Archive for the ‘Financial melt-down’ Category

History brewing…

Friday, July 18th, 2008

– Here’s my take on what’s going on in the Middle East at the moment. Like so much going on around us now, it is in almost everyone’s best interests to keep things stable. But, on the other hand, entire forests can be lost to just one careless match.

– I correspond a lot with friends off on the side from this Blog. The following is my half of a recent exchange with a friend of mine who lives in Europe.

– All food for thought in a changing world.

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M.,

I share your concerns about the rise of Islamic fundamentalism in the Middle East. And I agree that Turkey, Pakistan and Iran are certainly centers of deep concern.

I saw a lot of news a week or so ago on the topic of whether or not Israel might ‘whack’ Iran. And those, plus your E-mails alerting me to your concerns, certainly got my attention.

On the other side, I also saw an article that looked at the probable consequences if the U.S. or Israel attacked Iran, and it concluded that these consequences were so bad, that an attack would be unlikely.

Of course, this latter article had no answer for the longer term conundrum of if Iran is not taken down now, she will have nuclear capabilities later and that will be the worst of all possible outcomes for Israel.

In talking against the likelihood of an attack, the article pointed out that attacking Iran would result in them shutting the Straits of Hormuz and that, in turn, would cut the world’s oil supplies by almost half and the economic chaos would be colossal.

Then there was the likelihood of Iran lofting missiles into the main producing Saudi oil fields, into Israeli cities and into the large US bases in Iraq where U.S. troops are known to be highly concentrated.

And, in the end, the efforts to eradicate Iran’s nuclear facilities might very well fail due to their intentional wide distributions, hiding and hardening.

And, finally, one possibility that none of the articles mentioned but which I think is highly likely: To date, so far as we know, rogue governments with enriched nuclear materials haven’t released such materials into the hands of the suicidal Islamic Jihadists. Such governments would probably prefer not to send such loose canons into the world where their control, thereafter, of how things unfolded would not be under their control.

But, if Iran is attacked, their nuclear ambitions thwarted and much of their nation damaged, just think how easily they could play that card to hurt the west. Think what just one dirty bomb loosed in Washington, D.C. or Manhattan might do to the U.S.

All of this is extremely ugly and I believe that the major players can all see the likely outcomes and all are holding back from acting because one event could trigger huge consequences for everyone. The only ones who want to act immediately are the Jihadists who are eager to pass into paradise. But, the Israelis are also thinking very hard about where their best options lie. And for them, indefinitely inaction could be fatal.

It looks like a fatal embrace to me.

The organisation of denial: Conservative think tanks and environmental scepticism

Saturday, June 21st, 2008

This worrisome research article has appeared in a peer reviewed journal. It’s not telling us anything that we didn’t already know, but it does catalogue the situation and help us steer clear of the hyperbole.

Environmental scepticism denies the seriousness of environmental problems, and self-professed ’sceptics’ claim to be unbiased analysts combating ‘junk science’. This study quantitatively analyses 141 English-language environmentally sceptical books published between 1972 and 2005. We find that over 92 per cent of these books, most published in the US since 1992, are linked to conservative think tanks (CTTs). Further, we analyse CTTs involved with environmental issues and find that 90 per cent of them espouse environmental scepticism. We conclude that scepticism is a tactic of an elite-driven counter-movement designed to combat environmentalism, and that the successful use of this tactic has contributed to the weakening of US commitment to environmental protection.

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Texans head across the border to save on gasoline

Saturday, June 21st, 2008

CIUDAD JUÁREZ, Mexico – With gasoline prices hovering near $4 per gallon, Texans along the U.S.-Mexico border have discovered a cheaper alternative: Mexico.

Mexican service stations all along the border report brisk sales in recent weeks as fuel prices in Texas continue to climb. Even Ciudad Juárez has seen a notable increase in customers from the United States, despite escalating drug violence that includes gunbattles in the streets and several decapitations.

Victor Gonzalez was among those risking their lives for cheaper gasoline Monday. Mr. Gonzalez crossed the border from El Paso in his silver Ford F150 truck with Chip, his cranky Chihuahua, riding next to him.

“I was running on empty – almost,” said Mr. Gonzalez, a cattleman who normally pays about $90 to fill up his truck’s tank on the Texas side of the border.

In Mexico, gasoline is about a dollar cheaper a gallon because the government subsidizes it.

Mexico’s state-owned petroleum company, known as Pemex, is the sole supplier of gasoline for the country’s gas stations and buys nearly half of it from the U.S. because of a lack of Mexican refineries.

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West told to brace for flood of refugees

Saturday, May 17th, 2008

As many as a billion people could lose their homes by 2050 because of the devastating impact of global warming, scientists and political leaders have been told.

Delegates at a climate change conference hosted by a top British think tank heard last night that the steady rise in temperatures around the planet could trigger mass migration on unprecedented levels.

Hundreds of millions could be forced to move because of water shortages and crop failures in most of Africa, as well as in central and southern Asia and South America, the conference in London was told. There could also be an effect on levels of starvation and on food prices as agriculture struggles to cope with growing demand in increasingly arid conditions.

Rising sea levels could also cause havoc, and coastal communities in southern Asia, the Far East, the south Pacific islands and the Caribbean could be submerged.

North and west Africans could head towards Europe, and the southern border of the United States could come under renewed pressure from Central America.

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Growing Deficits Threaten Pensions

Sunday, May 11th, 2008

– One aspect of the Perfect Storm Hypothesis that is particularly hard to convey is the collateral damages part of it. A problem in one area is not typically an isolated event. In a complex world like ours, everything basically connects to everything else at some level.

– The currently unfolding economic situation in the U.S. economy is one such. It may have started with the Sub-Prime melt-down but other dominoes are still continuing to fall as the consequences roll through the system. The melt-down, itself, was made worse by other preexisting problems. The deep U.S. trade deficit, the shifting of manufacturing and technical jobs offshore, the huge amounts being spent on the Iraq War. All of these have served to ‘weaken the patient’ in advance of the Sub Prime debacle.

– The article I’m reporting on here, “Growing Deficits Threaten Pensions” is one of the follow-on consequences of a weakening economy. And, if these pensions fail to deliver what all the folks who’ve spent an entire working career assuming they would deliver, then what? Then what?

– People at the end of their career suddenly finding out that they have no retirement? People who’ve done their half of the pension bargain at every step of the way – only to find out that the other side isn’t going to do theirs?

– I’ll make a prediction here… When it turns out that pensions funds fail and everyone starts asking who is responsible, there’s going to be a lot of talking heads, lawyers and fund managers explaining how it wasn’t their fault and, in the end, no one will be responsible. But, just watch and see if any of those ‘explainers’ got caught up in the damage – or did they walk away richer than they began?

– Sorry to be such a cynic but in an age of failing pension funds for the ‘little people’ and golden handshakes for the fund managers, I am a bit soured on it all.

– There was a piece of ‘humor’ the other way on one of the financial Blogs I follow. It was meant to be a tongue-in-cheek word problem for those aspiring for a financial career. It went like this:

In a given year, the Dow Jones Industrial Average rises 8.3 percent, the NASDAQ rises 7.6 percent, and the S&P 500 rises 7.9 percent. If, in that same period, you manage a $29 billion hedge fund that loses 11.6 percent, how large a year-end bonus are you entitled to? (Round to the nearest $10 million.)

– Funny, eh?

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Accounting Tactics Conceal a Crisis For Public Workers

The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars.

But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts.

State governments alone have reported they are already confronting a deficit of at least $750 billion to cover the cost of the retirement benefits they have promised. But that figure likely underestimates the actual shortfall because of the range of methods they use to make their calculations, including practices that have been barred in the private sector for decades.

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Climate change: a global threat multiplier

Friday, April 18th, 2008

– This is a favorite theme of mine and an essential part of what I call the Perfect Storm Hypothesis.   That there are many problems building up around us and that these problems potentiate and empower each other, or as the folks say, they multiply each other.

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A European Union study on the problems of global climate change, leaked to the press four days before its official launch on March 14, 2008, contained the sobering assessment that a failure to take radical action now to address global warming would create the likelihood of severe conflict over resources in the decades ahead. Two days later, on March 16, data from the United Nations Environment Programme (UNEP) reveals that the rate of shrinking of glaciers across the world – a key marker of climate change – has accelerated; this more than doubled between 2006 and 2007, and the 2007 figure was five times the average for the 1980-99 period. These two documents, taken together, present governments and citizens in the leading emissions-producing countries in particular with an unavoidable test.

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In Africa, the Situation has Become Volatile

Sunday, March 30th, 2008

In many countries on the continent the price rise has hit hard, causing protests in Senegal, Burkina Faso and Cameroon.

West Africa,

Special Report.

In the hubbub of Treichville market in the south of Abidjan, Ivory Coast’s economic capital, two friends on greying horses wind between the cages of chickens and stacks of vegetables. By their own description — not really poor and not really middle class either — they confirm how difficult it has become to fill their shopping baskets. “Today, with 10,000 CFA (23 USD), you can feed your family for 3 days. A few months ago, that was enough for a week.” As a result, these two mothers leave out certain products. They no longer buy milk or butter, which have gone from 400 CFA (0.91USD) to nearly 1000 CFA (2.29USD). Some families are only eating one meal a day. “I sometimes skip lunch”, says one of them.

Further on, Mady digs her hand into her sack of Asian rice “I have to sell the kilo at 350 CFA (0.80USD) compared to 250 CFA (0.60USD) a couple of months ago” she explains. It’s the same story with oil, another staple for cooking in Africa. “Last year, I would buy a 200 litre barrel for 100,000 CFA (229USD). Today it costs me 146,000 CFA (335USD)” Nearly a 50% price rise impacting directly on the price of a bottle. “Now, the women are only buying 3 litres instead of the usual 5”.

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Blue Moon Economics

Friday, March 28th, 2008

– Kurt Cobb over at Resource Insights wrote an excellent piece on the state of the world’s economics the other day. I’m going to provide a couple of paragraphs to whet your appetite and then a link over to the full article on his site.

– It is a good site to know about and I’ve just added a link to it on my Blogroll.

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As the United States sinks into a financial vortex and begins to drag the rest of the world with it, commentators are reaching for every form of hyperbole available. Former chairman of the U. S. Federal Reserve Board Alan Greenspan characterized the current trouble as “the most wrenching since the end of the second world war.”

So unexpected and extreme have recent financial trends been that even the man who warned that derivatives are “financial weapons of mass destruction,” legendary investor Warren Buffett, has encountered difficulties when his companies waded into the derivatives market.

Concern about a cascade of failures among financial institutions led the Federal Reserve to make loans to the beleaguered investment bank Bear Stearns Cos. by invoking authority it last used in the 1960s.

All of the events of recent weeks including the wild swings in both the stock and commodities markets are signaling the advent a rare full-blown, long-term credit crisis not seen in, well, a blue moon. Some are saying we haven’t seen anything like it since the 1930s. As frightening as such pronouncements are, they all imply a rare but cyclical crisis that is understood to be severe, but ultimately of limited duration. Yes, such a crisis only occurs once in a blue moon, but when it does, despite all the damage that results, it eventually comes to an end.

All of this may turn out to be true, but only if the cause of this economic crisis is strictly as advertised, namely, too much credit given to too many people at prices too cheap for too long until many overreached and could not make good on their obligations. The problems appear to extend all the way from the humblest subprime mortgage holder to major financial institutions at the center of Wall Street.

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Insecure About Climate Change

Friday, March 28th, 2008

By Joshua W. Busby

From the Council on Foreign Relations
Saturday, March 22, 2008; 12:00 AM

When Hurricane Katrina struck New Orleans in 2005, Americans witnessed what looked like an overseas humanitarian-relief operation. The storm destroyed much of the city, causing more than $80 billion in damage, killing more than 1,800 people, and displacing in excess of 270,000. The country suddenly had to divert its attention and military resources to respond to a domestic emergency. While scientists do not attribute single events to global warming, the storm gave Americans a visual image of what climate change — which scientists believe will likely exacerbate the severity and number of extreme weather events — might mean for the future.

The large, heavily populated coastal areas of the United States are vulnerable to these kinds of extreme weather events, suggesting homeland security will require readiness against climate change. Moreover, scientists tell us that poor countries in the developing world, particularly in Africa and Asia, are the most vulnerable. They are likely to be hit hardest by climate change, potentially putting hundreds of thousands of people on the move from climate change-related storms, floods and droughts. In such circumstances, outside militaries may be called on to prevent humanitarian tragedies and broader disorder.

A number of recent studies have begun making these kinds of links between climate change and national security. My report for the Council on Foreign Relations goes further, focusing on what should be done in three main areas: risk reduction and adaptation; mitigation of greenhouse gas emissions; and institutional changes in the U.S. government.

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Global crisis deepening: IMF Chief

Thursday, March 20th, 2008

IMF head Dominique Strauss-Kahn says global financial crisis worse that originally believed, and worsening.

PARIS (AP) — The collapse of a Wall Street institution over the weekend shows the global financial crisis is broader than policy makers realized and it is growing worse, the head of the International Monetary Fund said Monday.

“The financial crisis which started in the United States is more serious and more global than it was a few weeks ago,” IMF Chief Dominique Strauss-Kahn said in Paris.

“The risks and dangers are very high. The economic environment is still worsening.”

The current crises will require a “global answer,” Strauss-Kahn said.

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