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Japan struggles to rebuild

Insight: Japan struggles to rebuild, leaving lives in limbo | Reuters.

Severe storms hit the Midwest on Saturday and are expected later in the Northeast, where flash flooding killed at least four people in Pittsburgh on Friday.

Heavy rains submerged cars in flood water that was nine feet deep in places in Pittsburgh, authorities said.

A mother and her two daughters died when water engulfed their vehicle in a low-lying section of the city’s Washington Boulevard near the Allegheny River.

Kimberly Griffith, 45, and her daughters Brenna, 12, and Mikaela, 8, were pronounced dead at the scene, a spokeswoman for the Allegheny County medical examiner’s office said.

The water pinned their vehicle to a tree and they were unable to escape, authorities said.

Also recovered after the flood was the body of Mary Saflin, 72, who had been reported missing earlier, according to the Allegheny County medical examiner’s office.

The Philadelphia area was also soaked by heavy thunder showers Friday, bringing a record rainfall of 12.95 inches for August, close to the record for any month, according to NWS meteorologist Lee Robertson.

The previous record is from September 1999, set when a hurricane pushed rainfall to 13.07 inches.

As more storms were forecast for the region Sunday, the NWS warned in a flood advisory that nearly half of all flood fatalities are vehicle-related.

“As little as six inches of water will cause you to lose control of your vehicle,” the NWS stated.

MORE STORMS

The Weather Channel forecast more storms from the Great Lakes to the Central Plains into Saturday night.

One man died as storms and a tornado roared across northern Wisconsin Friday night, cutting an 8-mile-wide swath 65 miles north of Green Bay and taking out power to around 2,000 homes, officials said.

Douglas Brem, 43, was staying in a rented trailer at a recycling center in the path of the storm, which caused extensive damage to homes, Marinette County Coroner George Smith said.

A fierce thunderstorm in the Chicago area Saturday suspended the Chicago Air & Water Show until about 2 p.m., leaving time for a condensed show. The two-day free annual event was expected to attract around 2 million spectators.

Saturday’s thunderstorm threat will shift to the Northeast Sunday.

The Southeastern Virginia Hampton Roads region was spared from severe storm activity, but smoke from a 6,000-acre fire in the Great Dismal Swamp continues to plague the region down into North Carolina.

Virginia’s Environmental Quality Department downgraded Friday’s air quality red alert in some areas to orange, advising of possible health problems for sensitive individuals.

(Additional reporting by John Rondy in Milwaukee, Cynthia Johnston in Las Vegas, Matthew A. Ward in Chesapeake, Va., David Warner in Philadelphia; Writing by Molly O’Toole and Mary Wisniewski; Editing by Jerry Norton)

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ACTION PLAN NEEDED

<span class="articleLocation”>More than five months after a massive magnitude 9.0 earthquake and a deadly tsunami ravaged Japan’s northeast coast, the nation has yet to come up with a detailed action plan and the money needed to rebuild the devastated areas.

The following is a summary of where Japan’s rebuilding efforts stand.

DEATH TOLL, EVACUEES AND SHRINKING WORKING-AGE POPULATION

— About 15,690 were killed, 4,740 are missing, and 5,710 were injured.

— Many of about 5.6 million residents of the three prefectures worst hit by the March disaster have lost their homes and the number of evacuees peaked at more than 475,000 on March 14.

— Some 9,900 still live in evacuation shelters while 34,100 are staying in hotels or with relatives or friends and about 40,000 live in temporary housing.

— Japan’s northeast is aging faster than other area of a country whose population is already graying at a rapid pace. By 2030, 31.6 percent of the population is expected to be above 65 in Tohoku, whereas the country-wide estimate is 29.6 percent.

According to BNP Paribas estimates the region’s working population shrunk 8.4 percent over the past 15 years and is expected to decline by further 12.6 percent over the next decade.

RUBBLE

— The quake and tsunami left an estimated 22.6 million tonnes of rubble in the coastal towns. Out of that, nearly half has been moved to temporary storage destinations.

— By end-August, the government aims to remove debris from areas where people live and work and this goal is likely to be met. But removal of all rubble and dismantling of damaged buildings will take months, if not years, and the government aims to dispose the stored rubble by end of March, 2014.

ECONOMIC DAMAGE

— The quake and tsunami destroyed supply chains given that the northeast is home to many manufacturers. Japan’s gross domestic product fell 0.9 percent in the first quarter, tipping the economy into its second recession in three years. But in the second quarter, the economy shrank much less than foreseen as companies made strides in restoring output and is expected to bounce by 1.2 percent this quarter — probably the best performance among major industrialized nations.

— The government initially estimated the material damage from the March 11 disaster at 16-25 trillion yen ($190-$300 billion) but later lowered it to 16.9 trillion yen ($210 billion). The estimated damage is roughly double that from the 1995 Kobe earthquake.

EMERGENCY BUDGET FOR RELIEF

— The government enacted its first extra budget of 4 trillion ($50 billion) in May, and its second emergency budget of 2 trillion ($25 billion) in July.

— The government hopes to pass the third extra budget by the end of September under a new prime minister, though whether this can materialize so quickly is unclear.

DAMAGE TO FISHING AND FARMING

— Northeast Japan is known for fishing and farming. Damages in the fishing industry are estimated at 1.23 trillion yen. About 320 fishing ports, or 11 percent of all fishing ports in Japan, have been closed due to the March disaster and it would take at least another decade for full operations to resume at these ports.

— About 2.6 percent of the total farm area in Japan, or 23,600 Ha, has been washed away or submerged due to the disaster.

AID MONEY

— The Japanese Red Cross Society has so far collected 259 billion yen in relief money. Out of this, about 48 percent has been distributed to disaster victims, while the remaining amount is stuck at overburdened local governments.

(Sources: The Cabinet Office’s Reconstruction Headquarters in response to the Great East Japan Earthquake, Environment Ministry, Fukushima Prefecture, Miyagi Prefecture, Statistics Bureau, Fisheries Agency, Farm Ministry, Japanese Red Cross Society, Cabinet Office, National Police Agency, Tohoku Trade department)

(Reporting by Yuko Takeo; Additional reporting by Yoko Kubota)

 

Poorer Nations Are Leaders Toward Low Carbon Energy

Poorer Nations Lead Global Movement Toward Low Carbon Energy: Scientific American.

Poor countries have spent just as much as rich ones — and in the case of China, more — to develop low-carbon energy, according to a study coming out this week. Its conclusions could turn the conventional wisdom about the differences among nations over mitigation efforts on its head.

The report by former World Bank economist David Wheeler, who now leads the climate change division at the think tank Center for Global Development, finds that China spent 94 cents of every $10,000 of average income on clean energy between 1990 and 2008. The United States, by contrast, spent 44 cents of every $10,000.

Meanwhile, all other industrialized countries combined spent only a penny more per year than their less developed counterparts.

“We all had this idea that [climate change] was a rich country problem and that poor countries shouldn’t have to do anything until they get to a certain stage of development, and that rich countries need to make it worth their while. But what I had seen suggested [was] that poor countries were already doing a lot,” Wheeler said.

The data bore that out. Wheeler examined International Energy Agency data for 174 countries on investments in six low-carbon power sources (hydro, geothermal, nuclear, biomass, wind and solar) to find the incremental costs of clean power compared to a cheaper, carbon-intensive option like a conventional coal-fired power plant. He then computed the average income share in countries to compare how much people in poor countries are paying for carbon mitigation compared to those in rich nations.

“Lo and behold, you get a world in which the shares that poor countries have been devoting to low-carbon technologies over the past 18 years is really comparable to the rich countries,” Wheeler said.

The study comes as countries continue to debate whether to develop a new international climate change treaty. Developing countries, which currently are not obligated to curb emissions, have long argued that they should not be required to help solve a problem caused by industrialized nations.

Many maintain that they also have “atmospheric rights” — that is, the right to pollute — in order to develop. Wealthy countries, meanwhile, argue that fast-growing developing countries like China and India are not doing enough to mitigate emissions. U.S. lawmakers in particular have argued that cutting carbon would put America at a competitive disadvantage to China.

Developing nations attracted to hydropower
But the fact is, countries are working steadily to develop clean energy. And, Wheeler’s study argues, they’ve been doing so for a long time.

Since 1990, developing countries have accounted for 55 percent of the global increase in low-carbon energy generation, he found. China accounted for 15 percent of it alone.

In fact, because of the growth of hydroelectric generation in particular, developing nations like the Kyrgyz Republic, Bhutan, Mozambique, Paraguay and Zimbabwe crowd out the few top-spending developed countries like Iceland, Germany and Finland.

Tajikistan actually tops the list, spending $12.27 for the incremental costs of clean energy for every $10,000. But Wheeler noted that might be an anomaly because the country underwent a civil war. A push in hydro development in 1992-1993 might have been a restart of war-idled energy capacity rather than new development, he noted.

Iceland is the only high-income country in the top 10 list. With a gross domestic product per capita of $29,752, the country spends $11.56 per person annually — mostly on geothermal power. But the Kyrgyz Republic, with a per capita GDP of just $1,634, has spent only slightly less — $11.22 per person.

Wheeler said he purposely included the controversial energy sources hydro and nuclear. While environmental groups fighting for action on climate change don’t like to include those options, Wheeler said he felt it was important to look simply at what sources produce low or zero emissions. At the same time, he argued, despite the safety risks and environmental hazards posed by nuclear and large hydro, respectively, the climate would be in far worse condition had countries not developed those sources.

 

“They’re a huge part of this story,” Wheeler said. “If poor countries hadn’t gone down that road, our carbon emissions would be now far higher than they are, and it would be growing every day much worse than it is.” He also didn’t try to tease out a country’s motive for developing low-carbon energy, since in virtually every case, it had little or nothing to do with climate change.

Flying under the accounting radar
Derek Scissors, a research fellow in the Asian Studies Center at the Heritage Foundation, questioned whether looking at the past decades is a useful comparison, particularly for hydro development, since industrialized countries like the United States built their dams decades ago.

But he also objected to thinking about the climate debate, or the spending necessary to reduce emissions, in terms of developed versus developing countries. Rather, he said, the discussion should be among major emitters of the past, present and future.

“Why would we think that one country should spend as much on clean energy as another country? Why should a country with low emissions do as much?” he said. “It starts from a false premise that the discussion is developing versus developed, which is just another way of saying rich versus poor. But that’s not how to address the problem. That just immediately starts this as a redistribution effort.”

Wheeler said he also thinks the equity argument needs to be put to rest, but that countries like the United States need to realize that long-held arguments that China is not doing enough to mitigate greenhouse gas emissions don’t hold water. He noted that the 94 cents per $10,000 average income that China spent compared to America’s 44 cents looks like an even wider gap when the income is factored in. China’s average GDP per capita for that time period was $2,860, while the United States’ was $37,640.

“What I see is, I have a really rich country that seems to be spending less than 20 percent per unit of income that what China is spending. There’s no possible way I can judge that as reasonable,” Wheeler said.

Developing countries as whole, he said, “have been doing a lot all along. We just haven’t been doing the accounting right.”

* Countries’ spending on low or zero-carbon energy (hydro, geothermal, nuclear, biomass, wind and solar) from 1996 to 2008, calculated as a share of their average income.

Source: Center for Global Development.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

High-speed trading algorithms place markets at risk

One Per Cent: High-speed trading algorithms place markets at risk.

Jacob Aron, technology reporter

Computers that buy and sell shares in a fraction of a second are in danger of destabilising stock markets around the world says Andrew Haldane, executive director for financial stability at the Bank of England. Speaking last night at the International Economic Association in Beijing, China, Haldane said that High Frequency Trading (HFT) firms were in a “race to zero” that could increase market volatility.

HFT algorithms can execute an order in just a few hundred microseconds, rapidly trading shares back and forth in order to quickly eke out profits from minor differences on the various exchanges. These trades are so fast that the physical location of the computers executing them becomes vital – even being a few hundred kilometres away from the exchange could mean missing out. It’s commerce far removed from any ordinary experience, as Haldane illustrated with an every day example: “If supermarkets ran HFT programmes, the average household could complete its shopping for a lifetime in under a second.”

Now it seems this lightning-fast trading could come at a cost. Haldane blamed HFT for causing the “Flash Crash” which occurred on US markets last year, with the Dow Jones losing $1 trillion in just half an hour. The event was marked by trading oddities such as management consulting firm Accenture shares falling from $40 to $0.01, while auction house Sotheby’s rose from $34 to $99,999.99 – the lowest and highest values permitted by HFT algorithms.

Haldane said that the latest research shows that while HFT increases liquidity when markets are functioning normally, it has the opposite effect during more troubled times. He also built on work by Benoit Mandelbrot, the mathematician famous for inventing the word “fractal” for patterns with self-similarity. Mandelbrot showed that stock trading can also display fractal behaviour, and Haldane last night said that HFT algorithms cramming more and more trades into this fractal structure could lead to the kind of pricing abnormalities seen during the Flash Crash.

The solution? Introduce new rules to limit the speed of HFT. “Flash Crashes, like car crashes, may be more severe the greater the velocity,” said Haldane. “Grit in the wheels, like grit on the roads, could help forestall the next crash.”

ForeclosureGate Could Force Bank Nationalization

t r u t h o u t | ForeclosureGate Could Force Bank Nationalization.

by: Ellen Brown, t r u t h o u t | News Analysis

photo
(Photo: Joey Parsons / Flickr)

For two years, politicians have danced around the nationalization issue, but ForeclosureGate may be the last straw. The megabanks are too big to fail, but they aren’t too big to reorganize as federal institutions serving the public interest.

In January 2009, only a week into Obama’s presidency, David Sanger reported in The New York Times that nationalizing the banks was being discussed. Privately, the Obama economic team was conceding that more taxpayer money was going to be needed to shore up the banks. When asked whether nationalization was a good idea, House Speaker Nancy Pelosi replied:

“Well, whatever you want to call it…. If we are strengthening them, then the American people should get some of the upside of that strengthening. Some people call that nationalization.

“I’m not talking about total ownership,” she quickly cautioned – stopping herself by posing a question: “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?'”

Noted Matthew Rothschild in a March 2009 editorial:

[T]hat’s the problem today. The word “nationalization” shuts off the debate. Never mind that Britain, facing the same crisis we are, just nationalized the Bank of Scotland. Never mind that Ronald Reagan himself considered such an option during a global banking crisis in the early 1980s.

Although nationalization sounds like socialism, it is actually what is supposed to happen under our capitalist system when a major bank goes bankrupt. The bank is put into receivership under the FDIC, which takes it over.

What fits the socialist label more, in fact, is the TARP bank bailout, sometimes called “welfare for the rich.” The banks’ losses and risks have been socialized, but the profits have not. The bankers have been feasting on our dime without sharing the spread.

And that was before ForeclosureGate – the uncovering of massive fraud in the foreclosure process. Investors are now suing to put defective loans back on bank balance sheets. If they win, the banks will be hopelessly under water.

“The unraveling of the ‘foreclosure-gate‘ could mean banking crisis 2.0,” warned economist Dian Chu on October 21, 2010.

Banking Crisis 2.0 Means TARP II

The significance of ForeclosureGate is being downplayed in the media, but independent analysts warn that it could be the tsunami that takes the big players down.

John Lekas, senior portfolio manager of the Leader Short Term Bond Fund, said on “The Street” on November 2, 2010, that the banks will prevail in the lawsuits brought by investors. The paperwork issues, he said, are just “technical mumbo jumbo”; there is no way to unwind years of complex paperwork and securitizations.

But Yves Smith, writing in The New York Times on October 30, says it’s not that easy:

“The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.

“Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?”

Chris Whalen of Institutional Risk Analytics told Fox Business News on October 1 that the government needs to restructure the largest banks. “Restructuring” in this context means bankruptcy receivership. “You can’t prevent it,” said Whalen. “We’ve wasted two years, and haven’t restructured the top banks, but for Citi. Bank of America will need to be restructured; this isn’t about the documentation problem, this is because [of the high] cost of servicing the property.”

Profs. William Black and Randall Wray are calling for receivership for another reason – the industry has engaged in flagrant, widespread fraud. “There was fraud at every step in the home finance food chain,” they wrote in The Huffington Post on October 25:

“[T]he appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers’ incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.”

Players all down the line were able to game the system, suggesting there is something radically wrong not just with the players, but with the system itself. Would it be sufficient just to throw the culprits in jail? And which culprits? One reason there have been so few arrests to date is that “everyone was doing it.” Virtually the whole securitized mortgage industry might have to be put behind bars.

The Need for Permanent Reform

The Kanjorski amendment to the Banking Reform Bill passed in July allows federal regulators to preemptively break up large financial institutions that pose a threat to US financial or economic stability. In the financial crises of the 1930s and 1980s, the banks were purged of their toxic miscreations and delivered back to private owners, who proceeded to engage in the same sorts of chicanery all over again. It could be time to take the next logical step and nationalize not just the losses, but the banks themselves, and not just temporarily, but permanently.

The logic of that sort of reform was addressed by Willem Buiter, chief economist of Citigroup and formerly a member of the Bank of England’s Monetary Policy Committee, in The Financial Times following the bailout of AIG in September 2008. He wrote:

If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?

Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the tax payer taking the risk and the losses?

If so, then why not keep these activities in permanent public ownership? There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.

Even where private deposit insurance exists, this is only sufficient to handle bank runs on a subset of the banks in the system. Private banks collectively cannot self-insure against a generalised run on the banks. Once the state underwrites the deposits or makes alternative funding available as lender of last resort, deposit-based banking is a license to print money. [Emphasis added.]

All money today except coins originates as a debt to a bank, and debts are just legal agreements to pay in the future. Legal agreements are properly overseen by the judiciary, a branch of government. Perhaps it is time to make banking a fourth branch of government.

That probably won’t happen any time soon, but in the meantime we can try a few experiments in public banking, beginning with the Bank of America, predicted to be the first of the behemoths to be put into receivership.

Leo Panitch, Canada Research Chair in comparative political economy at York University, wrote in The Globe and Mail in December 2009 that “there has long been a strong case for turning the banks into a public utility, given that they can’t exist in complex modern society without states guaranteeing their deposits and central banks constantly acting as lenders of last resort.”

Nationalization Is Looking Better

David Sanger wrote in The New York Times in January 2009:

Mr. Obama’s advisers say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff. “The nightmare scenarios are endless,” one of the administration’s senior officials said.

Today, that scenario is looking less like a nightmare and more like relief. Calls have been made for a national moratorium on foreclosures. If the banks were nationalized, the government could move to restructure the mortgages, perhaps at subsidized rates.

Lending money to ailing projects in cities and states is also sounding rather promising. Despite massive bailouts by the taxpayers and the Fed, the banks are still not lending to local governments, local businesses or consumers. Matthew Rothschild, writing in March 2009, quoted Robert Pollin, professor of economics at the University of Massachusetts at Amherst:

“Relative to a year ago, lending in the US economy is down an astonishing 90 percent. The government needs to take over the banks now, and force them to start lending.”

When the private sector fails, the public sector needs to step in. Under public ownership, wrote Nobel Prize winner Joseph Stiglitz in January 2009, “the incentives of the banks can be aligned better with those of the country. And it is in the national interest that prudent lending be restarted.”

For a model, Congress can look to the nation’s only state-owned bank, the Bank of North Dakota (BND). The 91-year-old BND has served its community well. As of March 2010, North Dakota was the only state boasting a budget surplus; it had the lowest default rate in the country; it had the lowest unemployment rate in the country; and it had received a 2009 dividend from the BND of $58.1 million, quite a large sum for a sparsely populated state.

For our newly-elected Congress, the only alternative may be to start budgeting for TARP II.