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EJ
11-26-07, 07:46 PM
http://www.itulip.com/images/libeuro.jpg
Dollar’s last lap as the only anchor currency (http://www.ft.com/cms/s/0/96754c52-9b7c-11dc-8aad-0000779fd2ac.html)
November 25, 2007 (Wolfgang Munchau - Financial Times)
It has been one of the most influential theories about exchange rates in the age of globalisation and it may be about to go up in smoke.
In 2003, the economists Michael Dooley, David Folkerts-Landau and Peter Garber* proposed what has since been known as the Bretton Woods II theory. The idea is based on the observation that newly industrialised countries peg their currencies to the dollar at an undervalued exchange rate in pursuit of export-led growth. In return, they reinvest their loot back into the US, which acts as an anchor and consumer of last resort.
[snip]
I can think of two scenarios. The first is that the dollar’s global monopoly will give way to a duopoly of the dollar and the euro. It is impossible to predict the timing of any such shift. Over time, as countries replace a dollar peg with a mixed basket peg, they are likely to readjust reserve portfolios as well.
Another, at least theoretical possibility is the emergence of regional exchange rate regimes, along the lines of what happened in Europe after Bretton Woods I. There has been a lot of talk for a long time about Asian monetary union, with little progress so far.
Either way, we are probably in the last long lap of the dollar as the world’s only anchor currency. We do not yet fully comprehend the new era, but it is fair to say that it is probably not going to be Bretton Woods III. AntiSpin: Each person I have interviewed over the past year and a half has contributed at least one major insight to my understanding of how the aging international currency regime will go through a long overdue transition. Neither scenario Munchau forecasts will happen, and I'll tell you why.

Jamie Galbraith (http://www.itulip.com/forums/showthread.php?t=654) noted that a multilateral dollar/euro/yen global monetary system is limited by lack of a euro bond market, that is, while there is a market for German bonds in euros and French bonds in euros, etc., there is no institution that acts as a "euro Treasury" as a U.S. Treasury or Japanese Treasury functions, that is, no centralized euro bond institution. How can any currency act as a true global reserve currency without such an institution?

Louis-Vincent Gave of GaveKal (http://itulip.com/forums/showthread.php?t=2051) contributed the insight that in an economic crisis the lack of a euro bond Treasury authority raises deflationary threats because inflation via bond monetization cannot be coordinated across the euro zone. This helps explain the recent investor rush during the credit crisis to short term treasury bonds while euro denominated bonds have not participated.




I have long warned that the euro is not stress tested. My seemingly odd obsession with gold over the euro as a dollar hedge since 2001 is predicated on worries about how the euro will fair in a crisis as national needs overwhelm euro loyalties. These appear, unfortunately, to be coming to pass.
Eurozone split as bond spreads hit 6-year high (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/22/bcnitaly122.xml)
Nov. 23, 2007 Ambrose Evans-Pritchard - Telegraph UK)
Investors in Europe have suddenly become wary of Italian, Greek, Spanish, and Belgian sovereign bonds, driving spreads over German government bonds to the highest level in six years.
Belgian Treasury promises no default
Yields on Italian 10-year bonds rocketed to 40 basis points over comparable German Bunds today as the flight to safety gathered pace. The spread had been stable at around the mid 20s for several years until this month.
The scramble to dump riskier bonds hit all the southern European countries, as well as Ireland and Slovenia.
While the markets have not begun to discount a possible break-up of the eurozone, they are clearly pricing in an ominous rift between the Latin and Germanic halves of the monetary system.Ambrose Evans-Pritchard is getting carried away looking for European nations to split with the euro near term. I don't see that as a possibility unless and until a severe global recession spans European national elections.

Getting back to Munchau's report, regional currency regimes may be an outcome of the global currency regime crisis but cannot forestall the crisis.

I'm sticking to my 2001 forecast of a global currency crisis, emanating from a U.S. economic recession, as the most likely forcing function for a new global currency regime. A new regime can only be created out of crisis because the transition costs to a new global monetary system are too high for each member of the system, or for members collectively, to initiate or achieve avoidance of crisis through negotiation.

Dr. Hudson's contribution to my thinking in our interview this summer (http://www.itulip.com/forums/showthread.php?t=1088) is that this ongoing currency and credit crisis can be viewed as a geopolitical "jump ball." Global players over the past few years have been pre-positioning for the grab. This gives context to otherwise inexplicable developments, such as the U.S. invasion of Iraq on a weak pretext, Putin's apparently urgent grab for power, and the development of new political and military alliances among oil producers and consumers.

Testing readers' patience by switching metaphors to poker, the U.S. held all of the cards after the long monetary crisis that started in the early 1930s and ended after WWII at Bretton Woods with a gold-based dollar standard in 1944. Almost 30 years later the U.S. still held enough cards in 1971 to force the world onto a U.S. Treasury dollar standard. Going into this new crisis, we need to ask, Who holds which cards and how will they be played? If we understand that, then we understand how the crisis is likely to turn out.

Bretton Woods II is a fiction. The shipping of oil exporters' and Asian nations' economic surplus to the U.S. is not a "system" but the adaptation of global economic players to an outdated global monetary system, a symptom of the perverse mismatch in production, wealth, and money flows that has developed within the confines of U.S.-centric Bretton Woods system.

My conviction is that as there is no single dominant economic, political and military power going into this crisis as in 1944 and 1971, the outcome remains highly unpredictable. It should be remembered that the last major global currency crisis started in the early 1930s. Resolution only arrived with the geopolitical finality of WWII. Assuming the current crisis is not compounded by a global economic recession on a scale which sets nations on unilateral economic defense paths and so does not escalate out of control, only a politically neutral global currency regime is likely to be acceptable to all parties, not one unilaterally dictated by a single dominant power as happened in 1946–because there is no single dominant power today.

Not dollars. Not dollars/euros/yen, either, for reasons discussed, but something else. A fourth currency.

One final point. The financial relationship between the U.S. and its creditors in a global economic crisis is not unlike the tie of a debtor colony to a colonial power. The political relationship is between sovereign nations, but this comes under strain; an economic crisis is foremost a political crisis.




The relationship between between bondholder and debtor represented by Newfoundland and Great Britain in the 1933 is instructive.
The British parliament accepted the proposals of the Amulree commission and passed legislation suspending Newfoundland's status as a self-governing dominion. The Labour Party strongly opposed the Newfoundland proposals on grounds that they were undemocratic and that it was morally indefensible to rescue bondholders who had made a bad investment. The Welsh Labour M.P., David Grenfall, said:
"If you invest in coal mines in this country you may lose money, as many investors have lost their money. If you invest in steel or railways you stand a chance of losing. Why should this (moneylending) class be subjected to special government protection, and why should we and the poor people of Newfoundland be pledged bodily, physically, socially, to guarantee the claims of the bondholders?"The Labour leader, Clement Attlee, suggested that default was preferable to giving up democracy. Referring to Britain's own default on its wartime loans from the United States, he said "All the best countries default nowadays." But in the early 1930s it was impossible to imagine a British dominion defaulting. In 1932, the provincial premier of New South Wales, Jack Lang, had proposed to default on the state's debts. He was promptly dismissed by the royal Governor and went on to lose an election for the provincial parliament. As with Gough Whitlam in 1975, the voters upheld the prerogative of the crown to dismiss prime ministers threatening the law or unable to obtain supply. In the world of the early 1930s, it was commonly accepted that democracy should be subordinate to debt.


The Newfoundland lessonOf course, I'm not suggesting that Asian creditors are in a position to force the U.S. into giving up its sovereignty. The point is that debts form the nexus of deep political conflicts; as the next global recession unfolds, the political debt to Asia represented by U.S. financial debt to Asia should not be understimated.

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jk
11-26-07, 08:44 PM
Jamie Galbraith (http://www.itulip.com/forums/showthread.php?t=654) noted that a multilateral dollar/euro/yen global monetary system is limited by lack of a euro bond market, that is, while there is a market for German bonds in euros and French bonds in euros, etc., there is no institution that acts as a "euro Treasury" as a U.S. Treasury or Japanese Treasury functions, that is, no centralized euro bond institution. How can any currency act as a true global reserve currency without such an institution?

Louis-Vincent Gave of GaveKal (http://itulip.com/forums/showthread.php?t=2051) contributed the insight that in an economic crisis the lack of a euro bond Treasury authority raises deflationary threats because inflation via bond monetization cannot be coordinated across the euro zone. This helps explain the recent investor rush during the credit crisis to short term treasury bonds while euro denominated bonds have not participated.

anti-anti-spin-
1. the euro has already become a reserve currency by default. nations of all political stripes all around the globe have chosen to move assets into that currency in spite of its lack of a politically cohesive home, its lack of a treasury, its lack of a centralized and standardized bond market, its overvaluation on purchasing power parity, and its inherently fractured and flawed economic basis in the eurozone. some currencies are born with reserve status, some attain reserve status, and some have reserve status thrust upon them. like it or not, the euro is already a reserve currency.

2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.

3. the dispersion of power, of "cards in the hands" of the various players around the world, the lack of a central overarching power or authority to provide a natural and clearly acceptable alternative to the dollar centrality as a reserve means there will be no acceptable alternative. or at least there will be no alternative for several playings and reshufflings of the cards. the dollar will decline in both value and esteem, and nations as well as individuals will scramble for assets with which to replace it. when the ecb finally bends to the political will of southern eurozone leaders, and finds an excuse to cut rates and thus cheapen the euro, we will know we are in full beggar-thy-neighbor mode. protectionist legislation in the u.s. will be another step towards geopolitical turmoil.

4. we need not worry about the power of dollar bond holders. this will not be a replay of newfoundland. as long as the u.s. functions as a market for their goods, the dollar holders dare not precipitate a crisis. by the time the u.s. no longer functions as a market for their goods, the dollar holders will not be capable of precipitating a crisis, for the value of their dollars will have evaporated into an inflationary miasma.

5. if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

Spartacus
11-26-07, 09:01 PM
I was thinking the exact same thing - people SHOULD prefer the Euro (the currency that cannot be easily inflated) if they think inflation is possible worldwide.



2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.


The currency could deflate but if the underlying economies stumble badly, will the deflation matter - what assets can the deflated Euro be exchanged for, and with a stumbling economy, what'st he risk of default?

The creditworthiness of the issuing country will be the determining factor.

So it IS "Eurobond" but it's also "Greek/Spanish/Italian" etc ...

In the end it's a choice between a Greek bond paying in Euros, carrying a high [1] risk of default vs a much safer (or perceived to be safer) US dollar bond

[1] IMHO currently not quantifiable, but to bond investors "not quantifiable" must mean "high" that's what the spreads are probably telling us

Uncle Jack
11-26-07, 09:20 PM
anti-anti-spin-
5. if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

Could you be hinting at the U.S. with that line?

The supply-siders have argued that our debt is not a problem, but with the crisis of not being able to fund an ever-growing entitlement program, the U.S. was my first thought to your #5. Okay, it's not just war debt, but we've got some big burdensome debt hanging over our heads no matter where it came from.

Didn't 1930s Germany have the punitive Versailles Treaty to contend with, which helped fuel their hyper-inflation mess and Hitler's rise to power? Right, never mind you said "war debts." But anyway, our game plan seems very similar, an attempt to print our way out of it.

jk
11-26-07, 09:25 PM
Could you be hinting at the U.S. with that line?
as a matter of fact, yes.


The supply-siders have argued that our debt is not a problem, but with the crisis of not being able to fund an ever-growing entitlement program, the U.S. was my first thought to your #5. Okay, it's not just war debt, but we've got some big burdensome debt hanging over our heads no matter where it came from.

Didn't 1930s Germany have the punitive Versailles Treaty to contend with, which helped fuel their hyper-inflation mess and Hitler's rise to power?
yes, the german war debt was imposed by the versailles treaty after wwi. we had a lot more fun accruing our debt, didn't we?
this reminds me of an interview with an argentine economist after argentina dropped the dollar peg and then defaulted on its bonds. the economist was asked what happened to all the money that had flowed into argentina. he replied: "we enjoyed it very much."
i just hope the politics of inflating away the debt plays out a little softer here.

Contemptuous
11-26-07, 09:47 PM
Very popular idea circulating on iTulip that runaway debt to GDP leads inevitably to totalitarianism.

Italy has a 106% Government debt to GDP ratio, and has fluctuated around in those unholy levels for a couple of decades. No totalitarianism that I can discern. They had a thriving export sector with the weak Lira until they were yoked into the strong Euro (weak USD doesn't get yoked to anything ).

Has anyone actually questioned this hoary accepted wisdom on iTulip before - that the US runaway public debt 'must' lead to totalitarian solutions? Italy had far better excuses for the past 30 years but never went down that road.

metalman
11-26-07, 10:02 PM
anti-anti-spin-
1. the euro has already become a reserve currency by default. nations of all political stripes all around the globe have chosen to move assets into that currency in spite of its lack of a politically cohesive home, its lack of a treasury, its lack of a centralized and standardized bond market, its overvaluation on purchasing power parity, and its inherently fractured and flawed economic basis in the eurozone. some currencies are born with reserve status, some attain reserve status, and some have reserve status thrust upon them. like it or not, the euro is already a reserve currency.

2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.

3. the dispersion of power, of "cards in the hands" of the various players around the world, the lack of a central overarching power or authority to provide a natural and clearly acceptable alternative to the dollar centrality as a reserve means there will be no acceptable alternative. or at least there will be no alternative for several playings and reshufflings of the cards. the dollar will decline in both value and esteem, and nations as well as individuals will scramble for assets with which to replace it. when the ecb finally bends to the political will of southern eurozone leaders, and finds an excuse to cut rates and thus cheapen the euro, we will know we are in full beggar-thy-neighbor mode. protectionist legislation in the u.s. will be another step towards geopolitical turmoil.

4. we need not worry about the power of dollar bond holders. this will not be a replay of newfoundland. as long as the u.s. functions as a market for their goods, the dollar holders dare not precipitate a crisis. by the time the u.s. no longer functions as a market for their goods, the dollar holders will not be capable of precipitating a crisis, for the value of their dollars will have evaporated into an inflationary miasma.

5. if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

the best back seat driving on itulip, for sure!

how'd you arrive at these wisdoms? looking for, ya know, a few thousands pages of stuff over, ya know, ten years or so.

i'm no expert but let me take a crack at... anti-anti-antispin!


1. the euro has already become a reserve currency by default. nations of all political stripes all around the globe have chosen to move assets into that currency in spite of its lack of a politically cohesive home, its lack of a treasury, its lack of a centralized and standardized bond market, its overvaluation on purchasing power parity, and its inherently fractured and flawed economic basis in the eurozone. some currencies are born with reserve status, some attain reserve status, and some have reserve status thrust upon them. like it or not, the euro is already a reserve currency.

reserve currency in good times, that is. you missed the one strength of the euro: the lack of a politically cohesive home, lack of a treasury, lack of a centralized and standardized bond market = politically independent.

where's the paulson of the euro?


2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.

you saying gave makes no sense or ej's interpretation of gave makes no sense?

"the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion."

huh? his point is about deflation not inflation. did you miss the point?


3. the dispersion of power, of "cards in the hands" of the various players around the world, the lack of a central overarching power or authority to provide a natural and clearly acceptable alternative to the dollar centrality as a reserve means there will be no acceptable alternative. or at least there will be no alternative for several playings and reshufflings of the cards. the dollar will decline in both value and esteem, and nations as well as individuals will scramble for assets with which to replace it. when the ecb finally bends to the political will of southern eurozone leaders, and finds an excuse to cut rates and thus cheapen the euro, we will know we are in full beggar-thy-neighbor mode. protectionist legislation in the u.s. will be another step towards geopolitical turmoil.

uh, care to unpack that for us? reads like hand waving.

4... by the time the u.s. no longer functions as a market for their goods, the dollar holders will not be capable of precipitating a crisis, for the value of their dollars will have evaporated into an inflationary miasma.

this is so unlike you. this makes no sense at all!


5. if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

why does anyone gotta play 1930s germany? these are parallels not exact replicas. this ain't hollywood.

who stole our jk and replaced him with a mish-esque replica?

metalman
11-26-07, 10:23 PM
Very popular idea circulating on iTulip that runaway debt to GDP leads inevitably to totalitarianism.

what are you talking about? am i on a different site? where does anything here say that?


Has anyone actually questioned this hoary accepted wisdom on iTulip before - that the US runaway public debt 'must' lead to totalitarian solutions? Italy had far better excuses for the past 30 years but never went down that road.

"hoary accepted wisdom"??? silly.

let's talk serious. what kind of olive green pinto do yo drive?

GRG55
11-26-07, 10:27 PM
Could you be hinting at the U.S. with that line?

The supply-siders have argued that our debt is not a problem, but with the crisis of not being able to fund an ever-growing entitlement program, the U.S. was my first thought to your #5. Okay, it's not just war debt, but we've got some big burdensome debt hanging over our heads no matter where it came from.

Didn't 1930s Germany have the punitive Versailles Treaty to contend with, which helped fuel their hyper-inflation mess and Hitler's rise to power? Right, never mind you said "war debts." But anyway, our game plan seems very similar, an attempt to print our way out of it.

Seems to me the US today is more analagous to Great Britain in the run up to the last currency crisis. At that time the Pound was in its last days as the world's reserve currency, and Britain's WWI debts and gradual loss of colonies, were indicative of a structural decline in many of its previously dominant economic sectors. I also think that Britain's resistance to let go of its last major colony, India, with its East India Company materials supply chain, has some similarities to the behaviour of the US today, particularly towards the "colonies" that supply its most important raw material, oil.

In the late 1920's it was Britain that had the overvalued currency (in 1925 then Chancellor of the Exchequer, Winston Churchill returned the Pound to the gold standard at the pre-WWI exchange rate of $4.86). One of Britains most valuable exports had been coal, but the displacement of this energy source with oil, which Britain didn't produce but the USA did, was already well advanced.

All these factors made the British economy uncompetitive, especially against the USA with its new, more efficient, and growing infrastructure of railways, electricity grid, roads and skyscrapers. Today it's Asia in that role, of course.

That suggests that if there is another economic calamity like the Great Depression (precipitated by the credit collapse now underway?), perhaps its effects will be felt most in the developing economies instead of the USA (de-coupling anyone?). Let's pray we can make it through this transition without that sort of economic calamity or, even worse, the cataclysm of global war, as happened last time.

jk
11-26-07, 10:30 PM
the best back seat driving on itulip, for sure!

how'd you arrive at these wisdoms? looking for, ya know, a few thousands pages of stuff over, ya know, ten years or so.

i'm no expert but let me take a crack at... anti-anti-antispin!



reserve currency in good times, that is. you missed the one strength of the euro: the lack of a politically cohesive home, lack of a treasury, lack of a centralized and standardized bond market = politically independent.

where's the paulson of the euro? i agree, this is attractive in a reserve currency.



you saying gave makes no sense or ej's interpretation of gave makes no sense?
i didn't track it back to its source. i'm just saying it doesn't make sense irrespective of the source.


"the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion."

huh? his point is about deflation not inflation. did you miss the point?
the original point [not mine] was that there was a deflationary cloud over the euro. my point is that such a cloud makes sovereign euro denominated bonds more, not less, attractive. and, mutatis mutandi, the ability of the u.s. to inflate makes its bonds less attractive. more broadly, there are different populations of purchasers. the dollar drops as foreign investors, and some domestic ones as well, head for the exits. the u.s. is experiencing capital flight, just like argentina did. in the meantime institutions with domestic mandates and an inability to short seek what refuge they can by buying treasuries, spurning other debt instruments for fear of counterparty risk.



uh, care to unpack that for us? reads like hand waving. {refers to passage about the lack of a dominant player, the dispersion of power and claims, the risk of beggar-thy-neighbor and of protectionism}
unpacked, i was attempting to say that there is a huge potential for CHAOS and conflict. i am most skeptical that there can be a negotiated solution until well AFTER the shtf.



this is so unlike you. this makes no sense at all!
i expressed this poorly, but my point is that i am doubtful that our debt holders have much power over us. we will inflate away their claims. more acutely, there is the saying that if you owe the bank a million dollars, you have a problem. but if you owe the bank a hundred million dollars, the bank has a problem. or, if you prefer, the quote from john connally in the '70s, addressing our trade partners: "the dollar is our currency but your problem."




why does anyone gotta play 1930s germany? these are parallels not exact replicas. this ain't hollywood.
i slip into dark moods when i start worrying about the possible political fallout of the economic disaster that i see unfolding, and i think about the erosion of rights in the name of antiterrorism, the u.s. branded by a policy of torture, and so on. perhaps lukester, in his post above, is right-- we should look to italy, not germany, as an inspiration and guide in learning to enjoy life in the face of economic and political chaos. it provides a charming and attractive model.


who stole our jk and replaced him with a mish-esque replica?
i'm touched.

Contemptuous
11-26-07, 10:32 PM
My PINTO is a faded out pink, with flat tires, bricks under the axle, a leaking tranny, and yeller polka dots. I've got a mini-bar and a waterbed built into the back.

But I think we better take this frivolous conversation elsewhere because E.J.'s just posted one of his more serious updates here and however enlightening and rewarding our PINTO discussion is to the general readership, it's probably off-topic, eh? (FRED may SWAT us? :o )

jk
11-26-07, 10:40 PM
Seems to me the US today is more analagous to Great Britain in the run up to the last currency crisis. At that time the Pound was in its last days as the world's reserve currency, and Britain's WWI debts and gradual loss of colonies, were indicative of a structural decline in many of its previously dominant economic sectors. I also think that Britain's resistance to letting go of its last major colony, India, with its East India Company materials supply chain, has some similarities to the behaviour of the US today, particularly in the "colonies" that supply its most important raw material, oil.

In the 1920's it was Britain that had the overvalued currency (in 1925 then Chancellor of the Exchequer, Winston Churchill returned the Pound to the gold standard at the pre-WWI exchange rate of $4.86).

All these factors made the British economy uncompetitive, especially against the USA with its new, more efficient, and growing infrastructure of railways, electricity grid, roads and skyscrapers. Today it's Asia in that role, of course.

That suggests that if there is another economic calamity like the Great Depression (precipitated by the credit collapse now underway?), perhaps its effects will be felt most in the developing economies instead of the USA? Let's pray we can make it through this transition without that sort of economic calamity or, even worse, the cataclysm of global war, as happened last time.
i agree with the parallels you draw. i think we are in a transition in which a hyperpower, as britain was in the mid-late 19th century and the u.s. in the late 20th, gives way to a multipolar world, preceding perhaps the emergence of the next hyperpower. i hope we can avoid the wars required for the last such transition. i guess it's too late for that - we can count korea, vietnam, the cold war arms race, afghanistan and iraq, perhaps lebanon, and on and on. so maybe, at least, we can avoid wars as big as last time.

my mention of germany was elicited by ej's reference to the power of the u.s.'s asian creditors. the "winners" of wwi became germany's creditors - or at least the putative beneficiaries of the debt imposed on germany after that war. trying to collect on that debt proved unrewarding, to say the least, because the attempt to collect on the debt drove dark political processes within the debtor country. my point was that the u.s.'s debts make the u.s. vulnerable, and also make the u.s. dangerous because of the risks that economic pressure will trigger unfortunate political processes in the u.s. i hope i am being foolish and alarmist in having such thoughts.

Spartacus
11-26-07, 10:46 PM
But if you believe Hussman, the FED is powerless - just completely impotent, and bond monetization is not worth considering except for a miniscule, academic side issue.

So if it's the private banking system that is the real source of 99% of today's inflation (including in Europe) the Euro's rise means .... something I can't figure out at the moment.

and the Eurobond question is moot.



2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.

Spartacus
11-26-07, 10:51 PM
4. we need not worry about the power of dollar bond holders. this will not be a replay of newfoundland. as long as the u.s. functions as a market for their goods, the dollar holders dare not precipitate a crisis. by the time the u.s. no longer functions as a market for their goods, the dollar holders will not be capable of precipitating a crisis, for the value of their dollars will have evaporated into an inflationary miasma.


You're putting all the big holders on an equal footing. As far as causing trouble, they've all had an equal dis-incentive to do it until now - that doesn't have to hold into the future.

IMHO the petroleum producers could demand their pound of flesh from the US. If their reserves become worthless, they can demand something be done - China, India, Japan and Europe, maybe not.

GRG55
11-26-07, 10:54 PM
i agree with the parallels you draw. i think we are in a transition in which a hyperpower, as britain was in the mid-late 19th century and the u.s. in the late 20th, gives way to a multipolar world, preceding perhaps the emergence of the next hyperpower. i hope we can avoid the wars required for the last such transition. i guess it's too late for that - we can count korea, vietnam, the cold war arms race, afghanistan and iraq, perhaps lebanon, and on and on. so maybe, at least, we can avoid wars as big as last time.

my mention of germany was elicited by ej's reference to the power of the u.s.'s asian creditors. the "winners" of wwi became germany's creditors - or at least the putative beneficiaries of the debt imposed on germany after that war. trying to collect on that debt proved unrewarding, to say the least, because the attempt to collect on the debt drove dark political processes within the debtor country. my point was that the u.s.'s debts make the u.s. vulnerable, and also make the u.s. dangerous because of the risks that economic pressure will trigger unfortunate political processes in the u.s. i hope i am being foolish and alarmist in having such thoughts.

Maybe there's some reason for hope jk. The last transition saw one Anglo-Saxon power give way to another. Asians generally value harmony over conflict (a constant source of frustration for us westerners when we find ourselves in protracted business negotiations). If indeed this transition is towards "the Asian century", then perhaps it will play out over a longer period of time, but with less conflict than last transition?

metalman
11-26-07, 11:02 PM
i agree, this is attractive in a reserve currency.



i didn't track it back to its source. i'm just saying it doesn't make sense irrespective of the source.


the original point [not mine] was that there was a deflationary cloud over the euro. my point is that such a cloud makes sovereign euro denominated bonds more, not less, attractive. and, mutatis mutandi, the ability of the u.s. to inflate makes its bonds less attractive. more broadly, there are different populations of purchasers. the dollar drops as foreign investors, and some domestic ones as well, head for the exits. the u.s. is experiencing capital flight, just like argentina did.

yeo. ej talks about capital flight under kapoom theory.


in the meantime institutions with domestic mandates and an inability to short seek what refuge they can by buying treasuries, spurning other debt instruments for fear of counterparty risk.

sorry, i dont get it.


unpacked, i was attempting to say that there is a huge potential for CHAOS and conflict. i am most skeptical that there can be a negotiated solution until well AFTER the shtf.

yep, kapoom theory again.


i expressed this poorly, but my point is that i am doubtful that our debt holders have much power over us. we will inflate away their claims. more acutely, there is the saying that if you owe the bank a million dollars, you have a problem. but if you owe the bank a hundred million dollars, the bank has a problem. or, if you prefer, the quote from john connally in the '70s, addressing our trade partners: "the dollar is our currency but your problem."

yep, kapoom again.


i slip into dark moods when i start worrying about the possible political fallout of the economic disaster that i see unfolding, and i think about the erosion of rights in the name of antiterrorism, the u.s. branded by a policy of torture, and so on. perhaps lukester, in his post above, is right-- we should look to italy, not germany, as an inspiration and guide in learning to enjoy life in the face of economic and political chaos. it provides a charming and attractive model.

the italians know how to live! great food. good looking folks. no offense to the germans but, uh, the italians have it!


i'm touched.

yes you are!

GRG55
11-26-07, 11:03 PM
You're putting all the big holders on an equal footing. As far as causing trouble, they've all had an equal dis-incentive to do it until now - that doesn't have to hold into the future.

IMHO the petroleum producers could demand their pound of flesh from the US. If their reserves become worthless, they can demand something be done - China, India, Japan and Europe, maybe not.

They are getting it already in the form of military protection, so they don't tear each others throats out. Think that's an extreme view? Turn on the television and dial it to Iraq. Forget about the Humvees, pay attention to what the Iraqis are doing to each other...

(geez, that's starting to sound like metalman in tone. next time i'll do it without caps...)

GRG55
11-26-07, 11:14 PM
the italians know how to live! great food. good looking folks. no offense to the germans but, uh, the italians have it!

Had occasion to use the Italian train system last year. Sat across from an Italian couple. Was enthusiastically describing my culinary experiences in Florence in the prior days. They told me that when it comes to preparing food "The French think they are professionals, and they aren't. The Italians think they are amateurs, and they aren't". Sez it all... :)

bill
11-27-07, 12:44 AM
[Not dollars. Not dollars/euros/yen, either, for reasons discussed, but something else. A fourth currency.

A regional consolidation of currencies creating a fourth as Benn Steil http://www.cfr.org/bios/1637/benn_steil.htmldescribes?

]http://www.financialpost.com/story.html?id=2bc3c0c6-e3c9-42c4-8ffa-be94a91a6f4e&p=1


Since economic development outside the process of globalization is no longer possible, countries should abandon monetary nationalism. Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area.



Or do you mean a global recognized new born currency and if so who would set policy B.I.S.?
http://www.bis.org/cgfs/index.htm


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donalds
11-27-07, 02:25 AM
Lets be clear about one thing. The glory years of US hegemony began with the end of WWII and the decline began with the Vietnam War. During 70's - 90's, financial crisis in that half of the world making up capitalism was frequent, while competition with the USSR was carried out in the context of a Cold War. The withering of US hegemony coincides with the expansion and integration of capitalism world-wide. The globalization of neo-liberal global economic integration (pushed most forcefully by the US), ironically now requires the slippage of US power - global power is now being fragmented and distributed.

Today, the decline of US global economic, geopolitical and military hegemony is on the fast track. The Bush admin. and the Iraq war and now the impending US recession (or should I say global recession) along with the financial credit crisis (with the US - not some developing country - as the epicenter of that crisis) has fast forwarded the process. What remains is what some now call a multipolar world. What this means is that competition between countries and blocs of countries or regions pose a real potential for resource conflicts/wars. China, in the meantime will likely experience even more severe problems than the US, providing the feedback loop with the US to drive the global recession into even deeper trenches.

In the end, the US will forever be downsized economically, geopolitically and militarily. It is this last factor that declines most slowly. Since the US remains the world's strongest military force, this will be its only means in an attempt to regain lost hegemony, which also will provide economic stimulus. Since military occupation is out of the question, all that remains is bombing, which in the end will prove futile.

In the process of US economic decline, citizens of the US will be forced to accept a significantly lower standard of living. In response, expect the pursuit of external scapegoats to coincide with the search for internal (domestic) scapegoats (e.g. like those lazy Mexicans stealing our jobs). Furthermore, the psychic adjustments required when the shopping experience no longer provides enjoyment will come swift and hard, providing heavy doses of anomie.

BlackVoid
11-27-07, 06:59 AM
- that the US runaway public debt 'must' lead to totalitarian solutions? Italy had far better excuses for the past 30 years but never went down that road.

A possible explanation is that Italy is not a world class power. They cannot just do anything they want with all the trade with other EU countries.
On the other hand China, Russia and the USA can prety much do anything at home. Also the USA has a lot more debt than the official numbers.

BTW, I am undecided on this theory, just offering a possible explanation.

EJ
11-27-07, 09:36 AM
A regional consolidation of currencies creating a fourth as Benn Steil http://www.cfr.org/bios/1637/benn_steil.htmldescribes?

]http://www.financialpost.com/story.html?id=2bc3c0c6-e3c9-42c4-8ffa-be94a91a6f4e&p=1



Or do you mean a global recognized new born currency and if so who would set policy B.I.S.?
http://www.bis.org/cgfs/index.htm


<!-- toctype = X-unknown --><!-- toctype = text --><!-- text -->

I have to say, you always come up with the most intriguing reference material.

To answer your question, no one can know exactly what we'll wind up with. So much depends on how acrimonious the negotiations become, and that depends on increased nationalism, and that depends on the depth of a future U.S.-centric global recession.

One thing is certain, that the current multi-polar global military power structure is inherently less balanced and stable than the bi-polar structure that emerged after WWII that allowed the U.S. to shape the international monetary system. It wasn't much of a negotiation at Bretton Woods; terms were more or less dictated. That will not be the case this time.

Back in 1990 I read the first piece I recall seeing that attempted to forecast the outcome of the post-Soviet multi-polar world in the article Why We Will Soon Miss The Cold War (http://72.14.205.104/search?q=cache:G9XlPiSXnM8J:mearsheimer.uchicago.e du/pdfs/A0014.pdf) by John J. Mearsheimer (The Atlantic Monthly; August 1990).

There is something elementary about the geometry of power in international relations, and so its importance is easy to overlook. "Bipolarity" and "multipolarity" are ungainly but necessary coinages. The Cold War, with two superpowers serving to anchor rival alliances of clearly inferior powers, is our model of bipolarity. Europe in 1914, with France, Germany, Great Britain, Austria-Hungary, and Russia positioned as great powers, is our model of multipolarity.Mearsheimer's gloomy forecast was that without Soviet power to balance U.S. power, European nations would soon be at each other's throats. Seventeen years later there's not much sign of that, in fact, the opposite; Mearsheimer didn't imagine the level of economic integration necessary to produce the euro, for example. But then again, except for minor recessions we've seen nothing but economic prosperity throughout the period, so European economic integration has never been tested. This is an inherent strength of the U.S., that Michigan can go into recession but their is no President of Michigan who has to defend the state's continued participation in the union that is throttling the state's economic prosperity with too high interest rates and insufficient fiscal and monetary stimulus.

Russia remains the wild card in the European union's future in the next period of economic and political stress.

Then, too, the Soviet withdrawal from Eastern Europe hardly guarantees a permanent exit. Indeed, the Russian presence in Eastern Europe has surged and ebbed repeatedly over the past few centuries. In a grave warning, a member of President Mikhail Gorbachev's negotiating team at the recent Washington summit said, "You have the same explosive mixture you had in Germany in the 1930s. The humiliation of a great power. Economic troubles. The rise of nationalism. You should not underestimate the danger." Were a global recession to cause oil demand to fall dramatically, the impact on the Russian economy will be more profound than on China's. In the context of rising nationalism in Putin's Russia, President Mikhail Gorbachev's negotiating team member's warning may prove prophetic.

GRG55
11-27-07, 10:03 AM
Is this what happens when you can't borrow any more, and everyone holding US $ wants to turn them into something else, anything else, even a crippled up bank with a US stock listing?

(didn't Citi try this with Saudi Prince Al Waleed the LAST TIME they got into trouble?)

Citigroup to Raise $7.5 Billion From Abu Dhabi State
By Will McSheehy and Bradley Keoun
Nov. 27 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.
Citigroup rose 3.7 percent in early trading today following acting Chief Executive Officer Win Bischoff's statement late yesterday that funds from the state-owned Abu Dhabi Investment Authority will help ``strengthen our capital base.''

Abu Dhabi will buy securities that convert to stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company's need for cash. Fourth-quarter profit will be reduced by as much as $7 billion because of losses from subprime mortgages, which led to the departure of CEO Charles O. ``Chuck'' Prince III and a 46 percent slump in its stock this year.

``Clearly, Citi has a problem with capital adequacy after the subprime crisis,'' said Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, Abu Dhabi's biggest bank by market value. ``ADIA has seen an opportunity to get cheaply into a blue-chip stock.''

With the purchase of a 4.9 percent stake, Abu Dhabi, the largest emirate in the United Arab Emirates and its capital, would rank as Citigroup's largest shareholder ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.

Depleted Capital
The investment follows purchases by U.A.E. fund Dubai International Capital LLC in companies including London-based HSBC Holdings Plc, Europe's biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management LLC. In Abu Dhabi, state-backed Mubadala Development Co. agreed to buy 7.5 percent of Washington-based buyout firm Carlyle Group. ADIA also owns a stake in Leon Black's New York-based buyout firm, Apollo Management LP.

Citigroup Chairman Robert Rubin, who stepped in after Prince resigned, and Chief Financial Officer Gary Crittenden said on a conference call earlier this month that the bank expects to restore capital to targeted levels by the end of the second quarter without having to cut its $2.7 billion-a-quarter dividend.

Mortgage writedowns cut Citigroup's ``tier 1'' ratio, a metric used to assess banks' ability to weather loan losses, to 7.3 percent on Sept. 30. The figure, while above U.S. regulators' 6 percent threshold for a ``well-capitalized'' bank, was below the bank's 7.5 percent target.

`Bullish' View
The Citigroup equity units that ADIA will purchase can be swapped for as many as 235.6 million shares starting in 2010. The securities will convert into Citigroup shares at prices ranging from $31.83 to $37.24 between March 15, 2010, and Sept. 15, 2011. Citigroup fell to $29.80 in New York Stock Exchange composite trading yesterday, the lowest price in five years, and was at $31.85 in early trading before the market opened in New York.

``The structure of the deal suggests that Abu Dhabi is very bullish, effectively participating in the upside beyond $37.24, and sharing in the downside below $31.83,'' said George Nikas, who helps manage $1 billion at Deutsche Bank AG in Sydney.
Abu Dhabi will have ``no role in the management or governance of Citi, including no right to designate a member'' of the company's board, Citigroup said in its statement.

``This investment reflects our confidence in Citi's potential to build shareholder value,'' ADIA Managing Director Sheikh Ahmed bin Zayed a-Nahyan said in the Citigroup statement.

Cost of Capital
Mounting subprime losses have increased Citigroup's funding costs. The bank sold $4 billion of 10-year bonds on Nov. 14, paying annual interest of 6.125 percent. The securities were priced to yield 190 basis points more than Treasuries, up from 118 basis points, or 1.18 percentage points, in a similar sale three months earlier.

CIBC World Markets analyst Meredith Whitney said in a note to clients today that she still expects Citigroup to cut its dividend as mortgage losses increase.

Abu Dhabi officials met with Rubin in the emirate yesterday to discuss ``world stock markets and their impact on the performance of banks,'' the state-run WAM news agency reported on its Web site.
Abu Dhabi owns the world's fifth-biggest oil reserves. It channels oil surpluses to ADIA, which ranks as the world's biggest sovereign wealth fund with assets of $875 billion, according to July estimates by the London-based Economist Intelligence Unit. The authority will spend $40 billion this year to buy foreign assets, estimates Gokkent at the National Bank of Abu Dhabi.

Buying Assets
Gulf investors have spent about $70 billion on overseas acquisitions this year, almost double their spending in 2006, as oil prices soared 58 percent, data compiled by Bloomberg show. With oil above $90 a barrel, Gulf producers including Saudi Arabia and the U.A.E. earn more than $1.3 billion a day from their energy sales.

State-controlled Saudi Basic Industries Corp., the biggest chemicals company by market value, in May agreed to buy General Electric Co.'s plastic unit for $11.6 billion in a record acquisition for the Gulf. State-owned Dubai World in August agreed to invest as much as $5.1 billion in MGM Mirage, the second-largest casino company, to try to tap into the Las Vegas- based company's U.S. gaming and real estate earnings.

Gulf petrodollars don't always get the prize. Qatar on Nov. 5 said it abandoned a $21.9 billion bid for U.K. supermarket chain J Sainsbury Plc after its cost of funding jumped ``significantly'' since first making the bid July 18.

China's Purchases
China also has been increasing investments in the U.S. and Europe. Bear Stearns Cos., the fifth-biggest U.S. securities firm, agreed last month to sell a 6 percent stake to China's government-controlled Citic Securities Co. for about $1 billion. China Investment Corp., the nation's $200 billion sovereign wealth fund, paid $3 billion for a stake in New York-based private equity firm Blackstone Group LP in May. Barclays Plc, the U.K.'s third-biggest lender, agreed to sell 6.7 percent of itself to China Development Bank in July.

The state-owned Dubai International Financial Center, which bought 2.2 percent of Deutsche Bank AG in May, on Nov. 19 said it is seeking acquisitions in the U.S., where the falling dollar and a lending crisis are driving down the price of banks and property.

Citigroup is among tenants at the Dubai center, a business park being used to attract banks, insurers and asset managers to the Persian Gulf. Like neighbors Qatar and Bahrain, Dubai is bidding to plug the trading time gap between Europe and Asia and become the region's pre-eminent financial hub.

Oil Running Out
Qatar, like Abu Dhabi, is seeking to diversify its economy away from near-total reliance on energy earnings. Unlike Abu Dhabi, the oil wells of Dubai and Bahrain have almost run dry.

ADIA ``will bolster Citigroup's capital and competitiveness,'' U.S. Senator Charles E. Schumer said in a statement. The New York Democrat was among the lawmakers who criticized the Bush administration's decision last year to approve DP World Ltd.'s $6.8 billion acquisition of London-based Peninsular & Oriental Steam Navigation Co., a deal that gave the Dubai state-owned port company control of six U.S. terminals.

Schumer was among those who said Dubai ownership would jeopardize U.S. national security, arguing that two terrorists involved in the Sept. 11, 2001, attacks were from the U.A.E.

DP World agreed in December to sell the U.S. terminals, in cities including New York, Philadelphia, Baltimore and New Orleans, to American International Group Inc., the world's biggest insurer.

Prince Alwaleed, a nephew of Saudi King Abdullah, invested $590 million in Citigroup predecessor Citicorp in 1991 when the bank needed cash because of loan losses in Latin America and a collapse in U.S. property prices. Alwaleed now holds about $6 billion of Citigroup shares. The prince wasn't available for comment at his Riyadh office today.

EJ
11-27-07, 10:13 AM
anti-anti-spin-
1. the euro has already become a reserve currency by default. nations of all political stripes all around the globe have chosen to move assets into that currency in spite of its lack of a politically cohesive home, its lack of a treasury, its lack of a centralized and standardized bond market, its overvaluation on purchasing power parity, and its inherently fractured and flawed economic basis in the eurozone. some currencies are born with reserve status, some attain reserve status, and some have reserve status thrust upon them. like it or not, the euro is already a reserve currency.

The euro is becoming a reserve currency by virtue of the dollar becoming less worthy of that status. Europeans worry that a single nation splitting from the euro zone will have an out-sized impact on the euro. The dollar doesn't face that risk but others. It's striking to me that Europeans I speak with are as critical of the euro as Americans are of the dollar. Perhaps the expression "familiarity breeds contempt" applies to currencies as well.


2. gave's argument, at least as stated above, makes no sense. the fact that u.s. bonds can be monetized means that indeed there will always be cash to pay them off, but also means that their value can be diminished in unlimited fashion. a deflationary threat overhanging the eurozone should makes its bonds more valuable than ever.

You misunderstand either Louis or my description of his position, I'm not sure which.

He speaks of deflation not inflation risk. Clearly, the self-consistent points about the dollar and inflation discussed here for going on ten years is that there is zero monetary deflation risk in the U.S. economy owing to the ability and clearly stated and demonstrated willingness of the Fed to monetize debt. Louis' point is that without a central euro treasury institution, the ability to fight monetary deflation may be insufficient to produce monetary inflation when needed to prevent deflation. Your point is well taken that this institutional limitation may make euro denominated bonds themselves more interesting to own than U.S. treasury bills, that's is not the point that Louis is making.


3. the dispersion of power, of "cards in the hands" of the various players around the world, the lack of a central overarching power or authority to provide a natural and clearly acceptable alternative to the dollar centrality as a reserve means there will be no acceptable alternative. or at least there will be no alternative for several playings and reshufflings of the cards. the dollar will decline in both value and esteem, and nations as well as individuals will scramble for assets with which to replace it. when the ecb finally bends to the political will of southern eurozone leaders, and finds an excuse to cut rates and thus cheapen the euro, we will know we are in full beggar-thy-neighbor mode. protectionist legislation in the u.s. will be another step towards geopolitical turmoil.

This comment is consistent with our theories here.


4. we need not worry about the power of dollar bond holders. this will not be a replay of newfoundland. as long as the u.s. functions as a market for their goods, the dollar holders dare not precipitate a crisis. by the time the u.s. no longer functions as a market for their goods, the dollar holders will not be capable of precipitating a crisis, for the value of their dollars will have evaporated into an inflationary miasma.

The Newfoundland example is about the political impact of debt burdens under economic duress, both on the debtor and the creditor. Great Britain defaulted on its debt to the U.S., increasing U.S. economic hardship. Some historians connect the political repercussions of that default with the decision by the U.S. to delay entry into WWII. If we accept Dr. Hudson's statement that no nation in history has ever repaid its foreign debts, and I have no reason to question that assertion coming from an economic historian, the question we've been asking here since 1998 is what form the U.S. default on its foreign debts will take. We have long assumed currency depreciation and inflation, ala 1999 Ka-Poom Theory. But it is useful to consider other forms and their impact. Of course, no player in the system wants to cause a crisis, and that is also part of the thesis; no party can undertake change so only a crisis that develops for other reasons will be the forcing function for the dissolution of the current order. That crisis may already be in play, starting from the housing led U.S.-centric credit crisis and recession and spreading outward. Just reported by S&P is a 4.5% national decline in housing prices in Q3. That is a stunning rate of decline.


5. if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

Russia. This time around, the risk is not war debts but dependency on oil demand for economic and political power, and international prestige. Let's hope Peak Cheap Oil holds up.

jk
11-27-07, 10:31 AM
The euro is becoming a reserve currency by virtue of the dollar becoming less worthy of that status. Europeans worry that a single nation splitting from the euro zone will have an out-sized impact on the euro. The dollar doesn't face that risk but others. It's striking to me that Europeans I speak with are as critical of the euro as Americans are of the dollar. Perhaps the expression "familiarity breeds contempt" applies to currencies as well.
all the risks to the euro are domestic/european, while foreign support is overwhelming.

touchring
11-27-07, 12:33 PM
Were a global recession to cause oil demand to fall dramatically, the impact on the Russian economy will be more profound than on China's. In the context of rising nationalism in Putin's Russia, President Mikhail Gorbachev's negotiating team member's warning may prove prophetic.


In such a scenario, wouldn't there be serious deflation as opposed to inflation?

bart
11-27-07, 02:32 PM
Or do you mean a global recognized new born currency and if so who would set policy B.I.S.?
http://www.bis.org/cgfs/index.htm
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Globalization and the NWO are alive and well.
The B.I.S. I.M.F. and World Bank were there at Bretton Woods, when the gold window was closed in 1971, and are very much still around. In the '70s, many folk characterized the I.M.F. as the engine of inflation.


"For more than a century, ideological extremists at either end of the political spectrum have seized upon well-publicized incidents to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure - one world, if you will. If that's the charge, I stand guilty, and I am proud of it."
-- David Rockefeller, Memoirs, 2002

rj1
11-27-07, 05:14 PM
To answer your question, no one can know exactly what we'll wind up with. So much depends on how acrimonious the negotiations become, and that depends on increased nationalism, and that depends on the depth of a future U.S.-centric global recession.

Of course not. But that doesn't mean we can't speculate like we were sitting around a bar drinking and discussing it. ;)


One thing is certain, that the current multi-polar global military power structure is inherently less balanced and stable than the bi-polar structure that emerged after WWII that allowed the U.S. to shape the international monetary system. It wasn't much of a negotiation at Bretton Woods; terms were more or less dictated. That will not be the case this time.

To me, this is going to be the most interesting part of the future United States and how it acts. What's the U.S. and its population going to do when it realizes it's no longer the superpower? How's it going to act when it has to treat China for example as an equal? China is clearly rising in power and I think most people realize it, but very few common Americans or politicians in public would ever think they'll become our equal in economy, military, geopolitics the way the Soviet Union once was.

Whether we treat it with grace and acceptance the way the British did after their failure at Suez in the 1950s or deny it all the way down and refuse to accept truth is going to have a large determination in my view of how the world will turn out after all this crisis is done. I personally expect us to deny it and we're going to have an even greater reckoning.


Back in 1990 I read the first piece I recall seeing that attempted to forecast the outcome of the post-Soviet multi-polar world in the article Why We Will Soon Miss The Cold War (http://72.14.205.104/search?q=cache:G9XlPiSXnM8J:mearsheimer.uchicago.e du/pdfs/A0014.pdf) by John J. Mearsheimer (The Atlantic Monthly; August 1990).



There is something elementary about the geometry of power in international relations, and so its importance is easy to overlook. "Bipolarity" and "multipolarity" are ungainly but necessary coinages. The Cold War, with two superpowers serving to anchor rival alliances of clearly inferior powers, is our model of bipolarity. Europe in 1914, with France, Germany, Great Britain, Austria-Hungary, and Russia positioned as great powers, is our model of multipolarity.Mearsheimer's gloomy forecast was that without Soviet power to balance U.S. power, European nations would soon be at each other's throats. Seventeen years later there's not much sign of that, in fact, the opposite; Mearsheimer didn't imagine the level of economic integration necessary to produce the euro, for example. But then again, except for minor recessions we've seen nothing but economic prosperity throughout the period, so European economic integration has never been tested. This is an inherent strength of the U.S., that Michigan can go into recession but their is no President of Michigan who has to defend the state's continued participation in the union that is throttling the state's economic prosperity with too high interest rates and insufficient fiscal and monetary stimulus.

So who's the weakest kid on the European bloc whose politics and citizenry can provide the earliest insight to what will happen there? Spain?



Russia remains the wild card in the European union's future in the next period of economic and political stress.



Then, too, the Soviet withdrawal from Eastern Europe hardly guarantees a permanent exit. Indeed, the Russian presence in Eastern Europe has surged and ebbed repeatedly over the past few centuries. In a grave warning, a member of President Mikhail Gorbachev's negotiating team at the recent Washington summit said, "You have the same explosive mixture you had in Germany in the 1930s. The humiliation of a great power. Economic troubles. The rise of nationalism. You should not underestimate the danger." Were a global recession to cause oil demand to fall dramatically, the impact on the Russian economy will be more profound than on China's. In the context of rising nationalism in Putin's Russia, President Mikhail Gorbachev's negotiating team member's warning may prove prophetic.

Russia is a kind of oddball in this whole situation. I would call them a #4 power in the world right now, behind the U.S., China, and the EU. They have a strategic alliance with China that is mixed, and they supply resources to the EU and are using it to their strategic benefit. The EU is trying to limit their influence through a kind of buffer region of sympathetic states in Ukraine and Georgia for example, not to mention the EU want missile defense. However, I severely question the long-term potential of the EU when the member countries are required to take a bullet.

We could be coming up on a kind of pre-World War I period, where powers draw battle lines and alliances for their strategic interests and no one trusts anyone else.

metalman
11-27-07, 08:21 PM
In such a scenario, wouldn't there be serious deflation as opposed to inflation?

recall he's said elsewhere that if the dollar falls by 1/2 while demand falls by 1/3 still inflationary, and grg55 said somewhere that production can fall even faster than demand as projects get pulled.

jk
11-27-07, 08:30 PM
2 more pieces on the euro:

1st a remark from bill fleckenstein:

"The euro is a flawed piece of paper, just not as over owned, nor as flawed as the dollar....someday it too will have problems, but that may be a while down the road."




2nd- here's ambrose evans-pritchard's latest

Are we primitive euro-haters? (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/nov07/euro.htm)

Posted by Ambrose Evans-Pritchard (ambrose.evans-pritchard@telegraph.co.uk) on 27 Nov 2007 at 07:50


In answer to all those posts suggesting that we will use any piece of dirt to besmirch the euro, let me reply.

Politicians were told that the euro would lead to a crisis
It is true that a substantial army of British Eurosceptics kept insisting until the eve of E-day in January 1999 that the single currency would never get off the ground.
They then repeated their dire claims as the euro plummeted to 82 cents against the dollar, predicting a bond crisis.
Well, yes, but I was not among them, and nor were many of us diehard critics. The beauty of the internet (and often the curse, for journalists) is that you can check these things.
The article below was one that I wrote in late 1998, after a visit to Rome to talk to the Italian central bank and Treasury – since Italy was then viewed as the weakest link.
The euro will work - that's the problem (http://www.telegraph.co.uk/htmlContent.jhtml?html=/archive/1998/12/15/ntony115.html)
My point is – and always has been – that launching the euro was the easy part. The test would be 1) whether countries with vastly different structures, trade patterns, wage bargaining systems, debt structures, sensitivities to interest rates, productivity growth rates, and historic inflation rates would diverge so far over time that this would threaten the viability of the system.
2) Whether EMU could weather a bad storm without single treasury and debt union to back it up.
3) Whether the eurozone bloc had the “solidarity characteristic of a nation” (the Bundesbank’s term) required for it to endure through bad times.
As Jon Livesey and others have pointed out on my last blog, the euro-zone is not an “optimal currency area” – OCA in the jargon.
Since it has no central treasury, it cannot spread money from vibrant regions to depressed regions to cushion the blow.
These “fiscal transfers” happen automatically in the US through social security payments, federal assistance, etc (DC takes 20pc of GDP. Brussels takes just over 1pc, and it is banned from using it to smooth ups and downs) .
And since the euro-zone is a linguistic Babel, it lacks the migrant flows that act as a social safety valve. Yes, we all know that unemployed French youths come to London, and 500,000 Poles are in Britain, and that certainly helps.
But will a 38-year old German car worker pick up sticks and migrate to Spain to start a new working life in Valladolid. Not likely.
In fact, we know that there is less migration between regions within the borders of Germany, or France, or Spain, or Italy, that there is across the entire US.
There is a school of thought that the US is not an optimal currency area either, and that Americans would be richer if they had a New England dollar, a Southern dollar, a Prairie dollar, etc. Possibly.
But the US is so obviously a unified nation and democracy that the political benefits of a single Greenback vastly outweigh any quibbling points over efficiency.
Can this apply to Europe? Well, the original architects of EMU saw it as a means of forcing the pace towards a European proto-state – disregarding the advice of their own economists that a currency straddling the Latin and Germanic blocs could not work until they had brought their economic, commercial, and legal cultures into alignment – a task that takes decades.
The politicians were told that the euro would ultimately lead to a crisis. They did not care.
Indeed, they saw the uses of pushing events to a head – as Romano Prodi candidly admitted as Commission president -- hoping for a “beneficial crisis” that would then enable Brussels to push its agenda, taking over parts of fiscal policy and establishing the beginnings of a debt union.
The euro was to be the midwife of the federal state.
We will see about that. I suspect that it will be the midwife of disorder, leading to an existential crisis for the European system.
I don’t know when this will occur, but I suggest that Club Med’s loss of unit labour competitiveness against Germany since 1995 – 20pc for France, 30pc for Spain, and 40pc for Italy (Eurostat data) – has gone beyond the point of no return. We simply await a slow motion train-wreck.
It feels to me like the period from early 1991 to September 1992, when sterling and the lira were at last blown out of the ERM.
You could see that the structure was unsustainable.
You could see that Germany was overheating, while Britain was heading into a housing slump, and that Britain’s M3 money supply growth was slowing faster than it had between 1929 and 1931 – and that if had we not been rescued in time by George Soros, the British economy would have spiralled into depression. (Sweden hung on for another two months or so – with overnight interest rates at 500pc – and did in fact go into depression, with two major bank failures).
Yet the consensus kept pretending that nothing was wrong. You learn to distrust consensus.
Yes, I know: EMU is not the ERM. The political investment is much greater, the stakes much higher. But that means the fever will rise even higher before the bubonic boil is lanced.
So yes, I have been repeating – like a stuck record, perhaps – that this will all end badly. But only once the divergences have been stretched to snapping point. We are not there yet.
How it all unfolds will depend on countless different decisions by different players, above all Berlin and the Bundesbank.
If the German people are willing to tolerate a life of inflation at 4pc, 5pc, 6pc, and perhaps even threatening to rise beyond that – then the day of reckoning can be put off for a while.
But will they tolerate any such thing?

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/nov07/euro.htm

metalman
11-27-07, 08:44 PM
Of course not. But that doesn't mean we can't speculate like we were sitting around a bar drinking and discussing it. ;)

another round, barkeep! things are sleepy tonight at the itulip bar and grill.


To me, this is going to be the most interesting part of the future United States and how it acts. What's the U.S. and its population going to do when it realizes it's no longer the superpower? How's it going to act when it has to treat China for example as an equal? China is clearly rising in power and I think most people realize it, but very few common Americans or politicians in public would ever think they'll become our equal in economy, military, geopolitics the way the Soviet Union once was.

Whether we treat it with grace and acceptance the way the British did after their failure at Suez in the 1950s or deny it all the way down and refuse to accept truth is going to have a large determination in my view of how the world will turn out after all this crisis is done. I personally expect us to deny it and we're going to have an even greater reckoning. sure & 15 years later...

Britain Gaining Time; Massive I.M.F. Loan Allows Breather In Fight to Overcome Economic Woes (http://select.nytimes.com/gst/abstract.html?res=FB0A1FFE3D5F147A93C1A8178ED85F41 8685F9)
By CLYDE H. FARNSWORTH
May 13, 1965, Thursday

Section: BUSINESS FINANCIAL, Page 51, 910 words

LONDON, May 12 -- With a massive new loan from the International Monetary Fund, Britain has lost some of her economic sovereignty; but she has gained time in the attempt to solve her economic problems.

that's what happens when the colonies stop paying the bills.



So who's the weakest kid on the European bloc whose politics and citizenry can provide the earliest insight to what will happen there? Spain? spain on the top of the itulip list. haven't seen any updates recently, tho.


Russia is a kind of oddball in this whole situation. I would call them a #4 power in the world right now, behind the U.S., China, and the EU. They have a strategic alliance with China that is mixed, and they supply resources to the EU and are using it to their strategic benefit. The EU is trying to limit their influence through a kind of buffer region of sympathetic states in Ukraine and Georgia for example, not to mention the EU want missile defense. However, I severely question the long-term potential of the EU when the member countries are required to take a bullet. how about those riots in france? a strong euro and recession ain't going to help matters.


We could be coming up on a kind of pre-World War I period, where powers draw battle lines and alliances for their strategic interests and no one trusts anyone else.that's why these guys are so friggin desperate to avoid a recession. they'll print & print & print until the cows come home. inflation sucks but war sucks more.

Spartacus
11-27-07, 08:45 PM
India is as widely varied as Europe - linguistically (from Tibetan to Tamil to Pushtun, from Burmese to Hindi, with Arabic and/or Persian influenced dialects of every one) and culturally (with cultures varying between languages, and sometimes completely different cultures within the same language group)

than Europe, IMHO - but the rupee seems to do well enough, with many fewer resources than Europe has.


2 more pieces on the euro:

1st a remark from bill fleckenstein:

"The euro is a flawed piece of paper, just not as over owned, nor as flawed as the dollar....someday it too will have problems, but that may be a while down the road."




2nd- here's ambrose evans-pritchard's latest

Are we primitive euro-haters? (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/nov07/euro.htm)

Posted by Ambrose Evans-Pritchard (ambrose.evans-pritchard@telegraph.co.uk) on 27 Nov 2007 at 07:50


In answer to all those posts suggesting that we will use any piece of dirt to besmirch the euro, let me reply.

Politicians were told that the euro would lead to a crisis
It is true that a substantial army of British Eurosceptics kept insisting until the eve of E-day in January 1999 that the single currency would never get off the ground.
They then repeated their dire claims as the euro plummeted to 82 cents against the dollar, predicting a bond crisis.
Well, yes, but I was not among them, and nor were many of us diehard critics. The beauty of the internet (and often the curse, for journalists) is that you can check these things.
The article below was one that I wrote in late 1998, after a visit to Rome to talk to the Italian central bank and Treasury – since Italy was then viewed as the weakest link.
The euro will work - that's the problem (http://www.telegraph.co.uk/htmlContent.jhtml?html=/archive/1998/12/15/ntony115.html)
My point is – and always has been – that launching the euro was the easy part. The test would be 1) whether countries with vastly different structures, trade patterns, wage bargaining systems, debt structures, sensitivities to interest rates, productivity growth rates, and historic inflation rates would diverge so far over time that this would threaten the viability of the system.
2) Whether EMU could weather a bad storm without single treasury and debt union to back it up.
3) Whether the eurozone bloc had the “solidarity characteristic of a nation” (the Bundesbank’s term) required for it to endure through bad times.



(along with north/south, east/west, dark skin / light skin bigotries within and between groups)

jk
11-27-07, 09:12 PM
India is as widely varied as Europe - linguistically (from Tibetan to Tamil to Pushtun, from Burmese to Hindi, with Arabic and/or Persian influenced dialects of every one) and culturally (with cultures varying between languages, and sometimes completely different cultures
within the same language group)

than Europe, IMHO - but the rupee seems to do well enough, with many fewer resources than Europe has.



(along with north/south, east/west, dark skin / light skin bigotries within and between groups)
india has a single polity, fractious though it may be. the federal institutions of the eurozone are very weak.

metalman
11-27-07, 09:25 PM
india has a single polity, fractious though it may be. the federal institutions of the eurozone are very weak.

paradox... federal institutions in the usa are very strong, thus able to inflate and depreciate. in the global mess... live in the usa but own german bonds! worst... live in germany and own usa bonds (in the winter while putin turns off the heat). worst of all possible worlds... live in france and be an immigrant.

spruced the old museum up recently but the tribes of europe will go at it again some day.

GRG55
11-27-07, 11:14 PM
...We could be coming up on a kind of pre-World War I period, where powers draw battle lines and alliances for their strategic interests...

That's along the lines of Niall Ferguson's views in War of the World.

http://www.amazon.com/War-World-Twentieth-Century-Conflict-Descent/dp/1594201005/ref=pd_bbs_2?ie=UTF8&s=books&qid=1196223096&sr=1-2

fogger
11-27-07, 11:29 PM
The Euro and all of today's currencies have the same problem: pure fiat. (Even the Swiss Franc decoupled from gold in 2001.) As faith in this trust-based system is destroyed, people will demand something solid: gold/silver.


Looking at this through purely national lines is a mistake. Bankers are not national. The danger is when the solution is presented to create a single global currency issued by a world central bank (backed by gold of course).


What better way to consolidate power? Destroy faith, offer solution, rule the planet. If I owned the BIS, that's what I'd do. Ridding myself of those pesky central bank satellites stealing my profits.

c1ue
11-28-07, 09:17 PM
if this is a replay of the '30s we must ask which nation holds the place of germany - with its unbearable burden of war debts hindering its economic growth.

Pogo's wisdom as always applies:

we have met the enemy, and he is us.

Substitute overconsumption for war debts...voila!

I note that the consensus on iTulip seems to be that the rest of world will sit idly by while both their export market to the US is eroded and the accumulated work of the past 20 years is inflated away - I'm not sure I agree. As I noted previously, all the ROW must do is stop lending money. Present debts are such that even this action would have clear effects - and bombing offshore production centers still doesn't put the Tonka truck under the Xmas tree.

As for Russia - while there is always the probability of politicians exploiting native Russian xenophobia, this time around there is not a nearby danger.

China is far away and apparently not needing Siberian land.

Europe is dependent on energy.

Iraq is neutralized from a geopolitical perspective, while Iran is severely restricted by the US fomented economic and political sanctions.

Only Turkey of all of Russia's historical enemies is still available to cause trouble, and they in turn have their own internal secular vs. theological state, plus minority unrest issues.

More likely the US would pick a fight with Russia to 'free the world from XXXX'

Contemptuous
11-28-07, 11:05 PM
C1ue -

You are way smarter than I am on economics, so please cut me some slack here on my criticism. You wrote:

< Substitute overconsumption for war debts...voila! >

It's really important however that one recognize, one absolutely cannot substitute overconsumption for war debts. One is voluntary, with options for change open within it's future, the other involuntary, trapped by past events. And people in those two situations really can't finesse that difference too much at all.

This is part of the what now seems fashionable around here - to equate many aspects of Weimar to the US. There are one or two limited parallels, but that's about it. I think Metalman at one point tried to point that out too, elsewhere.

bart
11-28-07, 11:25 PM
C1ue -

...

It's really important however that one recognize, one absolutely cannot substitute overconsumption for war debts. One is voluntary, with options for change open within it's future, the other involuntary, trapped by past events. And people in those two situations really can't finesse that difference too much at all.

This is part of the what now seems fashionable around here - to equate many aspects of Weimar to the US. There are one or two limited parallels, but that's about it. I think Metalman at one point tried to point that out too, elsewhere.

I'll be gentle... ;)

The best parallel for Weimar war debts today in my opinion are derivatives and general very high indebtedness.

Debt to GDP today is way higher than at any other time is US history at roughly 3.6x, and just 100% US only attributed derivatives are well over $150 Trillion. World wide, it's over $500 trillion which is about 7-8 times total world GDP.

Contemptuous
11-28-07, 11:46 PM
Bart -

Overconsumption = Derivatives? That's news to me Bart.

Further, the 'derivatives' mess is arguably worse for the many other countries holding these time bombs, as they can't print more of the senior currency to paper over the cracks, unlike the US, which can.

Please note we've got people around here with a good few years in business in multiple locations overseas who seem remarkably certain the dollar won't be totally eclipsed as the senior currency for a while yet.

Lots of grey areas in there. I appreciate your reminding me that the scale of derivatives dwarfs any debt which Weimar Germany carried relative to GDP. But that is a firecracker that will take multiple countries down, and C1ue's analogy was regarding the US events, as distinct from any others.

Did Weimar have a senior currency?

jk
11-29-07, 09:36 AM
the u.s. is the over-indebted country about to embark on a new experience [for the u.s.]: a severe and inflationary recession. let's hope there are no military adventures fomented to distract us from our pain.

bart
11-29-07, 09:50 AM
Bart -

Overconsumption = Derivatives? That's news to me Bart.

Further, the 'derivatives' mess is arguably worse for the many other countries holding these time bombs, as they can't print more of the senior currency to paper over the cracks, unlike the US, which can.

Please note we've got people around here with a good few years in business in multiple locations overseas who seem remarkably certain the dollar won't be totally eclipsed as the senior currency for a while yet.

Lots of grey areas in there. I appreciate your reminding me that the scale of derivatives dwarfs any debt which Weimar Germany carried relative to GDP. But that is a firecracker that will take multiple countries down, and C1ue's analogy was regarding the US events, as distinct from any others.

Did Weimar have a senior currency?



No, overconsumption does not equal derivatives unless you're consuming too much Orwell.

True on it being arguable about which country will be most affected by derivatives but I urge you to consider that both the US's share is way higher than its GDP share of the world and that US multi-nationals are not accounted for properly in the world wide breakdown.

As far as Weimar, the facts of it remain the same regardless of senior currency issues.

Spartacus
11-29-07, 04:02 PM
I'll beat Rajiv to this - you should you read Paul Craig Roberts and Seymour Hersh re: plans to nuke Iran

Also Karen Kwiatkowski on how the neocons pushed the Iraq campaign through US military intelligence


the u.s. is the over-indebted country about to embark on a new experience [for the u.s.]: a severe and inflationary recession. let's hope there are no military adventures fomented to distract us from our pain.

Contemptuous
11-29-07, 04:32 PM
Spartacus -

Neither of you had to beat the other to be the first to post that suggestion, as it was fully anticipated by me that someone would post such objections regardless. I think I'll leave that reading to you! If you think I'm unaware of these issues you are mistaken. I factor them, and I don't buy at least half (if not more) of the ideologically labored baggage which they carry along with that strand of an idea.

As for the US nuking Iran, I would recommend not hyperventilating about that. It's an extremely remote, (and fairly shrill) hypothesis. The whole baggage that goes along with this world-view suggests you find no significant gaps in reading the 'inexorable conclusions' of authors such as Ms. Wolf. For myself, I'm quite skeptical her views exercise a sufficiently broad field of probing observations about the wider context and issues, and I object to their highly selective focus in certain directions, and soft-pillow-down like silence in entire other (very broad, deep and critical) areas of international affairs.


I'll beat Rajiv to this - you should you read Paul Craig Roberts and Seymour Hersh re: plans to nuke Iran. Also Karen Kwiatkowski on how the neocons pushed the Iraq campaign through US military intelligence

Spartacus
11-29-07, 05:32 PM
Spartacus -

As for the US nuking Iran, I would recommend not hyperventilating about that. It's an extremely remote, (and fairly shrill) hypothesis. The whole baggage that goes along with this world-view suggests you find no significant gaps in reading the 'inexorable conclusions' of authors such as Ms. Wolf.

I suggest someone (not you, JK) read PCR, Seymour Hersh and Karen Kwiatkowski,

therefore I agree with everything Naomi Wolf (AND VARIOUS UNNAMED OTHERS) ever wrote.

Is that what you meant to write?

That you know I completely agree with authors you have not even named?

Contemptuous
11-29-07, 05:37 PM
Sorry Spartacus -

You seem to post in truncated sentences. I'm not sure what you are saying / asking / clarifying here.

Spartacus
11-29-07, 05:44 PM
Sorry Spartacus -

You seem to post in truncated sentences. I'm not sure what you are saying / asking / clarifying here.

just repeating the sequence of posts

I posted a suggestion that JK read a couple of authors.

From that suggestion you seem to have concluded that I completely agree with everything Naomi Wolf and several unnamed authors ever wrote.

Just asking how one follows from the other

c1ue
11-29-07, 06:00 PM
Lukester,

Overconsumption is the method, debt is the result.

Germany's war debt was basically a consolidation of Allied costs thrown onto Germany; American debt is a result of overconsumption from the President down to John Smith; from foreign adventures however well intentioned to buying new cars every 2 years, and down towards shifting from $0.50 crap coffee to $3.50 Starbucks.

Sure, when the debt pyramid collapses, there will be suffering spread around.

But the countries doing to saving and working will still have savings and work; the country doing its best locust imitation will have a long tough winter ahead.

EJ and others have faith in innovation to get out of this mess, but the only creativity I've seen evidence of in resolving debt crises has been financial innovation.

Creativity does well for increasing production, but the problem with a debt pyramid is that consumption needs to be permanently reduced.

Innovation such as LEDs to replace incandescent or even fluorescent lights is great, but when TSHTF, there simply won't be the capital needed for the nation nor its individuals to invest in new technologies. This basically blunts the short term effects of all but a 'fusion' type innovation.

Even in the 'dilithium crystal'/fusion power scenario - I shudder to think what the economic dislocation would be: where would all the oil company/exploration company/gas station/combustion engine service employees go? Who'd pay to retool all of the cars in America?

There will eventually be benefits, but when the choice is eating or retooling the car, I'm guessing the choices will uniformly be for the former.

The innovative and the capitalists will simply do what they've been doing since time immemorial - move to better economic climates.

Contemptuous
11-29-07, 06:21 PM
C1ue -

Always appreciate your politically agnostic posts. You are about as idealistic and sentimental about political persuasions as a Gila Monster might be about eating it's next four legged dinner. :D

Spartacus -

I'm interested in those aspects of Ms. Wolf's analysis of America's slide into mere Fascism you disagree with, rather than those you agree with. I've never actually read anything of yours specifically skeptical or qualified of such views. What's your "position paper" on this topic? :)

Spartacus
11-29-07, 07:01 PM
Might have been better to ask for that before assuming
(lots of edits)
At first I got angry but now i'm just finding the whole episode funny. Your "analysis" of Wolf as I remember it was (paraphrased)

"she's never lived under a repressive regime, so she has no right to write this"

then later, after no one bought that

"she makes quote marks with her fingers so don't listen to her"

And you're demanding that I write a reasonable critique?

To the extent that I wrote anything about Wolf I wrote something that she's either wrong about or has not mentioned - loss of liberties started not with any fascism but with the war on drugs, and those in power now, maybe authoritarians, maybe Bush personally are taking it further

Chris Coles
11-29-07, 07:08 PM
I start with China. They hold in their treasury a very large quantity of dollars. The first mistake has been to assume that they sit on them. That somehow, the US, while at war in two small regions, (Iraq and Afghanistan), and is well known to be at its limits of manpower and funds yet remains, in everybody's eyes; the strongest military power. That is a very big mistake. I suspect they are going to suddenly arrive on the scene with ten times what everybody thinks they have. In arms, manpower, every field of warfare and all paid for by those dollars that were supposed to just lie in the pockets of the CCP. The upside of that evaluation is that there is a strong element of belief that their ordinary people will force a change of overall control to something much more in line with their intellectual history. As someone that lived in San Francisco once told me; the Chinese are the best landlord... they do not gouge you. So I see China becoming the new superpower, but balanced by the surrounding influences of India and Asia minor.

Turning to the debate about the Euro. Europe, as a, yes, disperate group of nations, peoples if you like; is much more stable than many give it credit. You never assume that the South Eastern States are more prosperous than say DC, so, why do you expect the same differences between say, Germany and Italy to be so destructive of the value of the Euro?

The flight to the Euro is simply based upon reality. The Euro is seen as being the strongest currency at this time that is freely available world wide.

Germany has endured the massive cost of integrating East Germany back into some semblance of prosperity while remaining stable and economically in positive balance. Spain has taken itself from a small agrarian economy to become one of the major food suppliers while at the same time becoming the leading holiday economy, certainly for the Germans and the British. Another Florida while at the same time eclipsing California's Great Valley for food production.

Italy? Every family has a wayward teenager who overspends their budget. The Italians are well liked and enjoyed. So they have economic problems? They have always had such.

Russia is a different problem. A good friend has just returned to report he felt as safe in Moscow as anywhere he has ever been and the cost of a meal matched central London. But they do not have an economy based upon the work ethic of the small businessperson as we do here in the West. Their economy is entirely based upon the idea that central control will in the end bring greater prosperity. And it has.. has it not? For the time being...

In my opinion, the straw that will break the camels back is not economic, but the weather. I fear that the breakup of the ice at each pole is moving much faster than anyone has expected. A sudden rise in sea levels will force a complete change in EVERY economy. London and New York flooded are worthless. Food for thought.

Contemptuous
11-29-07, 07:48 PM
Spartacus -

Sounds like you are tied up in knots over my posts, channeling your anger into derisory 'humor'? :D Do you feel your personal civil liberties are in dire peril up there in Canada? Looks pretty good over where you are, from my perch.

I'll chip in my two cents from down here in the purportedly Proto-Neo-Quasi-Fascist USA - things aren't great, but I hardly feel I'm living in a police state yet old chap. Been around a good few countries in my life so far, so I have some useful 'benchmarks'. We are definitely not speaking out here in fear of our lives at this time, so the 'courage' Ms. Wolf congratulates her audience for in attending her speaking engagement may be a trifle over-rated.

That these are not the 'good old days' should be self-evident. That they are not yet the days governed by Ms. Wolf's "Blackwater-Brownshirts" may be an insight still intelligible only to those who don't go into cardiac palpitations over breathless blog articles (US has wargamed nuclear scenarios vs. Iran, therefore "Iran is about to be nuked". :confused: :p

Contemptuous
11-29-07, 07:56 PM
Chris -

Wouldn't it be a real 'kick in the head' (a Dean Martin favorite line) if your ideas on this outlandish polar melt topic, probably universally regarded as hilarious here among hardened skeptics of every stripe, are born out to actually be true in a mere ten years?

I cannot imagine anything working more magically, to take the entire world's mind of all of it's other innumerable squabbles: economic, political, religious - the whole ball of wax. Unheard of! Our planet host actually has the audacity to be complaining of our excretions, and threatening to evict us? :rolleyes:

Chris Coles
11-30-07, 02:18 AM
Lukester,

You got it in one. Everybody looks for the obvious. It will be something totally unexpected that tips the balance into true chaos. From that point onwards, all bets are off and we are back to the dark ages.

GRG55
11-30-07, 02:36 AM
Lukester,

You got it in one. Everybody looks for the obvious. It will be something totally unexpected that tips the balance into true chaos. From that point onwards, all bets are off and we are back to the dark ages.

You two are just full of sunshine today, aren't you... :)

Lukester: So which is it really going to be? Climate change induced floods and drought, or Matt Simmons view that an energy crisis is soon going to trump global warming for all the space on Page 1?

Or maybe both? Which probably means we "fry (instead of freeze) in the dark"?

I think I'm going to crawl back into bed and pull the covers over my head after reading all this stuff... ;)

Chris Coles
11-30-07, 03:23 AM
Spartacus -

Sounds like you are tied up in knots over my posts, channeling your anger into derisory 'humor'? :D Do you feel your personal civil liberties are in dire peril up there in Canada? Looks pretty good over where you are, from my perch.

I'll chip in my two cents from down here in the purportedly Proto-Neo-Quasi-Fascist USA - things aren't great, but I hardly feel I'm living in a police state yet old chap. Been around a good few countries in my life so far, so I have some useful 'benchmarks'. We are definitely not speaking out here in fear of our lives at this time, so the 'courage' Ms. Wolf congratulates her audience for in attending her speaking engagement may be a trifle over-rated.

That these are not the 'good old days' should be self-evident. That they are not yet the days governed by Ms. Wolf's "Blackwater-Brownshirts" may be an insight still intelligible only to those who don't go into cardiac palpitations over breathless blog articles (US has wargamed nuclear scenarios vs. Iran, therefore "Iran is about to be nuked". :confused: :p

I have to start with publicly eating a small portion of humble pie. Not long ago, Lukester, (among others), and me had a spat about one certain guy called Chavez down there in Venezuela and I was keen to rise to the bait and defend the poor guy. In truth, my quest was to debate that it was not supportable to allow ANY attempt to undermine the democratically elected leader of ANY nation. I want to make it perfectly clear, I remain completely committed to that ideal. But recently we had a BBC TV program showing how corrupt the Chavez, (now not a single "guy" but the whole family), have become. So, in part, (careful Lukester, wait for it), Lukester was correct to imply that Chavez was not the person he seemed to be from the outset. Indeed, it became clear from watching the program, that Chavez is more inclined to line his own, and his brothers and other relatives, pockets than do more than pay lip service to the needs of the poor. So, in part, Lukester, you were right about Chavez and I was mistaken.

But in contemplating eating some humble pie it became clear that neither side has all the answers. Chavez has been properly and fairly elected by the majority of the people on a platform to bring some relief to the poor who elected him. What has become very clear, Chavez does not know how to do that. He has fallen back onto old fashioned left wing ideas that do not work. It is worth suggesting that it would be improbable to believe he would take exactly the same economic values and rules, (that did not work for the majority of the poor), as had the previous national leaders. That in turn seems to have quite naturally led Chavez to believe that he can move forward in any manner he can think of. We can now see what happened next, as the BBC have now illustrated, he lines his and his families pockets. In fact the program showed, he does not have a clue as to what to do for the best for his people.

Why do I bring this up while highlighting the "domestic" between Spartacus and Lukester?

None of us has all the answers.

The truth is democratic capitalism had left the majority of the people of Venezuela with no hope and dirt poor. Equally true is that the alternative, left wing pseudo-communist tribalism does not work either. The point I am trying to make is that it is no good continuing to argue about ideas and rules for society that do not bring results. We have to sit down and work out what is wrong and create a better set of rules than we have today.

That it is a worthless road that leaves us throwing pebbles of bile at each other, rather than sitting down and admitting our differences, each eating a little of the humble pie and then getting on with it.

We came to this forum because we all of us believe that the rules we all believed were good and would work for the rest of our working lives; are instead a load of crap and do not work. The world economy is teetering on the edge of oblivion and yes, there are some complete idiots in charge at the moment. That is the truth of it.

We sit around the virtual table and have the potential to open up a clean sheet of paper and re-write the rules.

Let us do so.

So please, put down the mop or rolling pin and clear the debris off the kitchen table and let us make a clean start. Put the past mistakes behind us and let us take the lead for everyone else. We have the means to do so here with iTulip and we have the individuals with wide experience from all walks of life to set the stage for a really useful debate.

The proposal is; we none of us has all the answers; so what basic economic and social rules do we need that will work to bring true economic prosperity allied with really true freedom to the majority of the people of any nation?

Let the Debate begin -

Chris Coles
11-30-07, 08:42 AM
You two are just full of sunshine today, aren't you... :)

Lukester: So which is it really going to be? Climate change induced floods and drought, or Matt Simmons view that an energy crisis is soon going to trump global warming for all the space on Page 1?

Or maybe both? Which probably means we "fry (instead of freeze) in the dark"?

I think I'm going to crawl back into bed and pull the covers over my head after reading all this stuff... ;)

Well, this is the main news story this lunchtime here in the UK. So if I were you I would go out and buy some wellies for Christmas.

Business call for plan on climate

http://news.bbc.co.uk/1/hi/business/7120324.stm

Contemptuous
11-30-07, 09:33 AM
So if I were you I would go out and buy some wellies for Christmas.

There you go GRG55 - Nothing a really stout pair of English Wellies couldn't fix. You can take on the world with a pair of those. Although come to think of it some people may gawp a bit down in Riyadh to see you walking around in a pair of Wellies. But "in principle" it's the right move. :D

bill
11-30-07, 10:36 AM
Russia remains the wild card in the European union's future in the next period of economic and political stress.


Then, too, the Soviet withdrawal from Eastern Europe hardly guarantees a permanent exit. Indeed, the Russian presence in Eastern Europe has surged and ebbed repeatedly over the past few centuries. In a grave warning, a member of President Mikhail Gorbachev's negotiating team at the recent Washington summit said, "You have the same explosive mixture you had in Germany in the 1930s. The humiliation of a great power. Economic troubles. The rise of nationalism. You should not underestimate the danger." Were a global recession to cause oil demand to fall dramatically, the impact on the Russian economy will be more profound than on China's. In the context of rising nationalism in Putin's Russia, President Mikhail Gorbachev's negotiating team member's warning may prove prophetic.

I just listened to Mr. Medvedev say live on Bloomberg, Russia will sell oil in rubles within a year. What a wild card indeed.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUb9Bo2Ik4A&refer=home


Gazprom May Switch Sales to Rubles as Dollar Weakens (Update3)
By Dan Lonkevich and Jim Kennett
<!-- WARNING: #foreach: $wnstory.ATTS: null at /bb/data/web/templates/webmacro_en/20601087.wm:266.2 --><!-- WARNING: #foreach: $wnstory.ATTS: null at /bb/data/web/templates/webmacro_en/20601087.wm:280.19 -->Nov. 29 (Bloomberg) -- OAO Gazprom, the world's largest natural-gas exporter, may start selling its crude and gas production in rubles rather than dollars and euros after the U.S. currency weakened.
``We are seriously thinking about selling our resources in rubles,'' Alexander Medvedev, Gazprom's deputy chief executive officer, told reporters today in New York. He didn't give a specific timeline for the decision

Chris Coles
11-30-07, 11:16 AM
I just listened to Mr. Medvedev say live on Bloomberg, Russia will sell oil in rubles within a year. What a wild card indeed.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUb9Bo2Ik4A&refer=home


That is a very interesting concept. But the question springs to mind, where do you get the rubles to pay for the oil and gas? Somewhere down the line, someone else has to buy ? to pay for them. And, when the supply dries up, the price will go through the roof..... Nasty!

Definitely not good for the UK energy scene long term. Did someone say Russia was possibly going to return to Eastern Europe? More like the UK will be at their mercy during a hard winter. (Assuming we will get at least one more before the ice melts).

WDCRob
11-30-07, 11:32 AM
I believe Tet has been saying that would happen for some time now.

jk
11-30-07, 12:10 PM
i don't think it's worth arguing about theoretical rules or optimal social or political norms. lukester, you've complained that all anyone wants to do is turn a discussion of global warming into an investment theory. [i would respond that an investment theory is something i can act on.] this reminds me of a joke i heard in the late 60's [dates me] about a guy who said he made all the big decisions in his marriage: he decided the family policy on vietnam, civil rights, and so on. his wife decided the little stuff like where they lived and whether to buy a new car.

c1ue
11-30-07, 01:46 PM
As someone that lived in San Francisco once told me; the Chinese are the best landlord... they do not gouge you

I'd be careful to compare the ex-Kuomintang landlords of SF with the "new China" capitalists. The latter are the ones stuffing dumplings with cardboard to reduce costs.


In my opinion, the straw that will break the camels back is not economic, but the weather.

If you believe that, you should have run me over on the way to move money into Russia.

Sibera is the one place that will clearly benefit from global warming: millions (billions?) of acres of new farmland but with decent fertility.

Canada is just an inch of soil over rock.


Chavez has been properly and fairly elected by the majority of the people on a platform to bring some relief to the poor who elected him.

True, but his real platform should have stated that it would be bread and circuses.

Now that the grain shipments from Egypt (i.e. Petroleos) are slowing down, can the Visigoths be far behind?

GRG55
12-01-07, 12:43 AM
There you go GRG55 - Nothing a really stout pair of English Wellies couldn't fix. You can take on the world with a pair of those. Although come to think of it some people may gawp a bit down in Riyadh to see you walking around in a pair of Wellies. But "in principle" it's the right move. :D

A short while back someone posted an item about the real estate developments out here in the Arabian Gulf (zoog?) and the dredging operations used to create new land, like The Palm in Dubai.

Last night I had dinner with an engineering friend who's involved in one of these mega-projects. When I asked him about how much "free-board" they allow above tide-water for these reclaimation projects, got the following tid-bits about his project:
Highest tide from sea level datum is 2.6 metres;
Height of reclaimed land above sea level datum is 3.8 metres;
Allowance for future global warming sea level rise is 30 centimetres (included in the 3.80);
Outer rip-rap (rock) protective walls are 5.2 metres above sea level datum.

Can you spell "New Orleans"?

If sea levels are indeed set to rise due to global warming, my theory is the Govt of Dubai will just initiate yet another world-record mega-project...a Thames-like barrier across the Strait of Hormuz, to keep the waters of the Indian Ocean from flooding the Burj Dubai?

zoog
12-01-07, 01:18 AM
A short while back someone posted an item about the real estate developments out here in the Arabian Gulf (zoog?) and the dredging operations used to create new land, like The Palm in Dubai.

Last night I had dinner with an engineering friend who's involved in one of these mega-projects. When I asked him about how much "free-board" they allow above tide-water for these reclaimation projects, got the following tid-bits about his project:
Highest tide from sea level datum is 2.6 metres;
Height of reclaimed land above sea level datum is 3.8 metres;
Allowance for future global warming sea level rise is 30 centimetres (included in the 3.80);
Outer rip-rap (rock) protective walls are 5.2 metres above sea level datum.

Can you spell "New Orleans"?

If sea levels are indeed set to rise due to global warming, my theory is the Govt of Dubai will just initiate yet another world-record mega-project...a Thames-like barrier across the Strait of Hormuz, to keep the waters of the Indian Ocean from flooding the Burj Dubai?

Wasn't me. I think that was you (http://www.itulip.com/forums/showthread.php?p=20261#post20261), man.:D Your barrier idea also reminds me of the proposed operable barriers for Venice. There was a Nova program about the sinking city (http://www.pbs.org/wgbh/nova/venice/) back in 2002. Last I heard, the project was unlikely to move forward due to lack of financing.

Contemptuous
12-01-07, 01:32 AM
GRG55 -

All kidding aside.

I'm really agnostic as to rising sea levels. I only know that CO2 levels are at a very striking, thought provokingly high anomaly point of 370 PPM, and it must be noted that anyone could spot that anomaly on those very long charts, because even 300 PPM is already far outside the topmost readings of four glacial and interglacial ages spanning a half million years. That anomalous data is jumping right off the chart.

So if the CO2 data is showing a very large anomaly right smack at the tail end of our exceedingly brief human history (5000 years), precisely overlaying our industrialisation, which itself has only occupied a tiny fragment of the past mere 1000 years, it begs the question "what are the statistical odds of that coincidence?

What are the statistical odds of an exceedingly high CO2 anomaly being precisely overlaid onto this global industrialisation in time frame - when either of these two events could have otherwise occurred spaced even just a single thousand years apart (or also tens or even hundreds of thousands of years apart!)? These two events have found each other wth pin-point overlap out of a 400,000 year span of time, and it's mere coincidence?

A rational inquiring, agnostic mind would adopt at least a provisional hypothesis, that the present ultra-high CO2 readings, and the present globalising industrialisation (complete with smog plumes seen by satellites up in the jetstream quite visibly traveling from Asia over to the Americas) are two events that are quite likely related.

That they might be unrelated, in such precise overlay of time period out of such a vast history is probably statistically at the outer range of probabilities. At very least, it begs the observation that "chance is not the factor at work". Therefore all I know, based upon that statistical improbability, is that all this talk about global warming bears much closer examination. That's all I know.

As for the government of Dubai, I think the term is, "if you got the money, who's to tell you where you must spend it"? Personally I would be really distressed to see Venice (Italy) vanish under the waves. A billion dollar glam hotel / condo project in the Arabian Gulf, built a mere decade prior, I can't promise I'd sorely miss. Of course, it's not my money went into building it.

[ Zoog - looks like our posts crossed each other in the "internet ether", and both reference Venice. You aptly mention the mammoth budget project to set up two "tidal gates" at the entrance to Venice harbor to protect it from both rising seas, and the fact that Venices is sinking. Anyone curious to see Venice should plan to go in the next five to ten years max, because I really think we will lose this city. One of the most truly stunning, dreamlike places in the world to see. ]

c1ue
12-01-07, 11:36 PM
What are the statistical odds of an exceedingly high CO2 anomaly being precisely overlaid onto this global industrialisation in time frame - when either of these two events could have otherwise occurred spaced even just a single thousand years apart (or also tens or even hundreds of thousands of years apart!)?

Lukester,

You're pointing out the exact source of my cynicism: unlike the '10,000 year' events of a quant, "real" statistical analysis requires a comprehensive understanding and relative weighting of all possible factors over a statistically relevant time frame. Lack of or distortion of any of these renders results irrelevant.

CO2 is not the only greenhouse gas, nor are greenhouse gases the only method by which global warming/cooling can occur.

I've mentioned methane, also solar energy output. Other possible causes: earth's axis of tilt relative to the sun, the moon's distance from earth, earth's magnetic pole (has changes several times), Krakatoa type volcanoes, 'dinosaur killer' asteroid impacts, and the list goes on.

The whole list is tremendous - which is why I like to see how computer models work on proven outlying events from the past.

If the models don't show something like the Middle Ages ice age, then I have great difficulty placing faith in them.

Similarly Krakatoa in 1883 and Tambora in 1815 seem to coincide with global cooling - but there is a lack of data correlating the SO2 release from these past events with something like Pinatubo in 1991 (22M tons).

In contrast CO2 release in 2005 was around 7.8B tons - but of course CO2 and SO2 have different effects on planetary albedo.

The short of it is that I want to see better explanation of past behavior from the models before I can believe in future predictions.

As for the incentive - scientists are incentivized by 2 things: critical acclaim and money.

Global warming is very much in the forefront in both areas.

In fact, having Gore as the global warming spokeperson is itself a negative sign to me - any politician involved in what should be a fact discovery is bad.

Contemptuous
12-02-07, 01:03 AM
C1ue -

<< scientists are incentivized by 2 things: critical acclaim and money. >>

We've been through this in great detail, and I think it was debunked, and covered much of your other points as well, on another thread. You can check a detailed list of my own observations of the merits of these obections there. To my mind all your observations are either near term or of the nitpicking variety.

Why do I say "nitpicking"? Because A) the 400,000 year charts discussed there were not "computer models" they were data collected from ice cores all the way back ( so maybe you did not read the thread fully? ) and B) because even if those data sets are vastly inaccurate, when you dial out to a half million years, you can catch the "general drift" of the shifts without too much nitpicking being required.

This is a very, very, very long data set, and it is not a computer model, it implies no particularly sophisticated interpolations whatsoever - it merely notes the present CO2 is one full standard deviation outside half million year trends. You are an engineer of some sort by training, right? If so you've employed highly pragmatic methods for sorting and assigning weight to data as a methodology, and may recognize what I'm referring to here?

Will you therefore distinguish here, that there is "junior data" or "subordinated data" and there is "senior data". A clearly discernible, that's an understatment - a very emphatically discernible anomaly in CO2 relative to half million year hard data trumps every one of your objections by a country mile, as far as opening a serious inquiry whether the CO2 today is in an aberrant range which is overwhelmingly sufficient cause for serious investigation.

You are whiling away your time on the objections, making notes about events in the past century or two. You might try a little pragmatic weeding out of essential criteria here C1ue - any anomaly that stands out massively on a half million year chart is gargantuan on smaller time scales. Your scientific training should bring you to acknowledge this is an issue you would best not simply summarily dismiss, for the sake of your own children, if nothing else.

GRG55
12-02-07, 10:13 AM
Wasn't me. I think that was you (http://www.itulip.com/forums/showthread.php?p=20261#post20261), man.:D Your barrier idea also reminds me of the proposed operable barriers for Venice. There was a Nova program about the sinking city (http://www.pbs.org/wgbh/nova/venice/) back in 2002. Last I heard, the project was unlikely to move forward due to lack of financing.

Actually it was DemonD here:

http://www.itulip.com/forums/showthread.php?t=2236&highlight=dubai

bill
12-02-07, 12:25 PM
We've been through this in great detail, and I think it was debunked, and covered much of your other points as well, on another thread.


If you insist on bringing global warming into this thread lets do it. What reserve currency will be used for co2 tax, credits, trading? What price will be set on carbon?
One opinion:http://www.feasta.org/events/debtconf/sleepwalking2.htm


Basing money on the scarcest resource

Moreover, reviving SDRs would be a missed opportunity. To deliver the maximum level of human welfare, every economic system should try to work out which scarce resource places the tightest constraint on its development and expansion. It should then adjust its systems and technologies so that they work within the limits imposed by that constraint. In line with this, an international currency should be linked to the availability of the scarcest global resource so that, since people always try to minimise their use of money, they automatically minimise their use of that scarce resource.

What global resource do we most need to much use less of at present? Labour and capital can be immediately ruled out. There is unemployment in most countries and, in comparison with a century ago, the physical capital stock is huge and under-utilised. By contrast, the natural environment is grossly overused especially as a sink for human pollutants. We believe that the scarcest resource is the planet’s ability to absorb greenhouse gases and that a new world currency should therefore be based on CO2 emissions rights.

How could that be done? We’ve already seen that, under Contraction and Convergence, emissions permits would be issued to every adult in the world. Let’s make an ironic bow to the IMF and call these permits Special Emission Rights or SERs. As we saw, these would essentially be ration coupons. They would be issued by an international Issuing Authority, distributed to individuals, bought up by dealers and sold on to fossil energy distributors such as electricity companies and oil and coal merchants. These companies would then pay over SERs in addition to normal money to fossil fuel producers whenever they bought fresh supplies. An international inspectorate would monitor the fuel producers to ensure that their sales did not exceed the number of SERs they received. This would be surprisingly easy to do as nearly 80 per cent of the fossil carbon that ends up as manmade carbon dioxide in the earth's atmosphere comes from only 122 producers of carbon-based fuels<SUP>7 (http://www.feasta.org/events/debtconf/sleepwalking4.htm#footnote7)</SUP>. Once a producer’s sales had been checked, the inspectors would remove and destroy the SER coupons the producer had collected. Any not used would lapse at the end of a year.

Besides the SERs, the Issuing Authority would supply governments with a new international money called ebcus (emissions-backed currency unit) to be used for all international trade, not just for buying permits. Like SERs, ebcus would be issued to each country on the basis of its population but, unlike the SERs, they would be given to each country’s central bank rather than to individuals. The ebcu issue would be a once-off, to get the system started, and the Issuing Authority would announce that it would always be prepared to sell additional SERs at a specific ebcu price. This would fix the value of the ebcu in relation to a certain amount of greenhouse emissions. It would make holding the unit very attractive as rival monies such as the dollar have no fixed value and everyone would know that SERs would become scarcer year by year as fewer and fewer were going to be issued.

If a buyer actually used ebcus to buy additional SERs from the Issuing Authority in order to be able to burn more fossil energy, the number of ebcus in circulation internationally would not be increased to make up for the loss. The ebcus paid over would simply be cancelled and the world would have to manage with less of them in circulation. This would cut the amount of international trading it was possible to carry on and, as a result, world fossil energy consumption would fall. On the other hand, there would be no limit to the amount of trading that could go on within a country provided its fossil energy use was kept down. We recognise that selling these additional emissions permits would lead to the C&C emissions limit being exceeded in each year that sales took place. However, because a fixed amount of ebcus would be put into circulation at the start of the scheme and no more would ever be issued, the total excess over the years could never exceed the amount of SERs that the original sum of money could buy.

Essentially, the system is a version of the Bretton Woods arrangement that President Nixon destroyed except that the right to burn fossil energy replaces gold and ebcus play the role of the US dollar. Its introduction would ensure that the level of economic activity around the world was always consistent with the ability of the Earth to cope with it, at least as far as greenhouse emissions were concerned. It would re-link the money system to reality and the world.

The combined C&C/ebcu arrangement would not end economic growth but it would mean that growth could only proceed in countries that increased the economic value they extracted per tonne of CO2 emitted at a faster rate than they were having to cut their CO2 emissions back. There is no point in denying that this requirement would make global growth very difficult. Incomes in many countries would fall back although whether the quality of life would do so is another matter. However, some sectors of most national economies would grow very quickly – those connected with saving energy and capturing power from renewable sources, for example – and businesses ought to be able to get good returns on investments made in those sectors.

By encouraging people to borrow enough to maintain the money supply, these profit opportunities would reduce the risk of continuing to operate a national debt-based money systems during the period of emissions contraction. After that, however, the rate of change would become much slower and countries would be wise to gradually switch to using a money stock that was spent into circulation by the state. This type of money is described in James Robertson and Joseph Huber’s NEF book, Creating New Money. Its advantage is that growth and continual borrowing are not required to keep an adequate amount of it in circulation. This helps to ensure a very stable economy because, if one sector goes into decline, there is still the same amount of purchasing power about and other sectors will expand to compensate.

The massive investment required to free the ‘advanced’ countries from their reliance on fossil fuels should be the last act of the growth-reliant economic system. As roughly half of all energy gets used to achieve economic growth, it is absolutely imperative that richer countries adopt a money system that doesn’t require them to keep growing to avoid an economic collapse. This is not only because they will have to buy fewer emissions permits if they cease to grow but also because they would free resources for use by much poorer countries.

In any case, economic growth in the richer countries is bringing negligible results in terms of increases to human welfare and happiness. The American economist Herman Daly thinks that growth has become uneconomic in a lot of rich countries because it is increasing costs more rapidly than benefits. In other words, it is proving damaging rather than beneficial. The Index of Sustainable Economic Welfare, which Daly developed, shows that this is the case in almost every country for which it has been calculated, even though the calculations ignored the damage potential of CO2 emissions. If estimates for this damage are factored in, the case for saying that rich country growth is seriously damaging becomes overwhelming.

But, as Daly pointed out in a speech to the World Bank in 2002,

The current policy of the IMF, the World Trade Organisation and the World Bank, however, is decidedly not for the rich to decrease their uneconomic growth to make room for the poor to increase their economic growth. The concept of uneconomic growth remains unrecognized. Rather the vision of globalization requires the rich to grow rapidly in order to provide markets in which the poor can sell their exports. It is thought that the only option poor countries have is to export to the rich, and to do that they have to accept foreign investment from corporations who know how to produce the high-quality stuff that the rich want. The resulting necessity of repaying these foreign loans reinforces the need to orient the economy towards exporting, and exposes the borrowing countries to the uncertainties of volatile international capital flows, exchange rate fluctuations, and unrepayable debts, as well as to the rigors of competing with powerful world-class firms.

The whole global economy must grow for this policy to work, because unless the rich countries grow rapidly they will not have the surplus to invest in poor countries, nor the extra income with which to buy the exports of the poor countries.

In other words, the present system makes it impossible for the poor to rise out of poverty. We are not merely playing a zero-sum game in which the gains of the winners equal the loss of the losers. We are playing a negative sum game in which even the people who think themselves winning are, in reality, losing out. Stopping damaging growth in the rich countries is not a cost but a gain.




Keep a eye on IPCC:http://unfccc.int/meetings/cop_13/items/4049.php

Contemptuous
12-02-07, 01:34 PM
Bill -

I apologize for the snippet of already "lengthy" and "tired" global warming discussion here you refer to, within one of E.J.'s threads which is dedicated to the international monetary system.

Actually I was trying to move this discussion to the thread where it was already being discussed at length - elsewhere. I got sidetracked by some banter about "wearing Wellingtons in Riyadh".

I find the implications of your post very interesting. The issues are very hard to untangle into a viable system which can permit the world to continue to grow without producing compounding problems. Here is an eye-opener, and a further complication to add to the difficult calculations your post reveals:





<HR style="COLOR: #99ff99" SIZE=1><!-- / icon and title --><!-- message -->
US MOST EFFICIENT OIL CONSUMER PR UNIT OF GDP


Derived from statistics from GeoHive, the Pew Center, the World Resources Institute and other sources:

Measured on a per-unit-of-oil-consumed scale, the U.S. produces less GHG than every other major developed or developing nation except Japan (we’re on a par with militantly green Germany). While consuming 25.4% of the world’s oil in 2000, we emitted only 20.6% of the GHGs. Compare that to China’s 6.5% of world oil consumption versus 14.8% of the GHGs (2.8 times as much as the U.S. per unit of oil consumed); India’s 3.0% consumption versus 5.5% GHG (2.26 times as much as the U.S. per barrel); and Russia’s 3.5% consumption versus 5.7% GHG (more than twice as much per unit as the U.S.). Even darling of the greenies Canada belches more GHG per barrel of oil consumed than the U.S.
Measured in terms of economic yield (meaning how much we get from the oil we use), one need only compare GHG emission to gross domestic product (GDP) to get the full picture of just how much more effectively the U.S. consumes fossil fuels than almost any other industrialized nation on Earth (again, Japan and Germany are the exceptions). In 2000, America produced 39% more dollars in domestic GDP per unit of GHG expelled than Canada, 569% more dollars per GHG than India, a whopping 642% more dollars per GHG than China, and an incredible 1,041% more GDP per unit of GHG than the Russian Federation.
<!-- / message --><!-- controls -->http://www.itulip.com/forums/images/misc/progress.gif

c1ue
12-02-07, 08:35 PM
This is a very, very, very long data set, and it is not a computer model, it implies no particularly sophisticated interpolations whatsoever - it merely notes the present CO2 is one full standard deviation outside half million year trends.

Size isn't everything ;). And my point wasn't that CO2 itself was /was not well documented, it is that I have not seen conclusive evidence that CO2 itself is the primary cause. As for relative strength, the Sun is the big boy on the block. 1% change in solar radiation would have major impact on Earth as an example.

As for CO2 being clearly above historic levels - sure, but there are many other things above historic levels. Numbers of people ('green' or otherwise). Numbers of cows. Metal in refined form. Corn. Wheat. Pigs. Chickens. Concrete. Asphalt. Electricity. Electromagnetic radiation in various forms. Neither an anomaly nor the size of an anomaly proves causation.

Why is it so difficult for the IPCC to prove CO2 is the smoking gun? Because it is NOT clear - unlike HFCs which were clearly proven.

To paraphrase from the legal system - circumstantial evidence is not sufficient in and of itself to constitute proof.


Your scientific training should bring you to acknowledge this is an issue you would best not simply summarily dismiss, for the sake of your own children, if nothing else.

Now you're talking like Pascal: if there is a God, and unbelief = eternity in Hell, then I should believe because avoiding infinite Hell is worth a little worship - as opposed to the alternative of unbelief and being wrong.

I don't agree with Pascal - Gimme the facts only.

As for my kids, they'll be sitting on the mountaintop with stored food, guns, and gold :cool:


Measured on a per-unit-of-oil-consumed scale, the U.S. produces less GHG than every other major developed or developing nation except Japan (we’re on a par with militantly green Germany).

That's because we've outsourced most of our dirty manufacturing production to China, while still being able to get the results. But we can't pay so much anymore...

I had relatives involved in this type of business - buy scrap metal, process in China/Taiwan, sell back to the US. The US is absolutely the entity which engenders this particular pollution, but the pollution wound up in another country. More global warming related BS...

Contemptuous
12-02-07, 11:40 PM
C1ue -

You are reiterating, "charts are bad", and "there are no charts even giving an approximate clue what CO2 has done for 400K years", and then again "half the scientists in the world studying climate are victims of groupthink", and then "or they are merely venal, sucking up to the popular science for a Nobel", so the insight you would have me gain is that"everybody out there who disagrees with me on this is also a victim of groupthink", and so forth.

You posted:

... I've never said global warming is false. ... What I've said over and over again is that I see zero conclusive proof that ... CO2 is the primary culprit
and again:

... And my point wasn't that CO2 itself was /was not well documented ... As for CO2 being clearly above historic levels - sure. Neither an anomaly nor the size of an anomaly proves causation. ... More global warming related BS ...

So now the question has been reduced down to it's bare essentials.

You are claiming you see nothing in the below chart that suggests to you that there is any "remotely discernible relationship" between CO2 levels and temperature?

In the above excerpt you say in effect "sure, CO2 levels are high - so what?"

I had a much more involved discussion on this with GRG55 - At first he was a hard skeptic - but I was quite impressed by his complete agnosticism after we hashed it back and forth a few times, with some great input from JK on what it means to be "agnostic" towards new ideas.

When I pointed out the chart below which maps correlation between CO2 and Temperature to GRG55, and how temperature normally spikes over the CO2 at the peaks but in this chart at present CO2 is leading by a large margin (implying the potential for a chatch up move in Temp), this was sufficient to spark his curiosity. I certainly did not change his mind, but he was curious to understand what that might imply. I submit to you, that the spirit of innocent curiosity is the most serious form of discovery.

I understand he is placing inquries with some of his colleagues in the Gulf as a result of our discussion.

GRG55 became interested enough to entertain the idea that CO2 may indeed now be anomalously high (which you now grudgingly acknowledge) and that there does seem to be a quite interesting correlation between CO2 and temperature spanning a quite a long time frame, at least in the posted chart. Maybe we can dig up another couple of charts and see if this is borne out, without any more talk, and that would settle it for you?

He was intrigued, because at the end of the day, GRG55 apparently just keeps an open mind to any possibility. He gets my considerable respect for that.

I believe you are a software or hardware engineer? GRG55 is a petroleum engineer, so arguably a little more tuned in to geology. He demonstrated an agnosticism in recognizing the above points (and he I think also took duly into consideration, that calling 2500 scientists findings accumulated after a full decade "deluded nonsense" right off the bat, may not be the most serious methodology for at least preliminarily checking out the implications of very high CO2).

I discussed this issue thoroughly with GRG55, and he now professes to be at least "intrigued" by the possibility. That is a serious response. I am no more sure of the implications of CO2 for global warming than he is (and I'm less qualified!), but I am equally curious as is GRG55, and that's a quality you conspicuously don't display on this topic.

Rather, you seem to hold the caliber of your intellect in such high regard that you find it easy to suggest flatly that a few thousands of other scientists, who presumably trained just as rigorously as you in objective methodologies, all flouted that training and methodology in coordinated unison to the point of being specious in complete unison, all while you presumably have maintained an unerring corner on hard headed truth.

This approach of yours seems exacerbated to the point where while you are acknowledging "CO2 is high, but so what?" you are in the next breath apparently denying the below chart shows any correlation, or even a hint of a correlation, sufficient to arouse your intellectual curiosity, between CO2 and temperature? :p :p :p


http://environmentaldefenseblogs.org/climate411/wp-content/uploads/2007/06/last_400000_years.png

c1ue
12-03-07, 08:07 PM
Lukester,

Your faith in the charts is heartwarming - as I am a chartalist shark.

You should know by now that any argument can be made - on both sides - by playing with charts. This includes scales, included data, excluded data, logarithms, whatever.

I am an engineer - but trained as a statistician.

But as a statistician in the real world, I am inherently distrustful of hypothesis based on data concentrated on only 2 data fields. Very little in real life moves only in 2 axes.

This is where the engineer part comes in. As an engineer I seek validation of any chart derived hypothesis using different situations which should elicit similar behaviors.

Your arguments repeat - the chart doesn't lie, the chart doesn't lie.

My point is that the chart doesn't speak to other factors.

If CO2 is the smoking gun AND the predicted trend holds, then you will be right. Now the question is whether the predictions AND the remediation are correct.

If CO2 is NOT the smoking gun AND the predicted trend fails, then you will be VERY wrong. All the remediation done was a waste of time, but felt good.

If CO2 is the smoking gun and the predicted trend fails, then you will be wrong. Wrong but for the right reasons.

If CO2 is NOT the smoking gun, and the predicted trend holds, then something else is doing it.

All of the CO2 rigmarole was wasted time and effort, unless fortunately the CO2 reduction also happens to reduce the other effect. Thus you could be right for the wrong reasons.

I prefer deriving a complete understanding of what is going on, THEN acting. Being right for the right reasons.

From my point of view, I am the one being agnostic as to CO2 being the smoking gun.

You consider my failure to agree that CO2 is the smoking gun shows my stubbornness or arrogance.

Whatever.

I'm not trying to change YOUR mind.

And you're not going to change mine waving the CO2 gospel chart in my face.

And if you think I'm one of those anti-carbon warming to save expenses, certainly there are those who grasp any argument to fight against carbon minimization requirements.

Just as in my previous example of management promotion of 'X', certainly there are companies where 'X' = anti global warming.

But in reality most businessmen don't give a s**t. They know full well for something with so much hype behind it, additional costs are eminently able to be passed on - just like no one complains about having to pay for seat belts or air bags in cars. Most of these businessmen are figuring on how to add EXTRA profit in as pricing power is not something to be dismissed lightly.

Just as Stalin's liquidation lists grew 10x from conception to execution, so too does capitalist implementation of social responsible products.

Contemptuous
12-03-07, 08:54 PM
C1ue -

I've got a great deal of respect for the overwhelming majority of your other posts, but frankly I think you are blowing a lot of smoke in my face here. It's fluff.

I have scrupulously avoided drawing the inference that CO2 and TEMP 'must' be correlated. I only inquired as to your elaborate avoidance of any acknowledgement that they 'might' be correlated, which has you posting labyrinthine "enumerative circumlocutions" (which look to me like just a bunch of smoke), such as this:
____________

If CO2 is the smoking gun AND the predicted trend holds, then you will be right. Now the question is whether the predictions AND the remediation are correct.

If CO2 is NOT the smoking gun AND the predicted trend fails, then you will be VERY wrong. All the remediation done was a waste of time, but felt good.

If CO2 is the smoking gun and the predicted trend fails, then you will be wrong. Wrong but for the right reasons.

If CO2 is NOT the smoking gun, and the predicted trend holds, then something else is doing it.
____________

I have only this observation on your responses to date on this topic - your elaborate professed lack of curiosity. You've acknowledged elsewhere on this forum, that you were buying a big chunk of land in the Siberian tundra on the thesis it will thaw, and provide you good farmland and a big jump in valuation consequently.

How is it that your anticipation of that, so that you seriously consider putting money into this as a business plan, is completely mismatched with your elaborate lack of curiosity on the topic of warming we are discussing here?

I put the two together and conclude you have indeed bought into the warming thesis, due to some cause, and in this topic's posts, you have also clearly acknowledged that CO2 is admittedly "very high", yet you can't seem to offer the smallest acknowledgment that these two events could have anything remotely to do with each other? That's not a "chartist shark" replying, that seems like plain old fudge replying. :D

__________


You are correct, but the country that will gain by far the best advantage is Russia. They have a vast area of permafrost, possibly several times the area in Canada that has been thawed out during every summer since 2000. (I flew over it twice during 2001) and it is prime land. We sometimes get reports of Mammoths being found and when they show us the region it is a thirty foot thick layer of alluvial soil through which runs a river, exposing the Mammoths in the river bank.
Damn, you have my secret plan found out!

fogger
12-06-07, 01:04 AM
Will our C02 emissions eventually cause a problem? Yes, of course. Is the ecosystem going to implode in your grandchildren's lifetime? No.

Everything we know is going to be redefined in the next 30-50 years:
money
govt
hierarchical structures
societal organization
consciousness
human

C02 is the least of our problems.

bart
12-06-07, 01:09 AM
Professor Wheeler's research of climate cycles:
http://www.cyclesresearchinstitute.org/wheeler.html


http://www.nowandfutures.com/download/wheeler_weather_cycles.png

Contemptuous
12-06-07, 02:28 AM
Will our C02 emissions eventually cause a problem? Yes, of course. Is the ecosystem going to implode in your grandchildren's lifetime? No. C02 is the least of our problems.

Fogger - I would suggest you think about it with a little more altruism. I suggest you keep your eyes firmly upon the price of grains and the food complex in the next decade, to see how accurate your assessment will be. They are already leaping, and anyone telling you this is due to primarily to currency debasement is not giving you the whole story.

If you have discretionary income to re-route to doubling your cash allocation to feeding yourself and your family you are more fortunate than 50% - 60% of the global population. Are you then being a good sport to take the risk of the "other 50%" so cavalierly?

Look elsewhere, toward groups for whom the food budget comprises 50% - 60% of their income (hint - they are very many). You may come to reassess the importance of CO2 as a factor, relative to your (our) quite narrow economic class firstly, and secondarily recognise that 50%++ of the world population does not have anything remotely like your discretionary income to act as a shock absorber if food costs soar much higher this decade - which I am here to assure you, due to the future soaring price of petroleum derived fertilizer and soil erosion - they most certainly will.

Global deserts are growing apace, arable land is diminshing apace, global population is cruising from 6.5 billion to 7.5 billion by mid-century, deforestation is reducing an irreplaceable old growth forest in a land mass equivalent to the State of Texas yearly from the world, while you profess serene confidence? Allow me to suggest your comment is entirely too glib on your grandchildren's behalf, if nothing else.

Are you aware there are food price riots occurring scattered around the world already, and do you stop to note why those food prices are beginning to soar uncontrollably at the present time? Food inflation is starting to soar all over the world - and contrary to the very popular view on these pages, it's NOT primarily due to currencies.

This is called "situational awareness" in the global context. These people, on the other side of the discretionary food budget barrier from you and I, would be highly appreciative of your increased "situational awareness" of these issues. They would doubtless much prefer you and I were part of any eventual "die off" due to soaring food costs and insufficient global food production rather than that they should go down obligingly for us.

And yes, as outlandish as "die off" sounds, take note that the present world's population has exploded precisely due to cheap petroleum in farming, and just as the global population wanting something more than a subsistence dieat is exploding, the availability of larger amounts of petroleum to expand food production is faltering.

Why the soaring cost of food production? Look for the redirection of corn to ethanol, the soaring cost of fertilizer, the rise of 3 billion people who want the same varied diet you and I consider our birthright. Hell, you need only look at the soaring price of food itself, up 20% - 30% across the board in most Western countries in one year alone. CO2 is one part of the equation bearing in on us - but a good subset of components in all that other supposedly "trendy" eco-stuff that sets so many people's teeth on edge is actually bearing down on us too (it's called limit's to growth, and it's about to slam into us in a big way), and is inextricably tied up with those "pesky soaring food prices" at the supermarket.

So needless to say, if the tables were turned and it was you and I who's food security was actively threatened here, we'd suddenly discover a good deal more lively a concern, no? You don't have to go far to discover these people Fogger - just take a trip down to Chiapas state, in Mexico, and you'll find a good representative group of the millions in this predicament all over your world.

Now broaden the focus a bit elsewhere - a mere 2-4 degree change in global mean temperatures will wipe out tens of thousands of species. Another symptom - half the world's coral beds are dying already - with entire ecosystems of rich aquatic life which exist only around coral reefs dying with them. This is not Sierra Club chit-chat - it's actually well along in it's trend already, (for those with a scrap of conscience for their grandchildren's inheritance who wish to look).

Further - I've read a third of the old growth forest in some parts of Canada are already dead trees, due to the encroachment of a beetle which never existed at these latitudes prior to the warming of the past half dozen years, and we apparently are just getting started? The trees die off because they never encountered this beetle at that latitude before. This is highly significant to some of us, but maybe not worth more than a yawn to others.

Curious, how such large damage proceeds from so slight a temperature change, or other variables which can easily tip the scales into hundreds of millions sliding towards food hardship (the euphemism for "starving") due to a mere slowdown in the formerly robust rate of petroleum production growth. Where then do you derive your serene convictions that this will not do real damage to the ecosystem in your grandchildren's lifetimes?

From what I've read, it will do (is doing!) considerable damage within your own lifetime. Are you really confdent you are being as good a steward of your grandchildren's inheritance as you presently believe?

I can imagine, if your family encounter steeply rising insurance costs, or commuting costs, or the cost of health coverage, or schooling for your kids - you'll spend an evening at the kitchen table discussing it seriously with your spouse? What gives you the assurance then to assume that similar soaring costs in mere food prices, (that inert, low tech stuff we consider the least threatening of our survival worries), does not have the power to be utterly devastating to people who have nothing in the world and who's great majority of earnings go merely towards buying enough food to stay alive? They who don't own a single scrap of all the stuff you buy and pay for monthly on an installment plan - but they spend 60% of their income just to feed their families. You think CO2, and it's (apparently still hotly disputed here) potential to influence the price of the food they buy is an issue they take as lightly as you do?

c1ue
12-06-07, 03:20 AM
I have only this observation on your responses to date on this topic - your elaborate professed lack of curiosity. You've acknowledged elsewhere on this forum, that you were buying a big chunk of land in the Siberian tundra on the thesis it will thaw, and provide you good farmland and a big jump in valuation consequently.


Lukester,

I never said I was buying Siberian land - I was just joking ;), I said if you truly believed in global warming, that you should buy Siberian land as that is the one region likely to become productive farmland in a global warming scenario.

As for lack of curiosity, I'm not sure how my examination of global warming theories and hype to date qualifies.

I monitor the global warming racket just as I do a number of others - maybe the thesis will pan out, but then again maybe not.

Contemptuous
12-06-07, 04:05 AM
Uh huh. Whatever you say C1ue. S'aright.



I never said I was buying Siberian land - I was just joking ... I monitor the global warming racket just as I do a number of others.

Chris Coles
12-06-07, 08:16 AM
As I seem to be the starting point for a furious debate back and forth about the merits of global warming, I feel I should intercede with Cold Hard Facts and let them talk for themselves. So, do not take my word for anything. Look at the reality which is that the Arctic ice melt is accelerating way beyond anything forecast. I am not sure that I will be able to find the other recent films of some guys larking around with Methane that is now suddenly bubbling up under new surface ice over the previous years UNFROZEN perma frost. They dig a hole down to the bubbles and set light to the gas, providing a very startling "whoosh!" of flame about 10 feet high.....

I tell you what I SEE.... ice is melting many times faster than ANY previous prediction, by ANYONE. Period.

A global warning for UN chief : Polar experts fear an ice sheet covering a fifth of Antarctica could crumble causing sea levels to rise by six metres http://www.timesonline.co.uk/tol/news/world/article2852908.ece?EMC-Bltn=EFKCF4

There has been a lot of news about arctic ice. This seems the best report as it is by the very people at the heart of the problem. http://www.canada.com/edmontonjournal/story.html?id=4b1d78fc-4f51-4aaa-859e-c8757921430f&k=24062

More on Arctic Ice http://eospso.gsfc.nasa.gov/newsroom/viewStory.php?id=804

This is a very large web page and you need to go nearly to the bottom to get at a continuous video of the loss of the ice from 1995 to 2007.

http://nsidc.org/news/press/2007_seaiceminimum/20070810_index.html

Also, Geophysical Research Letters announced a major report on Arctic Ice 4th October. http://www.agu.org/journals/gl/

http://www.agu.org/pubs/crossref/2007/2007GL031138.shtml

BBC science and environment correspondent David Shukman joined the Canadian Coast Guard research vessel, the Amundsen, as it attempted to make a crossing of the Northwest Passage. Record summer melting of the sea-ice made this famous waterway that connects the Atlantic with the Pacific fully navigable this year.

http://news.bbc.co.uk/1/hi/sci/tech/7033831.stm

These are NOT predictions or opinions, they are the reports of the facts. The Northwest Passage was open this year. 1 million Sq Kms of ice were lost this year. Methane is bubbling up all over the vast arctic areas where perma frost was completely frozen all year around until 2001/2 since when it has now been covered by water for the last five summers. So, in my humble opinion, stop thinking it won't happen, even to your grandchildren and start to accept, it might happen within our lifetimes. Within the next decade.

Contemptuous
12-06-07, 01:58 PM
Chris -

You wrote:

<< The Northwest Passage was open this year. 1 million Sq Kms of ice were lost this year. Methane is bubbling up all over the vast arctic areas where perma frost was completely frozen all year around until 2001/2 since when it has now been covered by water for the last five summers. >>

You are wasting your efforts putting this data forward for consideration here - C1ue will advise you (with a commiserating smile), that you are "jumping to conclusions". :D Every train must have a Caboose - that's the part that comes clicking across the tracks at the brow of the hill, after the engine and forward cars are already traveling across the bottom of the next valley.

c1ue
12-07-07, 12:40 AM
Once again, is it hype or is it scientific reality?


A good candidate for the last previous opening of the Northwest Passage was the period 5,000-7,000 years ago, when the Earth's orbital variations brought more sunlight to the Arctic in summer than at present. Prior to that, the Passage was probably open during the last inter-glacial period, 120,000 years ago. Temperatures then were 2-3 degrees Centigrade higher than present-day temperatures, and sea levels were 4-6 meters higher.

There it is again, the sun and the earth's orbital tilt.

Yes, the Northwest Passage is open for the first time European recorded history (Eskimos don't have calendars). But that is best case only 500 years to draw on - a lot of time if human intervention scales are at question, but not a lot of time in solar/earth orbital terms.

http://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=826&tstamp=200710

Lest you think Dr. Masters is a Republican plant:

Jeffrey Masters, Ph.D.

Director of Meteorology
Jeff Masters grew up in suburban Detroit, and attended the University of Michigan, where he received his B.S. and M.S. degrees in Meteorology in 1982 and 1983, respectively. While working on his Masters degree, he participated in field programs studying acid rain in the Northeast U.S. and air pollution in the Detroit area.

metalman
12-07-07, 12:45 AM
Lukester,

I never said I was buying Siberian land - I was just joking ;), I said if you truly believed in global warming, that you should buy Siberian land as that is the one region likely to become productive farmland in a global warming scenario.

As for lack of curiosity, I'm not sure how my examination of global warming theories and hype to date qualifies.

I monitor the global warming racket just as I do a number of others - maybe the thesis will pan out, but then again maybe not.

i still think a guy's gotta choose: either global warming or peak oil. you can't have both disasters. pick one.

zoog
12-07-07, 12:57 AM
i still think a guy's gotta choose: either global warming or peak oil. you can't have both disasters. pick one.

Oh I dunno. Maybe global warming is melting the oil away. Two for one special.:eek::rolleyes:;)

Chris Coles
12-07-07, 02:30 AM
i still think a guy's gotta choose: either global warming or peak oil. you can't have both disasters. pick one.

I am tempted to apologise for this, but you have got them both in my humble opinion.

Lukester, that bit about the Caboose.... great! Nice to have a smile on my face so early in the morning.;)

Andreuccio
12-07-07, 11:02 AM
As for the government of Dubai, I think the term is, "if you got the money, who's to tell you where you must spend it"? Personally I would be really distressed to see Venice (Italy) vanish under the waves. A billion dollar glam hotel / condo project in the Arabian Gulf, built a mere decade prior, I can't promise I'd sorely miss. Of course, it's not my money went into building it.

[ Zoog - looks like our posts crossed each other in the "internet ether", and both reference Venice. You aptly mention the mammoth budget project to set up two "tidal gates" at the entrance to Venice harbor to protect it from both rising seas, and the fact that Venices is sinking. Anyone curious to see Venice should plan to go in the next five to ten years max, because I really think we will lose this city. One of the most truly stunning, dreamlike places in the world to see. ]

Tragic. (Venice sinking, not necessarily the Dubai hotel project.)

I lived in Venice for a year. It really was magical. It even snowed once that year. I don't imagine it's likely that'll be happening there again in the near future.

akrowne
12-10-07, 12:02 AM
Thank you for posting that JK; I think you took care of my major comments on the initial article (which was excellent, despite my quibbles).

I don't actually consider it a handicap that the Eurozone lacks a single Treasury; in fact I consider that an advantage -- akin to the 19th century free banking period in the US. Yes, your Euro-bond issuer (country) could fail, but the answer to that is not invest in (financially) stupid countries.

The US is proving right now, in blatant obviousness, that unifying the banking system behind a currency zone -- when the political bloc in charge becomes deeply mismanaged (which may be inevitable) -- is not going to lead to more secure returns for investors (especially not outside ones). Even if there is no formal default, there is the "inflation default". Over-strained is over-strained.

A corollary to the above analysis is that the collapse of some parts of the banking system in a free banking environment doesn't tend to weaken the currency in the long term. The 19th century US saw a gradually strengthening currency, not weakening, despite periodic waves of bank failures, and even two defunct central banks.

So let Spain fail; whatever. I'll be holding German bunds (well, not really -- but I wouldn't be too worried if I was). The Euro may take a hit, but cash will rally domestically, my bunds will rally, and the hit to the Euro exchange rate isn't likely to be lasting either.

I wanted to riff on your point #5 as well (assuming you mean the United States). I wonder how many people realize that, given how bogus the GDP is as an absolute metric, just how ominous the public debt is. It is close to $12 trillion including both Federal and non-Federal, whereas national income is more like $6 or $7 trillion.

Taking the more optimistic number, and assuming we could somehow put 10% of the national income per year towards paying it down (and ignoring private debt held by foreigners), that is 17 years to full payoff.

More likely, we can't afford that 10% tithe, so we'll just inflate by that amount.

Hmm, 17 years of 10% inflation reduces the value of today's dollar to 16 cents.

I realize the above isn't very scientific, but it is certainly suggestive, and probably in the right direction (unfortunately).

akrowne
12-10-07, 12:25 AM
A possible explanation is that Italy is not a world class power.

Or more directly: Italy isn't the backer of the world's (ailing) reserve currency. The US's problems per se matter more, because it has so much more to lose.

Also, ominously (see my earlier post), the US public debt already (close to) meets the 100% GDP ratio when one gets past the multi-level-government counting distractions. Then there's the fact that the US additionally has tons of private debt. Then there's the fact that the US GDP is heavily distorted upwards -- could Italy possibly be lying as much as the US? (My guess is there is some level of Eurozone auditing of such vital stats -- does anyone know for sure?) Then there's the off-balance sheet promissary debt, $55 trillion+ and so forth (no one else's health care system is as screwed up as the US's, hence ballooning the cost of medicare).

I wonder how much of Italy's public debt is owned by foreign creditors? Such debt is a much higher risk than domestic, since domestic investors cannot flee inflation. I suspect the US is in a far worse position (obviously, it is in a bad one, per se).

jk
12-10-07, 09:13 AM
welcome back, aaron. it's good to see you posting again.

it's interesting to contemplate the euro and the ecb's position. the ecb has only 1 mandate: price stability. but the political pressures can only grow.

airbus' deteriorating competitive position is indicative of the situation of all european manufacturers of internationally traded goods. the caveat is to keep in mind that some of the manufacturing may have been offshored from europe to asia or the americas. [witness european automakers' plants in the u.s.] but politically, the degree to which e.g. bmw is insulated from the euro by virtue of doing some of its manufacturing the u.s., is also the the degree to which it is not maintaining employement in the e.u.

if the u.s. enters recession, i don't see how europe can avoid following. if the ecb stays with its mandate, europe's recession may well be worse than the u.s.'s. i think the ecb will eventually pay attention to europe's gdp more than europe's cpi. and when the ecb finally caves to political pressure, i would think that gold will take off like a scalded [yellow] dog.

does this mean that gold and german bunds are the perfect hedge?

akrowne
12-10-07, 11:46 AM
Both Japan and Canada are in a similar situation in terms of threats to the export complex as the US currency plummets (of course, Canada has raw materials to export even if finished goods cannot be. Japan and Europe, not so lucky).

If these export-driven countries think that throwing their own currencies under a bus is the best solution, things will certainly get interesting. Will that allow bubbling to shift into these other currency zones, or will it just magnify the near-term global crack-up boom (will the US-centered "no bid" continue to haunt the Eurozone and the loonie, etc?)

Who knows, but either way it is good for gold... hint hint.

Chris Coles
12-10-07, 11:57 AM
if the u.s. enters recession, i don't see how europe can avoid following. if the ecb stays with its mandate, europe's recession may well be worse than the u.s.'s. i think the ecb will eventually pay attention to europe's gdp more than europe's cpi. and when the ecb finally caves to political pressure, i would think that gold will take off like a scalded [yellow] dog.

My view is the ball game is radically different this time to any other period of such instability. In the past when the United States went to war, financially, with the rest of the planet, as it is doing now; there was insufficient dynamic to the rest of the worlds economy to allow them to fight back. But this time is very different indeed.

I believe that the US has crucially misjudged the overall mood and is certainly more vulnerable to a shift change from the dollar to the Euro as the base trading currency. It only needs relatively few BIG players to change currencies for the whole thing to backfire and the trend to become unstoppable. In that case, the ECB is much better off sticking to its own policy and sitting this out, rather than trying to quickly square the circle as you suggest they will, from political pressure. The ECB is not in the firing line this time, the dollar is. Just at this particular moment in the history of finance, the United States does not hold the strong cards it needs to pull off another route of the rest of the planet.

No one, can beat the market trend all of the time. No one! I believe we are about to see a great sea change, a crossover from the dollar to the Euro as the base currency of trade. The ECB, seeing that potential, will stick it out for they have nothing to lose and everything to gain.

jk
12-10-07, 12:13 PM
My view is the ball game is radically different this time to any other period of such instability. In the past when the United States went to war, financially, with the rest of the planet, as it is doing now; there was insufficient dynamic to the rest of the worlds economy to allow them to fight back. But this time is very different indeed.

I believe that the US has crucially misjudged the overall mood and is certainly more vulnerable to a shift change from the dollar to the Euro as the base trading currency. It only needs relatively few BIG players to change currencies for the whole thing to backfire and the trend to become unstoppable. In that case, the ECB is much better off sticking to its own policy and sitting this out, rather than trying to quickly square the circle as you suggest they will, from political pressure. The ECB is not in the firing line this time, the dollar is. Just at this particular moment in the history of finance, the United States does not hold the strong cards it needs to pull off another route of the rest of the planet.

No one, can beat the market trend all of the time. No one! I believe we are about to see a great sea change, a crossover from the dollar to the Euro as the base currency of trade. The ECB, seeing that potential, will stick it out for they have nothing to lose and everything to gain.
there aren't enough euros around for the euro to replace the dollar as reserve and means for trade. let's imagine the chinese decide to trade their trillion dollars in for euros.... what do you think the exchange rate would go to?

the eurozone will have to run enormous trade deficits for many years to get enough euros in global circulation to allow trade to be priced in euros. say, isn't there a country that's already done that?

the dollar is the only thing in big enough supply to be the currency of [reluctant] choice for global trade.

Chris Coles
12-10-07, 12:41 PM
there aren't enough euros around for the euro to replace the dollar as reserve and means for trade. let's imagine the chinese decide to trade their trillion dollars in for euros.... what do you think the exchange rate would go to?

the eurozone will have to run enormous trade deficits for many years to get enough euros in global circulation to allow trade to be priced in euros. say, isn't there a country that's already done that?

the dollar is the only thing in big enough supply to be the currency of [reluctant] choice for global trade.

With the greatest of respects, you have missed the point. The way around that problem has been a road travelled before, but the last time by the United States. You simply go back to pre Bretton Woods and get together and decide to use Gold as the interface between the currencies and you use the interface between Gold and every other currency to overcome the problem. So, yes, in a very real sense, you are correct, but it is the dollar under pressure and those that use it; not the rest of the planet. I like an old French expression Force Majeure; an unexpected or uncontrollable event that upset's ones plans...... Woops!

jk
12-10-07, 01:24 PM
With the greatest of respects, you have missed the point. The way around that problem has been a road travelled before, but the last time by the United States. You simply go back to pre Bretton Woods and get together and decide to use Gold as the interface between the currencies and you use the interface between Gold and every other currency to overcome the problem. So, yes, in a very real sense, you are correct, but it is the dollar under pressure and those that use it; not the rest of the planet. I like an old French expression Force Majeure; an unexpected or uncontrollable event that upset's ones plans...... Woops!

there is no doubt in my mind that the dollar cannot remain THE reserve currency long term. but "long term" is a long time. there is no interim alternative. certainly not gold - the politicians and central bankers will not quickly give up the ability to manipulate their budgets and their currencies. only if we go through financial catastrophe will they THEN consider such a radical alternative. thus i believe that for at least the next several years there will be diversification into ad hoc baskets of dollar alternatives, but the dollar will retain a central, albeit ever weakening, role. these changes don't come easily. the transition from the pound to the dollar, after all, took a depression and 2 world wars.

Chris Coles
12-10-07, 03:23 PM
If you chose to go to war, financially and to cover the same ground and the same strategy again and again you have to accept that somewhere down that time line, someone will figure a way around your forces. That is as plain as a pikestaff. All it would need is for a beleaguered British Exchequer, (now certain that it cannot gain the high ground and return good old Sterling to its pride of place), to decide to throw its towel in with the Euro and all bets would be off.

Turning Sterling into Euro's might be all that would be needed and remember, there are a lot of Arabs and Asians holding a lot of Sterling.

War is a chancy business and victory goes to the brave and the bold.

jk
12-10-07, 03:37 PM
If you chose to go to war, financially and to cover the same ground and the same strategy again and again you have to accept that somewhere down that time line, someone will figure a way around your forces. That is as plain as a pikestaff. All it would need is for a beleaguered British Exchequer, (now certain that it cannot gain the high ground and return good old Sterling to its pride of place), to decide to throw its towel in with the Euro and all bets would be off.

Turning Sterling into Euro's might be all that would be needed and remember, there are a lot of Arabs and Asians holding a lot of Sterling.

War is a chancy business and victory goes to the brave and the bold.
do you think the uk is going to adopt the euro? it appears ever less likely to me, but i'm curious how it looks to someone living there.

Chris Coles
12-10-07, 04:22 PM
do you think the uk is going to adopt the euro? it appears ever less likely to me, but i'm curious how it looks to someone living there.

The Euro represents many nations, not one. While it has indeed got problems, hardly to be unexpected, it is a stable currency in an unstable world. On the one hand, why should the Euro zone always roll over? Why should the European business environment always be under the heel of the dollar? I suspect that exactly the same thoughts were in the minds of many in the United States at exactly the point where, weakened by war, the UK Pound £ seemed vulnerable enough to make it worth while to take a stand and tell its holders to "take a hike".

the £ was, not that long ago, in exactly the same place as the dollar is today; a thought that must be running through many well oiled minds world wide. Add to that the fact that there are a lot of £'s in circulation and in long term holdings.... precisely the reason why there was so much angst against throwing our hands in with the Euro.... and you start to see the potential for a different strategy.

Pride comes before a fall. Over confidence is the crack in your armour.