California to Stop Water Deliveries to Farms

StormWire: California to Stop Water Deliveries to Farms:

Despite barrage of storms that struck the California coastline throughout February, drought conditions still exist in the San Joaquin Valley. Since October, the area from Stockton southward to Bakersfield is still suffering from a rainfall deficit.

California authorities report that most state and federal reservoirs are at their lowest levels since 1992. Therefore, the U.S. Bureau of Reclamation, which operates a massive network of dams, canals and pumps that moves water between Northern and Southern California, is stopping water deliveries to state farms for a three-week period beginning March 1st for the first time in 18 years.

This is a crushing blow to the nation’s number one agricultural state. Lester Snow, the director of the Department of Water Resources, estimates that the drought could cause a $1.15 billion dollar loss in agriculture-related wages and eliminate as many as 40,000 jobs in farm-related industries in the San Joaquin Valley alone.

Over 90% of nectarines and 60% of peaches in the U.S. are grown in California. The San Joaquin Valley, specifically, is the major source of tomatoes, grapes, almonds, apricots, asparagus, and cotton for the country. With an ongoing drought combined with a lack of reservoir water, farmers are being forced to either downsize their crop area or produce fruits and vegetables than are not significantly profitable.

The reduced crop production and poor quality are likely to increase produce prices in the supermarkets over the coming months. Furthermore, any food items that use California crops as ingredients will also see a rise in price.

The attraction of gold

The attraction of gold | Haring away | The Economist:

Feb 26th 2009
From The Economist print edition

Burnished by bad news, gold looks like a good each-way bet

IT IS 1979 and Harry “Rabbit” Angstrom, the hero of John Updike’s series of novels, is explaining to his wife why he has just spent more than $11,000 on 30 gold krugerrands. “The beauty of gold is, it loves bad news,” he says. Three decades later, gold is once again thriving on despair. Before Christmas, a troy ounce could be bought for around $800. By the third week in February, gold was trading at close to $1,000 an ounce.

A surge in demand for gold as an investment lies behind the jump in prices. Flows into exchange-traded funds, which buy and store gold for their shareholders, rose from 105 tonnes in January to 208 tonnes in the first three weeks of February, according to Suki Cooper at Barclays Capital. At that rate, inflows will soon surpass the total of 322 tonnes for the whole of 2008. Buying by investors has more than made up for a slump in gold-jewellery purchases in key markets, such as India and Turkey, where higher prices and wilting exchange rates have crushed demand.

People have long viewed gold, rightly or wrongly, as a hedge against high inflation and a weak dollar. So when the gold price briefly broke through the $1,000 mark in March last year, it was easily explained by fears that rising commodity prices (and, in America, a weak dollar) would feed inflation. An earlier run-up in gold prices, between 2002 and 2005, coincided with a sustained fall in the dollar. But now gold is strong even as the dollar thrives and economies face deflation.

Gold’s recent progress seems to be a response to generalised fears of economic turmoil. When supposedly safe savings vehicles, such as bank deposits, look shaky and offer scant returns, gold has greater appeal as an alternative store of wealth. It also looks like an attractive each-way bet. If drastic cuts in interest rates work too well, that will fuel inflation. If they do not work, prices of assets, such as stocks and houses, will sink further.

Like Updike’s protagonist in “Rabbit is Rich”, the new wave of gold investors typically have wealth to preserve, according to Adrian Ash at BullionVault, an online service for gold investors. “Gold is something you buy if you have something to lose,” he says. What links today’s gold fever with the 1970s rush is negative real deposit rates. Many savers now prefer a claim on gold in a vault to one on cash in the bank. There is less risk that a counterparty blows up, and the “carrying cost” of gold in terms of lost interest is, in any case, vanishing.

How high might the gold price go? Gold bugs talk excitedly about it reaching $2,300, which would match the January 1980 peak in real terms (see chart). Already the gold price is above its average since 1972 when calculated in today’s money. There is a limited supply of gold and lots of potential buyers—ideal conditions for a bubble, says Stephen Jen at Morgan Stanley. If gold is burnished by grim news, it seems likely to become still more alluring.

GDP revision is all about INVENTORY

FT Alphaville » Blog Archive » A GDP primer:

What happened with the Q4 GDP estimates, is that the FINAL SALES figure did not change much (revised down from -5.9% to -6.4%) but the government made a massive change to the INVENTORIES figure (revising inventories from a rise of $6.2 billion to a fall of $19.9 billion).

So the inventory shift produced a huge revision in the HEADLINE GDP figure, revised from -3.8% to -6.2%."

The Obamaist Manifesto

Charles Krauthammer - The Obamaist Manifesto - washingtonpost.com:

Not a great speech, but extremely consequential. If Barack Obama succeeds, his joint address to Congress will be seen as historic -- indeed as the foundational document of Obamaism. As it stands, it constitutes the boldest social democratic manifesto ever issued by a U.S. president.

The first part of the speech, justifying his economic stabilization efforts, was mere housekeeping. The economic crisis is to Obama a technocratic puzzle that needs to be solved because otherwise he loses all popular support.

Unlike most presidents, however, he doesn't covet popular support for its own sake. Some men become president to be someone, others to do something. This is what separates, say, a Bill Clinton from a Ronald Reagan. Obama, who once noted that Reagan altered the trajectory of America as Clinton had not, sees himself a Reagan.

Reagan came to office to do something: shrink government, lower taxes, rebuild American defenses. Obama made clear Tuesday night that he intends to be equally transformative. His three goals: universal health care, universal education, and a new green energy economy highly funded and regulated by government.
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(1) Obama wants to be to universal health care what Lyndon Johnson was to Medicare. Obama has publicly abandoned his once-stated preference for a single-payer system as in Canada and Britain. But that is for practical reasons. In America, you can't get there from here directly.

Instead, Obama will create the middle step that will lead ultimately and inevitably to single-payer. The way to do it is to establish a reformed system that retains a private health-insurance sector but offers a new government-run plan (based on benefits open to members of Congress) so relatively attractive that people voluntarily move out of the private sector, thereby starving it. The ultimate result is a system of fully socialized medicine. This will probably not happen until long after Obama leaves office. But he will be rightly recognized as its father.

(2) Beyond cradle-to-grave health care, Obama wants cradle-to-cubicle education. He wants far more government grants, tax credits and other financial guarantees for college education -- another way station to another universal federal entitlement. He lauded the country for establishing free high school education during the Industrial Revolution; he wants to put us on the road to doing the same for college during the Information Age.

(3) Obama wants to be to green energy what John Kennedy was to the moon shot, its visionary and creator. It starts with the establishment of a government-guided, government-funded green energy sector into which the administration will pour billions of dollars from the stimulus package and billions more from budgets to come.

But just picking winners and losers is hardly sufficient for a president who sees himself as world-historical. Hence the carbon cap-and-trade system he proposed Tuesday night that will massively restructure American industry and create a highly regulated energy sector.

These revolutions in health care, education and energy are not just abstract hopes. They have already taken life in Obama's $787 billion stimulus package, a huge expansion of social spending constituting a down payment on Obama's plan for remaking the American social contract.

Obama sees the current economic crisis as an opportunity. He has said so openly. And now we know what opportunity he wants to seize. Just as the Depression created the political and psychological conditions for Franklin Roosevelt's transformation of America from laissez-faireism to the beginnings of the welfare state, the current crisis gives Obama the political space to move the still (relatively) modest American welfare state toward European-style social democracy.

In the European Union, government spending has declined slightly, from 48 percent to 47 percent of GDP during the past 10 years. In the United States, it has shot up from 34 percent to 40 percent. Part of this explosive growth in U.S. government spending reflects the emergency private-sector interventions of a Republican administration. But the clear intent was to make the massive intrusion into the private sector temporary and to retreat as quickly as possible. Obama has radically different ambitions.

The spread between Europe and America in government-controlled GDP has already shrunk from 14 percent to 7 percent. Two terms of Obamaism and the difference will be zero.

Conservatives take a dim view of the regulation-bound, economically sclerotic, socially stagnant, nanny state that is the European Union. Nonetheless, Obama is ascendant and has the personal mandate to take the country where he wishes. He has laid out boldly the Brussels-bound path he wants to take.

Let the debate begin."

Penn and Teller Explain Sleight of Hand

YouTube - Penn and Teller Explain Sleight of Hand

Natural gas glut

Shale gas strategy shifts with price:
Rush is over; Drillers now focus on best and lowest-cost plays

Claudia Cattaneo, Financial Post Published: Thursday, February 26, 2009

With natural gas prices collapsing and, according to one analyst, potentially plunging to zero this summer, the North American shale gas rush is slowing to a trickle.

After exploding in recent years thanks to new drilling technology, significant drilling plans in the highest-cost plays, such as the Barnett shale in Texas and the Horn River in British Columbia, have been put on hold.

'Activity is shifting away from where it was, to the best plays and the lowest-cost plays,' said Dallas-based Paul Sander, vice-president of the mid-continent business unit at EnCana Corp., North America's largest producer of unconventional gas.

'These are big massive resources and in a low-price environment the sweet spots will be the clear winners,' Mr. Sander said. 'I don't think industry is walking away from shales. We are just focusing on the best parts at this point in time.'

Chris Theal, managing director of research at Tristone Capital Inc., said companies are moving capital to lower-cost shale plays such as the Montney in British Columbia, the Haynesville in Louisiana and Texas and the Marcellus in New York and Pennsylvania, to make do with smaller budgets because of weak prices.

The emergence of gas from shales was seen as a panacea until a few months ago to replace maturing conventional supplies.

Most major companies shifted gears to chase unconventional gas, making acquisitions, buying up lands in places such as British Columbia, and taking cash away from their conventional operations.

According to Tristone, the top nine North American shale plays could contain at least 262 trillion cubic feet of gas, about equal to North America's proven natural gas reserves, but their cost of production can be half of what is required to extract conventional gas, or around $4.50 per million British thermal units.

As more industry operators piled into the business, production soared, pushing out higher-cost conventional supplies like those from Alberta, as well as liquefied natural gas imported from offshore.

The recession in the United States reduced natural gas demand, particularly from industrial consumers, to the point inventories are overflowing and production will have to be shut by September, Mr. Theal said.

He estimates about 700 million cubic feet a day will likely have to be taken off line, with Alberta seeing the bulk of the shut-ins.

The glut is so extensive Mr. Theal believes the gas downturn will outlast the oil slump, and gas prices can weaken substantially from today's depressed levels.

While the OPEC cartel appears to be doing a good job of managing the oil bulge, the natural gas market will be tougher to rebalance, he said.

'We are going to have a glut, and when that glut comes in the fall, gas prices are going to be below $3,' Mr. Theal said. Indeed, 'gas can go to zero,' as it did for brief periods in 2002.

Natural gas for March delivery fell US18¢, to settle at US$4.06 per million British thermal units yesterday on the New York Mercantile Exchange.

Gas has dropped 28% this year and is down 70% from the 2008 high of US$13.694 reached on July 2.

The downturn is depressing drilling in both Canada and the United States, a lot of which was driven by the shale-gas surge. Mr. Sander predicted drilling would continue to plunge.

Rigs active in the Barnett, the first and most developed of the plays, are down to 110, from 188 last fall, he said.

As for EnCana, it has reduced rigs deployed in the Barnett to two from five. At the same time, drilling is continuing to rise in the Haynesville, where EnCana is a top operator and 'there are enough positive indicators, especially with the high initial [production] rates, that people are still interested in progressing the play at this stage,' Mr. Sander said.

Drilling in Horn River is lower than what was anticipated last year, while activity in the Montney is flat, said Todd Garman, oilfield services analyst at Peters & Co.

'It's not a terribly positive outlook for the (oil) service sector,' he said."

Solar Panels Get Cheaper

Solar Panels Get Cheaper, But Is the Trend To Last? - Solar Panel Materials like Silicon from First Solar are on the Wane - Popular Mechanics:

A solar power milestone was reached on Tuesday when First Solar Inc brought its manufacturing costs for solar panels down to $1 per watt. But a study from the University of California and Lawrence Berkeley National Labs suggests that this might be the bottom for a price-point—if solar power is ever going to scale up to become competitive with other forms of energy. Here are the new challenges facing the solar industry and some suggestions to make a brighter future.



First Solar's eventual goal is "grid parity," a phrase that refers to making solar power cost the same as competing conventional power sources without subsidies. Right now the cost of making panels accounts for a little less than half the total cost of installation. The company estimates that it needs to get manufacturing costs down to $0.65 to $0.70 per watt, and other installation costs down to $1 a watt in order to reach grid parity—goals First Solar plans to reach by 2012.

Global warming isn't man-made

Japan's boffins: Global warming isn't man-made • The Register

Climate science is 'ancient astrology', claims report
By Andrew Orlowski

Japanese scientists have made a dramatic break with the UN and Western-backed hypothesis of climate change in a new report from its Energy Commission.

Three of the five researchers disagree with the UN's IPCC view that recent warming is primarily the consequence of man-made industrial emissions of greenhouse gases. Remarkably, the subtle and nuanced language typical in such reports has been set aside.

One of the five contributors compares computer climate modelling to ancient astrology. Others castigate the paucity of the US ground temperature data set used to support the hypothesis, and declare that the unambiguous warming trend from the mid-part of the 20th Century has ceased.

The report by Japan Society of Energy and Resources (JSER) is astonishing rebuke to international pressure, and a vote of confidence in Japan's native marine and astronomical research. Publicly-funded science in the West uniformly backs the hypothesis that industrial influence is primarily responsible for climate change, although fissures have appeared recently. Only one of the five top Japanese scientists commissioned here concurs with the man-made global warming hypothesis."

Google’s PowerMeter

I, Cringely » Blog Archive » Power to the People - Cringely on technology:

Google’s PowerMeter is a Trojan horse – a way to become a de facto Internet Service Provider for potentially millions of homes.

Sub-$30 Oil Possible

Schork: Sub-$30 Oil Possible - Features and Interviews - Hard Assets Investor:

Written by HardAssetsInvestor

Wednesday, 25 February 2009 16:05

Mike Norman, HardAssetsInvestor.com (Norman): Hello everybody, and welcome to the HardAssetsInvestor.com interview series. I’m Mike Norman, your host. Well, oil prices pumping along at $40 per barrel; they had been lower, but last year was a different story. We saw them almost at $150. Here to talk about the outlook is Stephen Schork, editor of The Schork Report. Stephen, welcome back.

Riots in Caribbean

Full Scale Riots in Tranquil Caribbean Island!

Britons are among thousands of tourists fleeing Guadeloupe after full scale urban warfare erupted on the French Caribbean island. Trouble broke out on the island earlier last month after protesters began rioting over high prices and low wages. But the situation escalated this week after protesters began turning on rich white families as they demanded an end to colonial control of the economy. Guadeloupe's socialist opposition leader Malikh Boutih said: 'It is shocking to watch a police force which is almost 100 per cent white confront a population which is 100 per cent black.

The troubles come at the height of the holiday season, with thousands of mainly British, French and American tourists on the paradise tropical island. Tourism Authority chief Madeleine de Grandmaison said: 'Tourism is fragile. People are not only cancelling this week, but also for all the months of February, March and April. 'We have a huge deficit of tourists ahead of us. At least 10,000 tourists have cancelled vacations in Martinique and Guadeloupe.'

"The Burning Platform"

"The Burning Platform" by James Quinn. FSO Editorial 02/18/2009:

THE BURNING PLATFORM
by James Quinn
February 18, 2009

"The US government is on a “burning platform” of unsustainable policies and
practices with fiscal deficits, chronic healthcare underfunding, immigration and
overseas military commitments threatening a crisis if action is not taken soon."
David M. Walker

David Walker served as Comptroller General of the United States from 1998 through 2008.

This too shall pass

This too shall pass - Wikipedia, the free encyclopedia:

"This too shall pass" (Hebrew: גם זה יעבור‎‎, gam zeh yaavor) is a phrase occurring in a Jewish wisdom folktale involving King Solomon. The phrase is commonly engraved on silver rings. Many versions of the folktale have been recorded by the Israel Folklore Archive at the University of Haifa. Heda Jason recorded this version told by David Franko from Turkey:

“

One day Solomon decided to humble Benaiah Ben Yehoyada, his most trusted minister. He said to him, "Benaiah, there is a certain ring that I want you to bring to me. I wish to wear it for Sukkot which gives you six months to find it." "If it exists anywhere on earth, your majesty," replied Benaiah, "I will find it and bring it to you, but what makes the ring so special?" "It has magic powers," answered the king. "If a happy man looks at it, he becomes sad, and if a sad man looks at it, he becomes happy." Solomon knew that no such ring existed in the world, but he wished to give his minister a little taste of humility. Spring passed and then summer, and still Benaiah had no idea where he could find the ring. On the night before Sukkot, he decided to take a walk in one of the poorest quarters of Jerusalem. He passed by a merchant who had begun to set out the day's wares on a shabby carpet. "Have you by any chance heard of a magic ring that makes the happy wearer forget his joy and the broken-hearted wearer forget his sorrows?" asked Benaiah. He watched the grandfather take a plain gold ring from his carpet and engrave something on it. When Benaiah read the words on the ring, his face broke out in a wide smile. That night the entire city welcomed in the holiday of Sukkot with great festivity. "Well, my friend," said Solomon, "have you found what I sent you after?" All the ministers laughed and Solomon himself smiled. To everyone's surprise, Benaiah held up a small gold ring and declared, "Here it is, your majesty!" As soon as Solomon read the inscription, the smile vanished from his face. The jeweler had written three Hebrew letters on the gold band: gimel, zayin, yud, which began the words "Gam zeh ya'avor" -- "This too shall pass." At that moment Solomon realized that all his wisdom and fabulous wealth and tremendous power were but fleeting things, for one day he would be nothing but dust.

”

The phrase "This too shall pass" and the associated ring story were made popular by Abraham Lincoln in his 'Address Before the Wisconsin State Agricultural Society, Milwaukee, Wisconsin' on September 30, 1859:

“

It is said an Eastern monarch once charged his wise men to invent him a sentence, to be ever in view, and which should be true and appropriate in all times and situations. They presented him the words: "And this, too, shall pass away." How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction![1]

Obama's Straw Men

Why does he routinely ascribe to opponents views they don't espouse?
By KARL ROVE
http://online.wsj.com/article/SB123561484923478287.html?mod=djemEditorialPage


President Barack Obama reveres Abraham Lincoln. But among the glaring differences between the two men is that Lincoln offered careful, rigorous, sustained arguments to advance his aims and, when disagreeing with political opponents, rarely relied on the lazy rhetorical device of 'straw men.' Mr. Obama, on the other hand, routinely ascribes to others views they don't espouse and says opposition to his policies is grounded in views no one really advocates.

On Tuesday night, Mr. Obama told Congress and the nation, 'I reject the view that . . . says government has no role in laying the foundation for our common prosperity.' Who exactly has that view? Certainly not congressional Republicans, who believe that through reasonable tax cuts, fiscal restraint, and prudent monetary policies government contributes to prosperity.

Mr. Obama also said that America's economic difficulties resulted when 'regulations were gutted for the sake of a quick profit at the expense of a healthy market.' Who gutted which regulations?

Perhaps it was President Bill Clinton who, along with then Treasury Secretary Larry Summers, removed restrictions on banks owning insurance companies in 1999. If so, were Mr. Clinton and Mr. Summers (now an Obama adviser) motivated by quick profit, or by the belief that the reform was necessary to modernize our financial industry?

Perhaps Mr. Obama was talking about George W. Bush. But Mr. Bush spent five years pushing to further regulate Fannie Mae and Freddie Mac. He was blocked by Democratic Sen. Chris Dodd and Rep. Barney Frank. Arriving in the Senate in 2005, Mr. Obama backed up Mr. Dodd's threat to filibuster Mr. Bush's needed reforms.

Even in an ostensibly nonpartisan speech marking Lincoln's 200th birthday, Mr. Obama used a straw-man argument, decrying 'a philosophy that says every problem can be solved if only government would step out of the way; that if government were just dismantled, divvied up into tax breaks, and handed out to the wealthiest among us, it would somehow benefit us all. Such knee-jerk disdain for government -- this constant rejection of any common endeavor -- cannot rebuild our levees or our roads or our bridges.'

Whose philosophy is this? Many Americans justifiably believe that government is too big and often acts in counterproductive ways. But that's a far cry from believing that in 'every' case government is the problem or that government should be 'dismantled' root and branch. Who -- other than an anarchist -- 'constantly rejects any common endeavor' like building levees, roads or bridges?

During his news conference on Feb. 9, Mr. Obama decried an unnamed faction in the congressional stimulus debate as 'a set of folks who -- I don't doubt their sincerity -- who just believe that we should do nothing.'

Who were these sincere do-nothings? Every House Republican voted for an alternative stimulus plan, evidence that they wanted to do something. Every Senate Republican -- with the exception of Judd Gregg, who'd just withdrawn his nomination to be Mr. Obama's Commerce secretary and therefore voted 'present' -- voted for alternative stimulus proposals.

Then there's Mr. Obama's description of the Bush-era tax cuts. 'A surplus became an excuse to transfer wealth to the wealthy,' he explained in his Tuesday speech, after earlier saying, 'tax cuts alone can't solve all of our economic problems -- especially tax cuts that are targeted to the wealthiest few.'

The Bush tax cuts were not targeted to 'the wealthiest few.' Everyone who paid federal income taxes received a tax cut, with the largest percentage of reductions going to those at the bottom. Last year, a family of four making $40,000 saved an average of $2,053 because of the Bush tax cuts. The tax code became more progressive as the share paid by the top 10% increased to 46.4% from 46% -- and the nation experienced 52 straight months of job growth after the cuts took effect. And since when is giving back some of what people pay in taxes 'transferring wealth?'

In his inaugural address -- which was generally graceful toward the opposition -- Mr. Obama proclaimed, 'We have chosen hope over fear, unity of purpose over conflict and discord.' Which Republican ran against him on fear, conflict and discord?

Mr. Obama portrays himself as a nonideological, bipartisan voice of reason. Everyone resorts to straw men occasionally, but Mr. Obama's persistent use of the device is troubling. Continually characterizing those who disagree with you in a fundamentally dishonest way can be the sign of a person who lacks confidence in the merits of his ideas.

It was said that Lincoln crafted his arguments in 'resonant words that enriched the political dialogue of his age.' Mr. Obama's straw men aren't enriching the dialogue of our age. They are cheapening it. Mr. Obama should stop employing them.

Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.

Eastern European Tinderbox: How Explosive Could It Get?

http://www.rgemonitor.com/

The Central and Eastern Europe (CEE) region is the sick man of emerging markets. While the global crisis means few, if any, bright spots worldwide, the situation in the CEE area is particularly bleak. After almost a decade of outpacing worldwide growth, the region looks set to contract in 2009, with almost every country either in or on the verge of recession. The once high-flying Baltics (Estonia, Latvia, Lithuania) look headed for double-digit contractions, while countries relatively less affected by the crisis (i.e. Czech Republic, Slovakia and Slovenia) will have a hard time posting even positive growth. Meanwhile, Hungary and Latvia’s economies already deteriorated to the point where IMF help was needed late last year.

The CEE’s ill health is primarily driven by two factors – collapsing exports and the drying-up of capital inflows. Exports were key to the region's economic success, accounting for a significant 80-90% of GDP in the Czech Republic, Hungary and Slovakia. By far the biggest market for CEE goods is the Eurozone, which is now in recession. Meanwhile, the global credit crunch has dried up capital inflows to the region. An easy flow of credit fueled Eastern Europe’s boom in recent years, but the good times are gone. According to the Institute of International Finance, net private capital flows to Emerging Europe are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009. Whether or not this is formally considered a ‘sudden stop’ of capital, it will necessitate a very painful adjustment process.

Classic Emerging Markets Crisis In The Works?

What is especially worrisome is that the days of easy credit flows were accompanied by rising external imbalances that rival or even exceed the build-up of imbalances in pre-crisis Asia – e.g. current account deficits in Southeast Asia from 1995-97 fell within the 3.0-8.5% of GDP range, while those in CEE were in the double-digits in Romania, Bulgaria and the Baltics in 2008. As examined in a recent RGE analysis piece, the vulnerabilities in many CEE countries – high foreign currency borrowing, hefty levels of external debt and massive current-account deficits – suggest the classic makings of a capital account crisis a la Asia in the late 1990s.

Spillover Effects To Rest Of World

Like the Asia crisis of 1997-98, a regional crisis in Eastern Europe would have far-reaching effects. As Harvard professor Kenneth Rogoff noted in a recent New York Times article: “There’s a domino effect. International credit markets are linked, and so a snowballing credit crisis in Eastern Europe and the Baltic countries could cause New York municipal bonds to fall.” Western Europe looks set to be particularly impacted via its strong trade and financial linkages. Of particular concern is the strong presence of Western European banks (via subsidiaries) in the CEE, where they hold 60-90% market share depending on the country, which paves the way for contagion.

So is this the making of a cross-border banking crisis? It could be. Given the sharp contraction in Eastern Europe’s economies, combined with high foreign currency-denominated lending (particularly in Croatia, Hungary and Romania), weakening currencies and heavy reliance on non-deposit external financing, Eastern Europe’s banks will likely see a large spike in non-performing loans. Banking systems in the region are likely only as strong as their weakest link – or in this case, weakest country. That’s because of the ‘common lender’ phenomenon. As many CEE countries share foreign parent bank(s) in common, this paves the way for problems in just one of these countries to have ripple effects into other CEE countries. So even a relatively healthy economy/banking system like the Czech Republic’s – with a reasonable loan-to-deposit ratio and scant fx-denominated lending to households – is still vulnerable.

Austria is far and away the Western European country most heavily exposed to the CEE region (via Austrian-based banks like Raiffeisen and Erste Bank). These banks’ collective exposure to the region amounts to over 70% of Austria’s GDP. Notably, however, other Western European countries’ total exposure is far less. Belgium and Sweden are the next in line after Austria; their lenders’ total exposure to the region amounts to a still significant 20-25% of GDP. Some fear that parent banks, if they get into trouble, could either fire-sell subsidiaries or simply walk away. Another concern is Europe’s fragmented regulatory system, which means that if a cross-border bank needs to be unwound, the process is likely to be extremely messy.

Policymakers In Virtual Straitjackets

CEE policymakers have fairly limited tools to cope with the crisis. Fiscal policy is constrained by the fact that belt-tightening is required to restore order to the balance of payments in some countries (i.e. Hungary, Romania, Ukraine, and the Baltics), while euro adoption ambitions limit the fiscal response in others (i.e. Poland). Meanwhile, monetary policy easing is constrained in countries with heavy foreign currency-denominated lending, like Hungary and Romania, where a weakening of the local currency could potentially trigger defaults, thereby impacting financial stability. In others (i.e. Bulgaria, Estonia, Latvia and Lithuania), monetary policy is not an available tool due to fixed exchange rates.

Due to limited fiscal and monetary policy options, other CEE countries might need to follow in the footsteps of Latvia and Hungary and call on IMF help. In a nod to the difficult situation of many CEE countries, EU leaders called last week for IMF resources to be doubled to $500 billion to help head off new problems in crisis-hit countries. It remains to be seen, however, whether IMF help will be enough to return financial stability to the region.

In a recent research report, economists from Danske Bank point to the increasing concern of spill-back from problems in Eastern Europe to the Eurozone. Polish authorities and commentators, such as Wolfgang Munchau, recently made the point that East European countries should be given a shortcut to join the euro and access to its safety and stability net. However, current problems faced by some EMU members show that EMU membership alone is no panacea. Moreover, previous experience shows that currency pegs can be double-edged swords that often end in capitulation. The current test case for the entire region is Latvia, whose currency peg looks increasingly fragile even after its IMF-led EUR 7.5 billion bailout package. Devaluation with its ripple effects through the region would be devastating for the mostly foreign-owned banks in the region.

Unlike EMU member countries, EU countries that have not yet adopted the euro have access to the 'medium-term financial assistance' facility worth EUR 25 billion, of which EUR 10 billion in loans have already been extended to Latvia and Hungary. Additional assistance to the region will have to come from a revamped IMF, as noted before and the EBRD is also providing funds to banks in the region. Despite a 20% funding boost, however, its resources are much smaller.

Spotlight On Ukraine

European banks are also exposed to vulnerable economies outside of the EU. Russia is the second largest borrower from EU banks and it has over $100 billion of debt that must be financed this year. However, it is the Ukraine that may pose the biggest contagion risk, particularly if the next tranche of IMF funding continues to be deferred. Austrian, French, Swedish, Italian and German banks have a collective exposure of around EUR 30 billion to the Ukraine. Ukraine has $46 billion in foreign debt obligations falling due in 2009 and the swift plunge of the Hyrvnia has boosted the cost of servicing these debts even as corporate debts are on the rise. Ukraine’s political divisions and economic contraction of at least 6% suggest further sovereign and corporate ratings downgrades are on the way. Ukraine may thus be forced to make the budget cuts required by the IMF, but it is also reaching out to the U.S., Russia, China, Japan and the EU for additional funds.

Government Collapse in Latvia: More Yet To Come?

The series of riots that erupted in Bulgaria, Lithuania and Latvia in January, followed by Latvia’s government collapse last week, raise concerns that Eastern European countries may experience a period of deep destabilization and social strife as the economic crisis deepens and unemployment rates soar. The recent wave of popular unrest was not isolated to Eastern Europe. Ireland, Iceland, France, the UK and Greece also experienced street protests, but many Eastern European governments seem more vulnerable as they have limited policy options to address the crisis and little or no room for fiscal stimulus due to budgetary or financing constrains. Deeply unpopular austerity measures including slashed public wages, tax hikes and curbs on social spending will keep fanning public discontent in the Baltic states, Hungary and Romania. Dissatisfaction linked to the economic woes will be amplified in the countries where governments have been weakened by high-profile corruption and fraud scandals (Latvia, Lithuania, Hungary, Romania and Bulgaria). The political forces most likely to benefit from public disaffection are those running on the populist platforms, which could disrupt efforts to battle the effects of the economic crisis. Latvia could be a case in point, as there are growing concerns that the coming election campaign might suspend the fiscal austerity measures required by the IMF bail-out package. Two other political hotspots that are at risk of early elections are Romania and Estonia, while Bulgarian national elections are due in mid-2009.

EU’s Free Market Rules Under Pressure: Eastern Disillusionment and Western Protectionism

Overall, a big rise in support for populist and radical parties in the region could put social, structural and environmental reforms on hold in the region and could even call into question the economic and political model Eastern European countries have followed since the 1990s. The eastern EU member states’ decisions to open their markets and move toward greater integration with the EU are now being second-guessed by some. Moreover, the protectionist measures implemented in some western EU states in support of their automotive and financial sectors are threatening the EU’s single market rules and could particularly hurt Eastern European economies. Meanwhile, a backlash over immigrant labor is likely. With the 2009 unemployment rate set to rise to 8.75% in the EU27, according to the European Commission, member states are tempted to interpret the laws in a way more favorable to their nationals. This suggests that migration trends will reverse and the eastward flow of remittances will dwindle. The return of Eastern European migrant workers, in turn, may add to social discontent in their countries of origin.

Growing East/West Divide in the EU?

The financial crisis has exacerbated the East/West divide within the EU illustrated by the persistent bickering between the Czech Republic, the current holder of the EU presidency and France over trade and protectionist bail out packages that hurt automotive industries in Poland, Czech Republic, Slovakia and Hungary. So far, the EU has helped economically troubled Latvia, Poland and Hungary with swap lines and loans and called for the resources of the IMF to double in order to help the countries facing the crisis. Yet, there have been a growing number of calls for EU-led coordinated support to the Eastern European economies (recently echoed by the World Bank). If there is a perceived lack of help, the financial crisis could deepen the divide between so called “Old Europe” and “New Europe” and bring structural changes to the political landscape in Eastern Europe, such as strengthening the nationalist, euro-skeptic voices in Central Europe (Czech Republic, Poland) and the pro-Russian parties in the Baltic states.

The Obama Administration Sacrifices Israel - Forbes.com

Anne Bayefsky, 02.22.09, 11:48 AM EST
http://www.forbes.com/2009/02/22/obama-israel-holocaust-durban-opinions-contributors_united_nations.html

The cover-up on Durban II's anti-Semitic agenda.

The Obama administration's decision to join the planning of the U.N.'s Durban II "anti-racism" conference has just taken a new twist: cover-up. On Friday, State Department officials and a member of the American Durban II delegation claimed the United States had worked actively to oppose efforts to brand Israel as racist in the committee drafting a Durban II declaration. The trouble is that they didn't.

The Feb. 20 State Department press release says the U.S. delegation in Geneva "outline[d] our concerns with the current outcome document" and in particular "our strong reservations about the direction of the conference, as the draft document singles out Israel for criticism." One member of the delegation told The Washington Post: "The administration is pushing back against efforts to brand Israel as racist in this conference." In fact, tucked away in a Geneva hall with few observers, the U.S. had done just the opposite. The U.S. delegates had made no objection to a new proposal to nail Israel in an anti-racism manifesto that makes no other country-specific claims.

Getting involved in activities intended to implement the 2001 Durban Declaration--after seven and a half years of refusing to lend the anti-Israel agenda any credibility--was controversial to be sure. But late on Saturday Feb. 14, the State Department slithered out a press release justifying the move. It claimed that "the intent of our participation is to work to try to change the direction in which the Review Conference is heading."

Anne Bayefsky is a senior fellow of the Hudson Institute, director of the Touro Institute on Human Rights and the Holocaust and editor of www.EYEontheUN.org.

Roubini Says Nationalize the Banks

Nouriel Roubini Says Nationalizing the Banks Is the Market-Friendly Solution - WSJ.com:

OPINION: THE WEEKEND INTERVIEW
Nouriel Roubini
'Nationalize' the Banks
Dr. Doom says a takeover and resale is the market-friendly solution.

By TUNKU VARADARAJAN


Nouriel Roubini is always dressed in black-and-white.

I have known him for nearly two years, and have seen him in a variety of situations -- en route to class at New York University's Stern Business School, where he's a professor; over a glass of wine in his boyish loft in Manhattan's Tribeca; at an academic conference, seated sagely on the dais; at a bohemian party in Greenwich Village, at . . . oh . . . 3 a.m. -- and he always, always wears a black suit with a white linen shirt.
[The Weekend Interview] Terry Shoffner

And so, in black-and-white he was, earlier this week, when he rushed into the office of Roubini Global Economics, his consulting firm in downtown Manhattan, and offered a breathless apology to this correspondent, who'd been waiting for half an hour. 'Really sorry I'm late! Charlie Rose taped for way longer than he said he would.'

Mr. Roubini -- a month short of 50 -- is in huge media demand, the nearest thing to a rock-star among the economists who hold our fate in their hands these days. The peculiar thing, of course, is that he's in demand because he specializes in predictions of gloom. (He has earned himself the sobriquet of 'Doctor Doom.') In person, though, he's anything but a downer.

The man has instant impact on public debate. An idea he floated only last week -- that our 'zombie banks' be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom.

Last Sunday on ABC, George Stephanopoulos asked Lindsey Graham, the conservative Republican senator, what he thought about all this talk of bank nationalization. Mr. Graham said that he wouldn't take the idea off the table. And on Wednesday, Alan Greenspan told the Financial Times that 'it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.'

Mr. Roubini tells me that bank nationalization 'is something the partisans would have regarded as anathema a few weeks ago. But when I and others put it in the context of the Swedish approach [of the 1990s] -- i.e. you take banks over, you clean them up, and you sell them in rapid order to the private sector -- it's clear that it's temporary. No one's in favor of a permanent government takeover of the financial system.'

There's another reason why the concept should appeal to (fiscal) conservatives, he explains. 'The idea that government will fork out trillions of dollars to try to rescue financial institutions, and throw more money after bad dollars, is not appealing because then the fiscal cost is much larger. So rather than being seen as something Bolshevik, nationalization is seen as pragmatic. Paradoxically, the proposal is more market-friendly than the alternative of zombie banks.'

In any case, Republicans must now temper their reactions, he says. 'The kind of government interference in the economy that we saw in the last year of Bush was unprecedented. The central bank -- supposed to be the lender of the last resort -- became the lender of first and only resort! With our recapitalizing of financial institutions, and massive government intervention in the markets, we've already crossed a significant bridge.'

So, will the highest level of government be receptive to the bank-nationalization idea? 'I think it will,' Mr. Roubini says, unhesitatingly. 'People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover.' And how long will it be before the administration goes in formally for nationalization? 'I think that we're going to see the policy adopted in the next few months . . . in six months or so.'

That long? I ask. 'Six months from now,' he replies, 'even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness.

'Between guarantees, liquidity support, and capitalization, the government has provided between $7 trillion to $9 trillion of help to the financial system. De facto, the government is already controlling a good chunk of the banking system. The question is: Do you want to move to the de jure step.'

Yet another reason why bank nationalization is a good idea, Mr. Roubini continues, is that 'we started with banks that were too big to fail, but what has happened, in the process, is that these banks have become even-bigger-to-fail. J.P. Morgan took over Bear Stearns and WaMu. BofA took over Countrywide and then Merrill. Wells Fargo took over Wachovia. It doesn't work! You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing.

'So if you took over a big bank, and you split the assets in three or four pieces, maybe you create three or four regional or national banks, and they're stronger! Nationalization -- or 'temporary receivership,' if you like, if the N-word is a political liability -- is an occasion to undo the sort of consolidation that has created an even bigger systemic problem. And the only way to do it is by essentially taking them over and breaking them up.'

Here, I ask Mr. Roubini whether he has been more right -- more prescient -- in his reading of the economic downturn than all the other famous bears in America. After all, judging by the attention paid to him in the press, it is hard not to conclude that he is the leading guru of the current recession, or 'near-depression,' as he often calls it. My question, remarkably, induces in him some diffidence. 'I don't want to personalize the analysis, you know . . . because, first of all, there were many people who got many of the elements right.

'People like [Robert] Shiller were very worried about the housing bubble. People like Steve Roach were worried about an economy based on asset bubbles leading to consumption bubbles that were unsustainable. People like Ken Rogoff talked about global imbalances in the current account deficit not being sustainable. Nassim Taleb has been worrying for a while about 'fat tail' events . . . . So lots of people signaled concern about things. I was one of those who put the dots together and thus gave a more fleshed-out picture.'

To Mr. Roubini, the most interesting question isn't the one of who got it right. Instead, he asks why we 'over and over again, get into these periods of irrational exuberance, when not only is there an asset bubble and a credit bubble, but people believe these are sustainable over a long time -- Wall Street, policy makers, rating agencies, academics, journalists . . . .'

What exactly is Nouriel Roubini's economic philosophy? 'I believe in market economics,' he says, with some emphasis. 'But to paraphrase Churchill -- who said this about democracy and political regimes -- a market economy might be the worst economic regime available, apart from the alternatives.

'I believe that people react to incentives, that incentives matter, and that prices reflect the way things should be allocated. But I also believe that market economies sometimes have market failures, and when these occur, there's a role for prudential -- not excessive -- regulation of the financial system. The two things that Greenspan got totally wrong were his beliefs that, one, markets self-regulate, and two, that there's no market failure.'

How could Mr. Greenspan have been so naïve, I ask, hoping to get a rise. 'Well,' says Mr. Roubini, 'at some level it's good to have a framework to think about the world, in which you emphasize the role of incentives and market economics . . . fair enough! But I think it led to an excessive ideological belief that there are no market failures, and no issues of distortions on incentives. Also, central banks were created to provide financial stability. Greenspan forgot this, and that was a mistake. I think there were ideological blinders, taking Ayn Rand's view of the world to an extreme.

'Again, I don't want to personalize things, but the last decade was one of self-regulation. But in the financial markets, without proper institutional rules, there's the law of the jungle -- because there's greed! There's nothing wrong with greed, per se. It's not that people are more greedy now than they were 20 years ago. But greed has to be tempered, first, by fear of losses. So if you bail people out, there's less fear. And second, by prudential regulation and supervision to avoid certain excesses.'

How does Mr. Roubini think the media has covered the financial crisis? 'The problem,' he says -- after first stating to me that he intends 'no offense!' -- 'is that in the bubble years, everyone becomes a cheerleader, including the media. This is the time when journalists should be asking tough questions, and I think there was a failure there. The Masters of the Universe were always on the cover, or the front page -- the hedge-fund guys, the imperial CEO, private equity. I wish there had been more financial and business journalists, in the good years, who'd said, 'Wait a moment, if this man, or this firm, is making a 100% return a year, how do they do it? Is it because they're smarter than everybody else . . . or because they're taking so much risk they'll be bankrupt two years down the line?'

'And I think, in the bubble years, no one asked the hard questions. A good journalist has to be one who, in good times, challenges the conventional wisdom. If you don't do that, you fail in one of your duties.'

Mr. Varadarajan, a professor at NYU's Stern School and a fellow at Stanford's Hoover Institution, is executive editor for Opinions at Forbes."

Juan Enriquez wants to grow energy

Juan Enriquez wants to grow energy | Video on TED.com:

Juan Enriquez challenges our definition of bioenergy. Oil, coal, gas and other hydrocarbons are not chemical but biological products, based on plant matter -- and thus, growable. Our whole approach to fuel, he argues, needs to change.

Juan Enriquez shares mindboggling new science

Juan Enriquez shares mindboggling new science | Video on TED.com:

Even as mega-banks topple, Juan Enriquez says the big reboot is yet to come. But don't look for it on your ballot -- or in the stock exchange. It'll come from science labs, and it promises keener bodies and minds. Our kids are going to be ... different.

Juan Enriquez thinks and writes about the profound changes that genomics and other life sciences will cause in business, technology, politics and society."

Prem Watsa's winning hand

Secrets to Watsa's winning hand

Peter J. Thompson, National Post FilesPrem Watsa says inflation "will be a worry a few years from now."

The year 2008 will go down as one of the worst for the economy, but it was the best year in the history of Canada's Fairfax Financial Holdings Limited. Its chairman and CEO, Prem Watsa, and his team, were among the few money managers who forecasted, and profited, from the economic catastrophe.

As a result, Fairfax has become one of North America's 10 largest property and casualty companies. Here are the highlights of its 2008 financial results.

-Fairfax's 2008 earnings were US$1.5-billion, making it Canada's most profitable corporation

-It posted record investment gains of US$2.72-billion

-Book value increased by 21%

-The year ended with US$1.56-billion in cash or cash equivalents in Fairfax's treasury

-Common shareholders' equity rose to US$4.9-billion from US$4.1-billion.

The net investment gains were the result of shorting stock indices, hedging existing common stock positions, buying credit default swaps (a form of insurance against bond decreases) and profits from sales of U. S. bonds.

What's most interesting, however, about Fairfax's huge success is its avoidance of any counter-party risk in terms of its credit default swaps. In other words, Fairfax bought these swaps from the world's three preeminent banks and required full collateralization. Others, by contrast, have found that the party who insured the bond prices went under and the profits with it.

In an exclusive interview with Prem Watsa yesterday we talked about the future, what stocks he has begun to invest in and other opportunities.

Q How did you avoid the counter-party risk with these swaps? A "We worried about the collateral that these people would have and the possible bankruptcy of banks and our counterparties. So we did these with Citibank, Deutschebank and Barclays Bank. We also, unlike anybody else, were concerned about this and the banks thought we were crazy. We wanted them to collateralize their obligation to us so they put treasuries into an account in our name, held in trust, in order to backstop their obligations to us. At one point, the collateral was US$1-billion.

"We had very little counter-party risk because we dealt with Citibank, which the US government would not let go under; with Barclays, which the U. K. would not let go under; and Deutschebank, which Germany would not let go under. But even if Citibank went bankrupt, we had the collateral. We also bought tradeable contracts so that we could sell them through the bank into the marketplace."

"We sold $12.6-billion of these swaps, the cost was $271.5-million and we're shocked at how much we got, which was $2.2-billion. The remaining $8.87-billion cost $161-million and have a value of $415-million."

"We think the major gains in the CDS contracts are over."

Q Does that mean you believe the

markets are at the bottom?

A "Bottom? Stock prices are down 50%, credit spreads are very wide in the U. S., and Obama has come with a very significant stimulus plan. The Treasury Secretary has a very thoughtful way of handling the banks and yet no one believes it's the bottom."

"Today we've some of the biggest actions by the U. S. government in terms of stimulus, interest rates at zero and nobody believes it'll have any impact."

Q What has to change to get out of this?

A "We still have to worry about deflation because, remember, while Obama and the U. S. government are spending this money, the rest of the economy -- businesses and individuals -- are deleveraging. [People] are saving, not expanding capacity; [they're] scared. It's also important to note that the U. S. federal government is only 20% of the economy. It's spending, but 80% of the economy is deleveraging."

"Demand is the issue and what we have to worry about. Also remember that in the last five years, half of the increase in consumer spending in the U. S. was home equity loans borrowed against appreciation of homes. And that's all gone. The ultimate test is will the 80% start spending and we will not know that for some time."

Q So does that mean it won't and that you are not investing again yet? A "We have been negative on common stocks for four or five years, and hedged our positions. But we stopped hedging in November and have bought long-term valuable, big companies with good, tested management such as Johnson & Johnson, Dell Computers, Kraft Foods, Wells Fargo, Intel and others. We believe these will pay off five years from now. We also like corporate and muni [tax-free municipal bonds] bonds."

"U. S. municipal bonds always sold at a lower yield than U. S. treasuries because one is tax-free and the other is taxable. In the fourth quarter, we were able to sell treasuries, yielding pre-tax 3% to 3.5%, and have been buying munis yielding an average of 5.75% after tax. This is unheard of. We bought munis guaranteed by Berkshire Hathaway [Warren Buffett's company]."

Q Will inflation come roaring back with all the spending by governments?

A "It's a potential problem in the future but right now the problem is demand -- excess capacity all over the place. It will be a worry a few years from now but not currently."

Q How long will it take for fear to disappear?

A "The U. S. reacts quickly, as opposed to Japan. But it's a question of pessimism, which means it's not a bad time to buy for the long term. We could have four or five years of difficult times. We really don't know."

Q Some call this the end of capitalism. What do you think?

A "No I don't see that. Obama believes in private markets. But we had 20 years without a recession, because of monetary policy, which is why this one is so severe. Recessions take out the excesses in the system by slowing things down, lowering stock market and housing values so interest rates come down and the correction occurs. But for 20 years we didn't have that."

dfrancis@nationalpost.com

Taxpayers Fear Government Running Out of Cash More Than IRS Audit

Rasmussen Reports™: The Most Comprehensive Public Opinion Site.:

Taxpayers Fear Government Running Out of Cash More Than IRS Audit

Sunday, February 22, 2009

Advertisement

An audit by the Internal Revenue Service has long been the nightmare scenario for most taxpayers. But in 2009, after bailouts and stimulus plans totaling trillions of dollars, there’s a bigger concern: a fear the government will run out of money before issuing taxpayer refunds.

Nearly half (47%) of the nation’s adults expect a tax refund this year. Of that group, 34% of them are at least somewhat concerned the government won’t have enough cash left to write a refund check. That figure includes 20% who are Very Concerned there will be no cash left for refunds (see crosstabs).

The worry is likely fed in part by reports that both California and Kansas have threatened to hold up state tax refunds this year because of budget shortages.

By way of comparison, only six percent (6%) of Americans are Very Concerned about an IRS audit. Another 10% are somewhat concerned. On this question, there is little difference between those who expect a refund and those who don’t.

On the question of having enough cash for refunds, entrepreneurs are more worried than government workers and those who work for someone else in the private sector. Younger adults and those with lower incomes are a bit more concerned than others.

Twenty-eight percent (28%) of investors are concerned about getting the refund they’re owed along with 39% of non-investors.

Government employees and entrepreneurs are more concerned about an audit than private sector employees and those who are retired.

An earlier survey found that 66% of Americans worry that the federal government will run out of money.

Voters oppose more government money being spent to prop up the banking industry or rescue the auto industry. Voters have mixed reactions to plans for providing mortgage subsidies for financially troubled homeowners.

Soros sees no bottom for world financial collapse

Soros sees no bottom for world financial collapse | U.S. | Reuters:

NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

'We witnessed the collapse of the financial system,' Soros said at a Columbia University dinner. 'It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom.'

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

'I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world,' Volcker said."

Ahmadinejad Vs. Netanyahu

IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Ahmadinejad Vs. Netanyahu

Ahmadinejad Vs. Netanyahu

By INVESTOR'S BUSINESS DAILY | Posted Friday, February 20, 2009 4:20 PM PT

Middle East: The global stage is set for a confrontation reminiscent of Churchill vs. Hitler and Reagan vs. Gorbachev. How long will Benjamin Netanyahu tolerate an Iranian nuclear threat before acting?

---

Iranian President Mahmoud Ahmadinejad clearly wants to do something with the olive branch President Barack Obama has extended to him — even if what he does is stuff it into a Shahab-3 ballistic missile and fire it at somebody.

Netanyahu: Will he step up on Iran?

At a mega-rally for the 30th anniversary of the Islamist revolution, Ahmadinejad echoed the president's phrase in regard to U.S.-Iran relations, "mutual respect," and conceded that the Obama administration wanted "to produce change and pursue the course of dialogue."

It is clear, Ahmadinejad added, that "the Iranian nation welcomes real changes."

But whatever grand Barack/Mahmoud summits lie ahead may have just been dealt a pre-emptive strike, courtesy of the Israeli electorate.

Bibi Netanyahu, former prime minister and current Likud Party leader, has just been asked by President Shimon Peres to form a new coalition government after the close results in the recent Knesset elections.

His coalition will undeniably be fragile, depending on the support of one or a handful of the Jewish state's tiny fringe parties. But Netanyahu used his first statement as prime minister-presumptive to send a powerful message to both Iran and the Obama administration.

To the shock of many, he pointedly refused even to mention the Palestinian peace process, which has been going nowhere of late. Nor was there, again clearly deliberately, any reference made to the so-called two-state solution, which those negotiations had been aiming to find.

Instead, the man who will soon once again lead the state of Israel spoke of "the gravest threat to our existence since the war of independence" — Tehran's Islamofascist regime, which for years now has been pursuing a uranium enrichment program it claims to be peaceful, but which even the United Nations diplomats who seek to appease Iran know to be an unprecedented danger to the free world.

Just as Netanyahu's rise back to power was announced, the U.N.'s International Atomic Energy Agency (IAEA) — the self-styled nuclear proliferation watchdog — announced the surprise discovery of an extra 209 kilograms of low-enriched uranium at Iran's Natanz nuclear facility.

That means the fanatical regime has finally reached "nuclear breakout" and possesses enough fissile material for a bomb. Such an amount of low-enriched uranium would allow the manufacture of as much as 25 kilograms of highly enriched uranium, enough fuel for one nuclear device of the type that destroyed Hiroshima in 1945.

The IAEA has been telling the world that Iran was six months to a year away from this threshold — another illustration of the agency's incompetence, its Nobel Peace Prize notwithstanding.

In fact, the IAEA doesn't even know how many centrifuges Iran is manufacturing. And considering the urgency of the Iranian nuclear threat, it is incomprehensible and outrageous that the rest of the world stands for its inspections taking place only once a year.

Adding to the gravity of the situation, the IAEA also reported that a new roof has been built over Iran's heavy-water reactor under construction at the city of Arak, southwest of Tehran, a facility the regime has refused to allow inspectors to examine.

And the U.N. agency has found that the uranium traces discovered at the Syrian facility bombed by Israel in 2007 did not originate from the Israelis' bombs, as Syria claims.

It all spells the deadliest of challenges ahead for the United States and the rest of the civilized governments of the world. It seems, however, that only one leader fully appreciates the threat. Like Churchill, Benjamin Netanyahu is calling on his political rivals to unite in a broad "national unity" coalition government.

In nullifying the Islamist nuclear threat it should not be only Israel that unites, but all of us.

DEBATE Immigration Policy

Thinking the Unthinkables:

Canadian Business, Maclean's & Microsoft present: Thinking the Unthinkables DEBATE 1 OF 6 Canadian Immigration Policy Should Canada adopt a more wide-open immigration policy, or should we be more focused on targeted immigration based on Canada's market needs?

THE DEBATERS
	James Bissett Former head of Canadian Immigration Services		Andrew Coyne National Editor, Macleans
Moderated by: Steve Maich - Executive Editor of Macleans

Peggy Noonan: Dynamism Isn't Dead

Peggy Noonan: Dynamism Isn't Dead - WSJ.com:

Remembering the Dawn of the Age of Abundance
Times are hard, but dynamism isn't dead.
By PEGGY NOONAN

Monday morning, 11:30:39 Eastern Standard Time, and I had just hit send. I was in a wide-body 767, high above the continent. 'This is so exciting,' I wrote to a friend. 'I am on an airplane going over the Rockies. I am sending you an email. Down there the settlers went in covered wagons. Up here on American Airlines flight something to L.A., I am surfing the Internet. There are ruts baked into the soil down there from the heavy wagons pushing west. I have never been on Wi-Fi on a plane before. I am looking down at the Rockies. 'These are the days of miracles and wonders.' ' My friend, an Internet pioneer, a brave and steely-eyed entrepreneur, shot back a reply: 'We fly higher than mere birds can fly.' When I got home, I taped our exchange to a bookcase near my desk. In hard times we should not forget the magic of life, and the mystery.

I thought on the plane, for the first time in a long time, of the feeling of awe I had in 1990 and '91 and '92. I heard a man named Nathan Myhrvold speak of a thing called Microsoft. I saw a young man named Steve Jobs prowl a New York stage and unveil a computer that then we thought tiny and today we'd call huge. A man named Steve Wozniak became a household god as my son reported his visionary ways. It was a time so full of genius and dynamism that it went beyond words like 'breakthrough' and summoned words like 'revolution.' If you were paying attention, if you understood you were witnessing something great, the invention of a new age, the computer age, it caught at your throat. It was like hearing great music. People literally said what had been said in the age of Thomas Edison: 'What will they think of next?' What a buoyant era.

And for a moment, as I sent and received my first airborne Wi-Fi emails, I was back there. And I was moved because I realized how much I missed it, how much we all do, that 'There are no walls' feeling. 'Think different.' 'On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like '1984.' ' That was 25 years ago. The world was on fire.

It has cooled. And the essential problem with the crash we're in is no one can imagine quite feeling that way again. People can remember it, but they can't quite resummon it.

This isn't like the stock market crash of 1987 or the collapse of the dot-com bubble in 2001. People are not feeling passing anger or disappointment, they're feeling truly frightened.

The reasons:

This isn't stock market heebie-jeebies, it's systemic collapse.

It's not just here, it's global.

It's not only economic, but political. It wasn't only mortgage companies that acted up and acted out, so did our government, all the governments of the West, spending what they didn't have, for a decade at least.

And at the center of the drama is your house—its worth, or its ability to see you through retirement, or your ability to hold onto it. An extra added angst bonus: Those thinking now about retirement are just old enough to remember America before the abundance, before everyone was rich, rich being defined as plenty to eat, a stable place to live, and some left over for fun and pleasure. For them, the crash has released old memories. And it's spooking people.

Have you witnessed a foreclosure, or seen the growing log of pictures on the Internet? It happened to my family when I was a kid, and I didn't know how much it was with me until a woman in Los Angeles the other day mentioned she had a new chocolate Lab she'd adopted from a shelter. He'd been left behind when a family was foreclosed on. 'They left him in the house with a bowl of water and a tennis ball.' A neighbor heard him, saved him, and now he was hers. This story hurt like an old wound. There are a lot of such wounds out there. It's part of why people are hunkering down.

The best report on how the young are experiencing it all came this week from the Web site Boing Boing, from the writer Cory Doctorow, who asked readers, 'How are you coping with collapse-anxiety?' He wrote, 'For me, I think it's the suspense that's the killer. What institutions will survive? Which ones are already doomed? Which of the items in my calendar are likely never to come to pass? Will my bank last?' He continued, 'What are you telling yourself? How are you all sleeping at night? Are you hedging your bets with canned goods and shotguns, or plans for urban communal farming? Are you starting a business? Restructuring through bankruptcy? Moving back in with your parents?'

His readers wrote back, creating a stunning thread that said, essentially, all of the above, and more. They went from the wry—one reader is 'drinking more . . . feeling disconnected from reality . . . watching more TV and movies'—to the tough—one said, 'When the world turns crazy the crazy turn pro.' A number were moving in with relatives. In fact it sounded like the old days, before the abundance. Some were planting gardens. One said he was learning the ukulele so he could be a wandering minstrel. Mr. Doctorow told me the reaction was 'stupendous' not only in terms of numbers but in terms of seriousness: These were people truly sharing their anxieties.

All of this hunkering down has stopped the great churning, the buying, selling and buying that was at the heart of our prosperity. In private equity firms, the churning was life. They bought a company, removed the fat, sold it at a profit, and bought another one. They kept moving. That's over. No one is buying now, and no one can sell.

Perhaps the biggest factor behind the new pessimism is the knowledge that the crisis is not only economic but political, that we'll have to change both cultures, economic and political, to turn the mess around. That's a tall order, and won't happen quickly. One thing for sure: Our political leaders for at least a decade, really more, have by and large been men and women who had fortunate lives, who always seemed to expect nice things to happen and happiness to occur. And so they could overspend, overcommit and overextend the military, and it would all turn out fine. They claimed to be quintessentially optimistic, but it was a cheap optimism, based more on sunny personal experience than any particular faith, and void of an understanding of how dark and gritty life can be, and has been for most of human history.

I end with a hunch that is not an unhappy one. Dynamism has been leached from our system for now, but not from the human brain or heart. Just as our political regeneration will happen locally, in counties and states that learn how to control themselves and demonstrate how to govern effectively in a time of limits, so will our economic regeneration. That will begin in someone's garage, somebody's kitchen, as it did in the case of Messrs. Jobs and Wozniak. The comeback will be from the ground up and will start with innovation. No one trusts big anymore. In the future everything will be local. That's where the magic will be. And no amount of pessimism will stop it once it starts."

Lincoln supported Abolition, not racial political and social equality

Gmail - FORA.tv this week - Bright Lights, Big Screens, and Abraham Lincoln

Henry Louis Gates Jr.: Lincoln supported Abolition, not racial political and social equality.

The Great Emancipator was initially a supporter of repatriating slaves to Africa. | 00:04:05 | Click to View Program