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The cause of this recession? Economic pundits ignoring history’s voice | Simon Jenkins December 16, 2011

The Queen, reported the Daily Mail, was wearing a speckled cream suit and matching hat. Her Majesty was at the London School of Economics, listening to a professor, Luis Garicano, talk about the credit crunch. “It’s awful,” she said suddenly. “Why did nobody see it coming?”

For three years I have pondered the Queen’s question, and the answer. (LSE was institutionally flummoxed; a year later, it gave her a waffly reply, that “everyone thought they were doing the right thing,” and that “wishful thinking was combined with hubris”.) It resurfaced last Tuesday with the publication of the Financial Services Authority report into its own conduct of the 2008 collapse of RBS and the attendant chaos. It is like expecting the Cosa Nostra to investigate the mafia. We are all sinners, ruminated the FSA, and need forgiveness, but no one was really to blame. It is a rough old world.

Had the banking fiasco been a Russian invasion, nuclear meltdown or outbreak of plague, every expert would have faced inquisition, damning or being damned. Soldiers would have been cashiered and scientists ruined; doctors would have choked, blaming government cuts. Yet from the profession of economics and its gilded acolytes in the City, nothing but silence. The Queen’s question remains on the table, its acid quietly eating into the woodwork.

The world economy is in a mess. At such times we take refuge in familiarity and choose metaphors that fit our prejudices. Last week we either opted for the slow lane of Europe’s great future, or carefully declined a luxury berth on the Titanic. Britain was a dog slinking miserably from the top table, or walking proud into the sunset.

I prefer to seize the apron strings of history, following a series of articles in the New York Review of Books by the American Nobel economist Paul Krugman. For two years he and his colleague, Robin Wells, have been seeking to set current economic woes in the context of the past. They have studied previous crashes and distilled what was ordered at the time by such pundits as Keynes and Friedman. From the cliff of economic history, Krugman hacked nuggets of wisdom, many sane, most alarming. They should be wrapped in vellum and delivered to Buckingham Palace.

A year ago Krugman wrote up Reinhart and Rogoff’s history of financial crashes – with the ironic title, This Time Is Different. Every crash was unpredictable because everyone thought it was unlike the last one – until found in crucial respects to be the same. Then came Jeff Madrick’s The Age of Greed, with its eerie narrative of how each crash since the war had been worse than the one before and nobody noticed, and Roubini and Mihm’s Crisis Economics – with Krugman admitting “outrage fatigue” amid a crescendo of gloom.

At each turn the financial gurus assert that a recession will be temporary and “different”. Over the past two years each prediction, including from Britain’s Office for National Statistics, has been wildly optimistic. Mathematical models have proved as useless to economics as leeches and blisters once were to medicine. As Krugman notes, whatever the evil tidings, “things have turned out considerably worse … and are running fairly close to the historical norm”.

The western world is in the grip not of a blip or retrenchment, but of “the second great contraction” of modern times. It matches that of the Great Depression of the 1930s, out of which the west climbed only with the spending spree of Hitler’s war. Its roots lay in the same cause, a speculative bubble (this time in housing) linked to reckless bank lending to individuals and states. That lending concealed wide imbalances between national economies.

The fact that no remedy has seemed to work has had remarkably little impact on policy. During the Depression Milton Friedman’s call for an increase in money supply proved ineffective when that increase was merely hoarded by stricken banks. Thus pumping up the banks is exactly what the Bank of England is doing today: to the same minimal effect.

Likewise in the 1920s and 1930s governments that forced national budgets into balance through austerity saved their banks, but exacerbated stagnation and slump. Krugman accepts that deficit finance is more acceptable today than in the 30s, but it is as yet insufficient to stimulate real growth. Equally disastrous was forcing nations to sustain overvalued currencies in deference to the gold standard. Yet the EU is still trying to shackle the weaker European states to an overvalued currency.

There are lessons in smaller crashes, such as the 1982-3 boom in Latin American debt, the Swedish crash of 1991, or the 1997 downturn in the so-called Asian tiger economies. Latin America descended into depression and hyperinflation. Japan has yet to recover. Some things worked. Korea rescued itself by halving the value of its currency, leading to an export-led boom. Sweden nationalised, divided and recapitalised its banks.

Krugman holds strongly to the thesis that indebtedness is no enemy of growth, as creditworthy Britain showed for much of the 20th century. The task for government is to make the trade-off: how much credit to risk for how much growth. The argument between George Osborne and Ed Balls is old as the hills. Now that Osborne has established his bona fides on the credit front, the message of history is probably tilting Balls’s way, towards more aggressive stimulants to demand.

The question is not what history says but who is listening. The relaxation of global regulation in the 1980s arose from the influence over government of a profession that was becoming both rich and arrogant. Bankers paid lobbyists and courted politicians. Their influence is vividly narrated in Madrick’s Age of Greed, as they moved their lending into sovereign debt on the thesis that “countries don’t go out of business” and were “too big to fail”. It was a phrase they deftly applied to themselves when disaster struck.

This week Britain’s bankers likewise persuaded David Cameron that “the national interest” required a refusal to accept or even participate in a new regulatory regime, despite such a regime being palpably needed. The same lobby resisted pressure to reduce bonuses, erect Chinese walls or adopt the recent Vickers report on bank restructuring. History is clear: as long as sectional interest overrides prudence or common sense, there is another crash.

This repeats the awful lesson offered by Seymour Hersh in his book, The Target is Destroyed. Describing events after the Russians accidentally shot down a Korean airliner in 1983, Hersh accused Washington of refusing to believe its own clear intelligence that the shooting was in error. In the grip of the cold war, the most sophisticated surveillance on earth was useless because no one wanted to believe it. Reagan’s White House needed an excuse to hurl threats at Moscow. The message of economic history is similar. It can scream as loud as it likes, but if power is not listening it might as well be mute.

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Air Force investigating cause of drone crash in Seychelles December 15, 2011


December 14, 2011

by legitgov

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Air Force investigating cause of drone crash in Seychelles 13 Dec 2011 The U.S. military is investigating what caused a U.S. military drone [remotely piloted MQ-9 Reaper] to crash near a civilian airport runway in the Republic of Seychelles, a U.S. Air Forces in Europe spokesman said Wednesday. The United States has possession of the aircraft debris, Maj. Rickardo Bodden, a USAFE spokesman, said in an email. The U.S. military and Civil Aviation Authority of the Seychelles coordinated the removal of the debris following Tuesday’s crash at the Seychelles International Airport on the island of Mahe, according to Bodden.

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Shale gas drilling’s dirty secret is out | Josh Fox December 10, 2011

Thursday’s stunning announcement from US EPA that implicates hydrofracturing (“fracking”) as the cause of groundwater contamination in Pavillion, Wyoming is news that has rocked the world. But as groundbreaking and innovative as the investigation has been, the news comes as no surprise to anyone who has been following fracking closely. 

Anyone who lives in a gas drilling area can tell you: fracking contaminates groundwater. Citizens have been shouting this at the top of their lungs in fracking areas since shortly after the process of hydraulic fracturing was exempted from the Safe Drinking Water Act in 2005, paving the way for the largest gas drilling boom in domestic history. The exemption, known as the “Halliburton Loophole”, allows fracking companies to inject toxic chemicals under the ground in huge quantities and not report it to the EPA. But with this much fracking going on, with thousands of wells being drilled and fracked in 34 states, and with thousands of reported cases of contamination, the gas industry just can’t keep their secrets buried; they keep bubbling up through the ground.

Since April 2009, I have been documenting the water contamination in the gas fracking field in Pavillion, Wyoming. The testimony of Pavillion cowboys John Fenton, Louis Meeks and Jeff Locker and their incredible families is some of the most stirring in our film Gasland. Since that time, I have been closely following the extensive three-year EPA investigation, and the results have shown over and over again that there were contaminants in the groundwater, which posed a significant health risk to the residents.

Yet the EPA withheld any language that sounded conclusive – until now. When the whole world is watching, when the gas industry is decrying a lack of science (even as they obstruct and smear the science that has been done), and when the health of the state of New York, alongside significant areas in 34 states and 50 countries worldwide is on the line, you want to make sure that your methods are precise and your statements are conservative.

So, when the EPA now says, “When considered together with other lines of evidence, the data indicates likely impact to groundwater that can be explained by hydraulic fracturing,” that is something quite new. What is also clear is that the aquifer in Pavillion will never be cleaned. The contamination there, for the foreseeable future, is permanent. And considering that the permanent contamination of huge areas of groundwater in the US is now a scientifically proven risk, the Pavillion investigation, as extensive as it was, must become the new standard for investigating fracking complaints worldwide.

Having investigated fracking myself for three years, I have heard the same story hundreds of times, from residents in gas-drilling areas from Wyoming to Arkansas, from Pennsylvania to Texas. It goes like this: the frackers move in – and all of a sudden your water turns color, or can be lit on fire, or smells like turpentine or leaves burn marks on you after you take a shower. It doesn’t take a genius to connect the dots.

And when reading EPA’s water tablature from Pavillion, the notes are really familiar: a minor key refrain of benzene, xylene and other volatile organics, modulation over to glycol ethers and other chemicals in the antifreeze family, a bang-up chorus of thermogenic methane and a killer hook of acetone, naphthalene and 2-butoxyethanol. In fact, three days ago, practically the same list of fracking chemical ingredients found in Pavillion’s water were found in water tests from Dimock, Pennsylvania – another poster town for fracking contamination of groundwater.

In Dimock, PA, like Pavillion, citizen’s water went bad right after drilling and fracking moved in. Yet, the state agency, PA DEP, and the governor, Tom Corbett, have sided with the gas companies – and they deny any responsibility or long-term harm.

The EPA must intervene in Dimock immediately. An extensive study should be conducted there, with the same careful, methodical and thorough science that was employed in Pavillion. And while that study is conducted, the EPA should mandate that Cabot Oil and Gas supply the residents with replacement water; and the drilling moratorium in the area should continue.

It is hard to prove something that is happening thousands of feet below the ground. It’s very difficult and costly, both in time and money. To prove that fracking has contaminated water, even as obvious as it can be to residents who can see the apparent cause and effect, takes extensive and expensive hydrogeological study. Hundreds of chemicals need to be tested over a period of years in a large sample area. In Pavillion, nearly 50 water wells were sampled, two deep monitoring wells were drilled and years of working with the immense pool of data was required. After viewing the EPA draft study (pdf), no one can ever again say that robust science has not been brought to bear on fracking.

But the trail doesn’t end there. The gas fracking industry has been so poorly regulated for so long, the legacy of contamination and obfuscation has been allowed to run unchecked for so many years, that the EPA and the United States now faces a Herculean task of investigating the thousands of cases that mirror Pavillion and Dimock – from Texas, to Louisiana, Colorado, Arkansas, Michigan, New Mexico and more.

Beyond the US, Europe, South Africa, China and Australia are right now contemplating embarking on the “shale gas revolution”; they should take note of the EPA’s findings. As the story unfolds, the real answer bubbles inexorably to the surface: fracking is deeply flawed; it is inherently contaminating in its present form and must be halted immediately. The empty excuses of the gas industry and the pro-fracking politicians who defend them just don’t hold water.

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Progress made on Reno wildfire November 20, 2011

(CNN) — Firefighters in Reno, Nevada, have contained 80% of a wildfire there and expect to have it nearly completely contained by day’s end, officials said Saturday.

The blaze has made 32 homes uninhabitable and damaged five, but is no longer a major threat to other structures, said Reno Fire Chief Michael Hernandez.

Some 140 firefighters were at or around the scene, containing the fire and mopping up hot spots and cleaning, he said.

“It’s been a long, difficult 24 hours,” Hernandez said.

The cause of the fire remains unknown, but the fire chief said his department has ruled out that the blaze started at a homeless encampment or that teenagers seen in the area were responsible.

Investigators believe — though have not confirmed — that high winds caused electrical arcing on a power line, which sparked the fire, Hernandez said.

“My assessment is that the first responders did just an incredible job,” Nevada Sen. Dean Heller said.

Reno Police Chief Michael Poehlman said that about 50 officers were on the streets Saturday monitoring affected neighborhoods.

Starting at noon, residents were allowed to re-enter the area for the first time to survey their homes.

The city of Reno, the rest of Washoe County and Nevada all declared states of emergency Friday.

Authorities reported a fatality on Friday, but later determined that the fire evacuee had died of an apparent heart attack at 74.

One firefighter was taken to a hospital with first- and second-degree burns.

The fire was reported shortly after midnight Thursday, spreading within an hour and becoming a three-alarm blaze, Hernandez said.

The blaze had ballooned to 2,000 acres within about 12 hours, destroying some structures and causing minimal damage to others, according to the fire chief. He estimated that firefighters had saved 4,000 to 4,500 homes by Friday.

CNN’s Shawn Nottingham and Deanna Proeller contributed to this report.


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Police find body near where boy went missing November 16, 2011

(CNN) — Police in eastern Missouri found the body of missing 1-year-old Tyler Daniel Dasher on Tuesday in a wooded area about a mile from his home.

A cause of death has not been determined and authorities are still in the early stages of trying to figure out what happened, St. Louis County police said in a statement.

There is currently no known motive for an abduction or apparent homicide, police said.

The body was initially discovered by people walking their dog, St. Louis County Police Chief Tim Fitch told reporters.

Dasher was reported missing earlier Tuesday.

The boy’s mother told investigators that she last saw the child when she put him to bed Monday night, according to CNN affiliate KSDK. She is being interviewed, said Fitch.


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