Saturday, March 31, 2012

Sweden's One Percent

Things are changing everywhere and it seems even in the Utopia of Scandinava things are changing and not necessarily better. This story from

Fredde and Mickan own a waterfront mansion in the Stockholm suburbs, hire Polish help and have endless cash to spend on state-of-the-art barbecues and designer labels.

They are only characters in "The Sunny Side", a popular Swedish television series, but they drew so much attention to their wealthy neighborhood that an activist group called "Everything for Everyone" chose it for a class war safari.

The tour of the "rich man's ghetto" promised to "cultivate your class hatred". It was a one-off and participants were pelted with eggs but it sparked a soul-searching over growing income disparities in a country known for egalitarian values.

"I think many people would say this is the loss of one part of Swedish identity," said Michael Forster, a senior policy analyst at the Organization for Economic Cooperation and Development (OECD).

Sweden has seen the steepest increase in inequality over 15 years amongst the 34 OECD nations, with disparities rising at four times the pace of the United States, the think tank said.

Once the darling of the political left, heavy state control and wealth distribution through high taxes and generous benefits gave the country's have-nots an enviable standard of living at the expense of the wealthiest members of society.

Although still one of the most equal countries in the world, the last two decades have seen a marked change. Market reforms have helped the economy become one of Europe's best performers but this has Swedes wondering if their love affair with state welfare was coming to an end.

The real tipping point came in 2006 when the centre-right government swept to power, bringing an end to a Social Democratic era which stretched for most of the 20th century.

Swedes had grown increasingly wary of their high taxes and with more jobs going overseas, the new government laid out a plan to fine-tune the old welfare system. It slashed income taxes, sold state assets and tried to make it pay to work.

Spending on welfare benefits such as pensions, unemployment and incapacity assistance has fallen by almost a third to 13 percent of GDP from the early nineties, putting Sweden only just above the 11 percent OECD average.

At the other end of the spectrum, tax changes and housing market reforms have made the rich richer.

Since the mid-80s, income from savings, private pensions or rentals, jumped 10 percent for the richest fifth of the population while falling one percent for the poorest 20 percent.


Critics say the changes have left many behind.

In a small, dim room in central Stockholm, about 20 homeless Swedes huddled together for an hour-long radio show which they produce weekly to raise awareness of those on the streets.

"The soul of a man" - a song from the Great Depression in the United States - plays in between speakers and poetry readings while they warm up with free coffee and hot dogs.

At a waterfront conference centre across town, the head of the region's biggest bank defended the hefty profits banks are making on housing loans.

The CEO himself will soon be moving into a more than $3 million apartment which the bank recently purchased in one of Stockholm's ritziest neighborhoods.

Eurostat said recently that after Bulgaria, Sweden had the second biggest rise in the percentage of its population deemed at-risk-of poverty.

Jenny Lindroth, who runs the social department at Situation Sthlm, a magazine sold by the homeless and addicts, says welfare changes are hurting the vulnerable. "Some people can't live up to it, they can't take it, they can't handle it," she said.

The number of people selling Situation has more than doubled to about 500 in five years and they are getting younger.

A recent study by the National Board of Health and Welfare showed a 25 percent jump to 4,500 in the number faced with "acute" homeless situations - those who required emergency accommodation, shelter or slept outdoors - compared with 2005.


These diverging pictures of Sweden are increasingly common and are also being seen in neighboring Finland and Denmark, albeit at a slower pace.

"I certainly don't think Sweden is a utopia. Sweden has become much more of a fairly normal European country," said Stefan Folster, chief economist at the Confederation of Swedish Enterprise.

On the class war safari, participants were first bused through a neighborhood south of Stockholm, where some 10 percent of the residents are on social benefits.

Then they headed to "The Sunny Side", stopping by a luxury hotel next to a marina which is packed with gleaming yachts in the summer before viewing sprawling villas in the area.

"The differences were just so completely clear in these two areas," said 28-year-old Anna Svensson, one of the organizers. "We wanted to show what it really looked like, and where the money and the power can actually be found."

The tour was heavily criticized. A columnist for the daily Dagens Nyheter called it "a dangerous experiment in group hate".

"It feels like we are being treated like animals," a teenager from the area interviewed by Swedish television.

Some believe the latest trends in Sweden may hurt the centre-right government, especially if unemployment, running near 8 percent, remains high as the country heads towards new elections in 2014.

"This is going to be ammunition for the opposition in Sweden," said Soren Holmberg, a political science professor at Gothenburg University.

He believes there is still fundamentally strong support for the welfare state and that the jobless rate and changes to benefits such as healthcare will be increasingly in focus.

The government has defended its policies. Finance Minister Anders Borg called the rising income gap "troublesome" but said it was still low relative to other countries.

"While it is important to have a cohesive society, growth and social flexibility are also important, so those must be balanced," he said.

Markus Jantti, a Professor of Economics at Stockholm University's Swedish Institute for Social Research, fears Sweden will see a long period of rising inequality.

"The question to be asked is, how big growth in differences across the distribution are we willing to see... By the time we are finished with this it may well be the loss of Swedish identity," he said.

($1 = 6.7640 Swedish crowns)

Friday, March 30, 2012

World Food Prices

This story from Bloomberg discusses the value of rising food prices as one might expect from an investment organ but considering how much of these foods go to the poorest in the world one has to wonder what the true implications are for ordinary people:

Rising agricultural prices may spur increased investment in research and infrastructure, helping lift farm yields and output to feed a larger and richer global population, according to Nestle SA (NESN), the biggest food company.

“Prices are getting to a level that may result in an effect that is positive for food production,” Chief Executive Officer Paul Bulcke said in an interview on Bloomberg Television. “People are motivated again to be in agriculture.”

Global food prices rose for a second month in February on higher costs for cereals, cooking oils and sugar, according to a 55-item gauge tracked by the United Nations’ Food and Agriculture Organization. Costs may remain near current levels in the coming months as demand absorbs increased supply, Abdolreza Abbassian, a senior FAO economist, said on March 8.

Food-price volatility has increased as production isn’t growing at the same pace as demand, cutting stockpiles, Bulcke said in Kuala Lumpur. Raw-material costs for Vevey, Switzerland- based Nestle such as coffee and sugar were expected to continue to climb this year, although at a slower pace than 2011, he said.

The FAO’s World Food Price Index rallied 20 percent in 2009 and a further 26 percent in 2010 as the global economy recovered from recession. The gauge, which was at 215.27 last month, reached a record 237.92 in February last year. A decade ago, it was at 88.3, according to data tracked by Bloomberg.

Prices are “going up from a low base, so whatever that goes up, it looks like it’s doubling,” Bulcke said yesterday. “We’re going to have a world that is going to have 2 to 3 billion more people in the next few years.”

Global food output must rise 70 percent by 2050 as the world population grows to 9.3 billion from 7 billion, and wealthier consumers eat more meat, according to the FAO. The global trade in agriculture may climb 43 percent to more than $1 trillion by 2020 on rising emerging-markets demand, according to a projection from the U.S. Department of Agriculture last July.

Asian demand will grow as the middle class expands, making it a key market for products such as Milo, a chocolate-malt drink, and Maggi noodles, said Bulcke, who was in the country for events to mark the centenary of Nestle Malaysia Bhd.

Raw-material inflation will probably be less than 5 percent this year, Bulcke said, reiterating a forecast made by Chief Financial Officer Jim Singh on Feb. 16. Costs were being cut by operating more efficiently, Bulcke said.

Stock in the maker of Kitkat chocolate bars has rallied 11 percent in the past year to 56.75 Swiss francs today, valuing the company at 187.4 billion francs ($204.5 billion). Of the 40 analysts’ calls tracked by Bloomberg, 17 are “buy” recommendations, with 20 “holds” and three “sells.”

Nestle and Danone SA made first-round bids for Pfizer Inc. (PFE)’s baby-formula unit, which may fetch as much as $10.5 billion, people with knowledge of the process said in January. While Bulcke declined to comment on Pfizer, he said that Nestle was open to so-called “bolt-on” acquisitions that complemented existing operations.

Thursday, March 29, 2012

Energy Around The World

Several Energy stories today. From Bloomberg this story on Germany's solar panel production. Germany has always managed to keep an industrial base despite fierce competition from around the world, particularly the Third world. Not any more in this field, they tell us:

Germany’s solar manufacturing industry will disappear within five years because of competition from Chinese companies, said Klaus-Dieter Maubach, a member of the management board at EON AG.

A surge in production of solar cells from Chinese companies is driving down the price of panels and making German companies uncompetitive, Maubach said today at the Bloomberg New Energy Finance Summit in New York.

“In five years, not a single employee will be working at the German solar companies,” he said. “They will all be bankrupt.”

Next Canada, which is taking stock of it's nuclear programs and decideding to ramp them up, never mind the chaos in Japan following the meltdown, reports UPI:

Canadian energy company TransCanada announced it was closer to bringing an idled part of a nuclear power plant in Ontario back online.

The Canadian Nuclear Safety Commission gave approval for TransCanada to restart Unit 2 at the Bruce Power nuclear reactor in Ontario.

"This positive development represents the final major step necessary toward bringing the reactor into service," Russ Girling, TransCanada's president and chief executive officer, said in a statement.

Bruce Power consists of eight nuclear reactors in two generating stations. Six reactors are functioning and producing more than 4,700 megawatts of power for Ontario consumers.

Two units at the Bruce Power reactor were shut down in the 1990s and TransCanada said it aims to spend about $2.4 billion on refurbishment.

"Once the work is complete, Bruce Power will be the world's largest nuclear facility, generating more than 6,200 MW or about 25 percent of Ontario's power," the company said in a statement.

Unit 1, one of the four reactors in section A of the power plant, is expected to start operations at the end of the year, the company added.

And Russia is working on drilling plans for untapped wilderness areas. From Market Watch:

Chief Executive Vagit Alekperov told the Financial Times that Mother Russia is moving toward tossing down the welcome mat for anyone with the capital and technological expertise needed to drill in the Arctic waters north of Siberia.

This is one of the planet’s most remote and least hospitable regions. It’s so remote that Russia hadn’t fully mapped where the coast ended and the polar ice began until the end of the czarist era.

According to Alekperov, the offer would extend to private companies. That would be a radical departure from past Russian policy. While Russia has allowed outside participation in its oil and gas industry elsewhere, the Arctic has been reserved for state-owned energy giants Gazprom.

Why the change? Simple. Russia is the world’s biggest oil producer. Oil and gas exports are its biggest source of revenue. But its production levels will start to decline within a few years if new fields aren’t found, threatening to undo its trade surplus and leave it without the fuel essential for further economic growth.

Geologists believe some of Russia’s most promising oil fields lie off its northern coast. But Gazprom and Rosneft, both without much offshore experience, have had little luck finding them.

This is a source of extreme aggravation for Lukoil and other privately-held Russian oil companies. Apparently it has Prime Minister Vladimir Putin concerned as well, hence all the talk about relaxing the rules and reforming the tax code to attract deep-pocketed foreigners.

Exxon Mobil has deep pockets and, in fact, the company is already involved. The world’s biggest publicly-traded oil company teamed up last year with Rosneft to explore for oil in the frigid Kara Sea. But drilling isn’t slated to begin there until 2015, about the same time Russia’s oil output peaks.

That Exxon has a toehold in Russia’s Arctic is hardly surprising. Frustrated by years of opposition to drilling in the Arctic National Wildlife Refuge, Exxon has pretty much given up on northern Alaska.

More recently, the company has also been booted out of Venezuela. They’ve been getting similar treatment in Iraq.

Russia, famous for its strong-arm politics and distrust of foreigners, is certainly not without risk. But having hit so many dead-ends lately on the exploration front, Exxon and Russia share a need to explore other avenues if they are to avoid a crippling decline in their oil output.

It’s really the same story for the whole industry. Oil is a finite resource. The easy stuff is gone. At some point, drilling in Russia’s Arctic becomes a viable option. With oil stuck atop $100 a barrel and ever fewer prospects to tap, apparently that point is now

Wednesday, March 28, 2012

Financial Markets Versus The Real World

Joe Duarte at the blog has written an essay pointing out the lack of any sense of impending disaster in the financial markets when we, in the real world see plenty of signs of disasters in the making. To my mind this is what collapse looks like, gradual disintegration at an increasingly rapid pace. However the realisation that collapse is imminent only appears close to the very end. Hence the changes occur and suddenly they seem to be upon us. Who knows? Perhaps the extend and pretend madness of the post -2008 world can continue for decades to come...

What it all amounts to is that little is being accomplished and that the current cycle is going to be in place for some time in the future.

Yes, if Israel attacks Iran the world will notice. Markets will move. And other unpredictable circumstances will unfold. North Korea remains unpredictable. And Spain, Portugal, and other countries in Europe are still insolvent, nearly insolvent, or on their way to being insolvent. And yes, the U.S. debt crisis continues to climb. Gasoline prices are skyrocketing. And the U.S. election is getting stranger by the minute.

None of that matters to the markets right now, though, because the world is currently built upon a giant mountain of paper money created out of thin air. And the public has little idea about that. There are still a lot of people out there that think that money is backed by something, if they bother to think about it at all. Many just go about their business day by day doing the best that they can and don't have the time or interest to worry about the macro issues or the minutiae about where money comes from, or if the economic data being put out by governments is the truth. Many just don't care. And that's why governments and big trading firms get away with their actions and mostly escape unscathed. Too few people understand how the world works.

But our point isn't to go down a laundry list of what we know. It's not to wax philosophically, although it seems that way in this column. It's to see if there is something lurking out there that no one has thought about, the inevitable Black Swan, or dare we say it White Knight event.

What is troubling to us is the complete disconnect between what was once thought to be right and wrong and what is being bandied about as modernity. More distressing is the notion that modernity has a certain inevitability about it, an unstoppable momentum that can't be stopped, like a freight train that is running headlong along a track that never ends.

If modernity is about technological advance, that's fine. But if it means that crimes against people, groups, and countries can be committed in the name of "progress," there is something wrong with that. And no one seems to be paying attention that central tenet. Nothing is inevitable, except death and taxes. Even the latter is more questionable is there is political Disorder, which could be one of the many potential outcomes of the so called inevitability of modernity.

In other words, modernity without morals, responsibility, and common sense is a prelude to a dark future where anything goes, and where anything that goes is more violent, depraved and without concience as it's aided by technological advance.

What does this have to do with the markets? Nothing and everything, with inevitability being the common link. Think of the current market as one in which a correction has been predicted, including by yours truly, for some time. Yet, it hasn't come. And the market has climbed to new highs.

This is a momentum market. And the momentum is beginning to get that feeling of inevitability, similar to that feeling expressed expressed by The Washington Post's Lisa Miller in an article discussing the Rick Santorum campaign, which is beyond the scope of this column. Nevertheless, her conclusion is quite appropriate and says: "Modernity is here, with all its progress and imperfections,and no matter how hard they pray, Santorum and his flock will never be able to turn back time."

That's really what's at the center of everything that is going on in the world right now. That's the centerpiece of the polarization. Some people want to do things as they did in the past, regardless of the good or evil that those things engendered. Others want to leave the past and, like Ms. Miller says about Mitt Romney whom she describes as a person who "roll up his sleeves, organize some focus groups and apply some algorithms to their problems."

So it is in this market. There are handwringers who don't believe the data and the fact that the market is moving higher on a regular basis. And there are others who are no longer fighting the tape and taking their chances.

When it comes to the market, we are with the momentum crowd. When it comes to society we see big problems ahead. We see the Federal Reserve doing something about raising interest rates sooner than 2014. The bond market is clearly telling us that. And we see a win or a loss by President Obama as a pivotal event, given the polarization of the electorate, between the "modernity" crowd and the crowd, that as Ms. Miller notes "wants to pray."

We see a lot of rot in the underbelly of our society that has yet to come out and that will lead to major conflicts when it is exposed. We see "functional" people who work for a living but require painkillers and tranquilizers to make it through the day. And we see lives of previously productive people who have lost everything because of addiction to methamphetamine and cocaine. It's out there. And it's lurking.

Big law firms in New York are indebted to the tune of hundreds of millions of dollars. And partners that were promised X amount of money for bringing their big book of clients to the firm are leaving. We've seen this to some degree in our neck of the woods.

At the same time, some everyday people are finding work and making the best of it. There are new segments of businesses that are catering to those who were down and out and are now trying to climb back toward a better life.

What does it all mean? It's all one big soup with multiple moving parts. Nothing is working in synchronicity with anything else. And as long as this goes on, the market can go higher because there will be no single opinion about prices. Markets like worry. And there is lots of it to go around.

The world is on the verge of becoming a cauldron of Disorder. Yet the market is orderly for now and people refuse to fully acknowledge it. This inability to compartmentalize the "world reality" from the "market reality" is consting investors money.

The world isn't likely to end well in the not too distant future. But for now the market is doing just fine.

Tuesday, March 27, 2012

Britain's NHS In Peril

The British government has approved plans to make huge philosophical changes in the National health Service, what Americans call socialised medicine, a form of health care that has the Government paying the bills through higher taxation rates. The plans to bring in private competition have brought out a strong vein of protests in the UK. Some see these changes as the beginning of the end of government health care, a system created to make life easier for the masses after the bludgeoning of World War Two. These are the times in which we live, Americans squabble over contraception access of all health care issues while Europeans watch their social-democracy collapse under the weight of economic depression and energy scarcity. How can we in the US demand more comprehensive affordable coverage, the argument will go, when the Europeans so attached to their various systems are watching them implode? The one percenters win again at our expense.

The drip-feed of pro-competition arguments from economists Julian Le Grand and Zack Cooper at the London School of Economics raises serious questions about the independence and academic rigour of research by academics seeking to reassure government of the benefits of market competition in health care.

Last July, Cooper and several colleagues released an unpublished paper to coincide with the prime minister's announcement that he was setting up a forum in response to concerns about his health bill. The authors were sufficiently persuasive for David Cameron to declare "Put simply: competition is one way we can make things work better for patients. This isn't ideological theory. A study published by the London School of Economics found hospitals in areas with more choice had lower death rates."

The study in question claimed that competition in the NHS saved lives. The authors claimed that if heart attack mortality rates were used as an indicator of quality, mortality rates fell more quickly and therefore quality improved for patients after competition between hospitals was introduced to the NHS in their area. But if you examine the evidence it is clear that competition had nothing to do with it. The intervention that the authors claimed reduced deaths from heart attacks was patient choice – a proxy for competition. In 2006, patients were given choices of hospitals, including private providers, for some selected treatments, mainly non-emergency surgery. Yet there is no biological mechanism to explain why having a choice of providers for cataract, hip and knee operations could affect the overall survival rate from heart attacks. These are emergencies where patients do not exercise choice over where they are treated and are usually treated in the NHS.

As the government's own cardiac tsar Roger Boyle explains. "Patients can't chose where to have their heart attack or where to be treated. It is bizarre to choose a condition where choice by consumer can have virtually no effect. Patients suffering severe pain in emergencies clouded by strong analgesia don't make choices. It's the ambulance driver who follows the protocol and drives to the nearest heart attack centre."

So among the numerous problems with this study the authors have made the cardinal error of confusing minor statistical associations with causation. Deaths from acute heart attacks are not a measure of the quality of hospital care as a whole, as they claim, but rather a measure of access to and quality of cardiology care. Gwyn Bevan, professor of management science at the London School of Economics, who carried out a review of patient choice and competition in the BMJ commented on the paper's shortcomings. He subsequently went on to say that he was "perplexed" by Andrew Lansley's emphasis on the role of choice and competition because "the evidence is very weak and contested".

"In fact, I would argue that we don't have any strong evidence of that effect. To my mind, the jury is at best still out on whether choice and competition will improve quality of care in the NHS."

Cooper and colleagues were at it again in February, press releasing another as yet unpublished paper, once again coinciding with an important NHS event – Cameron's summit on the NHS bill. This time the authors claimed that length of stay fell more rapidly in NHS hospitals experiencing greater competition, but appeared to be unaware that lengths of stay differ between the four conditions they chose to examine. These were elective hip replacements, knee replacements, hernia repairs and arthroscopies (keyhole examination and sometimes surgery to repair joint damage), for which lengths of hospital stay vary widely. Arthroscopy may be done as an outpatient or day case procedure and therefore may not be recorded in statistics derived from admissions to hospital. Hernia repair usually involves admission as a day case although this varies according to the type of procedure and median lengths of stay range between one or two days. In contrast, for hip and knee replacements the median lengths of postoperative stay are four or five days depending on the procedure.

So, if providers switched to doing more arthroscopies and hernia repairs and fewer hip and knee replacements they will appear to have shortened their pre-operative and post-operative length of stay to less than a day. Length of stay should also take account of other factors such as whether patients are fit for discharge, especially if they live alone, and the need to avoid readmissions due to complications or premature discharge. So if hospitals switch to operating on patients who are well and healthy or to easier procedures they will also appear to have shortened their length of stay.

Equally, the authors did not look at how clinical coding changed following the introduction of the "payment by results" tariff in 2006, which was modelled on the payment system used in the US. Gaming, upcoding and diagnostic drift are widely recognised in research in the US where providers seek to improve and increase their payments through fraudulent billing and accounting by claiming for work that hasn't been done, or for making out that patients were sicker and more complicated and expensive than they are.

Even without fraud, in the NHS arthroscopy which may previously have been coded as an outpatient activity or not at all (ie it would not have been counted as an admission) may now be recorded separately as a daycase inpatient procedure. Similarly, patients undergoing simple surgical hip replacements might be billed as more complex.

These changes in coding distort measures of productivity so that providers appear to be more efficient as they appear to do both more cases and more complex operations and procedures in the time period.

Le Grand and Cooper call themselves "empiricists" and all those that disagree with them "intuitivists". Yet unlike scientists, they do not appear to have carried out real life observational work in general practice or on the wards, nor have they thought through how financial incentives can change the data. Neither do they appear to have tested their theories with experiments, or adapted their models to see if they are also compatible with different explanations from the many that could be derived from historical data. While their data dredging has generated weak statistical associations, they have made the cardinal error of assuming these associations were causal. Bad science makes bad policy, bad policy leads to careless talk and careless talk costs lives.

Monday, March 26, 2012

Municipal Cuts

From the website we get this story, rather generalized about local government bankruptcies impending. this isn't news necessarily and inasmuch as this source is a financial advice website one has to wonder how much truth there is in the supposition that the crisis is upon us. Yet at all local levels we know services are being cut and with them the quality of life of our cities and schools.

For many, the horizon of U.S. economic recovery can now be seen in the not-too-far-off-distance. But on second glance, that faint line in the sky is actually the crest of a new tidal wave heading straight for the shores of the nation's cities and states.

From Miami to Phoenix; New York to California -- a growing wave of debt is forcing many once-thriving municipalities onto the edge of bankruptcy. And in the case of Jefferson County, Alabama -- which filed the largest Chapter 11 case in U.S. history last November -- right over that edge.

In the words of one recent news source: "The $3.7 Trillion municipal market is facing major headwinds. The rate of municipal bond defaults doubled to 5.5 a year in 2011 from 2.7 in the previous 39 years." (Associated Press)

As the list of under-water cities grows, the mainstream economists do a good job assessing the post-trauma of the municipal crisis.

But was there a way to identify the pre-conditions of said crisis before it occurred? Yes.

In his 2002 best-selling book Conquer the Crash (now in its second edition), EWI president Robert Prechter foresaw that one of the main lynchpins to city solvency -- municipal bond-buying (the other being tax revenue) -- would soon become vulnerable, as the economic downturn took hold. There, Prechter wrote:

"In the United States, default could happen to municipal bonds at any time after times get difficult. Politicians in many jurisdictions have borrowed and spent way more money than is likely ever to be paid back. Merely paying the interest on that debt in tough economic times will become an acute problem for many issuers. In such cases, default for many cities and counties will be inevitable."

The potential for municipal hardship was just one part of Conquer the Crash's blue-print. There, Prechter also anticipated that state leaders would respond to the crisis via cutting government services and wrote:

"School districts will have to adopt cost-cutting measures. The tax receipts that pay for roads, police and jails, fire departments, trash pickup, emergency (911) monitoring, water systems and so on will fall to such low levels that services will be restricted."

Now, according to a March 10 New York Times quote from New York Mayor Michael R. Bloomberg, these exact measures are now being followed:

"'We really are up against it,' Bloomberg said during a recent trip to Albany, urging the state to reduce pension benefits for future public employees...'Towns and counties across the state are starting to have to make the real choices -- fewer cops, fewer firefighters, slower ambulance response, less teachers in front of the classroom.'"

Sunday, March 25, 2012

British Columbia And the Recession

I have no idea where most of these communities are in British Columbia, reported by the globe and Mail newsopaper out of Toronto but I have been expecting some sort of slow down in the housing market Up North. Canada suffers from trade problems as other countries run out of money, even though Canada has huge natural resources and a small population, smaller than California's.For those who followed the housing crash in the US there are echoes here, not least the sample realtor's enthusiasm for the boom to be continued elsewhere.

For the past few years, Bill Liu has sold homes at a steady clip, averaging four or five sales a month in Richmond and other communities in the Lower Mainland.

This year, his sales are running at about half that, as the once white-hot British Columbia real-estate market cools off. Sales are down, though prices are holding firm for the most part. The slowdown has cast a shadow of uncertainty over the direction of the market – although real-estate agents such as Mr. Liu still see some rays of hope amid the clouds.

Own a home in Vancouver? Not if you grew up there Prices aren’t likely to plummet, he said, since a mere whiff of a discount tends to draw bids from buyers waiting to pounce. “A lot of people have money,” said Mr. Liu, an agent with Royal Pacific Realty in Vancouver. “They’re waiting, but once they find something a little bit cheaper, they go and buy it.”

And lurking in the background is the hard-to-measure influence of real-estate money from China. Buyers from China – considered a major factor in price increases in Richmond and the west side of Vancouver and West Vancouver over the past year – remain keen on the city and are scouting other neighbourhoods, including Vancouver’s east side, real-estate agents say.

Vancouver’s climate, scenery, schools and well-established Asian population make it appealing for would-be buyers from China, said Caroline Hong, a Vancouver real estate agent who works almost exclusively with Chinese clients.

Ms. Hong, who recently sold a $9-million home on Vancouver’s west side that includes a cavernous media room and a wine bar, said the high end of the market has slowed slightly, but less costly homes are still in hot demand.

“On the east side, every single one that is well priced goes over asking,” she said, citing a Vancouver Special that sold for nearly $100,000 over the $900,000 asking price after 75 people streamed through an open house. She also works with developers who are building townhomes, priced in the $1-million to $1.2-million range, with Asian buyers in mind.

Multi-unit developments may face a different outlook. A February report from Vancouver research firms Strategics and MPC Intelligence notes B.C. is losing people to other provinces – a trend that’s been linked to high housing prices – and that there is a glut of unsold condos in some communities.

“Not much attention has been paid to declining net migration or the potential impact of the deflating Chinese real-estate bubble on foreign speculation in the Vancouver condo market,” says the February, 2012, Condominium Market Opportunities Report. “Both of these factors will have a negative effect on new condo sales.”

In response to speculation, China in the past year or so has tightened property regulations. In Beijing, for example, would-be buyers need a permanent residency certificate from the city to buy an apartment. There are also limits on those who wish to purchase two or more homes.

Those restrictions have pushed investors to look at other markets, including Vancouver.

The tempered activity in Vancouver reflects economic jitters and a market that was “pushing the edge of the price envelope,” said Tsur Somerville, an associate professor at University of British Columbia’s Sauder School of Business. “I think people in general are nervous.”

On the “foreign investor” front, he said, anecdotal reports don’t add up to hard numbers, and he noted that some supposedly foreign investors may actually be immigrants intending to settle in Vancouver permanently.

This year’s evolving real-estate picture includes a flurry of foreclosures in the Okanagan. Foreclosures there have spiked from an average 10 or 12 a month in 2009 to about 170 listed to date this year, Jason Neuman, a Century 21 agent in Kelowna, said.

As a percentage of listings, those foreclosures add up only to about 5 per cent of the market and don’t necessarily put downward pressure on prices – except when it comes to multiple-unit buildings, he said. In those instances, a foreclosed listing typically forces other sellers to drop their prices.

As a recreational real-estate market, the Okanagan is competing with rock-bottom prices in places such as Florida and Arizona – the result of the subprime mortgage mess in the United States.

The same impulse that persuades some real-estate investors to buy a home in Palm Springs instead of the Okanagan could come into play in Vancouver, as international buyers look to cities such as New York, Los Angeles and San Francisco for better value than what they can find here, said Andrey Pavlov, an associate professor at Simon Fraser University’s Beedie School of Business.

“I think they will eventually realize that they can get a better deal for investment in those cities, and either prices here are going to decline, or prices in New York or San Francisco are going to increase,” he said.

Far from worrying about a drop in the market, Mr. Liu is already eyeing new opportunities, akin to the North Shore housing boom sparked years ago by high prices in urban Vancouver. Now, he and many others are hoping that today’s prices, and the commuting convenience of the Evergreen SkyTrain expansion, will recreate the same magic in Coquitlam and other outlying suburbs.

Saturday, March 24, 2012

Marmite Famine

The after effects of the great Christchurch earthquake in New Zealand have spread to Australia where supplies of Marmite are running out. It seems there is one factory for all of the southern continent and it was on the epicenter so Marmite may be off the shelves for a few months aas things get sorted out. I love the stuff but I grew up with it and it is an aquired taste. But once aquired it cannot be substituted. This is bad news:

As Australasia borders on an all-out Marmite crisis, fans of the other dark yeasty spread are being urged to start rationing.

The spread has been out of production since Sanitarium was forced to close its Christchurch production plant in November after an earthquake-damaged tower block put staff safety at risk.

The Christchurch plant supplies all the Marmite for Australasia

The last remaining stocks have been sent to supermarket distribution centres, and when those are gone, there'll be no more Marmite until at least July, when operations at the Christchurch plant are expected to resume.

Sanitarium general manager Pierre van Heerden is urging customers not to panic-buy the spread, to try and minimise the shortage.

"What we're doing is asking consumers to use their Marmite sparingly at this stage," Mr van Heerden says.

He's suggesting consumers use Marmite on hot toast, instead of bread, because it spreads thinner and goes further.

"We will be back with Marmite, we will be manufacturing Marmite in New Zealand, and it will be the same product, so there's no need to panic or freak out that Marmite isn't going to be available in the longer term. This is a short-term hiccup because of the earthquakes," he said.

Mr van Heerden is confident the shortage won't push desperate customers to buy rival spread, Kraft's Vegemite.

"Our experience has been that if you eat Marmite, you don't eat the other spreads and you really love the Marmite that you've grown up with.

"We anticipate that our consumers will be patient, this is something that is beyond our control and I can just assure everyone that we're doing everything possible to get Marmite's production back up."

Sanitarium is still deconstructing the damaged manufacturing tower before work takes place to ensure the Christchurch plant is safe.

Mr van Heerden says the company has the assistance of Christchurch City Council to ensure no red tape holds up Marmite's return.

Friday, March 23, 2012

Martial Law Plans

I don't know what to make of this stuff, because it remains me of the tin foil hat loonies who sued to tell us oil was running out and getting expensive. i am still on the fence about these martial law things even though Peak Oil is quite real now.

This Executive Order was posted on the web site on Friday, March 16, 2012, under the name National Defense Resources Preparedness. In a nutshell, it’s the blueprint for Peacetime Martial Law and it gives the president the power to take just about anything deemed necessary for “National Defense”, whatever they decide that is. It’s peacetime, because as the title of the order says, it’s for “Preparedness”. A copy of the entire order follows the end of this story.

Under this order the heads of these cabinet level positions; Agriculture, Energy, Health and Human Services, Transportation, Defense and Commerce can take food, livestock, fertilizer, farm equipment, all forms of energy, water resources, all forms of civil transporation (meaning any vehicles, boats, planes), and any other materials, including construction materials from wherever they are available. This is probably why the government has been visiting farms with GPS devices, so they know exactly where to go when they turn this one on.

Specifically, the government is allowed to allocate materials, services, and facilities as deemed necessary or appropriate. They decide what necessary or appropriate means.

UPDATE: BIN reader Kent Welton writes: This allows for the giving away of USA assets and subsidies to private companies: “(b) provide for the modification or expansion of privately owned facilities, including the modification or improvement of production processes, when taking actions under sections 301, 302, or 303 of the Act, 50 U.S.C. App. 2091, 2092, 2093; and (c) sell or otherwise transfer equipment owned by the Federal Government and installed under section 303(e) of the Act, 50 U.S.C. App. 2093(e), to the owners of such plants, factories, or other industrial facilities.”

What happens if the government decides it needs all these things to be prepared, even if there is no war? You likely won’t be able to walk into a store to purchase virtually anything because it will all be requisitioned, “rationed” and controlled by the government. Construction materials, food like meat, butter and sugar, anything imported, parts, tires and fuel for vehicles, clothing, etc. will likely become unobtainable, or at least very scarce. How many things are even made here in the USA any more?

A bit of history… During WWII, price stabilization didn’t begin until May of 1942, which froze prices on nearly all every day goods and rationing started in 1943. Why would the government want to control everything before a war?

Here’s what some gas ration cards looked like during WWII. Will there be rationing under this kind of system? What better way to control the movement and actions of the populace…

WWII era gas ration cards via Old Chester PA. You couldn’t go on vacation without a “vacation pass”.

Under this new Executive Order, cabinet heads are authorized to loan money, offer loan guarantees and even subsidize payments at above market rates (no bid contracts?) for whatever they need. This could make Solyndra or Halliburton look like Junior Achievement. Nothing like a war will generate these kinds of huge profits for the corporate “partners” and you can bet the bankers and contractors are already lining up for this one—because under this order no war is even required!

In a crisis situation, the government will be able to take whatever they need, print money to get whatever they want and distribute it as they see fit….for the benefit of a “war effort” or the politically connected corporations and individuals. All other contracts except those for employment are superseded by this executive order, it’s all here in black and white.

Specifically, it orders:

“to require acceptance and priority performance of contracts or orders (other than contracts of employment) to promote the national defense over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary or appropriate to promote the national defense, is delegated to the following agency heads:

1.the Secretary of Agriculture with respect to food resources, food resource facilities, livestock resources, veterinary resources, plant health resources, and the domestic distribution of farm equipment and commercial fertilizer;
2.the Secretary of Energy with respect to all forms of energy;
3.the Secretary of Health and Human Services with respect to health resources;
4.the Secretary of Transportation with respect to all forms of civil transportation;
5.the Secretary of Defense with respect to water resources; and
6.the Secretary of Commerce with respect to all other materials, services, and facilities, including construction materials.

About all I can say is “Have a nice day!”

Thursday, March 22, 2012

Britain's Declining Coal

From this report showing the way ahead is without coal in Britain which is surprising considering how useful coal has been. It is generally considered to be a high polluting energy source so many will cheer planned cuts in production but the mines have also traditionally provided well paid work.

The capitalist world has little time for nostalgia, as its primary mission is making money, but a recent pronouncement out of Britain is sounding the incipient death knell for a power source that fuelled Britain’s Industrial Revolution, and, by extension, the modern capitalist world.

INING group UK Coal is currently in discussions to shutter Britain’s biggest remaining coal mining pit.

Nothing personal - INING group UK Coal wants to restructure its business.

The potential cost, for those on the coal face is hundreds of jobs.

The balance sheets rule and the firm is considering closing its Daw Mill near Coventry by early 2014 when current coal panels will have been exhausted. The firm has stopped work to extend production there beyond then.

Well, UK Coal is a major supplier to Britain’s coal-fired power stations from three deep mines and six surface mines but nonetheless issued a press release noting that while the Daw Mill had considerable long-term resources, production is 175,000 tons behind budget. Hence the projected closure.

UK Coal stated that it wants to ensure that financial uncertainty at the mine does not affect the rest of its business, which includes deep mines at Thoresby and Kellingley in North Yorkshire. UK Coal returned to profit in 2012 for the first time in since 2009 and UK Coal Chairman Jonson Cox said it was also negotiating with its main banker, Lloyds, and was confident it would secure new funding because of its restructuring plans, as last year its fortunes shifted from an interim loss of $146.4 million to a profit of $34.7 1 million in six months, with revenues surging more than 80 percent as coal's average prices rose by 20 percent..

In 1994 UK Coal, bought British Coal's core mining assets after the privatization of the state miner.

UK Coal, whose coal output generates 5 percent of Britain's electricity, said the situation at Daw Mill had reached “crunch point” and its continued operation was no longer sustainable as miners are currently drilling through a geological fault, reducing output.

But hidden in the UK Coal pronouncements is the prolonged and slow motion war waged by the government against the miners, which culminated in the increasingly personal battle between Conservative Prime Minister Margaret Thatcher and her nemesis, National Union of Miners President Arthur Scargill.

In the May 1979 British General Election Thatcher became Prime Minister with a 30-seat majority in the House of Commons. Her economic policies, combined with the recession of the early 1980s, saw union membership plummet from 12 million in the late 1970s to almost half that by the late 1980s. Remembering that the previous Tory government of Prime Minister Ted Heath had been brought down by a miners' strike, Thatcher took on Miners Union President Arthur Scargill in late 1984 after she trounced Argentina in its Falklands dispute. She noted, "We had to fight the enemy without in the Falklands. We always have to be aware of the enemy within, which is much more difficult to fight and more dangerous to liberty."

Simply put, the NUM crumbled and the miners lost, returning to work humiliated in 1985.

And for the last two decades Britain’s miners, once the heart and soul of for more than a century of progressive labor policies in the United Kingdom, have essentially been forced to deal with whatever dictates Westminster has issued. After all, Britain has many options for buying coal elsewhere, ranging from the Russian Federation to former colony Australia.

But, not to worry. On its website UK Coal under the subheading “Renewable Energy” notes, "UK COAL has established its own power generation business, which utilizes waste gas from mines to generate electricity, and to pursue the development of wind power generation through a strategic collaboration agreement with Peel Energy. Over time, it is hoped that this collaboration will promote and maximize opportunities from this part of the business."

But for those observing the situation with a modicum of historical awareness, spare a thought for the two centuries of British ministers that went underground to work the ‘black seam” and power the world’s first industrial revolution.

Now, to quote Michael Corleone, “It’s just business,” and Britain’s business interests now extend far beyond its Midlands historical “black country” mining belt, home to the country's prosperity.

Wednesday, March 21, 2012

Fukushima Update

The Japan Times newspaper reports the problems of the nucler melt down in Japan still affect daily lives. the problems are less directly visible and dramatic than radiation burns but they are appalling nonetheless.

The number of Japanese suffering from Kawasaki syndrome, an autoimmune disease that mainly afflicts children and whose cause and cure remain unknown, has been steadily increasing, a recent nationwide survey showed.

The total number of patients under age 4 stood at 12,755 in 2010, exceeding 10,000 for the sixth straight year, according to the biannual survey.

Of even greater concern, the disease's incidence per 100,000 children under 4 came to 239.6, the highest rate recorded since the study began in 1970, eclipsing the rate of 219.9 seen in 2008.

The 2010 total also was the third-highest level on record, after the 15,519 incidences in 1982 and the 12,847 cases four years later.

Kawasaki syndrome is the most common cause of acquired heart disease among children in developed countries. It is an acute febrile illness of unknown etiology that primarily affects children younger than 5, and can damage coronary arteries supplying the heart, triggering a heart attack.

"The incidence of the disease has been rising steadily since the mid-1990s, although we don't know exactly what has been behind the latest increase," said Yoshikazu Nakamura, a public health professor at Jichi Medical University in Tochigi Prefecture.

The survey was led by a professor at the university. It collected data in 2009 and 2010, covering 2,033 medical institutions with pediatric departments. Of these, 1,445 submitted valid responses.

Kawasaki syndrome was first discovered in Japan, when pediatrician Tomisaku Kawasaki diagnosed the disease in 1967. Since then it has been found worldwide in children of all ethnic origins.

The cause of Kawasaki syndrome has yet to be identified, but it is widely believed that viral or bacterial infections can spark an autoimmune reaction in the patient, possibly causing coronary artery aneurysms.

It inflames small and medium-size blood vessels throughout the body, especially in coronary arteries.

Major symptoms include high fever, strawberrylike red bumps on the tongue, swollen lymph nodes in the neck, skin rashes and bloodshot eyes.

The standard treatment is intravenous immunoglobulin (IVIG), produced using antibodies from the blood of 3,000 to 10,000 healthy donors.

When administered in high doses, the treatment considerably reduces the symptoms of most Kawasaki syndrome patients, including inflammation.

Still, IVIG is not effective on 20 percent of patients, prompting researchers to look for other treatments, including steroids.

A research team at the health ministry conducted a clinical trial of steroids from September 2008 to December 2010 at 74 medical institutions across the country involving patients with potentially serious afflictions.

The patients were divided into two groups. One was treated only with IVIG and the other with both IVIG and steroids.

The trial found that 23 percent of those in the first group contracted coronary artery aneurysms, but the symptom was detected in only 3 percent of patients administered both IVIG and steroids.

Tuesday, March 20, 2012

Goldman Sachs Pay Scale

From the website this discussion of executive pay at the Giant Squid:

In addition to suffering a one-day $2 billion loss in market value on March 12 bestowed upon by the Goldman Letter at New York Times on March 12 , Goldman also has to deal with God problem regarding executive compensation packages as well.

According to Reuters, in the past two years, a group of religious institutions that hold Goldman shares, including the Sisters of St. Francis of Philadelphia, has been successful in getting its proposal requiring Goldman to conduct an independent examination of whether Goldman's executive pay levels were appropriate taken into regular shareholders' meetings.

However, this year, for the first time, the U.S. SEC (Securities and Exchange Commission) sided with Goldman, which argued it had already complied with the request. The SEC's letter of rejection came out just one day after Gregg Smith's Goldman Letter appeared on the Times.

From Reuters,

The SEC sided with Goldman this year because it felt the company had "substantially implemented" the proposal, an SEC spokesman said. "If the company's actions effectively moot the proposal, then we permit exclusion."

In its January 11 letter to the SEC, Goldman described a number of processes that the firm has in place that it says address the religious group's concerns.

For example, the company has an independent committee that reviews executive compensation packages, and it discloses the compensation principles in proxy reports to shareholders, according to the letter.

While it is true that many Wall Street big banks, including Goldman, had to endure pay cuts after the financial crisis partly in response to backlashes stemming form lavish paydays on its executives. Nonetheless, since the paycut has lofty starting point to begin with, the current average pay is still much higher above the national norm,

For example, The average Goldman employee took home roughly $365,000 last year. Although that's already down 15% from $430,000 in 2010, it is still 539% of $67,690--the national annual average salary of "Business and Financial Operations Occupations" as of May 2010, the most recent data from Bureau of Labor Statistics. That's hard to justify even after taking into account of the variables such as an ivy league degree, Quant wizard, etc.

In terms of executive compensation, Lloyd C. Blankfein, the chief executive of Goldman, earned $19 million in 2010 — roughly $5.4 million in cash, restricted stock valued at $12.6 million and other compensation. Before the near collapse of Wall Street in 2008, Blankfein made $68.5 million in 2007.

This year, Blankfein was granted $7 million in restricted stock, according to a regulatory filing last month, other forms of compensation like cash bonus have not been disclosed yet. The same $7 million award is also extended to Gary D. Cohn, the president, and David A. Viniar, the chief financial officer. The value is based on the company’s stock price as of Feb. 1.

Gregg Smith, who was merely one of 12,000 company vice-presidents, a low ranking employee, according to Goldman, was supposedly earning "no more than $750,000".

While it is refreshing to see SEC taking a contrarian view after Gregg Smith's Goldman exit letter, it looks like the government's regulatory sensors may have been blunted partly by the record $550 Million Goldman's settlement to SEC in 2010 on fraud charges related to Subprime Mortgage CDO, and possibly by the powerful Goldman revolving door between Goldman alumni and the U.S. Government.

Nevertheless, as Reuters quoted Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware,

"It's a [Goldman's] victory in a sense that it's kept off the proxy this year, but it doesn't make the issue go away."

Wall Street pay has garnered a lot of attention since the financial crisis, and the pressure for more transparency and review is unlikely to relent, SEC's opinion notwithstanding

Monday, March 19, 2012

Obesity Epidemic And Chemicals

From zero hedge this discussion of a chemical problem that may be causing huge weight gain in humans in this country. the damning evidence comes from the measurement of obesity in babies, receptors of environmental toxins and not subject to the same vagaries of diet and exercise in humans. provocative stuff.

Some 68% of all Americans are overweight, and obesity has almost doubled in the last couple of decades worldwide. As International Business Tribune reports:

Studies conducted jointly by researchers at Imperial College London and Harvard University, published in the medical journal The Lancet, show that obesity worldwide almost doubled in the decades between 1980 and 2008.


68 per cent of Americans were found to be overweight while close to 34 percent were obese.

Sure, people are eating too much and exercising too little. The processed foods and refined flours and sugars don’t help. And additives like high fructose corn syrup – which are added to many processed foods – are stuffing us with empty calories.

But given that there is an epidemic of obesity even in 6 month old infants there is clearly something else going on as well.

The toxins all around us might be making us fat.

As the Washington Post reported in 2007:

Several recent animal studies suggest that environmental exposure to widely used chemicals may also help make people fat.

The evidence is preliminary, but a number of researchers are pursuing indications that the chemicals, which have been shown to cause abnormal changes in animals’ sexual development, can also trigger fat-cell activity — a process scientists call adipogenesis.

The chemicals under scrutiny are used in products from marine paints and pesticides to food and beverage containers. A study by the Centers for Disease Control and Prevention found one chemical, bisphenol A, in 95 percent of the people tested, at levels at or above those that affected development in animals.

These findings were presented at last month’s annual meeting of the American Association for the Advancement of Science. A spokesman for the chemical industry later dismissed the concerns, but Jerry Heindel, a top official of the National Institute of Environmental Health Sciences (NIEHS), who chaired the AAAS session, said the suspected link between obesity and exposure to “endocrine disrupters,” as the chemicals are called because of their hormone-like effects, is “plausible and possible.”

Bruce Blumberg, a developmental and cell biologist at the University of California at Irvine, one of those presenting research at the meeting, called them “obesogens” — chemicals that promote obesity.


Exposed mice became obese adults and remained obese even on reduced calorie and increased exercise regimes. Like tributyltin, DES appeared to permanently disrupt the hormonal mechanisms regulating body weight.

“Once these genetic changes happen in utero, they are irreversible and with the individual for life,” Newbold said.


“Exposure to bisphenol A is continuous,” said Frederick vom Saal, professor of biological sciences at the University of Missouri at Columbia. Bisphenol A is an ingredient in polycarbonate plastics used in many products, including refillable water containers and baby bottles, and in epoxy resins that line the inside of food cans and are used as dental sealants. [It is also added to store receipts.] In 2003, U.S. industry consumed about 2 billion pounds of bisphenol A.

Researchers have studied bisphenol A’s effects on estrogen function for more than a decade. Vom Saal’s research indicates that developmental exposure to low doses of bisphenol A activates genetic mechanisms that promote fat-cell activity. “These in-utero effects are lifetime effects, and they occur at phenomenally small levels” of exposure, vom Saal said.


Research into the impact of endocrine-disrupting chemicals on obesity has been done only in laboratory animals, but the genetic receptors that control fat cell activity are functionally identical across species. “They work virtually the same way in fish as they do in rodents and humans,” Blumberg said. “Fat cells are an endocrine organ.”

Ongoing studies are monitoring human levels of bisphenol A, but none have been done of tributyltin, which has been used since the 1960s and is persistent in the marine food web. “Tributyltin is the only endocrine disrupting chemical that has been shown without substantial argument to have an effect at levels at which it’s found in the environment,” Blumberg said.

Concern over tributyltin’s reproductive effects on marine animals has resulted in an international agreement discontinuing its use in anti-fouling paints used on ships. The EPA has said it plans next year to assess its other applications, including as an antimicrobial agent in livestock operations, fish hatcheries and hospitals.

Bisphenol A is approved by the Food and Drug Administration for use in consumer products, and the agency says the amount of bisphenol A or tributyltin that might leach from products is too low to be of concern. But the National Toxicology Program, part of the National Institutes of Health, is reviewing bisphenol A, and concerns about its estrogenic effects prompted California legislators to propose banning it from certain products sold in-state, a move industry has fought vigorously.

Similarly, the Daily Beast noted in 2010:

Bad habits cannot explain the ballooning of one particular segment of the population, a segment that doesn’t go to movies, can’t chew, and was never that much into exercise: babies. In 2006 scientists at the Harvard School of Public Health reported that the prevalence of obesity in infants under 6 months had risen 73 percent since 1980. “This epidemic of obese 6-month-olds,” as endocrinologist Robert Lustig of the University of California, San Francisco, calls it, poses a problem for conventional explanations of the fattening of America. “Since they’re eating only formula or breast milk, and never exactly got a lot of exercise, the obvious explanations for obesity don’t work for babies,” he points out. “You have to look beyond the obvious.”

The search for the non-obvious has led to a familiar villain: early-life exposure to traces of chemicals in the environment. Evidence has been steadily accumulating that certain hormone-mimicking pollutants, ubiquitous in the food chain, have two previously unsuspected effects. They act on genes in the developing fetus and newborn to turn more precursor cells into fat cells, which stay with you for life. And they may alter metabolic rate, so that the body hoards calories rather than burning them, like a physiological Scrooge. “The evidence now emerging says that being overweight is not just the result of personal choices about what you eat, combined with inactivity,” says Retha Newbold of the National Institute of Environmental Health Sciences (NIEHS) in North Carolina, part of the National Institutes of Health (NIH). “Exposure to environmental chemicals during development may be contributing to the obesity epidemic.” They are not the cause of extra pounds in every person who is overweight—for older adults, who were less likely to be exposed to so many of the compounds before birth, the standard explanations of genetics and lifestyle probably suffice—but environmental chemicals may well account for a good part of the current epidemic, especially in those under 50. And at the individual level, exposure to the compounds during a critical period of development may explain one of the most frustrating aspects of weight gain: you eat no more than your slim friends, and exercise no less, yet are still unable to shed pounds.


Newbold gave low doses (equivalent to what people are exposed to in the environment) of hormone-mimicking compounds to newborn mice. In six months, the mice were 20 percent heavier and had 36 percent more body fat than unexposed mice. Strangely, these results seemed to contradict the first law of thermodynamics, which implies that weight gain equals calories consumed minus calories burned. “What was so odd was that the overweight mice were not eating more or moving less than the normal mice,” Newbold says. “We measured that very carefully, and there was no statistical difference.”

`Programming the fetus to make more fat cells leaves an enduring physiological legacy. “The more fat cells, the fatter you are,” says UCSF’s Lustig. But fat cells are more than passive storage sites. They also fine-tune appetite, producing hormones that act on the brain to make us feel hungry or sated. With more [fat cells], an animal is doubly cursed: it is hungrier more often, and the extra food it eats has more places to go—and remain.

In 2005 scientists in Spain reported that the more pesticides children were exposed to as fetuses, the greater their risk of being overweight as toddlers. And last January scientists in Belgium found that children exposed to higher levels of PCBs and DDE (the breakdown product of the pesticide DDT) before birth were fatter than those exposed to lower levels. Neither study proves causation, but they “support the findings in experimental animals,” says Newbold. They “show a link between exposure to environmental chemicals … and the development of obesity.”
This fall, scientists from NIH, the Food and Drug Administration, the Environmental Protection Agency, and academia will discuss obesogens at the largest-ever government-sponsored meeting on the topic. “The main message is that obesogens are a factor that we hadn’t thought about at all before this,” says Blumberg. But they’re one that could clear up at least some of the mystery of why so many of us put on pounds that refuse to come off.

Pthalates – commonly used in many plastics – have been linked to obesity. So has a chemical used to make Teflon and other products.

Most of the meat we eat these days contains estrogen, antibiotics and powerful chemicals which change hormone levels. Modern corn-fed beef also contains much higher levels of saturated fat than grass-fed beef. So the meat we are eating is also making us fat.

Antibiotics also used to be handed out like candy by doctors. However, ingesting too many antibiotics has also been linked to obesity, as it kills helpful intestinal bacteria. Arsenic may also be linked with obesity, via it’s effect on the thyroid gland. Arsenic is often fed to chickens and pigs to fatten them up, and we end up ingesting it on our dinner plate. It’s ending up in other foods as well.

The National Research Council has also found:

The effects of fluoride on various aspects of endocrine function should be examined further, particularly with respect to a possible role in the development of several diseases or mental states in the United States.

Some hypothesize that too much fluoride affects the thyroid gland, which may in turn lead to weight gain.

In response to information about toxic chemicals in our food, water and air, many people change the subject by saying “well, everything will kill you”. In other words, they try to change the topic by assuming that we would have to go back to the stone age to avoid exposure to toxic chemicals.

But this is missing the point entirely. In fact, companies add nasty chemicals to their products and use fattening food-producing strategies to cut corners and make more money.

In the same way that the financial crisis, BP oil spill and Fukushima nuclear disaster were caused by fraud and greed, we are daily exposed to obesity-causing chemicals because companies make an extra buck by lying about what is in their product, cutting every corner in the book, and escaping any consequences for their health-damaging actions.

In fattening their bottom line, the fat cats are creating an epidemic of obesity for the little guy.

Sunday, March 18, 2012

Telling Truth To Power

This story from London where reports are circulating about a young South African salesman for the Giant Vampire Squid who gave up after a year and decided to speak out rather negatively about the corporate culture:

Goldman Sachs faced an unprecedented assault from one of its own on Wednesday after a banker published a withering resignation letter in the New York Times, calling the Wall Street titan a "toxic" place where managing directors referred to their own clients as "muppets."

It was the latest blow for the investment bank. The company -- dubbed a "great vampire squid" in a 2009 article in Rolling Stone magazine -- has been embroiled in the biggest-ever insider trading scandal on Wall Street. And just weeks ago, a top judge criticized Goldman for big conflicts of interest in an energy deal.

In an opinion column in Wednesday's Times, Greg Smith, who worked in equity derivatives, said Goldman had become "as toxic and destructive as I have ever seen it.

"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,'" Smith said.

In the United States "muppet" brings to mind lovable puppets like Kermit the Frog, but in Britain, "muppet" is slang for a stupid person. (Goldman, as it happens, was at one time also the bank for the family of Muppets creator Jim Henson.)

Goldman Sachs issued a short statement in response:

"We disagree with the views expressed, which we don't think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."

In a memo to staff, Goldman Chief Executive Lloyd Blankfein and Chief Operating Officer Gary Cohn said Smith's views were in the minority among his 12,000 fellow vice presidents.

"And, what do our people think about how we interact with our clients? Across the firm at all levels, 89 percent of you said that the firm provides exceptional service to them," they said in the memo, a copy of which was reviewed by Reuters.

Congressman Barney Frank, an architect of the 2010 Dodd-Frank financial reform law, said Smith's piece would have "a big impact" on the banking industry's efforts to push back against financial reform.

"It puts the burden on Goldman Sachs and others to show us how what they do benefits the clients and therefore the broader economy," he told Reuters.

Goldman shares closed 3.3 percent lower, on a day when broader markets were up slightly. At least one bank wasted no time in trying to take advantage of the situation.

"In my experience ... client success and firm success can peacefully coexist; in fact thrive," Harris Private Bank Chief Investment Officer Jack Ablin said in an open letter.

"Having served clients for nearly 30 years I can tell you that the long-term success of any institution, whether in the financial field or not, depends on the long-term success and satisfaction of its clients," said Ablin, who oversees $60 billion of investments for individuals and families.

But the company, which sometimes lacks for defenders, garnered at least some public support in response to Smith.

"The many people we have dealt with there have all been exceptionally talented and high-grade, and never once have we had a negative experience in which we felt that they took advantage of us or didn't do what they said they would do," well-known fund manager Whitney Tilson said in a note.


Smith, who did not return voice mails on his cellphone, carried the title of executive director, but it was not nearly as illustrious as it might sound. Goldman's roughly 12,000 vice presidents and executive directors compare with 450 managing directors -- the next rung up in the Goldman hierarchy and a job classification that Smith didn't achieve. Overall, the company has about 33,000 employees, meaning that 36 percent of Goldman's workforce carried a title similar to Smith's.

South African David Berman, founder of hedge fund Durban Capital and friends with Smith, called him "a very understated, humble type of guy who would tell the truth as truth is important to him.

"But he never struck me as the Goldman-type as he isn't aggressive nor (the) salesman type one expects," Berman said, adding, "I am convinced this is for real with no selfish intent here."

According to the British Financial Services Authority's register, Smith joined Goldman's UK unit a year ago.

Johannesburg-born Smith attended universities in his home country and in the United States, where he received a degree in economics from Stanford University in 2001. He also interviewed to be a Rhodes Scholar in South Africa in 2002.

While at student at Stanford he had a summer internship at Paine Webber in 1999 and a summer internship at Goldman in 2000. Upon graduating from Stanford in 2001, he landed at Goldman.

Internally, Smith's op-ed piece was not necessarily well received. A trader, who knew Smith in passing, said the company is telling staff that Smith is a disgruntled employee who is leaving because he didn't make managing director.

This trader, who did not want to be named, says former Goldman colleagues are saying that Smith "wasn't very commercial," which means he wasn't producing the kind of sales the company wanted.


Goldman Sachs -- fourth among investment banks last year based on fee-income rankings compiled by Thomson Reuters and Freeman Consulting -- has a history of tension with client interests, experts say.

"Greg Smith refers to the last 12 years, but in fact Goldman has been doing this kind of thing since going back to the Great Depression," author William Cohan told Reuters Insider.

"It's not just the last 12 years; unfortunately it's part of the firm's DNA," said Cohan, author of the Goldman profile "Money and Power" and a former Wall Street banker himself.

In recent years the company has faced other high-profile incidents damaging to its image after the near-collapse of the global banking system in 2008.

Earlier this month it was accused of a major conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, while being a significant shareholder in Kinder.

A lawyer representing an Australian fund in a lawsuit against Goldman over mortgage-backed securities, filed in New York last year and alleging fraud and breach of contract, said he may seek Smith's deposition to help bolster his case.

"Part of Goldman's defense is everybody is sophisticated and everybody knew as much as we knew did," the lawyer, Eric Lewis, said. "But if you're calling your clients muppets -- most muppets don't have the cranial capacity of Goldman."

Paul Volcker, a former Federal Reserve chairman, called the Smith piece a "reflection of the change in market mentality over the last 15, over the last 20 years" at an economics summit in Washington hosted by the Atlantic magazine.


Unsurprisingly, Smith's resignation letter captured the imagination of Twitter users. "Greg Smith" was a worldwide trending topic early Wednesday, meaning it had suddenly spiked in interest, while both that and "Goldman Sachs" were trending in the United States.

Many of the commentators expressed surprise about the allegations in the piece, while others called for Smith to shed light on why he left the bank, or pointed out that he seemed to have been employed in a comparatively junior role.

As happens on the Internet in cases like this, near-instant parodies of Smith's letter cropped up. The most popular by far had Darth Vader of "Star Wars" fame resigning from the Empire via a letter similar to Smith's.

"To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead," the film franchise's dark lord wrote.

Saturday, March 17, 2012

Evolution Is True

I have decided that when the time comes and I am asked why I believe in evolutuion I will say it's just a matter of faith. However there is a blog on the subject, from the UK which makes for an excellent read. here's one essay dissecting a Huffington Post opinion piece.

I swear, physicist and atheist Victor Stenger gets more “militant” with each new post in his HuffPo column, and I love it. The man speaks the unvarnished truth.

His latest is a strong and alliteratively titled discussion of the incompatibility of science and religion called “The fall of foolish faith.” Besides urging scientists to help rid the world of religion, Stenger adds a new twist: that non-scientists should go after scientists who coddle faith.

I want to urge those of you who are not scientists to try to convince those who are to stop pussyfooting around with religion and confront the reality of what it is and always has been — a blight on humanity that has hindered our progress for millennia and now threatens our very existence.

Scientists have to help the rest of the secular community to work toward reducing the influence of religion to the point where it has negligible effect on society. I don’t believe this is impossible. Astrology and the reading of sheep entrails are no longer used to decide on courses of events, such as going to war. Why can’t we expect the same for the imagined dialogues with an ancient tribal sky god that at least one recent president has used to justify his actions?

Much of his message concerns the influence of religion on preventing the development of an energy-efficient America, one that, he says, should be using liquid thorium nuclear reactors (I have to confess I know nothing about these). Instead, the rich people, armed with the club of faith, continue to fight solar power and other new technologies, deny global warming, and foster the continued use of fossil fuels:

So why don’t we move in these directions already clearly marked out by science? Because since the late nineteenth century we have lived in a plutocracy in which petroleum and other fossil energies dominate almost every sector of our economy by virtue of the enormous wealth they bring to their producers and distributers.

Now, what does this have to do with religion? Since prehistoric times religion has served as the handmaiden to those in power, helping them to maintain that power. Tribal chiefs, kings, and emperors always had shamans and priests at their sides to assure their subjects that they led by divine right.

In America today, petro-dollars fuel a giant Christian propaganda machine that works to undermine the efforts of scientists to find solutions to the problems that face us with overpopulation, pollution, and climate change. They use techniques that were pioneered 30 years ago by the tobacco industry to suppress the evidence that smoking causes cancer and heart disease. And these techniques exploit the antiscience that is inherent in religious belief.

A new technique that in recent years has been added to the arsenal of global warming denialism is to frame climate change as a theological issue. Global warming deniers say that God would never allow life on Earth to be destroyed. After all, he gave humans dominion over the planet. Besides, the world is coming to an end soon anyway, so it doesn’t matter.

Energy matters are above my pay grade, though it’s clear that religion is behind (or at least used to justify) much of climate-change denialism. There’s also a connection, says Stenger, though the kind of magical, nonscientific thinking fostered by faith:

While the petrocrats use science in every aspect of their businesses, they hypocritically exploit the antiscience that is inherent in religion in order to undermine any scientific findings that threaten their power and fortunes.

But my favorite part of Stenger’s longish piece is his no-nonsense pronouncements about the incompatibility of science and religion:

Most scientists do not realize that science and religion are fundamentally incompatible. This is not because they have thought about it. It is because they prefer not to think about it.

Fundamentalists know science and religion are incompatible, since science disputes so much of what is in the Bible, which they take as the literal word of God. To them, science is simply wrong and must be Christianized. A well-funded effort exists to do just that, while most scientists sit on the sidelines because they prefer not to get involved.

But science and religion have always been at war, and always will be. One of yesterday’s speakers said that he did not like to use the word “religion” but rather called it a “belief system.” Well, there are different kinds of belief systems. Science is a belief system based on reason and evidence. Religion is a belief system based on bullshit.

I love the last sentence, which I wouldn’t have the guts to publish in a forum like HuffPo. He’s right of course, though I’d say “revelation and other forms of superstition” rather than “bullshit.”

And he’s absolutely on the mark with this:

Moderate Christians claim they support science, but they still hold to beliefs that have no empirical basis. Moderates will tell you that they accept evolution, but then they insist it is still guided by God. This is not Darwinian evolution. This is intelligent design. There is no guidance, divine or otherwise, in Darwinian evolution.

Yes, a hundred times yes! The National Center for Science Education should take this to heart, as should the Ken Millers, Francis Collinses, and the 38% of the American public who accept evolution, but only a form guided by God (only 16% of Americans accept naturalistic evolution, while 40% are straight-out creationists). Let us install this in our neurons: theistic evolution is not science, but creationism.

Among his other peeves is another I agree with: that science can indeed test the “supernatural,” or, if you don’t like that word, can test for the presence of a theistic god.

No doubt, science has its limits. However, the fact that science is limited doesn’t mean that religion or any alternative system of thought can or does provide insight into what lies beyond those limits. For example, science cannot yet show precisely how the universe originated naturally, although many plausible scenarios exist. But the fact that science does not–at present–have a definitive answer to this question does not mean that ancient creation myths such as those in Genesis have any substance, any chance of eventually being verified.

The scientific community in general goes along with the notion that science has nothing to say about the supernatural because the methods of science, as they are currently practiced, exclude supernatural causes. I strongly disagree with this position. If we truly possess an inner sense telling us about an unobservable reality that matters to us and influences our lives, then we should be able to observe the effects of that reality by scientific means.

If someone’s inner sense were to warn of an impending earthquake unpredicted by science, which then occurred on schedule, we would have evidence for an extrasensory source of knowledge.So far we see no evidence that the feelings people experience when they perceive themselves to be in touch with the supernatural correspond to anything outside their heads, and we have no reason to rely on those feelings when they occur. However, if such evidence or reason should show up, then scientists will have to consider it whether they like it or not.

So here’s one more thing to encode in our neurons: a theistic god is indeed a god that can be examined with the tools of science and reason. Every good theologian knows that—the people who don’t are the scientific organizations who have made the “god-is not-testable” statements: the National Academy of Sciences, the American Association for the Advancement of Science, and the National Center for Science Education.

If I go on, I’ll wind up reproducing Stenger’s whole article. So go read it: it’s all good.

Friday, March 16, 2012

Meredith Whitney Was Right

You don't get much more mainstream than CNN Money and that outlet is admitting that predictions which were mocked as overblown are coming true. You just can't argue with the math.

To readers of the business press, the story is a familiar one: fifteen months ago, superstar analyst Meredith Whitney rocked the world of municipal finance with a December 2010 prediction on 60 Minutes that a wave of municipal debt defaults was headed our way. Her forecast was quite specific: "You could see fifty to a hundred sizable defaults," she told her interviewer, correspondent Steve Kroft. "This will amount to hundreds of billions of dollars' worth of defaults."

The bottom fell out of the muni bond market as a result. Investors pulled some $14 billion from muni bond funds between December 22 and February 2, 2011, and returns in the fourth quarter of 2010 were the lowest in 16 years. Long-time players in the space, including analysts, fund managers, and muni brokers, reacted with indignation that an arriviste such as Whitney—the woman who made her name calling out Citigroup (C) as an emperor with no clothes at the dawn of the mortgage crisis—dared to try to expand her analytical purview into their cozy little corner of the capital markets.

She was wrong, they said. She didn't know squat about how their market worked. The kind of defaults she called for were never going to happen. And they were right, in the most literal sense. Since then, there have only been $2.6 billion in defaults from the $3.7 trillion market. And the muni bond swoon didn't even last very long: in 2011, Barclay's muni bond index returned 10.7%, more than five times the 2.1% return of the S&P500.

Nothing satisfies like a comedown of a prominent prognosticator, and Whitney has taken her lumps in both the business press and the more unbridled blogosphere ever since. She deserves at least some of it, but that's only for being overly specific. The more general point that she was trying to make—that municipal finances in this country were a mess that was only going to get messier—was dead on. Laugh at her all you want, but then try this: go find one person who says their local taxes are falling or their municipal services have improved in the past year or two. I wish you luck in your endeavor.

"States have pushed more and more expenses down to the local level," Whitney tells Fortune. "And municipalities don't have the money to make up the difference. That is where you see the real strain, especially after the American Reinvestment Recovery Act expired in June 2011."

Whitney's September 2010 report on municipal finances didn't contain a single call on a specific municipal bond. Indeed, the 1,400-page beast of analysis, titled "The Tragedy of the Commons," was instead focused on delineating the myriad—and slightly terrifying—financial obligations that the largest states in the country were having increasing trouble meeting. Something had to change, she said. And something did. It just wasn't as simple as a bunch of outright defaults.

When the criticism came raining down on her in early 2011, Whitney explained that she didn't just mean "technical" bond defaults but also mushier terms such a "social contract defaults"—e.g. less frequent trash removal schedules—and "employment contract defaults"—e.g. government employees being forced to contribute to their own pensions. Whether you think she tried to change the conversation after the fact or was merely elaborating is really neither here nor there. Because all of that is happening, and more. Municipal bond brokers may still find the time to chuckle about Whitney's comeuppance, but if you're someone responsible for actually dealing with the real-life implications of deteriorating muni finances, the mirth becomes a little harder to come by.

"States are regular bond market issuers, so they do care about their debt ratings, and have done everything they can to prevent public attention focusing on their crises," Whitney says. "They've even taken cities into receivership to prevent them from going bankrupt. But municipalities are only occasional issuers. They're much less concerned with bond market ratings than with the real pain they're already suffering."

Alabama's Jefferson County has actually gone bankrupt. Stockton, California is all but ready to do the same. And all you have to do is look to Detroit—or any of the nearby auto towns named after a Buick model of one sort or another—and you see fiscal crisis playing out right now. Look in your own backyard—or at the potholes on your neighborhood roads—and you will likely find the same.

Consider the email I received on March 7 from former New York State Assemblyman Richard Brodsky about Yonkers Mayor Mike Spano's recently formed Commission of Inquiry into what he refers to as that city's "Great Unraveling." (Brodksy is serving on the commission.)

"[Yonkers has] a budget of about $1 billion and a budget gap in the upcoming year that looks like it can't be bridged. There are reasons aplenty. Like may urban centers the Yonkers manufacturing base disappeared, the middle-class moved out and the people simply can't afford the property and sales tax burden that ensured. Anti-tax fervor hit and elected officials refused to raise recurring revenues. Gimmicks, one-shots, borrowing for operating expenses, assets sales, and assorted maneuvers 'kicked the can down the road' for a couple of years…The city has now run out of gimmicks."

And then he sounds very Whitney-like: "It's as though we stand on the shore and watch a tsunami gather and shrug and hope we'll get through it…That needs to change, and if the list of endangered cities gets larger this will force itself onto the national stage. [For now] the great national battle about the size of government and the level of taxation will be played out in the streets of small cities across America, with school kids, garbage pick-up, fire-protection, and safe streets competing with each other for inadequate resources. It's an ugly way to solve a problem."

In late February, Whitney signed a deal to write a book about the trouble that isn't going anywhere, even if her bond-market prediction was a misfire. Titled Downgraded: Why the Next Economic Crisis Will Be Local, it's on a fast turnaround for November publication.

Whitney isn't that interested in talking about her words on 60 Minutes anymore—why would she be?—but it's hard to argue with the fact that a prominent voice succeeded in bringing more focus to a real and pressing issue and helped change the conversation. Thirty-six freshly elected governors were listening in 2010. Or at least a few were—the likes of New Jersey's Chris Christie, Florida's Rick Scott, and Indiana's Mitch Daniels—but they and their successors are going to be playing the fiscal prudence game for years to come.

I have argued at length and one more than one occasion with Whitney that she made a mistake when she got too precise on TV. She doesn't agree. But we do find common ground about the fact that continuing to play "Gotcha!" over those 20 or so words is missing the forest for the trees. "Look at Greece," she says. "They're not in technical default. That doesn't change the fact that it's the biggest sovereign debt writedown in history. It's all the same in the end."

Thursday, March 15, 2012

Fading Dollar Hegemony

The US dollar has been the world's currency since World War Two but that dominance may be fading according to which argues that there is a drive by up and coming super powers to defeat the world's dependence on dollars:


When the dollar collapse comes, it will happen two ways – gradually then suddenly. That formula, famously used by Hemingway to describe how one goes bankrupt, is an apt description of critical state dynamics in complex systems. The gradual part is a snowflake disturbing a small patch of snow, while the sudden part is the avalanche. The snowflake is random yet the avalanche is inevitable. Both ideas are easy to grasp. What is difficult to grasp is the critical state of the system in which the random event occurs.” Jim Rickards, Currency Wars

As already published in the previous Oil and Gold Reports, the US dollar hegemony has been subject to increasing bouts of criticism. China, Russia, and India, but also Japan, are the countries that have gradually been switching the settlement of their bilateral trade in their own currencies or in commodities in order to circumvent the US dollar. This is a clear sign of a paradigm shift, especially since more than two thirds of the US currency is held abroad.

Last year, the Chinese rating agency Dagong Global Credit raised eyebrows when it downgraded the rating of the US to A and reduced the outlook to “negative”. According to Dagong, the QE scheme has sustainably eroded the legitimacy of the US dollar as global reserve currency. The rating agency regards the lack in willingness to pay off the government debt as ignorance vis-à-vis the creditors. In 2011 S&P downgraded the US rating to AA+. Since then, according to S&P, reckless budget policy continues, and a further downgrade is possible. Since Barack Obama took office, the US government debt has increased by 50%.

The Chinese policy of small steps signals the increasing intention to turn the renminbi into a freely convertible currency and to gradually liberalise the capital market. By 2020, China wants to have turned Shanghai into an international financial centre.

The open criticism vis-à-vis US politics is becoming louder even as we speak. And the fact that China wants to achieve full convertibility for the yuan in the long run is becoming clearer by the day. This would be a big step towards a new global leading currency. China is preparing for the post-USD era at full speed. The yuan should outrank the US dollar in terms of global relevance within but a few years. Yi Gang, the co-chairman of PBoC has recently made reference to a liberalisation within the next five years. Li Xiaojing, Managing Director of Bank of China in New York, has already mentioned the preparation work for the day that the Chinese currency will be fully convertible. He regards this as one of the highest priorities. The plans are more than just ambitious, but China has a track record of showing that it is possible to achieve ambitious goals if the political will is there. At the moment only 0.4% of all foreign exchange transactions are settled in Chinese currency. The US dollar has recently accounted for 43% of total transaction, the euro for close to 20%, and the Japanese yen for 10%. This means that the yuan is clearly underrepresented in view of the already central relevance of China for the world’s economy.

Currently, numerous smaller agreements are being signed that reveal the overall long-term strategy. We assume that this is how China wants to gradually boost demand without achieving outright convertibility right away. Within the framework of the new five-year plan, China wants to settle almost 50% of foreign trade in yuan by 2016. It wants to invoice in yuan in the bilateral trade transactions with African or Latin American countries that are rich in resources. Iran for example is said to supply oil for yuan. In addition, the PBoC has allowed almost 70,000 companies to invoice its foreign business worth almost USD 70bn in yuan.

Numerous further examples indicate the fact that the dollar scepticism is growing:

• India wants to pay in gold for Iranian oil. And, according to reports in the media, China may soon follow suit. The two countries together account for almost 40% of Iranian oil exports and are at the same time by far the biggest consumers of gold.
• In October, China reported that it had signed a free trade agreement with the ASEAN members, in the framework of which transactions would be settled in yuan. China also announced that a central bank for the entire ASEAN region would be set up and the yuan should be the reserve currency. In addition to the ASEAN countries, Japan and South Korea would also be invited to participate in the central bank. Since the bilateral free trade agreement ratified in 2010, trade between China and the ASEAN members has increased substantially. The ASEAN group has meanwhile become the third most important trading partner for China, after US and the EU. By 2015 ASEAN wants to create a common market for its 600mn citizens.
• Ecuador announced it was going to settle its debts owed to China (almost USD 5bn) through future oil deliveries.
• At the beginning of January, Iran and Russia agreed not to trade in US dollar anymore, but instead to resort to rouble and rial.
• India and Japan signed a currency swap agreement worth USD 15bn in order to facilitate bilateral trade.
• In July 2011, China and Iran agreed on a barter set-up for Iranian oil and Chinese goods .
• Japan and China, too, want to circumvent the US dollar even farther . In December Prime Minister Wen Jiabao and the Japanese Prime Minister Noda agreed to promote trade in yuan and yen. China has become Japan’s most important trading partner (USD 340bn per year). Both countries hold the highest volumes of US Treasuries, which is why the symbolic meaning of this agreement cannot be over-emphasized.

By Ronald Stoeferle of Erste Group an Eastern European Fincial Services Group.