Archive for March, 2011
Two women confronted the ruins that had been their neighborhood in Rikuzentakata, Japan, as they returned to try to retrieve their belongings on Tuesday.
TOKYO — After workers switched on the first set of control room lights at Japan’s crippled power plant in Fukushima last week, the Japanese government offered its strongest assurances yet that its nuclear crisis was close to being under control.
Heroic workers and firefighters continued to cool the volatile reactors by pumping in hundreds of tons of water a day. Much-awaited electricity had reached the plant after a rush to extend new power lines, ready to hook up to vital cooling systems and guide the plant to a long-term “cold shutdown.”
But less than a week later, a deluge of contaminated water, plutonium traces in the soil and an increasingly hazardous environment for workers at the plant have forced government officials to confront the reality that the emergency measures they have taken to keep nuclear fuel cool are producing increasingly dangerous side effects. And the prospect of restoring automatic cooling systems anytime soon is fading.
The recent flow of bad news from the Fukushima Daiichi Nuclear Power Station has undermined the drumbeat of optimistic statements by government and company officials who have at times tried to reassure a nervous public that significant progress is at hand — only to come up short.
“The earthquake, tsunami and the ensuing nuclear accident may be Japan’s largest-ever crisis,” the Japanese prime minister, Naoto Kan, told Parliament on Tuesday, in his most sober message to date on the nuclear crisis. “We find ourselves in a situation where we can’t let down our guard. We will continue to handle it in a state of maximum alert.”
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In a great article published 28 March on why the European Union is doomed to collapse or total transformation – into what? - Charles Hugh Smith shows the explain-it-all chart, below. One important fact is this economic model is a convergent and globalized “no alternative”. Countries that don’t play this game are almost inexistent, for example the paranoid police state of North Korea.
The EU collapse-or-transform endgame of today only reflects the harsh realities of this one-only model and is only a subset of the bigger game: the globalized no alternative economy. This has its own subset components. First we have the 30-member OECD group of rich nations including the EU27 countries. These countries are furthest along the development path to the single goal of urban “postindustrial” economies and their consumer society.
In the first economic metric since the Japanese earthquake struck, Japanese manufacturing activity slumped to a two-year low in March and posted its steepest monthly decline on record, confirming all the worst fears about supply chain disruptions and production operations, according to the Japanese PMI released on Thursday. From Need to Know News: “The 6.5-point drop in March was the largest on record, surpassing the falls seen after the collapse of Lehman Brothers in September 2008 and the U.S. terror attacks in September 2001, MarkIt Economics said, adding that the March PMI index was the lowest since 41.4 marked in April 2009. Kohei Okazaki, economist at Nomura Securities, said March industrial output due out on Apr. 28 is expected to show a m/m fall of at least 10%. The PMI index is closely correlated to industrial output released by the Ministry of Economy, Trade and Industry. Markit, a UK-based research firm, conducted the latest survey between March 11 and March 25, and only 67% of those polled responded. It releases manufactures PMIs for 25 areas in the world every month.” And in addition to all the collapse in all output metrics, adding insult to injury is the confirmation that inflation is now ravaging the land: the input price index increased to 65.2, the highest since September 2008, due to higher costs of raw materials such as crude oil and naphtha. It now appears that Japan is about to have the worst stagflationary episode in its history ever.
The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 46.4 in March, the lowest since April 2009 and down from February’s 52.9.
The data provided one of the first quantitative assessments of the severe damage to production from the March 11 quake and tsunami in northeast Japan, which triggered a nuclear safety crisis and widespread power shortages.
“The impact from the power outage, supply chain disruption and a halt of many factories’ activity after the quake is large. There is a possibility that the PMI index will further weaken,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.
“It is a major issue now how the nuclear crisis develops, and stock market players are also closely watching it. The
outlook for business activity depends on progress in reconstruction and recovery.”
Japan’s government is struggling to contain the world’s worst nuclear crisis in 25 years that triggered wide power outage, while carrying out a huge humanitarian relief effort following the March 11 quake and tsunami that devastated coastal areas of northeast Japan and left 27,500 people dead or missing.
It is set to compile several extra budgets to cope with the disaster with the first likely due next month but it will initially focus on urgent steps such as construction of temporary housing, leaving markets few clues about when reconstruction demand will start to give a much needed lift to the economy.
In the survey, the headline index slipped below the 50 threshold that separates contraction from expansion for the first time in three months, while the extent of the drop from the previous month exceeded those seen after the attacks of Sept. 11, 2001, and the collapse of Lehman Brothers in 2008.
“Suppliers’ delivery times lengthened at a survey record pace amid widespread disruption in the supply chain resulting from the disaster,” said Alex Hamilton, economist at Markit.
“These delays could affect production in coming months and drive input price inflation even higher than the two-and-a-half year peak seen in March.”
The output component of the PMI index dropped to a two-year low of 37.7 in March from 53.9 in February, logging the fastest decline on record with a number of respondents saying rolling blackouts and logistical problems in their supply chains restricted production, the survey showed.
The index for new orders also dropped to a two-year low of 39.6 from February’s 54.3. Some manufacturers responded that customers had to cancel or postpone orders.
The first phase of the Keynesian fanatics is now confirmed: the Japanese economy is devastated. And now we await to see whether they will be correct about the second phase, or that of the Phoenix rising from the radioactive ashes. Somehow we doubt there will be much if any recovery here for years.
- Japan’s economy: An ugly first look at the quake’s impact (curiouscapitalist.blogs.time.com)
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Phoenix Capital Research
I want to take a moment to address the US Dollar’s collapse.
The US Dollar which most investors follow is the US Dollar index. This represents the US Dollar’s value against a basket of major currencies: the Euro, Japanese Yen, etc.
Think about that for a moment: the way we measure the US Dollar’s value is against a collection of other un-backed paper currencies all issued by over-indebted, bankrupt nations.
In other words, its nonsense.
Case in point, the Euro comprises over 50% of the US Dollar index. What’s the Euro? A currency backed by a loose group of bankrupt nations with maybe two solvent members in the bunch. Greece has already asked for an extension on its bailout repayments (like they’re ever going to repay anything), Spain is bankrupt, ditto for Ireland, Italy, Portugal, and others.
As for the more solvent European members (Germany and maybe France) their political leaders are getting crushed in the elections because NOBODY who actually works for a living (or has a working brain) wants in on the Euro.
So in Europe we’ve got one perhaps two solvent countries that are supposed to bailout 5+ insolvent ones (like that’s even possible). And the solvent countries are comprised of people who want no part of the Euro.
Man, now that’s what I call a real currency.
In simple terms, to claim the Euro is a viable currency is pure insanity. And yet, this “currency” comprises 50% of the US Dollar index (not as though the Yen or US Dollar are worthwhile either).
My point in all of this is that measuring the greenback using the Euro is insane. 100% totally insane. Which is why claiming the US Dollar is not collapsing is BS. If you actually go outside the US (which 99% of commentators don’t) you’ll find that the US Dollar is worth much less than the Dollar index is telling you.
I was recently on a trip to South America looking at real estate. While there I was told repeatedly by developers that they didn’t want to sign a contract in US Dollars. Instead they wanted to do it in the local currency. This has NEVER happened before during my trips abroad (even as recently as 2009).
When I pushed for having contracts based in Dollars, the price went up EVERY week.
The reason? The US Dollar is falling in relation to the local currency on a daily basis.
So here are local businessmen, (not economists or analysts), people who actually work for a living, refusing to accept US Dollars during business transactions.
That alone should tell you just where the US Dollar stands on the international stage.
In plain terms, the US Dollar crisis is already underway. If you ignore the stupid headlines and pay attention to the real world you can already see it. Prices of goods are EXPLODING higher. It’s being hidden because retailers are downsizing the size of their packages OR packing less goods in the same space (look inside any cereal box or other dry good and you’ll find that at best it’s 75% full).
So if you think things are fine because the US Dollar chart shows we still have a few lines of support, you’re being mislead. The US Dollar is worth far, far less than the chart shows you. So if you want to prepare yourself for a currency crisis you need to move now.
On that note, if you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
PS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.
You can access this Report at the link above
In a letter focusing on what has been well known to Zero Hedge readers for about two years now, Bill Gross’ latest investment outlook does the usual attack of Beltway stupidity (as if Congress is in any way competent of making math-related decisions – they do what Wall Street – that’s you Bill! – tell them to do, and you know it), emphasizing the impossible math of total US entitlement liabilities (on a net present value basis), which Gross estimates at $75 trillion. That Gross conclusion is predetermined from the onset is not surprising: “Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates.” Then again, that America is bankrupt is not really news to anyone. Neither is it news, that Gross, as we first reported, no longer has any US bonds to dispose of. What will be news is the inflection point at which Gross starts purchasing Treasuries once again. And after all with $220 billion in AUM in the Total Return Fund, what else will he do: hold on to cash? Buy Netflix? Then the only question will be how Gross spins the inevitable capitulation of the re-hypocrisy trade, validating that he, in a narrow sense, and PIMCO in a broad one, is perhaps the biggest cog in the very system that Bill spends so many hours writing letters about and complaining against. But yes, even that won’t be all that surprising to us. After all, in this bizarro world absolutely everything is now priced in.
- Medicare, Medicaid and Social Security now account for 44% of total federal spending and are steadily rising.
- Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden.
- Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.
That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favorite cartoon characters. There’s something affable, even romantic about him as he seeks to woo his female companions with a French accent and promises of a skunk bungalow and bedrooms full of little Pepés in future years. It’s easy to love a skunk – but only on the silver screen, and if in real life – at a considerable distance. I think of Congress that way. Every two or six years, they dress up in full makeup, pretending to be the change, vowing to correct what hasn’t been corrected, promising discipline as opposed to profligate overspending and undertaxation, and striving to balance the budget when all others have failed. Oooh Pepé – Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid the Congress. Perhaps they don’t have black and white stripes with bushy tails. Perhaps there’s just a stink bomb that the Congressional sergeant-at-arms sets off every time they convene and the gavel falls to signify the beginning of the “people’s business.” Perhaps. But, in all cases, citizens of America – hold your noses. You ain’t smelled nothin’ yet.
This page collects information for a general audience related to EFF’s class action lawsuit against AT&T.
In Hepting v. AT&T, EFF sued the telecommunications giant on behalf of its customers for violating privacy law by collaborating with the NSA in the massive, illegal program to wiretap and data-mine Americans’ communications.
Evidence in the case includes undisputed evidence provided by former AT&T telecommunications technician Mark Klein showing AT&T has routed copies of Internet traffic to a secret room in San Francisco controlled by the NSA.
In June of 2009, a federal judge dismissed Hepting and dozens of other lawsuits against telecoms, ruling that the companies had immunity from liability under the controversial FISA Amendments Act (FISAAA), which was enacted in response to our court victories in Hepting. Signed by President Bush in 2008, the FISAAA allows the Attorney General to require the dismissal of the lawsuits over the telecoms’ participation in the warrantless surveillance program if the government secretly certifies to the court that the surveillance did not occur, was legal, or was authorized by the president — certification that was filed in September of 2008. EFF is planning to appeal the decision to the 9th U.S. Circuit Court of Appeals, primarily arguing that FISAAA is unconstitutional in granting to the president broad discretion to block the courts from considering the core constitutional privacy claims of millions of Americans.
More on Hepting:
More on EFF’s Case Against the NSA
More on NSA Spying:
Image by @mjb via Flickr
~will bring you shareholders soon~
By Bob Sechler_WSJ
General Electric Co.’s energy unit agreed to pay $3.2 billion in cash for a controlling stake in French power-conversion company Converteam, a deal that beefs up GE’s technology offerings in the oil-and-gas and renewable-energy sectors.
The acquisition marks GE’s latest in a string of deals over the past six months — totaling $11 billion — aimed at expanding its energy business. Among them, GE agreed in February to buy the well-support division of John Wood Group PLC for $2.8 billion, and it agreed in October to buy Dresser Inc., a maker of energy-infrastructure products, for $3 billion.
“This pace of $11 billion [in energy-sector acquisitions] over six months will not continue,” GE Vice Chairman John Krenicki Jr. said in an interview. “The top priority is to run what we’ve bought.” Still, Mr. Krenicki, who heads GE’s energy business, didn’t rule out additional deals if good opportunities arise.
Converteam, of Massy, France, makes drives and other power electronics, advanced rotating machines and controls that can be used to turn mechanical power into grid-quality electricity, among other things. It is owned by a group that includes company management; Barclays Private Equity, a unit of Barclays PLC; and private-equity firm LBO France.
Drowning Liquidity Flood
By Mike Endres / FinancialSense.com
Something is going on behind the scenes in the normally secretive back vaults of the Washington based funny farm called the “Federal Reserve”.
Thanks to the St. Louis Fed’s economic research unit, we have various data, graphs and information published from daily to monthly, depending upon the data being displayed. By perusing this data farm, one can get a fair (perhaps not good – but fair) idea of the actual actions of the Federal Reserve which, in all cases, is far better than relying on what the Federal Reserve Chairman says. The two rarely match.
Let’s take a look at the chart (BASE) of the base money supply in the USA, calculated bi-weekly, I believe. First we see what happened during the financial meltdown of 2008.
This chart – shaded to indicate all the action taking place during an “official” recession – shows the absolutely horrifying money pumping that flooded the banks with liquidity (i.e. bailout) to prevent the free market from punishing those TBTF banks for their admittedly criminal acts of fraud through the creation, sale and short sales of MBS, CDOs, and ABCs of all kinds and types.
The Federal Reserve just dumped money on the fire to put it out. Or delay it.
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by a shadow bailout of residential real estate and commercial real estate. The continuing hidden CRE bailout imperils future economic growth…
The biggest silent financial bailout going on in the nation revolves around commercial real estate. Commercial real estate (CRE) values have plummeted $3 trillion from their peak in 2008. While residential real estate values peaked in 2006 CRE waited two more years before moving lower. The two year lagged occurred because many banks, especially local regional banks have held onto trillions of dollars of CRE loans that have now lost nearly half their value. This includes hotels without adequate demand, empty shopping centers, and multi-use projects that really have little market demand in a country facing a debt base recession. Ultimately CRE had to come down to reflect the values of what people could afford. As it turns out when the average income is $25,000 in the U.S. there is little discretionary income on a per capita basis to spend day and night at the local shopping mall. We have all heard of the residential real estate bailout since this seems to be the message coming from the banks and government yet little is ever mentioned about this $3 trillion industry that is benefitting just as much.
The Federal Reserve bails out CRE without your knowledge
The biggest continuing bailout is occurring through the Federal Reserve. The Fed has allowed banks to suspend mark to market accounting so many institutions are merely rolling over CRE debt and allowing borrowers to renew loans even if they currently are non-paying. Most Americans do not have the luxury to stop paying on their medical bills, student loans, or car payment. It is better for a bank to pretend that their CRE is worth a peak value even if no money is coming in. This carefully mapped out calculus is problematic and the only way this can occur is if the bank of all banks, the Federal Reserve allows this to occur. The Fed has massive oversight and regulatory jurisdiction if it wishes to enforce any actions on the banks. Instead it continues to purchase mortgage backed securities and even today, the Fed is at the peak of their balance sheet: