Thursday, January 29, 2009


Barter Is Back, Dollar Is Out

Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars.

In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

The countries have not disclosed the value of any deals, and some have refused even to confirm their existence. Officials estimated that they ranged from $5m for smaller contracts to more than $500m for the biggest.

Josette Sheeran, head of the United Nations’ World Food Programme, said senior government officials, including heads of state, had told the WFP they were facing “difficulties” obtaining credit to purchase food. “This could be a big problem,” she told the Financial Times.

Last week, Malaysia’s commodities minister, Datuk Peter Chin Fah Kui, said Kuala Lumpur had already signed a barter deal swapping palm oil for fertilizer and machinery with North Korea, Cuba and Russia. He said Malaysia was talking to Morocco, Jordan, Syria and Iran about other barter deals.

“[Bartering] could be used for contracts with other countries that do not have the cash,” Mr Chin told the local press. “We can set the conditions for them to supply us with the raw materials that we need.”

Thailand, the world’s largest exporter of rice, is discussing barter deals with Middle Eastern countries, including Iran. The Philippines, the world’s largest importer of rice, has secured rice needs for this year through a diplomatic agreement with Hanoi.

The countries’ struggle to obtain credit to import food is boosting the price of domestic crops. Ms Sheeran said that prices of crops in some African countries were rising sharply even as international food commodities prices had fallen from last summer.

The move to barter shows the global food crisis that started last year is far from over.

Source - Financial Times

Wednesday, January 28, 2009


Drug Trade Linked To International Banking

The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year.

"In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor."

The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way."

Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved. He only said Austria was not on top of his list, Profil said.

Source - International Herald Tribune


Mercury In Corn Syrup

A swig of soda or a bite of a candy bar might be sweet, but a new study suggests that food made with corn syrup also could be delivering tiny doses of toxic mercury.

For the first time, researchers say they have detected traces of the silvery metal in samples of high-fructose corn syrup, a widely used sweetener that has replaced sugar in many processed foods. The study was published Monday in the peer-reviewed journal Environmental Health.

Eating high-mercury fish is the chief source of exposure for most people. The new study raises concerns about a previously unknown dietary source of mercury, which has been linked to learning disabilities in children and heart disease in adults.

The source of the metal appears to be caustic soda and hydrochloric acid, which manufacturers of corn syrup use to help convert corn kernels into the food additive.

A handful of plants across the nation still make the soda and acid by mixing a briny solution in electrified vats of mercury. Some of the toxic metal ends up in the final product, according to industry documents cited in the study.

Corn syrup manufacturers insisted their products are mercury-free. But the study said at least one maker of caustic soda that has used the mercury-based technology listed the corn syrup industry as a client.

"This seems like an avoidable source of mercury that we didn't know was out there," said David Wallinga, one of the study's co-authors and a researcher at the Institute for Agriculture and Trade Policy, a Minnesota-based advocacy group.

The researchers cautioned that their study was limited. Only 20 samples were analyzed; mercury was detected in nine.

Still, the impact of the findings could be significant. High-fructose corn syrup has become such a staple in processed foods that the average American consumes 12 teaspoons of it daily, according to federal estimates. Teenagers and children tend to eat more of it than adults.

There is no established safe dose for elemental mercury, the type discovered in corn syrup. But the U.S. Environmental Protection Agency says an average-sized woman should limit her exposure to 5.5 micrograms a day of methylmercury, the kind found in fish. If that same woman regularly ate corn syrup contaminated at the highest level detected in the study—0.57 micrograms per gram—the researchers estimated that she could end up consuming an amount of mercury that is five times higher than the EPA's safe dose.

A former EPA scientist who reviewed the paper said more study is needed to establish the risk, if any, posed by contaminated corn syrup. She urged the Food and Drug Administration to conduct a review of food made with the sweetener.

"For the most part, previous studies haven't found mercury in foods other than fish," said Kathryn Mahaffey, who co-wrote a landmark report to Congress on the perils of mercury contamination. "Is this an outlier or something we didn't know about before?"

Most chlorine plants already have switched to mercury-free technology. In response to a 2005 Tribune series about mercury hazards, Barack Obama, then a U.S. senator, introduced legislation that would force others to phase out its use or shut down. A plant in Wisconsin later vowed to switch by this year, leaving four others—in Georgia, Ohio, Tennessee and West Virginia—that still use the older technology.

The new study's lead author, Renee Dufault, began her research while investigating the Wisconsin plant for the FDA in the mid-2000s. But her results weren't published until now, a year after she retired from the agency.

An FDA spokesman said he still was waiting for a response to the study. Industry representatives, meanwhile, said the study was outdated.

"It is important that Americans are provided accurate, science-based information," Audrae Erickson, president of the Corn Refiners Association, said in a statement. "They should know that high fructose corn syrup is safe."

In another statement, the Chlorine Institute, a chemical industry trade group, said, "It is conceivable that measurable mercury content can be found in high-fructose corn syrup regardless of how it is processed."

Source - Chicago Tribune

Monday, January 26, 2009


Big Pharma Is A Major Chemical Polluter

Many of the pharmaceuticals consumed in the United States are made in India, where labor is cheap and environmental laws are lenient on powerful corporations. U.S. drug companies are exploiting this situation to manufacture hundreds of millions of doses of high-profit pharmaceuticals in India, where ingredients purchased for a few cents can be re-sold to U.S. health patients for hundreds of dollars (the markup on some drugs is literally over 500,000%).

There's something else Big Pharma doesn't want you to know about its drug operations in India: Big Pharma's manufacturing facilities dump millions of doses of toxic pharmaceutical chemicals directly into India's waterways.

Researchers were recently stunned to discover that 100 pounds of a powerful antibiotic called ciprofloxacin was being dumped into a local stream every day! That's a quantity of antibiotics that could treat an entire city of 90,000 people every day.

But that's not all: The same waterway contained an astonishing 21 pharmaceutical chemicals reports the Associated Press, some at levels that were 150 times the highest levels of contamination found in U.S. waterways. (And even the levels found in the U.S. were quite alarming.)

Big Pharma as a major chemical polluter

These findings are now added to the revelations of pharmaceutical contamination unveiled by the Associated Press last year, which found that the public water supplies in virtually all U.S. cities tested were contaminated with pharmaceutical chemicals.

What's emerging from these disturbing discoveries is a picture of Big Pharma as a global corporate polluter that's dumping chemicals into the world's sensitive waterways, polluting villages, cities and aquatic ecosystems around the world.

Under the Bush Administration, the U.S. Environmental Protection Agency outright refused to regulate pharmaceuticals as environmental hazards. With Obama in the White House, it remains to be seen whether the new administration will clamp down on pharmaceutical pollution.

Big Pharma now has something in common with Exxon, Cargill, Alcoa and Chevron: The outrageous pollution of the environment with toxic chemicals. But in many ways, Big Pharma's chemicals are far more dangerous. HRT drugs, for example, are toxic at parts per billion, and they're now being found in public water supplies around the world.

Municipal water treatment facilities, by the way, don't remove pharmaceutical chemicals from the water! Whatever HRT drugs, psychiatric drugs or other chemicals that exist in the water are passed right through the water treatment centers which unwisely add yet more chemicals (fluoride and chlorine, typically) to the toxic brew. Citizens drinking public water supplies in India, the U.K., Canada and the United States are now verifiably participating in a grand experiment involving the mass medication of the population with low levels of utterly untested pharmaceutical combinations.

How long will this be allowed to continue before the environmental protection authorities clamp down on pharmaceutical dumping?

So far, environmental regulators have done nothing to stop the dumping of drugs into public water supplies. This is true even in America, where hospitals routinely dispose of drugs by simply flushing them down the toilet (injecting them directly into the water supply consumed downstream).

Consumers also need to realize that the drugs you swallow are also environmental pollutants. Many drugs pass right through the human body unaltered, where they are flushed back into the water supply that's consumed downstream.

Source - Natural News

Sunday, January 25, 2009


Food Wisdom

To medicalize the diet problem is of course perfectly consistent with nutritionism. So what might a more ecological or cultural approach to the problem recommend? How might we plot our escape from nutritionism and, in turn, from the deleterious effects of the modern diet? In theory nothing could be simpler -- stop thinking and eating that way -- but this is somewhat harder to do in practice, given the food environment we now inhabit and the loss of sharp cultural tools to guide us through it. Still, I do think escape is possible, to which end I can now revisit -- and elaborate on, but just a little -- the simple principles of healthy eating. So try these few (flagrantly unscientific) rules of thumb, collected in the course of my nutritional odyssey, and see if they don't at least point us in the right direction.

1. Eat food. Though in our current state of confusion, this is much easier said than done. So try this: Don't eat anything your great-great-grandmother wouldn't recognize as food. (Sorry, but at this point Moms are as confused as the rest of us, which is why we have to go back a couple of generations, to a time before the advent of modern food products.) There are a great many foodlike items in the supermarket your ancestors wouldn't recognize as food (Go-Gurt? Breakfast-cereal bars? Nondairy creamer?); stay away from these.

2. Avoid even those food products that come bearing health claims. They're apt to be heavily processed, and the claims are often dubious at best. Don't forget that margarine, one of the first industrial foods to claim that it was more healthful than the traditional food it replaced, turned out to give people heart attacks. When Kellogg's can boast about its Healthy Heart Strawberry Vanilla cereal bars, health claims have become hopelessly compromised. (The American Heart Association charges food makers for their endorsement.) Don't take the silence of the yams as a sign that they have nothing valuable to say about health.

3. Especially avoid food products containing ingredients that are a) unfamiliar, b) unpronounceable c) more than five in number -- or that contain high-fructose corn syrup.None of these characteristics are necessarily harmful in and of themselves, but all of them are reliable markers for foods that have been highly processed.

4. Get out of the supermarket whenever possible. You won't find any high-fructose corn syrup at the farmer's market; you also won't find food harvested long ago and far away. What you will find are fresh whole foods picked at the peak of nutritional quality. Precisely the kind of food your great-great-grandmother would have recognized as food.

5. Pay more, eat less. The American food system has for a century devoted its energies and policies to increasing quantity and reducing price, not to improving quality. There's no escaping the fact that better food -- measured by taste or nutritional quality (which often correspond) -- costs more, because it has been grown or raised less intensively and with more care. Not everyone can afford to eat well in America, which is shameful, but most of us can: Americans spend, on average, less than 10 percent of their income on food, down from 24 percent in 1947, and less than the citizens of any other nation. And those of us who can afford to eat well should. Paying more for food well grown in good soils -- whether certified organic or not -- will contribute not only to your health (by reducing exposure to pesticides) but also to the health of others who might not themselves be able to afford that sort of food: the people who grow it and the people who live downstream, and downwind, of the farms where it is grown.

''Eat less'' is the most unwelcome advice of all, but in fact the scientific case for eating a lot less than we currently do is compelling. ''Calorie restriction'' has repeatedly been shown to slow aging in animals, and many researchers (including Walter Willett, the Harvard epidemiologist) believe it offers the single strongest link between diet and cancer prevention. Food abundance is a problem, but culture has helped here, too, by promoting the idea of moderation. Once one of the longest-lived people on earth, the Okinawans practiced a principle they called ''Hara Hachi Bu'': eat until you are 80 percent full. To make the ''eat less'' message a bit more palatable, consider that quality may have a bearing on quantity: I don't know about you, but the better the quality of the food I eat, the less of it I need to feel satisfied. All tomatoes are not created equal.

6. Eat mostly plants, especially leaves. Scientists may disagree on what's so good about plants -- the antioxidants? Fiber? Omega-3s? -- but they do agree that they're probably really good for you and certainly can't hurt. Also, by eating a plant-based diet, you'll be consuming far fewer calories, since plant foods (except seeds) are typically less ''energy dense'' than the other things you might eat. Vegetarians are healthier than carnivores, but near vegetarians (''flexitarians'') are as healthy as vegetarians. Thomas Jefferson was on to something when he advised treating meat more as a flavoring than a food.

7. Eat more like the French. Or the Japanese. Or the Italians. Or the Greeks. Confounding factors aside, people who eat according to the rules of a traditional food culture are generally healthier than Americans. Any traditional diet will do: if it weren't a healthy diet, the people who follow it wouldn't still be around. True, food cultures are embedded in societies and economies and ecologies, and some of them travel better than others: Inuit not so well as Italian. In borrowing from a food culture, pay attention to how a culture eats, as well as to what it eats. In the case of the French paradox, it may not be the dietary nutrients that keep the French healthy (lots of saturated fat and alcohol?!) so much as the dietary habits: small portions, no seconds or snacking, communal meals -- and the serious pleasure taken in eating. (Worrying about diet can't possibly be good for you.) Let culture be your guide, not science.

8. Cook. And if you can, plant a garden. To take part in the intricate and endlessly interesting processes of providing for our sustenance is the surest way to escape the culture of fast food and the values implicit in it: that food should be cheap and easy; that food is fuel and not communion. The culture of the kitchen, as embodied in those enduring traditions we call cuisines, contains more wisdom about diet and health than you are apt to find in any nutrition journal or journalism. Plus, the food you grow yourself contributes to your health long before you sit down to eat it. So you might want to think about putting down this article now and picking up a spatula or hoe.

9. Try to add new species, not just new foods, to your diet. The greater the diversity of species you eat, the more likely you are to cover all your nutritional bases. That of course is an argument from nutritionism, but there is a better one, one that takes a broader view of ''health.'' Biodiversity in the diet means less monoculture in the fields. What does that have to do with your health? Everything. The vast monocultures that now feed us require tremendous amounts of chemical fertilizers and pesticides to keep from collapsing. Diversifying those fields will mean fewer chemicals, healthier soils, healthier plants and animals and, in turn, healthier people. It's all connected, which is another way of saying that your health isn't bordered by your body and that what's good for the soil is probably good for you, too.

Source - Michael Pollan

Friday, January 23, 2009


Coming Soon To USA - Ghost Malls

America’s economy supports more than 1.1 million retail stores. There are approximately 1,100 Malls in the United States, not counting the thousands of strip mall centers. That will soon change as once thriving malls become ghost malls. By 2011, America’s malls within two years will have an entirely different set of numbers.

International Council of Shopping Centers (ICSC) chief economist Michael Niemira tries to put a good face on the gloom. He says, “In the midst of all this doom and gloom, it's hard to imagine it getting better... But keep in mind, what happens in strong downturns is there's a hefty pent-up demand. It's wrong to extrapolate these conditions for the next year or two."

But Mr. Niemira is probably wrong. There is no pent-up demand. Americans have bought everything they’ve desired for the last twenty years. The over-spending and over-leverage will take a decade to unwind.

According to the ICSC, about 150,000 stores are anticipated to shut down in 2009, in addition to the 150,000 that closed in 2008 and 135,000 in 2007. Normally, 110,000 to 125,000 new stores open per year. At least 700,000 of retail jobs will be lost. The opening of new stores will grind to a halt in 2009.

Some major retailers that have closed or will close include: Circuit City -728 stores; Linens N Things - 500 stores; Bombay Company- 384 stores; Sharper Image-184 stores; Foot Locker -140; Pacific Sunwear - 153. Other large retailers are closing underperforming stores and scaling back expansions plans. By 2011, at least 15% of the existing retail base will have gone to retail heaven. With the amount of vacant stores likely to be in excess of 200,000, there will be no need for the construction of new locations for many years.

Most of the retailers that are closing lease their locations from mall developers such as General Growth Properties, Simon Properties, Mills Corp., Pennsylvania REIT, and Vornado Realty Trust. These developers have a quadruple whammy hitting them in 2009. Many borrowed heavily to finance massive mall expansion. These loans were generally for five to seven year terms. The Wall Street wiz kids and their Collaterized Debt Obligation (CDO) machine generated the vast majority of financing in the last half decade.

According to commercial real estate expert Andy Miller, the collapse will come more rapidly than the residential collapse. “By contrast,” he says, “in the commercial world, the properties are fewer and much bigger. For example, you may have ten properties in a commercial pool that ultimately works its way into CDOs. Those loans are huge. You may have a shopping center loan in there for $25 million and an office building loan for $30 million dollars. As a result, if you have a default on just one of those loans, you can effectually wipe out all of the subordinate tranches.

Miller adds, “And that is why when you see the problems begin to appear on the commercial front. It's going to be a much quicker sort of devolution than we saw on the residential side. In the commercial world, most of the financing that happened outside of the apartment business was done by conduits, and there are no more conduits left, and conduits were doing the stupidest loans you could find. They were doing an advertised 80 percent loan-to-value, which was usually more closely aligned to a 100 percent loan-to-value. They were dealing with no coverage. They were all non-recourse loans. Many of them were interest-only loans. Those loans are now gone. You can't refinance them, and if you could, the terms would be onerous.”

The meltdown of materialism has hit the malls. For the last twenty years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but with consumers on steroids, it didn’t seem so heavy. The steroid of choice for the American consumer has been debt. They have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live far above their means. It has been a wild ride, but the ride is over. They can’t get steroids from their dealers (banks) anymore. The pseudo-wealth that has been created in the last twenty years has begun to unwind, but the deceleration will increase in 2009.

Average Americans, who saw their paper wealth growing rapidly as their home values increased, took advantage of this by refinancing their mortgages and extracting the equity from their homes and spending it. They sucked $3 trillion of equity out of their houses. Major Banks offered credit cards using your home equity as a way to pay everyday expenses like groceries, gas and clothes. Eating your house was never so easy. The massive number of excess home sales and equity withdrawal led to huge demand for home furnishings, remodeling services, appliances, electronic gadgets, BMWs, and exotic vacations. This led to massive expansion by retail and restaurant chains based on extrapolation of this demand. Enter mall mania.

But a psychological change has occurred in American consumers. They have lost $30 trillion in value from their homes and investments in the last two years. No amount of fiscal stimulation will reverse this psychological trauma. The savings rate will go from 0 percent to 8 percent. Mike Shedlock of Sitka Pacific Capital Management recently described the situation. “Peak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.” Now the impact of a retrenching consumer will be felt far and wide. Consumer spending has accounted for 70 percent of GDP. It will revert to at least.the long term mean of 65 percent.

David Rosenberg, the brilliant economist from Merrill Lynch, describes what will happen next: "This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007.Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8 percent, US housing stocks must fall to below eight months' supply, and the household interest coverage ratio must fall from 14 percent to 10.5 percent. It's important to note what sort of surgery this is going to require. We will probably have to eliminate $2 trillion of household debt to get there. This will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own balance sheets.”

Billions of debt needs to be refinanced, and there is no one willing to make those loans. The major mall developers are so worried they have made an all out press to get a piece of the TARP. As retailers go bankrupt, vacancy rates have reached 9.4 percent for shopping centers, according to CoStar Group. With virtually no demand, rental income is plunging. With cap rates eroding and operating expenses going up, a perfect storm will hit mall developers in 2009.

The negative feedback loop will accelerate as the year progresses and will likely spiral out of control by late 2009 and early 2010. The negative feedback loop will lead to developer bankruptcies and ultimately to Ghost Malls, particularly in the outer suburbs. The collapse of developers will result in more major write-offs by banks. This time, many smaller regional banks will feel the major pain. The U.S. taxpayer will need to step up to the plate and assume responsibility for their lack of spending.

Mall owners and commercial developers are on the brink of bankruptcy. Commercial developer CB Richard Ellis didn’t sound too optimistic in a recent 10Q filing. He stated, “We are highly leveraged and have significant debt service obligations. Although our management believes that the incurrence of long-term indebtedness has been important in the development of our business, including facilitating our acquisitions of Insignia and Trammell Crow Company, the cash flow necessary to service this debt is not available for other general corporate purposes, which may limit our flexibility in planning for, or reacting to, changes in our business and in the commercial real estate services industry. Notwithstanding the actions described above, however, our level of indebtedness and the operating and financial restrictions in our debt agreements both place constraints on the operation of our business.”

As Americans realize that they don’t “need” a $5 Starbucks latte, IKEA knickknacks, Jimmy Choo shoes, Rolex watches, granite counters, and stainless steel appliances, our mall-centric world will end. As low prices become the only factor that drives retail sales, retailers will have lower profits in the future, further restricting expansion and renovations.

General Growth Properties, a mall developer which owns or operates 200 malls, added $4 billion of debt in the last three years and is teetering on the brink of bankruptcy. Simon Properties, which owns or operates 320 malls, added $3 billion of debt in the last three years and will be greatly affected by the coming downturn. Many smaller developers will be in even dire straits. With shrinking cash flow, looming debt refinancing, and dim prospects for a resumption of conspicuous consumption, Mall developers are destined for a bleak future.

Every major retailer in the United States has built their expansion plans on an assumption that American consumers would continue to spend at an unsustainable rate. That crucial assumption error will lead to the bankruptcy of any retailer that financed their expansion with debt. Warren Buffet’s wisdom will be borne out, “Only when the tide goes out do you discover who’s been swimming naked.”

Source - The Cutting Edge

Thursday, January 22, 2009


The UK Is Fried

Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or twice annual GDP – according to the Bank of England. The mismatch is perilous.

It is why sterling has crashed 10 cents from $1.49 to $1.39 against the dollar in two days. The markets have given their verdict on Gordon Brown's latest effort to "save the world".

Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125 basis points, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 basis points since last week.

Standard & Poor's has quashed rumours that it will soon strip Britain of its AAA credit rating – an indignity averted even after the International Monetary Fund bail-out in 1976. But there was a sting yesterday as it responded to the Treasury plan for the banks. "Market confidence in the sector has eroded to such a degree that it is not clear whether these measures by themselves will bring about a material improvement," the IMF said. "As a result, full nationalisation of some banks remains a possibility in our view."

Spain was relegated from AAA to AA+ on Monday, and Spain's public debt is a much lower share of GDP.

"If Spain can get downgraded, then the risks for the UK are self-evident," said Graham Turner, of GFC Economics. "The increase in the UK gross public debt burden – 11.8 percentage points in just one year – is troubling. The market rightly fears the long-term fiscal costs of a collapsing banking system. Rising Gilt yields are the main impact of the botched move from the UK Treasury."

Mr Turner said the British Government had taken far too long to resort to quantitative easing – printing money – and had wasted months with fiscal frippery as debt deflation throttled the banks.

The parallels with Iceland are disturbing. The country was ruined by the antics of its three big banks. They built up foreign liabilities equal to 900pc of GDP. Operating as hedge funds, they borrowed in dollars, euros and pounds to speculate. However, the state lacked the foreign reserves to match this leverage.

But Iceland at least had the luxury of letting banks default – shifting losses on to the rest of the world. It refused to honour foreign debts.

"They drew a line," said Jerry Rawcliffe, who tracks Iceland for Fitch Ratings. "They created new banks, parking the old losses in resolution committees. It is not easy for other governments to walk away. They have a duty of care."

Indeed, if Britain walked away from UK banks' $4.4 trillion of foreign liabilities – worth eight times Lehman Brothers – it would destroy the credibility of the City and take the whole world into deeper depression.

"The UK cannot go down that route because it would set off an asset price death spiral," said Marc Ostwald, a bond expert at Monument Securities. "The Western banking system is already on life support. That would turn it off altogether."

So whatever the temptations, and whatever the feelings of righteousness over the follies of the RBS leadership in its debt-driven campaign of Napoleonic expansion, the Treasury is wedded to the banks and all their sins. Chancellor Alistair Darling cannot copy Iceland.

S&P's lead UK analyst, Trevor Cullinan, said the Government faces a "severe test" and will be judged by its actions, but he doubts whether matters will reach such a dangerous pass.

"The challenges to UK banks are significant amid a correction in property prices and a contraction of GDP. Nevertheless, the situation is very different from Iceland. The UK benefits from sterling, which is a major global funding currency. UK access to external funding is far more secure. In a worst-case scenario we estimate the cost of recapitalising the UK banking system to be in the region of £83bn (5.7pc of GDP)," he said.

The Government can take out derivatives contracts on currency markets to hedge the foreign debt risk. Perhaps it already has. The banks have $4.4 trillion foreign assets to offset their liabilities, of course. But what is their real value in this climate?

Britain is not alone in its current distress, although the fall in sterling speaks for itself. The sovereign debt of Russia, Ukraine, Greece, Italy, Belgium, Austria, The Netherlands, Ireland, Australia, New Zealand and Korea is all being tested by the markets. The core of countries deemed safe is shrinking by the day to a half dozen. Sadly, Britain is no longer one of them.

Source - Telegraph

Wednesday, January 21, 2009


Military Recruitment Up In US

As the number of jobs across the nation dwindles, more Americans are joining the military, lured by a steady paycheck, benefits and training.

The last fiscal year was a banner one for the military, with all active-duty and reserve forces meeting or exceeding their recruitment goals for the first time since 2004, the year that violence in Iraq intensified drastically, Pentagon officials said.

And the trend seems to be accelerating. The Army exceeded its targets each month for October, November and December — the first quarter of the new fiscal year — bringing in 21,443 new soldiers on active duty and in the reserves. December figures were released last week.

Recruiters also report that more people are inquiring about joining the military, a trend that could further bolster the ranks. Of the four armed services, the Army has faced the toughest recruiting challenge in recent years because of high casualty rates in Iraq and long deployments overseas. Recruitment is also strong for the Army National Guard, according to Pentagon figures. The Guard tends to draw older people.

“When the economy slackens and unemployment rises and jobs become more scarce in civilian society, recruiting is less challenging,” said Curtis Gilroy, the director of accession policy for the Department of Defense.

Still, the economy alone does not account for the military’s success in attracting more recruits. The recent decline in violence in Iraq has “also had a positive effect,” Dr. Gilroy said.

Another lure is the new G. I. Bill, which will significantly expand education benefits. Beginning this August, service members who spend at least three years on active duty can attend any public college at government expense or apply the payment toward tuition at a private university. No data exist yet, but there has traditionally been a strong link between increased education benefits and new enlistments.

The Army and Marine Corps have also added more recruiters to offices around the country in the past few years, increased bonuses and capitalized on an expensive marketing campaign.

The Army has managed to meet its goals each year since 2006, but not without difficulty.

As casualties in Iraq mounted, the Army began luring new soldiers by increasing signing bonuses for recruits and accepting a greater number of people who had medical and criminal histories, who scored low on entrance exams and who failed to graduate from high school.

The recession has provided a jolt for the Army, which hopes to decrease its roster of less qualified applicants in the coming year. It also has helped ease the job of recruiters who face one of the most stressful assignments in the military. Recruiters must typically talk to 150 people before finding one person who meets military qualifications and is interested in enlisting. Dr. Gilroy said the term “all-volunteer force” should really be “an all-recruited force.”

Now, at least, the pool has widened. Recruiting offices are reporting a jump in the number of young men and women inquiring about joining the service in the past three months.

As a rule, when unemployment rates climb so do military enlistments. In November, the Army recruited 5,605 active-duty soldiers, 6 percent more than its target, and the Army Reserve signed up 3,270 soldiers, 16 percent more than its goal. December, when the jobless rate reached 7.2 percent, saw similar increases in recruitments.

“They are saying, ‘There are no jobs, no one is hiring,’ or if someone is hiring they are not getting enough hours to support their families or themselves,” said Sgt. First Class Phillip Lee, 41, the senior recruiter in the Army office in Bridgeport, Conn.

The Bridgeport recruitment center is not exactly a hotbed for enlistments. But Sergeant Lee said it had signed up more than a dozen people since October, which is above average.

He said he had been struck by the number of unemployed construction workers and older potential recruits — people in their 30s and beyond — who had contacted him to explore the possibility. The Army age limit is 42, which was raised from 35 in 2006 to draw more applicants.

“Some are past the age limit, and they come in and say, ‘Will the military take me now?’ ” Sergeant Lee said. “They are having trouble finding well-paying jobs.”

Of the high school graduates, a few told him recently that they had to scratch college plans because they could not get students loans or financial aid. The new G. I. bill is an especially attractive incentive for that group.

The Army Reserve and the National Guard have also received a boost from people eager to supplement their falling incomes.

Sean D. O’Neil, a 22-year-old who stood shivering outside an Army recruitment office in St. Louis, said he was forgoing plans to become a guitar maker for now, realizing that instruments are seen as a luxury during a recession. Mr. O’Neil, a Texas native, ventured to St. Louis for an apprenticeship but found himself $30,000 in debt. Joining the Army, his Plan B, was a purely financial decision. With President-elect Barack Obama in office, he expects the troop levels in Iraq to be lowered.

Going to war, although likely, feels safer to him. “I’m doing this for eight years,” he said. “Hopefully, when I get out, I’ll have all my fingers and toes and arms, and the economy will have turned around, and I’ll have a little egg to start up my own guitar line.”

Ryen Trexler, 21, saw the recession barreling toward him as he was fixing truck tires for Allegheny Trucks in Altoona, Pa. By last summer, his workload had dropped from fixing 10 to 15 tires a day to mending two to four, or sometimes none. As the new guy on the job, he knew he would be the first to go.

He quit and signed up for the Jobs Corps Center in Pittsburgh, a federal labor program that would pay for two years of training, figuring he would learn to be a heavy equipment operator. When a local Army recruiter walked into the center, his pitch hit a nerve. Mr. Trexler figured he could earn more money and learn leadership skills in the Army. Just as important, he could ride out the recession for four years and walk out ready to work in civilian construction.

Although the other branches of the military have not struggled as much as the Army to recruit, they, too, are attracting people who would not ordinarily consider enlisting.

Just a few months ago, Guy Derenoncourt was working as an equity trader at a boutique investment firm in New York. Then the equity market fell apart and he quit.

Last week, he enlisted for a four-year stint in the Navy, a military branch he chose because it would keep him out of Afghanistan and offer him a variety of aviation-related jobs.

“I really had no intention to join if it weren’t for the financial turmoil, because I was doing quite well,” Mr. Derenoncourt, 25, said, adding that a sense of patriotism made it an easier choice.

The Army has struggled to attract the same caliber of enlistee that it did before the war. In 2003, 94 percent of new active-duty recruits had high school degrees. Last year, the number increased slightly from 2007, but it was still 82 percent. The percentage of new recruits who score poorly on the military entrance exam also remains comparatively high. The same is true for enlistees who need permission to enter the military for medical or “moral” reasons, typically misdemeanor juvenile convictions. Last year, 21.5 percent of the 80,000 new recruits in the Army required a so-called medical or moral waiver, 2 percent higher than in 2006. Fewer recruits needed waivers for felony convictions, though, compared with 2007.

Source - New York Times

Monday, January 19, 2009

Marching To Eden

Grow Your Own Food

Not long ago I sat down with the multi-Michelin-starred chef Heston Blumenthal to taste-test products from the supermarkets' value ranges, the very cheapest of the cheap, the lowest of the low. It was a truly humbling experience. As we studied the prices, all of them measured in pence rather than pounds, we swiftly concluded that whatever aesthetic considerations we might want to bring to bear - did this stuff taste nice? Was it well made? - were irrelevant. Nobody bought these products because they liked them; they bought them because economic circumstance forced them to do so.

Never was that more true than now. Anyone looking for a marker of recession could do worse than go loiter in the value-range aisles of their local supermarket. Hell, you might even be shopping there - and you won't be alone, because supermarket shopping habits are changing. In the past year sales of own-label premium ranges have dropped by more than 6%. Sales of organic products have dropped nearly 15%. Value-range sales, on the other hand, have leapt by 46%.

So what exactly is it they are buying? I happen to know. For the past few months I have been investigating the realities of cheap supermarket food for an edition of Dispatches, to be screened on Channel 4 this week - and it really ain't pretty. What would you say to a beef pie that was only 18% beef, and a few more percentage points "beef connective tissue" - or gristle, collagen and fat, as it's more commonly known? How about a pork sausage that's just 40% pork, with a slab of pig skin chucked in for bulk? Or an apple pie with so little apple - a mere 14% - that you can't help but wonder whether it really deserves the name? I suspect, like me, you would say, "No thanks."

Then again, I have a choice. I don't have to buy cheese slices with half the levels of calcium of the more expensive variety or chicken breasts that have been bulked up with 40% water to give you the impression you are getting more for less. The people who are buying these products generally don't have that choice. They have to take what the supermarkets deign to give them. Which raises the question: is what the supermarkets give them good enough?

Only the most callous could argue that it is. This is not born of some conviction that all supermarkets are Evil as the foodie Taliban like to claim. Sure, they aren't perfect. The economies of scale that help them to keep prices low mean they can sometimes exert undue pressure on producers. Their impact on small local shops can be devastating. But they provide a level of convenience that serves hard-pressed families - in which time is short because both parents have to work to make ends meet - very well. They have opened up the range of ingredients available to us and helped to foster a debate on where our food comes from.

In return we have rewarded them with an exceptionally light regulatory regime that has enabled the likes of Tesco, Sainsbury's, Asda and Morrisons and the new breed of discounters - Aldi, Lidl and Netto - to be amazingly successful. Their share of this country's £120bn retail food market has risen from less than 20% in the 1980s to more than 70% now. But with that unfettered access to the market must come responsibilities - and surely that should include improving the quality of the food sold to the very poorest in society.

We can fight long and hard about what the word "quality" means. The supermarkets argue that their value ranges aren't in any way harmful and point out - rightly - that in recent years great efforts have been made to reduce the levels of things such as salt and sugar in very cheap bread. The age of rickets is over. But that still leaves them selling products that contain animal products the vast majority of us would actually throw away rather than cook with. Pig skin is apparently quite high in protein, but would you really choose to have it minced up and put in your sausages simply because it's cheap?

Furthermore, is it outrageous to suggest that the supermarkets should absorb the costs of making these improvements? They make huge profits. Morrisons, for example, made £583m this year. Sainsbury's is behind but has a still sizable £239m. And Tesco, the market leader, has just posted more than £1.8bn worth, despite the tough economic climate. Indeed, their ability to make money has proved remarkably consistent. New research commissioned by Dispatches and carried out by John Thanassoulis, lecturer in economics at Oxford University, has found that the profit margins of the big supermarkets have remained surprisingly steady for decades at around 5%, not just in the good times but during recessions of the sort we're experiencing now as well. Thanassoulis even found evidence that margins actually go up during economic downturns.

In short, they can afford to take the hit - because it really wouldn't cost much at all. I asked a food technologist, David Harrison, who has huge experience of the mass-market food business, to re-engineer some standard value-range products. I didn't want him to make a gourmet beef pie. That would be easy. Just throw money and some quality sirloin at the problem. I wanted to make a better pie, keeping within reasonable financial parameters. He started by analysing all the cheapest pies on the market and found that, on average, they had just 18% beef plus a few more percentage points of that connective tissue. (It can go much lower. I came across a minced beef and onion pie that declared a beef content on the label of just 7%.)

Harrison upgraded our generic recipe to produce one that had no connective tissue and 25% beef. The extra cost, to increase the meat content by 38%? A penny a pie. To remove the pig skin from a budget pork sausage and lift the meat content from 40% to 54% cost 0.7p per sausage. To increase the amount of apple in an apple pie by more than 40% cost 0.8p. As the cost of raw ingredients is only a quarter of the finished product's retail price, these really are tiny amounts. All of these improvements, even represented as double-digit percentages, may look marginal but the differences in the finished product are discernible. In a series of blind taste tests that I conducted, the overwhelming majority of people identified our new improved products and preferred them. And if that sounds like banal advertising patter, so be it.

Obviously companies need to make money, or they wouldn't be able to invest in their business, which in turn means they wouldn't be able to serve their customers. But if absorbing the expense to make these improvements meant Tesco's profits went from that £1.8bn to, say, £1.77bn, if Morrison's made not £583m but £570m, who exactly would weep? Not me.

Unsurprisingly, the supermarket business doesn't quite see it this way. As far as it is concerned, it has never stopped striving to improve the quality and value of its products. "Supermarkets are constantly looking at their ranges, both in terms of the quality and the price that they can offer it at to customers," Andrew Opie of the British Retail Consortium told me. "It's what they do and it's what they do well. So all of the supermarkets will be undergoing reviews of their ranges on a regular basis to examine what's the best-quality products they can get on the shelves at the right price. This is nothing new to the supermarkets."

Let's be clear. A 25% meat pie is still not a fabulous item. Nor would Blumenthal and I have swooned over a 54% pork sausage. Likewise, we can lecture those in dire straits on the need to eat more fresh fruit and vegetables - where the value ranges happen to score well - though patronising people who are struggling to make ends meet has always left me with a nasty taste in the mouth. The fact is that the items I have looked at are invariably going to be a part of the diet, and that leads to simple questions of respect; of the supermarkets, which do so well out of us in good times, not forcing the very poorest to eat dross when the bad times come.

Not that concepts like this are entirely alien to Britain's big companies. It's called corporate social responsibility and every serious public company, including the supermarkets, has a department entirely dedicated to it. They know their business and environmental practices have to comply with certain standards. They know that their dominance of the market means they are scrutinised in detail. And they also aren't averse to taking a hit on their bottom line. They already sell certain cheap products at below cost as loss leaders. Isn't it time that they extended that principle so that the quality of their very cheapest food, sold to the most vulnerable of their customers, should also become a part of their corporate social responsibility code, too?

Source - Guardian

Thursday, January 15, 2009


Frightening Deterioration In The UK

Business leaders have painted a bleak picture of the UK economy, with a survey suggesting the end of 2008 saw a "frightening deterioration".

The British Chambers of Commerce (BCC) said its survey results were "awful" and the worst since it began in 1989.

Elsewhere, a separate report suggested it had been the worst December for UK retail sales in at least 14 years.

On 23 January, official figures are set to confirm the UK is in recession with six months of negative growth.

Margins hit

The British Retail Consortium figures on sales from the High Street and online said that like-for-like sales in December were down 3.3% on a year ago while total sales shrank 1.4%.

This is despite the government cut in value added tax (VAT), which took effect in December.

This made for the worst December since the survey began in 1995.

Some High Street retailers, including Sainsbury's and Greggs, have been reporting strong Christmas trading - suggesting that the economic picture is not yet entirely bleak.

But food retailers were almost the only sector to show growth, the BRC said, amid what it described as "truly awful numbers".

"Non-food retailers had a torrid December despite a blizzard of promotions and deals, which would have hit margins," the BRC's director general Stephen Robertson said.

"Many hard-pressed customers couldn't be seduced into spending."

Earlier, supermarket giant Tesco reported a 2.5% increase in like-for-like sales in the key Christmas period.

'No positives'

The BCC report, based on a survey of almost 6,000 firms which employ 680,000 people, pointed to plunging domestic demand, falling exports and plummeting confidence in the last three months of 2008.

"It is clear that the UK economy is facing a very serious recession, and the downturn is deepening at an alarming pace," said the BCC report.

"The results highlight a frightening deterioration in the UK economic situation."

Its latest survey - which covered the last three months of 2008 - showed "no positive features" it added, with both the manufacturing and service sectors worsening.

Manufacturing, home sales and orders, employment expectations, investment, confidence and cash-flow have all hit record lows.

In the service sector, every key area was at a new low.

BCC director general David Frost called for a national recovery plan to be "rolled out as soon as possible".

"These are truly awful results with the scale and speed of the economic decline happening at an unprecedented rate.

"Quite frankly the last time I saw anything of this magnitude of decline was when I worked in the West Midlands in the early 1980s," he said.

"The sheer scale of this comes as a surprise to many of us."

Printing money

The BCC's chief economist David Kern said that he now expected the UK economy to shrink by up to 2.4% in 2009, rather than the 2.2% he had earlier forecast.

"One must say that unfortunately in terms of GDP, this recession is worse than in the 1990s," he said.

But he added it was not worse than the 1980s, so it was still possible "to avoid a prolonged depression".

Last week, the Bank of England cut the cost of borrowing from 2% to 1.5% - the lowest since the Bank was founded in 1694.

Mr Kern said more rate cuts were likely, but that the authorities would have to go further to avoid a prolonged depression, including printing more money.

"The MPC is running out of conventional bullets," he added.

The suggestion that investment in factories and machinery was at record lows was particularly worrying, said Ross Walker, chief UK economist at Royal Bank of Scotland.

This indicated that private sector firms would see their capacity for recovery hindered when the UK came out of economic crisis, he said.

Source - BBC


Mexico & Pakistan - Unstable

Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats.

The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.

"The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and press by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."

The U.S. Joint Forces Command, based in Norfolk, Va., is one of the Defense Departments combat commands that includes members of the different military service branches, active and reserves, as well as civilian and contract employees. One of its key roles is to help transform the U.S. military's capabilities.

In the foreword, Marine Gen. J.N. Mattis, the USJFC commander, said "Predictions about the future are always risky ... Regardless, if we do not try to forecast the future, there is no doubt that we will be caught off guard as we strive to protect this experiment in democracy that we call America."

The report is one in a series focusing on Mexico's internal security problems, mostly stemming from drug violence and drug corruption. In recent weeks, the Department of Homeland Security and former U.S. drug czar Barry McCaffrey issued similar alerts about Mexico.

Despite such reports, El Pasoan Veronica Callaghan, a border business leader, said she keeps running into people in the region who "are in denial about what is happening in Mexico."

Last week, Mexican President Felipe Calderon instructed his embassy and consular officials to promote a positive image of Mexico.

The U.S. military report, which also analyzed economic situations in other countries, also noted that China has increased its influence in places where oil fields are present.

Source - El Paso Times

Tuesday, January 13, 2009


The City Hurts Your Brain

THE CITY HAS always been an engine of intellectual life, from the 18th-century coffeehouses of London, where citizens gathered to discuss chemistry and radical politics, to the Left Bank bars of modern Paris, where Pablo Picasso held forth on modern art. Without the metropolis, we might not have had the great art of Shakespeare or James Joyce; even Einstein was inspired by commuter trains.

And yet, city life isn't easy. The same London cafes that stimulated Ben Franklin also helped spread cholera; Picasso eventually bought an estate in quiet Provence. While the modern city might be a haven for playwrights, poets, and physicists, it's also a deeply unnatural and overwhelming place.

Now scientists have begun to examine how the city affects the brain, and the results are chastening. Just being in an urban environment, they have found, impairs our basic mental processes. After spending a few minutes on a crowded city street, the brain is less able to hold things in memory, and suffers from reduced self-control. While it's long been recognized that city life is exhausting -- that's why Picasso left Paris -- this new research suggests that cities actually dull our thinking, sometimes dramatically so.

"The mind is a limited machine,"says Marc Berman, a psychologist at the University of Michigan and lead author of a new study that measured the cognitive deficits caused by a short urban walk. "And we're beginning to understand the different ways that a city can exceed those limitations."

One of the main forces at work is a stark lack of nature, which is surprisingly beneficial for the brain. Studies have demonstrated, for instance, that hospital patients recover more quickly when they can see trees from their windows, and that women living in public housing are better able to focus when their apartment overlooks a grassy courtyard. Even these fleeting glimpses of nature improve brain performance, it seems, because they provide a mental break from the urban roil.

This research arrives just as humans cross an important milestone: For the first time in history, the majority of people reside in cities. For a species that evolved to live in small, primate tribes on the African savannah, such a migration marks a dramatic shift. Instead of inhabiting wide-open spaces, we're crowded into concrete jungles, surrounded by taxis, traffic, and millions of strangers. In recent years, it's become clear that such unnatural surroundings have important implications for our mental and physical health, and can powerfully alter how we think.

This research is also leading some scientists to dabble in urban design, as they look for ways to make the metropolis less damaging to the brain. The good news is that even slight alterations, such as planting more trees in the inner city or creating urban parks with a greater variety of plants, can significantly reduce the negative side effects of city life. The mind needs nature, and even a little bit can be a big help.

Consider everything your brain has to keep track of as you walk down a busy thoroughfare like Newbury Street. There are the crowded sidewalks full of distracted pedestrians who have to be avoided; the hazardous crosswalks that require the brain to monitor the flow of traffic. (The brain is a wary machine, always looking out for potential threats.) There's the confusing urban grid, which forces people to think continually about where they're going and how to get there.

The reason such seemingly trivial mental tasks leave us depleted is that they exploit one of the crucial weak spots of the brain. A city is so overstuffed with stimuli that we need to constantly redirect our attention so that we aren't distracted by irrelevant things, like a flashing neon sign or the cellphone conversation of a nearby passenger on the bus. This sort of controlled perception -- we are telling the mind what to pay attention to -- takes energy and effort. The mind is like a powerful supercomputer, but the act of paying attention consumes much of its processing power.

Natural settings, in contrast, don't require the same amount of cognitive effort. This idea is known as attention restoration theory, or ART, and it was first developed by Stephen Kaplan, a psychologist at the University of Michigan. While it's long been known that human attention is a scarce resource -- focusing in the morning makes it harder to focus in the afternoon -- Kaplan hypothesized that immersion in nature might have a restorative effect.

Imagine a walk around Walden Pond, in Concord. The woods surrounding the pond are filled with pitch pine and hickory trees. Chickadees and red-tailed hawks nest in the branches; squirrels and rabbits skirmish in the berry bushes. Natural settings are full of objects that automatically capture our attention, yet without triggering a negative emotional response -- unlike, say, a backfiring car. The mental machinery that directs attention can relax deeply, replenishing itself.

"It's not an accident that Central Park is in the middle of Manhattan," says Berman. "They needed to put a park there."

In a study published last month, Berman outfitted undergraduates at the University of Michigan with GPS receivers. Some of the students took a stroll in an arboretum, while others walked around the busy streets of downtown Ann Arbor.

The subjects were then run through a battery of psychological tests. People who had walked through the city were in a worse mood and scored significantly lower on a test of attention and working memory, which involved repeating a series of numbers backwards. In fact, just glancing at a photograph of urban scenes led to measurable impairments, at least when compared with pictures of nature.

"We see the picture of the busy street, and we automatically imagine what it's like to be there," says Berman. "And that's when your ability to pay attention starts to suffer."

This also helps explain why, according to several studies, children with attention-deficit disorder have fewer symptoms in natural settings. When surrounded by trees and animals, they are less likely to have behavioral problems and are better able to focus on a particular task.

Studies have found that even a relatively paltry patch of nature can confer benefits. In the late 1990s, Frances Kuo, director of the Landscape and Human Health Laboratory at the University of Illinois, began interviewing female residents in the Robert Taylor Homes, a massive housing project on the South Side of Chicago.

Kuo and her colleagues compared women randomly assigned to various apartments. Some had a view of nothing but concrete sprawl, the blacktop of parking lots and basketball courts. Others looked out on grassy courtyards filled with trees and flowerbeds. Kuo then measured the two groups on a variety of tasks, from basic tests of attention to surveys that looked at how the women were handling major life challenges. She found that living in an apartment with a view of greenery led to significant improvements in every category.

"We've constructed a world that's always drawing down from the same mental account," Kuo says. "And then we're surprised when [after spending time in the city] we can't focus at home."

But the density of city life doesn't just make it harder to focus: It also interferes with our self-control. In that stroll down Newbury, the brain is also assaulted with temptations -- caramel lattes, iPods, discounted cashmere sweaters, and high-heeled shoes. Resisting these temptations requires us to flex the prefrontal cortex, a nub of brain just behind the eyes. Unfortunately, this is the same brain area that's responsible for directed attention, which means that it's already been depleted from walking around the city. As a result, it's less able to exert self-control, which means we're more likely to splurge on the latte and those shoes we don't really need. While the human brain possesses incredible computational powers, it's surprisingly easy to short-circuit: all it takes is a hectic city street.

"I think cities reveal how fragile some of our 'higher' mental functions actually are," Kuo says. "We take these talents for granted, but they really need to be protected."

Related research has demonstrated that increased "cognitive load" -- like the mental demands of being in a city -- makes people more likely to choose chocolate cake instead of fruit salad, or indulge in a unhealthy snack. This is the one-two punch of city life: It subverts our ability to resist temptation even as it surrounds us with it, from fast-food outlets to fancy clothing stores. The end result is too many calories and too much credit card debt.

City life can also lead to loss of emotional control. Kuo and her colleagues found less domestic violence in the apartments with views of greenery. These data build on earlier work that demonstrated how aspects of the urban environment, such as crowding and unpredictable noise, can also lead to increased levels of aggression. A tired brain, run down by the stimuli of city life, is more likely to lose its temper.

Long before scientists warned about depleted prefrontal cortices, philosophers and landscape architects were warning about the effects of the undiluted city, and looking for ways to integrate nature into modern life. Ralph Waldo Emerson advised people to "adopt the pace of nature," while the landscape architect Frederick Law Olmsted sought to create vibrant urban parks, such as Central Park in New York and the Emerald Necklace in Boston, that allowed the masses to escape the maelstrom of urban life.

Although Olmsted took pains to design parks with a variety of habitats and botanical settings, most urban greenspaces are much less diverse. This is due in part to the "savannah hypothesis," which argues that people prefer wide-open landscapes that resemble the African landscape in which we evolved. Over time, this hypothesis has led to a proliferation of expansive civic lawns, punctuated by a few trees and playing fields.

However, these savannah-like parks are actually the least beneficial for the brain. In a recent paper, Richard Fuller, an ecologist at the University of Queensland, demonstrated that the psychological benefits of green space are closely linked to the diversity of its plant life. When a city park has a larger variety of trees, subjects that spend time in the park score higher on various measures of psychological well-being, at least when compared with less biodiverse parks.

"We worry a lot about the effects of urbanization on other species," Fuller says. "But we're also affected by it. That's why it's so important to invest in the spaces that provide us with some relief."

When a park is properly designed, it can improve the function of the brain within minutes. As the Berman study demonstrates, just looking at a natural scene can lead to higher scores on tests of attention and memory. While people have searched high and low for ways to improve cognitive performance, from doping themselves with Red Bull to redesigning the layout of offices, it appears that few of these treatments are as effective as simply taking a walk in a natural place.

Given the myriad mental problems that are exacerbated by city life, from an inability to pay attention to a lack of self-control, the question remains: Why do cities continue to grow? And why, even in the electronic age, do they endure as wellsprings of intellectual life?

Recent research by scientists at the Santa Fe Institute used a set of complex mathematical algorithms to demonstrate that the very same urban features that trigger lapses in attention and memory -- the crowded streets, the crushing density of people -- also correlate with measures of innovation, as strangers interact with one another in unpredictable ways. It is the "concentration of social interactions" that is largely responsible for urban creativity, according to the scientists. The density of 18th-century London may have triggered outbreaks of disease, but it also led to intellectual breakthroughs, just as the density of Cambridge -- one of the densest cities in America -- contributes to its success as a creative center. One corollary of this research is that less dense urban areas, like Phoenix, may, over time, generate less innovation.

The key, then, is to find ways to mitigate the psychological damage of the metropolis while still preserving its unique benefits. Kuo, for instance, describes herself as "not a nature person," but has learned to seek out more natural settings: The woods have become a kind of medicine. As a result, she's better able to cope with the stresses of city life, while still enjoying its many pleasures and benefits. Because there always comes a time, as Lou Reed once sang, when a person wants to say: "I'm sick of the trees/take me to the city."

Source - Boston Globe

Wednesday, January 07, 2009



The deep river of private money that helped knit together the global economy has abruptly dried up, new government figures show.
As the global financial crisis grew more severe this summer, foreigners sold almost $90 billion of U.S. securities — the greatest quarterly fire sale by overseas investors since the government began keeping track in 1960. U.S. investors also are retrenching; they unloaded about $85 billion worth of foreign holdings in the quarter, says the Commerce Department's Bureau of Economic Analysis.

"We've had a global panic. Everyone is pulling their money home," says economist Adam Posen of the Peterson Institute in Washington, D.C.

That's bad for economic growth in the U.S. because it threatens to starve capital-hungry companies and entrepreneurs. But it's especially serious for emerging-market countries that rely heavily on outside financing. Capital flows into countries such as South Korea, Turkey and Brazil were evaporating even before the mid-September Lehman Bros. bankruptcy made things worse.

The reversal of private capital flows signals an abrupt end to a nearly two-decades-long era of financial globalization, says economist Brad Setser of the Council on Foreign Relations. Private flows into and out of the U.S. for purchases of stocks, corporate bonds and federal agency bonds have dropped from around 18% of economic output to near zero "in a remarkably short period of time," Setser says.

The past five quarters — roughly since the August 2007 onset of the financial crisis — private foreign investors have been net sellers of U.S. securities. The turnabout represents a dramatic change from the first half of 2007 when foreign purchases of U.S. securities other than Treasuries averaged about $250 billion per quarter.

The past two quarters also have seen an about-face in cross-border bank flows as institutional investors found lenders unwilling to extend credit. In the first quarter of 2008, foreigners deposited more than $79 billion with U.S. banks. That flow reversed in the second quarter, as foreigners withdrew a staggering $256 billion, and the outflow continued in the third quarter with an additional $147 billion. Likewise, banks in the U.S. brought home more than $151 billion in the quarter, as overseas institutions repaid loans.

"Institutional investors, including banks, across the board are pulling their capital back home," says economist Eswar Prasad of the Brookings Institution.

One bright spot: Foreign central banks continue to spend heavily on U.S. government securities, allowing the U.S. to finance the gap between what it produces and consumes.

Source - USA Today


China 2009

China faces surging protests and riots in 2009 as rising unemployment stokes discontent, a state-run magazine said in a blunt warning of the hazards to Communist Party control from a sharp economic downturn.

The unusually stark report in this week's Outlook (Liaowang) Magazine, issued by the official Xinhua news agency, said faltering growth could spark anger among millions of migrant workers and university graduates left jobless.

"Without doubt, now we're entering a peak period for mass incidents," a senior Xinhua reporter, Huang Huo, told the magazine, using the official euphemism for riots and protests.

"In 2009, Chinese society may face even more conflicts and clashes that will test even more the governing abilities of all levels of the Party and government."

President Hu Jintao has vowed to make China a "harmonious society," but his promise is being tested by rising tension over shrinking jobs and incomes, as well as long-standing anger over corruption and land seizures.

China also faces a year of politically tense anniversaries, especially the 20th year since the June 1989 crackdown on pro-democracy protesters in Tiananmen Square. That date has already galvanised the "Charter 08" campaign by dissidents and advocates demanding deep democratic reforms.

While foreign commentary about risks to China's recipe of fast economic growth and one-party control are common, the nation's leaders are usually reticent about such threats.

This report and other recent open warnings may be intended to help snap officials to attention, said one Chinese expert.

"The candor about these problems reflects the severity of the unemployment problem. It's meant to attract the attention of all levels of government," said Mao Shoulong, a professor of public policy at Renmin University in Beijing.

"The government wants to show that stability is at the top of its agenda."


The biggest threats to China's social fabric will come from graduating university students, facing a shrinking job market and diminished incomes, and from a tide of migrant laborers who have lost their jobs as export-driven factories have shut.

Factory closures, sackings and difficulties paying social security had already unleashed a surge of protests, the report said. Officials in provinces that have provided tens of millions of low-paid workers for coastal factories have reported a leap in the number returning to their farm homes without work.

State statistical authorities estimated that close to 10 million rural migrant workers had lost their jobs, the magazine said, without specifying when the sackings happened.

Including students who graduated in 2008 and had not found work, there would be more than 7 million university and college graduates hunting for jobs this year, Huang calculated.

The government's goal of annual GDP growth for 2009 of 8 percent would generate only 8 million new jobs for the whole country, he added. In 1989, discontented students formed the core of the pro-democracy protests.

"If in 2009 there is a large number of unemployed rural migrant laborers who cannot find work for half a year or longer, milling around in cities with no income, the problem will be even more serious," said Huang.

Huang is Xinhua's bureau chief in the southwest city of Chongqing, which has long been a cauldron of unrest. Other parts of China have also seen intense but brief and localized protests over police abuses, corruption and factory closures.

Ian Bremmer, president of the prominent political risk consultancy Eurasia Group, said he foresaw no departure from that pattern and no overwhelming crisis.

"The party has built a large stockpile of domestic goodwill over the past three decades," Bremmer told Reuters in an interview this week, offering a more optimistic outlook.

"Toughening economic times will erode some of that credit, but the reserves are too deep for China to reach a crisis point in 2009."

Chinese Foreign Ministry spokesman Qin Gang said the government would be able to deal with the tough times.

"We have the ability and the confidence to ensure the Chinese economy's stable and relatively fast growth and to ensure social stability," he told a news briefing.

China's economy expanded by 9.9 percent from a year earlier in the first nine months of 2008. But some economists doubt that the government can achieve its goal of 8 percent growth for 2009.

The Outlook report also stressed the nation's strains were about more than growth rates. Protests were increasingly politicized, making it harder for officials to douse them by force or cash hand-outs, the report said.

"Social conflicts have already formed a certain social, mass base so that as soon as there is an appropriate fuse it always swiftly explodes and clashes escalate quickly," said Huang.

Source - Reuters