutive quarters – the largest fall in prices for 80 years – and the bank rate cut to zero from the 0.5% level at which it has been stuck since the banking crisis. Banks are being asked to test their ability to withstand shocks over a five-year period to the end of 2019 and be expected to maintain a minimum amount of capital and meet a leverage ratio – a tougher measure of financial strength – while ensuring lending to the real economy grows 10% over the five-year period.
Mark Carney, governor of the Bank, said last year’s results showed the UK banking system was stronger than it had been before the 2008 crisis. “This year’s test will have a different focus and is equally important. By assessing the resilience of the UK banking system against a major shock, we will improve further our ability to identify vulnerabilities and we will ensure that banks have plans in place to address a wider range of problems,” Carney said. The severity of the test’s imagined downturn in China – with growth falling to about 1.6% growth – is likened to the scale of the fall in house prices in the UK used last year, when house prices were assumed to collapse by 35%. Chinese economic growth is about 7%.
– Greece’s biggest creditor Germany said on Monday that the euro zone would give Athens no further financial aid until it has a more detailed list of reforms and some are enacted into law, adding to scepticism over plans presented last week. A senior official in Brussels on Sunday had dismissed the list as “ideas” rather than a plan that Greece could submit to EU and IMF lenders to avoid running out of cash next month. Euro zone states are still waiting for Greece to send a more comprehensive list, a German finance ministry spokesman said. Chancellor Angela Merkel said Athens had a certain degree of flexibility on which reforms to implement but that they must “add up” to the satisfaction of European partners. “The question is can and will Greece fulfill the expectations that we all have,” she said during a visit to Helsinki.
“There can be variation as far as which measures a government opts for but in the end the overall framework must add up.” There was no immediate reaction from Athens on whether the list would be amended further. Lenders have said it could take several more days before a proper list was ready. Greek and other euro zone officials from the Euro Working Group are due to discuss the reforms on April 1. A Greek finance ministry official said the list included a lowered target of €1.5 billion in proceeds from asset sales this year and a proposal to set up a bad bank with bailout funds returned to the euro zone in February. Among the slated asset sales is a stake in the country’s biggest port, Piraeus, in which China has expressed interest. The list also estimates Greece can raise €3.7 billion this year through audits of bank transfers abroad, TV license and e-gaming tenders, a value-added-tax lottery scheme, a crackdown on smuggling and the settlement of arrears owed to the state.
Greek finance minister Yanis Varoufakis has called for an end to the “toxic blame game” between Greece and Germany. He made the call as Greece prepares to finalise its list of economic reforms to present to its international creditors. The reforms are needed to unlock a new tranche of bailout cash for Greece, which could run out of money in weeks. Mr Varoufakis said that finger-pointing between Germany and Greece would only aid Europe’s enemies. Athens and Berlin have been engaged in a bitter war of words as the Greek government seeks to renegotiate the terms of its bailout. German finance minister Wolfgang Schaeuble has publicly expressed his anger, claiming last week that Greece “has destroyed all trust”. He also acknowledged that Greece could “accidentally leave the eurozone”.
Writing in the German business newspaper Handelsblatt, Mr Varoufakis said that tensions between the two countries “must stop”, adding: “Only then can Greece, with support of its partners, focus on implementing effective reforms and growth-orientated policy strategies.” Greece submitted preliminary plans to the EU, IMF and the ECB on Friday night that it says will raise some €3bn in state revenues. They include measures to combat tax evasion, more privatisations and higher taxes on alcohol and cigarettes, but no “recessionary measures” such as wage and pension cuts. However, the reforms as initially proposed do not appear to have been specific enough to win the approval of the lenders, formerly known as the “troika”.
Greece’s proposed plans to bolster its finances in exchange for unlocking bailout funds still need lots of work, three European officials said. The 15-page draft, which was discussed Sunday in Brussels, requires more information and details and was a long way from serving as the basis of a deal, said one of the aides, who asked not to be named because the talks were private. Seeking a strategy that passes muster with European officials now withholding loans as the country’s cash crunch deepens, Greece’s government foresees a net increase of €3.7 billion in receipts this year. The biggest chunk would be as much as €875 million from the “intensification of audits on lists of bank transfers and offshore entities,” according to the draft.
“The implication from early on has been that the Greek side doesn’t have enough flesh on bones of some of the new proposals,” said Michael Michaelides at RBS. “The surprising thing about even current proposals given leaks is the seeming lack of technocratic input, which would have helped the Greek case.” Prime Minister Alexis Tsipras was elected Jan. 25 on a platform of easing budget cuts and restructuring debt. While he backed away from those positions to win a Feb. 20 agreement to extend the nation’s bailout until the end of June, his diplomatic maneuvering and the delays in providing a detailed economic plan are frustrating the rest of the currency bloc. They have also roiled financial markets and spurred Greeks to pull their savings from banks, derailing the economic recovery.
Greek Prime Minister Alexis Tsipras, facing euro-area demands for a credible economic plan, is fending off allies at home who are spoiling for a fight. With the 40-year-old premier due to address parliament in Athens Monday evening amid a deepening cash crunch, a pair of his ministers warned against retreating from election promises to end austerity. Underscoring the cacophony, the energy minister contradicted Tsipiras’s deputy on the sale of the country’s biggest port to China. “This speaking with two tongues has an expiration date,” said Aristidis Hatzis, associate professor of law and economics at the University of Athens. “When the deputy prime minister is in China and making certain statements, you can’t contradict it here before he’s even returned to Greece.” [..]
Greece has red lines and won’t agree to any “recessionary measures” such as cutting wages or pensions or allowing mass dismissals, Tsipras told Real News newspaper in an interview published Sunday. The only way for Greece to end its crisis is through confrontation, if not conflict, with a “Germanized Europe,” Energy Minister Panagiotis Lafazanis said in an interview with the Athens-based Kefalaio newspaper. Privatizations, especially in strategic areas, “can’t and won’t happen,” he said. [..] Adding to the confusion, Euclid Tsakalotos, international economic-affairs minister, said Greece won’t abandon its anti-austerity philosophy in return for aid. He spoke in the U.K.’s Guardian newspaper as talks were taking place in Brussels over the reform measures. Greece wants a deal but will go its own way “in the event of a bad scenario,” he said.
I’m with Ron on this. As I said before, all supra-national organizations should be folded, because they will all over time drift towards attracting sociopaths attracted by the lack of transparency and democracy inherent in them.
A responsible financial institution would not extend a new loan of between $17 and $40 billion to a borrower already struggling to pay back an existing multi-billion dollar loan. Yet that is just what the International Monetary Fund (IMF) did last month when it extended a new loan to the government of Ukraine. This new loan may not make much economic sense, but propping up the existing Ukrainian government serves the foreign policy agenda of the US government. Since the IMF receives most of its funding from the United States, it is hardly surprising that it would tailor its actions to advance the US government’s foreign policy goals.
The IMF also has a history of using the funds provided to it by the American taxpayer to prop up dictatorial regimes and support unsound economic policies. Some may claim the IMF does promote free markets by requiring that countries receiving IMF loans implement some positive economic reforms, such as reducing government spending. However, other conditions imposed by the IMF, such as that the country receiving the loan deflate its currency and implement an industrial policy promoting exports, do not seem designed to promote a true free market, much less improve the people’s living standards by giving them greater economic opportunities.
The problem with the IMF cannot be fixed by changing the conditions attached to IMF loans. The fundamental problem with the IMF is that it is funded by resources taken forcibly from the private sector. By taking resources out of private hands and giving them to IMF bureaucrats, government distorts the marketplace, harming both American taxpayers and the citizens of the countries receiving the IMF loans. The idea that the IMF is somehow better able to allocate capital than are private investors is just as flawed as every other form of central planning. The IMF must be repealed, not reformed.
People in the United States feel under threat, both from beyond our borders and within them. In fact, when asked about both U.S. President Barack Obama and Russian President Vladimir Putin, it was a pretty darn close call — 20 percent saw Putin as an imminent threat compared to 18 percent who said the same about Obama. A recent Reuters/Ipsos poll asked more than 3,000 Americans what they see as some of the biggest threats to themselves and the country. You can slice and dice the information in literally hundreds of different ways here. People were shown a range of potential threats and then asked to rate how dangerous they were with one being no threat and five meaning the threat is imminent.
I think it’s safe to say that a national security expert might not agree with the public’s choices. More people fear Boko Haram, a scary but ragged Islamic radical group in Nigeria that might have trouble paying for plane tickets to the United States, than Russia, which recently invaded a major European country. And a whopping 34 percent consider Kim Jong-un, the leader of impoverished North Korea, an imminent threat. Kim may have a couple of nukes, but otherwise his nation is a basket case, so poor that it relies on international aid to feed itself. Though considering how fast Sony Pictures pulled “The Interview” from theaters, I guess the public’s not alone in being afraid of the young man with the unique hairstyle.
Perhaps the most disturbing part, however, is how Americans view each other, simply because of the political party they favor. Thirteen percent of us see the Republican and Democratic parties as an imminent threat. That’s the same number who think the Chinese might be. Quick reality check: neither political party is the largest foreign holder of U.S. debt, nor could they cripple us economically in an afternoon. Nor has either party independently building an army that may soon be able to rival that of the United States — that we know of, anyway.
After an earthquake toppled her chimney, sending rocks crashing through the roof and onto her legs, Sandra Ladra didn’t blame an act of God. She sued two energy companies, alleging they triggered the 2011 quake by injecting wastewater from drilling deep into the ground. Ms. Ladra’s lawsuit, now before the Oklahoma Supreme Court, highlights an emerging liability question for energy companies: Can they be forced to pay for damages from earthquakes if the tremors can be linked to oil-and-gas activity? Oklahoma, with a history of mild-to-moderate seismic activity, experienced 585 earthquakes of 3.0 or greater magnitude last year—big enough to be felt indoors—according to the Oklahoma Geological Survey.
That’s more than the state had in the previous 30 years combined and the most of any state in the contiguous U.S. So far, most of the tremors under investigation in Oklahoma and other oil-producing states, including Arkansas, Kansas, Ohio and Texas, have been too small to cause major damage. But the prospect of facing juries over quake-related claims is reverberating throughout the energy industry, which fears lawsuits and tighter regulations could increase costs and stall drilling. “It’s definitely something that has risen to a level of fairly high concern,” Steve Everley at industry advocate Energy In Depth said of earthquake-related risks. “Companies recognize that there’s a problem here,” he said, adding that they are contributing data to help regulators determine what’s causing the quakes.
Most of the focus isn’t on hydraulic fracturing, which involves shooting a slurry of water, sand and chemicals into wells to let oil and gas flow out—and which helped touch off the recent U.S. energy boom. Instead, researchers say the most serious seismic risk comes from a separate process: disposal of toxic fluids left over from fracking and drilling by putting it in wells deep underground. Geologists concluded decades ago that injecting fluid into a geologic fault can lubricate giant slabs of rock, causing them to slip. Scientists say disposal wells are sometimes bored into unmapped faults. The practice isn’t new, but has proliferated with the U.S. drilling boom.
Russian Foreign Minister Sergei Lavrov left talks on Iran’s nuclear program and will only return if an accord is in sight, suggesting that negotiations will continue into the final hours before a March 31 deadline. Diplomats said obstacles remain after foreign ministers from the six powers jointly met Iranian envoys for the first time in the latest round of talks in Lausanne, Switzerland. Lavrov will return if there’s a “realistic understanding of a deal,” Russian Foreign Ministry spokeswoman Maria Zakharova said. “The main thing that gives us optimism is the determination of all the ministers to reach a result without taking a pause,” said Lavrov’s deputy, Sergei Rybakov. Russia sees positive signals at the talks, Dmitry Peskov, Putin’s spokesman, said in Moscow.
After a 12-year standoff, negotiators are divided over the pace of easing sanctions on Iran and the limits to be imposed on its nuclear program. A framework accord by March 31 would be a step toward ending Iran’s economic isolation, though another three months are envisaged to reach a detailed final agreement. Talks are stuck on how to roll back sanctions and how to reimpose them should Iran violate the agreement, a European diplomat said after Monday’s plenary meeting. No decision has been made on how to dispose of Iran’s enriched uranium, which is essential to ensuring that its nuclear program is exclusively peaceful, a U.S. official said. While the countries in talks with Iran would prefer that the uranium be transferred to a guarantor nation, other options are being discussed, the European diplomat said.
A three-day lockdown in Sierra Leone has exposed hundreds of potential new cases of Ebola, aiding efforts to bring to an end an epidemic that has already killed 3,000 people in the country. Officials ordered the country’s 6 million residents to stay indoors or face arrest during the period that ended late on Sunday as hundreds of health officials went door-to-door looking for hidden patients and educating residents about the virus. Reports to authorities of sick people increased by 191% in Western Area, which includes the capital, during the lockdown compared with the previous weekend, said Obi Sesay of the National Ebola Response Center. “Tests are being carried out on their blood samples, and the results will be in by Wednesday,” Sesay said, adding that 173 of the patients in Freetown met an initial case definition for Ebola.
In the rest of the country, there was a 50% increase in sick people reported in the lockdown’s first two days, Sesay said. Sierra Leone has reported nearly 12,000 cases since the worst Ebola epidemic in history was detected in neighboring Guinea a year ago. In all, more than 10,000 people have died in the two countries plus Liberia. New cases have fallen since a peak of more than 500 a week in December, but the government said the lockdown, its second, would help identify the last cases and reduce complacency. A source who declined to be identified said there were 961 death alerts nationwide during the lockdown’s first two days and 495 reports of illness of which 235 were suspected Ebola.