April 28, 2011

Global Military Expenditure

Updated graph on global military expenditure, USA is still the top gun with a gigantic 46.5%.

Long Term Unemployment

This is an excellent new paper from the OECD on the crisis of sustained, high long-term unemployment.  Previous deep downturns were characterised by a straightforward pattern of joblessness: lots in, then lots out. This time around lots went in, and inflow to unemployment then returned to (near) normal levels. But almost no one is getting out.


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April 20, 2011

Greece default being invoked by the IMF

The International Monetary Fund believes Greece’s debt is unsustainable and that the country’s government should consider a restructuring as early as next year, the Wall Street Journal said, citing three unidentified people familiar with the situation. Senior IMF officials have told European Commission and euro-zone governments that a restructuring should be considered, the paper said. IMF, which hasn’t recommended a restructuring of all the country’s debt, has considered extending its loan repayment schedule, IMF spokesman William Murray told the paper.

Euro-zone officials, including finance ministers, have said it is necessary to restructure Greece’s debt and the European Central Bank responded by saying it didn’t want a public discussion, an unidentified official familiar with the situation told WSJ. A first step would be to substantially extend Greek bond maturities, another unidentified official said, according to the paper. That may include extending debt repayments by as much as 30 years, the official said.

Greece's central bank chief said Monday that a restructuring of the country's giant public debt would have "disastrous consequences," and called on the government to step up the pace of its reform program. "[A debt restructuring] is neither necessary nor desirable," Bank of Greece governor George Provopoulos said. "It would have disastrous consequences for the access of the government and of Greek enterprises to international financial markets, as well as very negative effects on the assets of pension funds, banks and individuals holding Greek government securities."


























In May last year, Greece narrowly avoided default with the help of a €110 billion bailout from the European Union and International Monetary Fund. In exchange for that loan, Greece has committed to a multiyear austerity program to fix its public finances and overhaul its economy. Since then the country has narrowed its budget gap by about a third, to around 10.6% of gross domestic product last year and is aiming to reduce it to 1% of GDP by 2015.

But many analysts say Greece's fiscal reforms aren't enough to tackle a debt burden expected to reach nearly 160% of GDP in 2013. In recent weeks, there has been growing speculation that Greece will need to proceed with some sort of debt restructuring to ease that burden. The central bank also sees inflation slowing to around 3.25% this year—down from an average rate of about 4.6% in 2010—but well above the government's 2.2% forecast for 2011.

FED's money printing bonanza

This is a chart of the adjusted US Monetary Base. It’s essentially a very simple means of charting how much money the US Federal Reserve is pumping into the system (on top of QE 2 which is providing another $100 billion in liquidity per month).

As you can see, starting in January 2011, the Fed left a paperweight on the “print” button. Since that time, it’s put $500 billion into the system. When you combine the $100 billion in liquidity provided by QE 2, we’re talking about $800-900 billion entering the financial system in 2011 alone.

There is only one period in which the Fed engaged in a similar amount of money pumps. And that was during the depth of the 2008 Crisis from October- December 2008.


This of course leads one to ask, “what is the Fed combating now?” And it’s not just Japan (the adjusted monetary base went vertical back in January). So what is requiring $200 billion per month?






How Italy tricked its entry into the Euro

The euro signImage via Wikipedia
The recent gold price escalation and the possible manipulation of the gold market has some interesting similarities with the LTCM collapse which risked in 1998 to derail Italy's qualification for the Euro.

LTCM was a hedge fund founded by bond guru John Meriwether which suffered a spectacular collapse in 1998 and was subsequently bailed out by consortium of banks at the behest of the U.S. Treasury and Federal Reserve. Fed and Treasury officials argued at the time that the bailout was necessary because the collapse of LTCM posed systemic implications for the global financial system. Here’s why:


When sovereign gold is lent / leased – it is generally sold into the market to raise cash balances.

The Italians were lending / leasing their sovereign gold and investing the proceeds with LTCM. Italy was no doubt attempting to reverse their sagging fortunes with their substantial sovereign gold holdings due to the reality that their gold holdings were only losing value over that time frame.

The declining gold price was effectively preventing Italy from qualyfing for the Euro by negatively impacting the value of their reserves.

This would have made the Italians highly agreeable to any proposal to help reverse or alleviate that reality.

Thinking that LTCM was infallible – owing to them having a couple of Nobel laureates on staff and also being predisposed to playing fast-and-easy with their gold accounts – Italy still wasn’t done. Next up was a gold loan / lease – arranged by bullion bankers [like Goldman Sachs]. The proceeds were invested in LTCM in the belief they would earn the ‘magical gains’ that LTCM had been delivering to their investors.

When LTCM failed, they had to be bailed out because a public bankruptcy would have:

A] exposed the Italian manipulation of their sovereign gold [which did aid and abet in a wider – globally coordinated - gold price suppression]

B] that Italy was playing “financial accounting tricks” to qualify for the Euro



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Top 25 holders of derivatives total up to 300 Trillion dollars

Interesting charts from the OCC on the institutions holding derivatives and their exposure. Staggering risks that could blow off any day, the worst case is JP Morgan with an incredible 78.6 Trillion Dollar derivatives book [446 dollars in bets for every one dollar in equity] which means that the most they could expect to lose in any given day is $ 71 million only.

Here’s how the U.S. Office of the Comptroller of the Currency [OCC] states how large institutions manage their risk [pg. 8]:

“Banks control market risk in trading operations primarily by establishing limits against potential losses. Value at Risk (VaR) is a statistical measure that banks use to quantify the maximum expected loss, over a specified horizon and at a certain confidence level, in normal markets. It is important to emphasize that VaR is not the maximum potential loss; it provides a loss estimate at a specified confidence level. A VaR of $50 million at 99% confidence measured over one trading day, for example, indicates that a trading loss of greater than $50 million in the next day on that portfolio should occur only once in every 100 trading days under normal market conditions. Since VaR does not measure the maximum potential loss, banks stress test trading portfolios to assess the potential for loss beyond the VaR measure. Banks and supervisors have been working to expand the use of stress analyses to complement the VaR risk measurement process that is typically used when assessing a bank’s exposure to market risk……..[more]”











April 18, 2011

Eurozone crisis update

Euro coinsImage by Mesq via Flickr
More bad news from Europe today:

Ireland's banks are now officially junk following a downgrading of the long-term deposit ratings of the four surviving banks by the ratings agency Moody’s.
The decision to downgrade Bank of Ireland (BoI), Allied Irish Banks (AIB), EBS Building Society and Irish Life & Permanent (IL&P) follows the move to cut Ireland’s own ratings status to one level above junk status last week.
In the meanwhile Athens repeated today it has no plans to restructure its debt, denying a Greek media report it had already requested talks with its lenders. Greek daily Eleftherotypia  said today Greece had told the International Monetary Fund and the European Union earlier this month at a meeting of European finance ministers that it wanted to restructure its debt. Discussions on the issue were expected to start in June, the newspaper said, citing a senior IMF official. US treasury secretary Timothy Geithner had also told Greek finance minister George Papaconstantinou a restructuring would be needed, the paper said.
A further addition to the Portuguese's woes is the recent Finnish election where the party True Finns quadrupled its share of vote in Finland elections, and its party leader says he expects EU to change Portuguese bailout plans.
Unlike others in the eurozone, Finland's parliament has the right to vote on EU requests for bailout funds, meaning it could hold up costly plans to shore up Portugal and bring stability to debt markets.
The strong showing for the populist True Finns reflects growing public frustration in some EU states about footing the bill for weaker economies such as Greece, Ireland and Portugal.

Portuguese five-year credit default swaps climbed 26 basis points to 625bps this morning, according to data monitor Markit.
And this euro mess is bringing back the 2 elephants Italy and Spain in the arena with spreads reaching new highs:

  • Portugal 625 (+26) - officially insolvent
  • Italy 156 (+13)
  • Ireland 588 (+21) - officially insolvent
  • Greece 1225bp (+89) - officially insolvent
  • Spain 250 (+16)


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April 12, 2011

Space Shuttle's 30th birthday

NASA is celebrating the 30th anniversary of the first space shuttle launch while at the same time saying goodbye, the space shuttle program will be officially retired this year.
To honor the occasion check out NASA’s infographic below, and make sure to visit its detailed mini-site devoted to the space shuttle.

USA Travels: Post-A-Nut from Hawaii

If your coconut of choice does not fit in your luggage you can always consider the Post-a-Nut service, courtesy of the Hoolehua Post Office, coconuts are free you just pay the postage.


post-a-nut-6.jpg


Post-A-Nut service was started about 20 years ago, and over 50,000 coconuts had been mail from the post office.

April 11, 2011

Fukushima radiation levels 4 times those of Chernobyl

INES/International Nuclear Event Scale (Triang...Image via Wikipedia
The situation at Fukushima is no longer top news but reports from reliable sources are being published stating that radiation level are 4 times those of Chernobyl:

[A] study conducted by a team of experts from Kyoto University and Hiroshima University ... found cesium-137 at levels between about 590,000 and 2.19 million becquerels per cubic meter [outside the 30 kilometer evacuation zone].

After the Chernobyl nuclear accident in the former Soviet Union in 1986, residents who lived in areas where cesium-137 levels exceeded 555,000 becquerels were forced to move elsewhere.

The amounts of cesium-137 found in Iitate were at most four times the figure from Chernobyl.


If more radioactive materials are emitted from the crippled Fukushima plant, the level of cesium-137 could rise even further.

Today, Kyodo News is reporting that - due to extremely high radiation levels - the Japanese government is considering raising the nuclear crisis from a 5 to a 7 - the highest possible level of disaster:
The Nuclear Safety Commission of Japan released a preliminary calculation Monday saying that the crippled Fukushima Daiichi nuclear plant had been releasing up to 10,000 terabecquerels of radioactive materials per hour at some point after a massive quake and tsunami hit northeastern Japan on March 11.

The disclosure prompted the government to consider raising the accident's severity level to 7, the worst on an international scale, from the current 5, government sources said. The level 7 on the International Nuclear Event Scale has only been applied to the 1986 Chernobyl catastrophe.

***

According to an evaluation by the INES, level 7 accidents correspond with a release into the external environment radioactive materials equal to more than tens of thousands terabecquerels of radioactive iodine 131. One terabecquerel equals 1 trillion becquerels.

Haruki Madarame, chairman of the commission, which is a government panel, said it has estimated that the release of 10,000 terabecquerels of radioactive materials per hour continued for several hours.

The commission says the release has since come down to under 1 terabecquerel
per hour and said that it is still examining the total amount of radioactive materials released.
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Daily Photo: Nissi Beach Cyprus

Russia rush ahead of Saudi Arabia as top oil producer

The conclusion we can get from this historical data is that either Saudi Arabia is cutting production or they have reached peak level and in that case it would be a confirmation that we have passed peak oil globally.



chart
Top 30 oil producing countries (those increasing production over 2009 are shown in red).

April 10, 2011

Immigration, debts and black swans..

The Commission President with the eight other ...Image via Wikipedia
The immigration crisis in Italy is getting nastier by the day and involving more actors, Germany has entered into the brawl and the lunacy of the Italian government is reaching new critical levels.





What started as a French-Italian brawl is widening fast to all the major players on the Europan arena and today Germany came to rescue of France on the immigration issue.
Undoubtedly Germany has a lot of weight at the moment in the European Union being the only sizable county able to rescue the bankrupt European periphery and also being the only country who is mantaining a minimum of leadership in the void of the European institutions.
Germany's stance against Italian policies is a sign that Italy is losing bargaining power in asking for assistance on a issue which can send the Italian government home.
Berlusconi's government has built its consensus upon tough anti-immigration policies and an articulated mediatic scaremongering of the immigrants , unfortunately for them the recent events and flooding of immigrants on the Italian coasts can create more damage to the the Italian government than all the trials for corruption and underage prostitution that see involved the Italian prime minister.
Immigration is for Italy what taxation is for the United States, it is an holy cow created ad hoc by the Italian media under instructions from Berlusconi to raise fears among the Italian population and to create consensus toward neo-fascist policies.
Now all this is at risk since the Italian government is clearly unable to manage 20000 immigrants and let alone managing the next waves approaching.
The Italian government failed policies have for sure reached success in encouraging further waves of immigration, after all who would not be tempted to fly to a country that is offering a free temporary residence permit regardless of any screening and that is showing an utter incapacity to even simply identify and process the immigrants reaching its shores.
While in the first phase immigration flows were targetting the island of Lampedusa, recently they spreaded to other location from Sardinia to Calabria making effectively impossible for the stretched coast guard forces to patrol the coasts of Southern Italy. Furthermore emboldened by the lack of effectivness and resolution of the Italian government, thousands are getting ready to follow.
The Italian answer to the crisis has not been efficiency but rather dumping the problem to their neighbours.
Now that the rift with the EU is open, we can expect more mayhem in the Italian government which is already by any standard a bomb ready to explode.
The racist Lega Nord is threatening to move the Italian soldiers out from international peace missions such as Lebanon to patrol the southern border, the Justice Minister is accusing the EU of dumping the issue to the Italian government, the rest of the political forces are in a frantic state of hysteria more related to their eroding image on being tough on immigration rather than being aware of the mess they are creating.
All this is coming into a context of economical and social turmoil. Italy is accellerating its economical,social and democratic implosion. Public debt is exploding and although given the size of the economy and the amount of foreign liabilities there has been plenty of latitude from rating agencies and international media toward the country this could change quickly.
The reality is the following, Italy is bankrupt but other European countries have recklessly invested too much in Italian bonds, the most incredible case is France with over 20% of their GDP invested in Italian sovereign, everyone is aware that if crisis reach Italy is the end of the game, this alone explains the quiet attitude toward Berlusconi and his many scandals and the latitude given to the Italian government from the EU on so many serious issues.
Berlusconi has been using this fear at his advantage doing whatever he pleased and receiving only occasionally a mild slap on the hand from the European Union. Furthermore whenever in the past Berlusconi was under attack on the international media he was able to wisely defer attacks by giving concessions to his enemies in exchange for a temporary truce. Unless a dramatic escalation of the economical crisis or other black swan will happen it is quite probable that after international pressure Berlusconi and its government to save themselves again will bow to Germany's pressure and will transform Italy in a big chaotic refugee center. If all this can teach us a lesson is that France and Germany have certainly the upper hand with the Italian government for holding its debts and for keeping them afloat but when the debt you hold is so much that if you lose it you are bankrupt as in the French case well You have to make deals with the devil itself and you are out of control just as much as the Italian government.
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Daily Photo: UCC Cork Widescape

April 8, 2011

Daily Photo: Beirut Lebanon

Only in Beirut you can find a Catholic church and a mosquee shoulder to shoulder, It can look surreal considering the past civil war fought on a religious divide of the country. But as it comes to everyday life inter-religious marriages are common and friendship and love is built up regardless of the religion. Politics and foreign meddling unfortunately does not appreciate the beauty of it.


US Federal Shutdown explained

U.S. Capitol, DCImage by Francisco Diez via Flickr
So It seems that in less than 24 hours the United States Federal Government will shut down unless a last minute resolution is reached, what does it mean exactly, full report on the shutdown process can be found at the US Congress Archive: http://democrats.rules.house.gov/archives/98-844.pdf





An extract on what happened the last time can be found below:

Effects on the Public


The long shutdown that began in December 1995 affected many members of the
public. A few examples, taken from congressional hearings, press and agency accounts,
follow:
! Health. New patients were not accepted into clinical research at the
National Institutes of Health (NIH) Clinical Center; the Centers for
Disease Control and Prevention ceased disease surveillance (information
about the spread of diseases, such as AIDS and flu, were unavailable);
hotline calls to NIH concerning diseases were not answered; and toxic
waste clean-up work at 609 sites stopped, resulting in 2,400 “Superfund”
workers being sent home.
! Law Enforcement/Public Safety. Delays occurred in the processing of
alcohol, tobacco, firearms, and explosives applications by the Bureau of
Alcohol, Tobacco, and Firearms; work on more than 3,500 bankruptcy
cases was suspended; cancellation of the recruitment and testing of
federal law-enforcement officials occurred, including the hiring of 400
border patrol agents; and delinquent child-support cases were suspended.
! Parks/Museums/Monuments. Closure of 368 National Park Service
sites (loss of 7 million visitors) occurred, with local communities near
national parks losing an estimated $14.2 million per day in tourism
revenues; and closure of national museums and monuments (estimated
loss of 2 million visitors) occurred.
! Visas/Passports. 20,000-30,000 applications by foreigners for visas
went unprocessed each day; 200,000 U.S. applications for passports went
unprocessed; and U.S. tourist industries and airlines sustained millions
of dollars in losses.
! American Indian/Other Native Americans. All 13,500 Department of
Interior Bureau of Indian Affairs (BIA) employees were furloughed;
general assistance payments for basic needs to 53,000 BIA benefit
recipients were delayed; and estimated 25,000 American Indians did not
receive timely payment of oil and gas royalties.
! American Veterans. Major curtailment in services, ranging from health
and welfare to finance and travel was experienced.
! Federal Contractors. Of $18 billion in Washington area contracts, $3.7
billion (over 20%) were managed by agencies affected by the funding
lapse;10 the National Institute of Standards, was unable to issue a new
standard for lights and lamps, scheduled to be effective January 1, 1996;
and employees of federal contractors were furloughed without pay.


Worth noting that there have been 17 shutdowns since 1977. The last one, in 1995-1996 (for six days in November 1995 and three weeks from December 1995 to January 1996) cost $1.4bn. 




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April 7, 2011

Dystopia Europe

Official insignia of the European Court of JusticeImage via Wikipedia
Quite a week for the crumbling European Union, we have not yet moved over the recent brawl on the Irish and Greek bailout chocking interest rates and the recent attempts to renegotiation, that 2 new crises have erupted on the Old Continent.








Portugal is Bankrupt


The first is a deja-vu, yesterday Portugal after a faustian conflict of many months has finally thrown in the towel admitting they cannot cope anymore with strangling interest rates, ballooning debt and a blast of rating cuts.

They asked formally help to the EU which very willingly decided to expedite quickly a bailout they had ready and packed since months which is estimated will amount to 90 billion euros.

3 out and counting for the dwindling Euro zone. The markets did not even blink at news of bankruptcy from Lisbon, it is true that it was a foregone conclusion many months ago and that it was no longer a matter of if but when, I'm not sure though there will be the same pacate reaction when it will come to Spain and Italy which are next in line. Of course Spain has already declared they will not be affected by the Portuguese mess but yet Portugal was saying the same thing of Ireland and Greece just few weeks ago.

The faultlines in the Euro zone are widening more and more and it is quite clear at this point it is simply a matter of deciding what to do with those little dysfunctional PIIGS who are no longer able to sustain themselves.

Either they will resort to the old idea of 2 tiers Europe or they will kick out from the Euro those poor PIIGS.

Will the virtouso countries keep propping up the poor south or they will decide to relieve themselves of such burden as soon as their banks will have covered their reckless investments in the PIIGS sovereign market?

An appeal to unity and solidarity in Europe appears to be sustained exclusively by the necessity for the richest states to cover the liabilities of their banks and to avoid major losses, as soon as those liabilities will be covered a different scenario will open which could possibly be the dumping of the PIIGS to their destiny.

Italy-France immigration brawl

A second indication of how Europe is struggling to mantain its ideals of unity and solidarity in time of crisis is the recent brawl between France and Italy on the thorny african immigration issue.

This is a perfect example of how Italy is imploding and the consequences of it.

Italy has been begging for help in sharing the burden of 15-20000 immigrants flooding the country from Libya and Tunisia.

Germany and France correctly told Italy it is their problem and they need to take care of it, after all there are many more immigrants entering Italy with a touristic visa and overstaying then those crossing the Mediterranean.

Still for a collapsing government to deal with such a number in a single shot it is too much.

Any other major European country would have dealt with this situation without any scaremongering but the inefficient and corrupt Italian government has not even been able to police the immigrants when transferred to immigration centers, with the appalling videos of police standing by while hundreds of immigrants were climbing the fence to run away.

Of course the majority of them wanted to reach France but they were stopped by the French at the border and sent back to Italy, no doubt that in same cases the Italian government might have decided to let them go to France as a way to get rid of them and to put pressure on the French government to give support to their bankrupt immigration system.

After having created a bottleneck at the french border, the Italian government has come up with the solution to give them temporary residence permit, another excellent way to avoid dealing with the problem; by having a temporary residence permit they can travel all over Europe as legal Italian residents and avoid any kind of border check.

Pity that France did not buy in and decided not to recognize this residence permit unless accompanied with a passport and proof of financial means, of course the Italian government scorned at their attempt to dump the problem to their neighbours has decleared illegal the french decision and a violation of the Schengen Treaty.

Let's us not forget that according to the Schengen Treaty Italy should have dealt with this issue on behalf of the entire EU with the utmost efficiency, but a government embroiled in scandals, corruption trials and total inefficiency has preferred to dump the problem somewhere else either due to incapacity or short term political gain and in this way effectively encouraging an immigration flooding from Northern Africa.

This is another example of how the EU institutions are ineffective to deal with any crisis, it is due time that either they start to work for the larger good or stop talking of pan-european ideals and values when it is clear that everyone is trying to pursue small national gains at the expense of everyone else.
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Daily Photo: The Monastery at Petra, Jordan

While everybody flocks to the Treasury the most famous landmark in Petra and internationally renown, courtesy of the Indiana Jones movie; at a distance of few hours walk and tiring climb in the desert is the Monastery, too far from the main entrance to the complex to attract hordes of tourists but it is definetely worth the effort.

For maps and details of the exceptional Petra Complex click HERE

click on the picture for a full size photo:




April 6, 2011

Recession: recovery and losses by advanced economies

Michael Mussa of the Peterson Institute for International Economics released his semiannual forecast for the global economy today, projecting GDP growth of 4.3% this year despite risks from turmoil around the world.
Mussa included this chart showing that only the U.S. and Canada (among the major advanced economies) had recovered by the end of last year from their sharp recession declines:



April 4, 2011

Earth gravitational pull

earth_spin_26.jpg
This globe—the BBC has a spinnable version—shows you how the strength of gravitational pull differs in different places around the Earth. The yellow areas were where gravity is strongest. The blue spots is where it is weakest.

April 3, 2011

Libya oil output

Out of the 1.7 million bpd, Europe is the Libya’s top crude customer with 11 countries importing about 1.1 million bpd, according to The Economist (See Chart).