Smart Economy

Zbigniew Brzezinski: National Strategy and US Education

By Leonard Liggio

Foreign Policy magazine (January-February 2012) lists Zbigniew Brzezinski among the five most important living influences on US foreign policy. In the weekend Financial Times (January 14-15, 2012), Edward Luce (FT’s chief US commentator) describes his recent luncheon interview with the former National Security Advisor under President Jimmy Carter and current trustee of the Center for Strategic and International Studies. After 1981, he continued in Washington as a professor at Georgetown University. Over his Dubonnet, he begins with his disappointment with President Barak Obama: “I’m all in favor of grand important speeches but the president then has to link his sermons to a strategy.” Although he has voted for Republican presidential candidates (such as George H. W. Bush in 1988) he is highly doubtful of the current Republican candidates. Compared to how well informed about the world he considers Chinese leaders: “And then you watch one of our Republican presidential debates …. The GOP field is just embarrassing.”

Brzezinski is 83 years old and was born in Warsaw. His father was a diplomat and Brzezinski spent his first three years in Paris and the next three in Berlin. His father was assigned to the embassy in Canada, so the family remained there when World War II began. He attributes his skills to attending Loyola High School in Montreal. (My graduate professor at Fordham University, Oskar Halecki (who had been secretary of the Polish delegation at the Versailles conference and then dean of Warsaw University) was a visiting professor at Grenoble University when the war began and was fortunate to move to Laval University in Quebec before the invasion of France.)

I first became aware of Brzezinski when I was working for the William Volker Fund assigned to read journal articles or books that might relate to its scholarly program. I extensively reviewed a book of Brzezinski written (c. 1961) (when he was at Harvard University) on the economic system of the Soviet Bloc. I recommended the book as knowledgeable and insightful.

He was appointed a professor of international relations at Columbia University. He became an advisor to Hubert Humphrey’s vice-presidential campaign and defended Lyndon B. Johnson’s war in Vietnam on the basis of the ‘Falling Dominos’ theory (if South Vietnam came under the Viet Cong, then Thailand, Malaya, Indonesia would become Communist.) (That theory arose in the 1950s: that Japan would want to trade with Red China if communists blocked Japan’s markets in Southeast Asia. Japan was trading with China through third countries, so the theory was questionable.)

Brzezinski opposed Republican senators critical of Johnson’s war. Senators Sterling Morton of Kentucky and Mark Hatfield of Oregon led the revival of the Republican party with over forty new Republican congressmen in 1966.

To him, today’s America appears to lack education in world politics. He sees a US failure in history and geography (French education always twined geography and history). “Americans don’t learn about the world, they don’t study world history, other than American history in a very one-sided fashion, and they don’t study geography. In that context of widespread ignorance, the ongoing and deliberately fanned fear about the outside world, which is connected with this grandiose war on jihadi terrorism, makes the American public extremely susceptible to extremist appeals.”

Fifty years ago when I began as a college instructor, there was a textbook which combined European and American history. However, as I was teaching fifteen hours a week the course in World Civilizations there was a dilemma. The chairman of the history and government department was a Viennese who had studied Japanese in the US army. He selected a textbook which went beyond European civilization to include: Hindu, Chinese, Japanese , etc. I had no background in those areas and told my five classes to ignore those chapters. American students have a hard enough time with European names, trying to have them or myself master exotic names was not education but chaos. I am reminded of one of my colleagues, a Chinese refugee from Red China, who upset his students of Chinese history when he later explained that the first seven dynasties they had struggled to learn were mythical.

Brzezinski considers America’s greatest national security threat to be the weak US economic situation, especially the political failure to address the government’s economic problems. His strategic advice: “the US should prod Europe to bring both Russia and Turkey into an enlarged west. America should hedge against China’s rise, without explicitly attempting to contain it. Most importantly, the US should revitalize its domestic economy if it wants to stave off further decline. On all counts, Brzezinski seems pessimistic about the likelihood that Washington’s elites will start to act strategically again.”

Thinking Outside the Rocks in the Search for Ancient Earthquakes

 

 EARTH: Thinking Outside the Rocks in the Search for Ancient Earthquakes

Alexandria, VA – The eyewitness accounts, written in columns from right to left, top to bottom, testify that there was no warning of the tsunami, no shaking to drive villagers to high ground before the wave hit, drowning rice paddies and swamping a castle moat. The entries, written by merchants, peasants and samurai, all clearly mark the time and date: just after midnight on Wednesday, Jan. 27, 1700.

For centuries, it was unclear why no shaking preceded the Japanese tsunami of 1700. Now, researchers know that it’s because the tsunami was set off by an earthquake clear across the Pacific. By noting the height of the waves described in the accounts and working backward from the moment the tsunami struck, modern-day researchers detailed the magnitude and timing of the causative event: a massive magnitude-9.0 earthquake that demolished villages along North America’s Pacific Northwest coast about 9 p.m. on Tuesday, Jan. 26, 1700.

As EARTH details in its September feature, ―Thinking Outside the Rocks in the Search for Ancient Earthquakes,‖ modern-day scientists are getting creative in the search for information about past quakes.

Read more about how researchers are turning to old newspaper articles and photographs, folklore, petroglyphs, crumpled buildings and toppled monuments — and how learning about past quakes can help seismologists to assess future seismic risk — and read other stories on topics such as what scientists are learning from the dust from the Twin Towers’ collapse on 9/11 that might help them determine how it affects people’s health; how clean rivers are actually creating a problem with ―rock snot‖; and how CAT scans may help us find oil and gas in the September issue. And be sure to check out the travelogue about Nova Scotia’s ancient rocks.

These stories and many more can be found in the September issue of EARTH, now available digitally (http://www.earthmagazine.org/digital) or in print on your local newsstands.

For further information on the September featured article, go to http://www.earthmagazine.org/earth/article/476-7db-8-19

Keep up to date with the latest happenings in earth, energy and environment news with EARTH magazine, available on local newsstands or online at http://www.earthmagazine.org/. Published by the American Geological Institute, EARTH is your source for the science behind the headlines.

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3 conventional scenarios for Russia 2020...but missing wild cards

Russia 2020

3 scenarios for Russia
http://www.scps.nyu.edu/ex​port/sites/scps/pdf/global​-affairs/russia-2020-scena​rios.pdf

Scenario One:
Working Authoritarianism
After a prolonged period of economic stagnation, Russia is forced to dramatically shift gears. Moscow rejects liberal-oriented economic solutions, steps that could lead to calls for more political openness. It ultimately manages to energize and diversify its economy without extensive liberalization by restructuring its energy sector and forging strategic commercial and financial alliances with China, Germany, and South Korea.

Scenario Two:
Bottom-Up Liberalization & Modernization
A struggle for dominance between reformist and conservative elements results in a stalemate, reducing the government’s ability to address economic challenges. Fueled by the dynamism of a new generation of entrepreneurs and capital from Moscow, new enterprises emerge in a number of Russia’s regions, symbolizing Russia’s economic rebirth and the beginning of political pluralism.

Scenario Three:
Degeneration
The Russian government remains unable to solve the country’s deep economic and social problems and deflects alternative solutions that might weaken its grip on political power. The country continues to stagnate, forcing the regions to “fend for themselves.” Gradually, state capacity erodes, social fabric breaks down, and the country begins to fragment politically and geographically.

When will the Recession End? Part 191 US 1930s dust bowl a repeat in this decade?

Conventional agriculture is a lot like conventional medicine (or conventional debt spending) -- it's not sustainable!

Much of the farming taking place today in Oklahoma, Nebraska, Colorado, Kansas and Texas is entirely dependent on fossil water stored in the Ogallala Aquifer.

 

Never heard of the Ogallala Aquifer? Most people haven't. But if you eat food in North America, a significant portion of the food on your plate comes from farms that only exist because of water from the Ogallala.

The Ogallala Aquifer is running dry. It is not being "recharged." The plummeting water levels are already turning some former farm hubs into dust towns.

Learn why this is happening and why the availability of cheap food is coming to an end:

Walter Derzko

When will the Recession End ? part 175 State of Virginia explores adoption of state currency in event of Federal Reserve collapse and Depression

Early warning signal?-What you don't read in the main stream press--What do US politicians know that we don't ?--Walter Derzko

2011 SESSION

Source: http://lis.virginia.gov/cgi-bin/legp604.exe?111+ful+HJ557

11102035D
HOUSE JOINT RESOLUTION NO. 557 Offered January 12, 2011 Prefiled January 5, 2011

Establishing a joint subcommittee to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.

 

Report. ----------Patron-- Marshall, R.G. ----------Referred to Committee on Rules ----------

WHEREAS, the Supreme Court of the United States has ruled in In re Rahrer, 140 U.S. 545, 554 (1891), that “the police power” of a State “is a power originally and always belonging to the States, not surrendered by them to the general government, nor directly restrained by the Constitution of the United States, and essentially exclusive”; and

WHEREAS, the Supreme Court of the United States has ruled in Beer Company v. Massachusetts, 97 U.S. 25, 33 (1877), that the police power of the States “extend[s] to the protection of the lives, health, and property of the[ir] citizens, and to the preservation of good order”; and

WHEREAS, the protection of the lives, health, and property of Virginia’s citizens, and the preservation of good order in the Commonwealth, depend upon the maintenance of both an adequate system of governmental finance and a sound and robust private economy; and

WHEREAS, an adequate system of governmental finance and a sound and robust private economy cannot be maintained in the absence of a sound currency; and

WHEREAS, the present monetary and banking systems of the United States, centered around the Federal Reserve System, have come under ever-increasing strain during the last several years, and will be exposed to ever-increasing and predictably debilitating strain in the years to come; and

WHEREAS, many widely recognized experts predict the inevitable destruction of the Federal Reserve System’s currency through hyperinflation in the foreseeable future; and

WHEREAS, in the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System, for which the Commonwealth is not prepared, the Commonwealth’s governmental finances and Virginia’s private economy will be thrown into chaos, with gravely detrimental effects upon the lives, health, and property of Virginia’s citizens, and with consequences fatal to the preservation of good order throughout the Commonwealth; and

WHEREAS, Virginia can avoid or at least mitigate many of the economic, social, and political shocks to be expected to arise from hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System only through the timely adoption of an alternative sound currency that the Commonwealth’s government and citizens may employ without delay in the event of the destruction of the Federal Reserve System’s currency; and

WHEREAS, “legal tender” denotes a currency that must be accepted in payment of a debt denominated in United States “dollars” if the parties have not stipulated that some alternative currency is to be used as their medium of payment or are not otherwise required to use such alternative currency; and

WHEREAS, the Federal Reserve System’s currency has been designated “legal tender” under color of Title 31, United States Code, Section 5103; and

WHEREAS, under Title 12, United States Code, § 411 and Title 31, United States Code, § 5118(b) and (c), the Federal Reserve System’s currency is not redeemable in gold or silver coin or the equivalent in bullion; and

WHEREAS, that the Federal Reserve System’s currency is not redeemable in gold or silver coin or the equivalent in bullion is being identified by more and more experts as a, if not the, major reason for the ever-increasing instability of the Federal Reserve System; and

WHEREAS, all gold and silver coins of the United States are designated “legal tender” under the aegis of Title 31, United States Code, §§ 5103 and 5112(h), and must be so designated perforce of Article I, Section 8, Clause 5 and Article I, Section 10, Clause 1 of the Constitution of the United States; and

WHEREAS, pursuant to Article I, Section 10, Clause 1 of and the Tenth Amendment to the Constitution of the United States, each State must make gold and silver coin a Tender in Payment of Debts; and

WHEREAS, the Supreme Court of the United States in Lane County v. Oregon, 74 U.S. (7 Wallace) 71, 76-78 (1869), and Hagar v. Reclamation District No. 108, 111 U.S. 701, 706 (1884), has ruled that the States may adopt whatever currency they desire for the purposes of performing their sovereign governmental functions, even to the extent of adopting gold and silver coin for those purposes while refusing to employ a currency not redeemable in gold or silver coin that Congress has designated “legal tender”; and

WHEREAS, “the police power” being the primary sovereign governmental function of every State, under Lane County and Hagar every State may adopt its own currency, consisting of gold or silver, or both, whenever necessary and proper to facilitate exercises of that power in aid of the general welfare of the State and its citizens; and

WHEREAS, under the aegis of Title 31, United States Code, § 5118(d)(2), and perforce of Article I, Section 8, Clause 5 and Article I, Section 10, Clause 1 of, and the Ninth and Tenth Amendments to, the Constitution of the United States, Americans may employ whatever currency they choose to stipulate as the medium for payment of their private debts, including gold or silver, or both, to the exclusion of a currency not redeemable in gold or silver that Congress may have designated “legal tender”; and

WHEREAS, under the aegis of Title 31, United States Code, § 5118(d)(2), and perforce of Article I, Section 8, Clause 5 and Article I, Section 10, Clause 1 of, and the Ninth and Tenth Amendments to, the Constitution of the United States, the citizens of Virginia may choose to employ as the medium for payment of their private debts whatever alternative currency, consisting of gold or silver, or both, that the Commonwealth may adopt in the exercise of “the police power”; and

WHEREAS, in light of the possible instability of the Federal Reserve System, proposals for states and their citizens to adopt an alternative currency consisting of gold or silver, or both, are receiving increasing attention throughout the United States, as evidenced by bills that have been or are being introduced in the legislatures of the States of Georgia, Indiana, Montana, New Hampshire, and South Carolina; and

WHEREAS, various systems of alternative currency employing gold or silver, or both, in the form of coin or its equivalent in bullion have already proved themselves in the free market, and could either be employed by the Commonwealth directly or be used as models for a new system created by the Commonwealth to meet Virginia’s unique needs; and

WHEREAS, the adoption of an alternative currency consisting of gold or silver, or both, would not destabilize the present monetary and banking systems, the Commonwealth’s governmental finances, or Virginia’s private economy, because it would not compel or commit the Commonwealth or her citizens to employ such alternative currency to the exclusion of the Federal Reserve System’s currency immediately, but would merely make the alternative currency available, and enable it to be used in competition with and preference to the Federal Reserve System’s currency, to the degree that the need for such use became apparent; and

WHEREAS, the United States Congress, the U.S. Department of the Treasury, and the Federal Reserve System have taken and are preparing to take no action to provide the United States with an alternative to the Federal Reserve System’s currency, in the likely event that the latter would be destroyed through hyperinflation; and

WHEREAS, because legislators in Virginia know or should know all of these facts; and because the General Assembly has the authority, the ability, and the duty to take timely action to deal with this situation without first seeking the approval of or assistance from Congress or any other state; and because the Constitution of Virginia provides, “That all power is vested in, and consequently derived from, the people, that magistrates are their trustees and servants, and at all times amenable to them”—for these reasons, the citizens of the Commonwealth will properly conclude that the members of the General Assembly will be primarily responsible if the Commonwealth is found to be without an alternative currency when the Federal Reserve System’s currency collapses in hyperinflation, or some other related economic calamity supervenes; now, therefore, be it

RESOLVED by the House of Delegates, the Senate concurring, That a joint subcommittee be appointed to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.

The joint subcommittee shall consist of eight legislative members who shall be appointed as follows: five members of the House of Delegates to be appointed by the Speaker of the House of Delegates in accordance with the principles of proportional representation contained in the Rules of the House of Delegates and three members of the Senate to be appointed by the Senate Committee on Rules. The joint subcommittee shall elect a chairman and vice-chairman from among its membership.

In conducting its study, the joint subcommittee shall call or hear from such witnesses and take such other evidence as it deems appropriate and shall consider recommendations for legislation, with respect to the need, means, and schedule for establishing such an alternative currency.

Administrative staff support shall be provided by the Office of the Clerk of the House of Delegates. Legal, research, policy analysis, and other services as requested by the joint subcommittee shall be provided by the Division of Legislative Services. Technical assistance shall be provided by the Treasurer of the Commonwealth of Virginia and the Bureau of Financial Institutions of the State Corporation Commission. All other agencies of the Commonwealth shall provide assistance to the joint subcommittee for this study, upon request.

The joint subcommittee shall be limited to six meetings for the 2011 interim, and the direct costs of this study shall not exceed $12,000 without approval as set out in this resolution. Approval for unbudgeted nonmember-related expenses shall require the written authorization of the chairman of the joint subcommittee and the respective Clerk. If a companion joint resolution of the other chamber is agreed to, written authorization of both Clerks shall be required.

No recommendation of the joint subcommittee shall be adopted if a majority of the House members or a majority of the Senate members appointed to the joint subcommittee (i) vote against the recommendation and (ii) vote for the recommendation to fail notwithstanding the majority vote of the joint subcommittee.

The joint subcommittee shall complete its meetings by November 30, 2011, and the chairman shall submit to the Division of Legislative Automated Systems an executive summary of its findings and recommendations no later than the first day of the 2012 Regular Session of the General Assembly. The executive summary shall state that the joint subcommittee intends to submit to the General Assembly and the Governor a report of its findings and recommendations for publication as a House or Senate document and shall specify the date by which the report shall be submitted. The executive summary and the report shall be submitted as provided in the procedures of the Division of Legislative Automated Systems for the processing of legislative documents and reports, and shall be posted on the General Assembly’s website.

Implementation of this resolution is subject to subsequent approval and certification by the Joint Rules Committee. The Committee may approve or disapprove expenditures for this study, extend or delay the period for the conduct of the study, or authorize additional meetings during the 2011 interim.

When will the Recession End? Part 174 West must see through Medvedev-Putin charade

West must see through Medvedev-Putin charade

By Mikhail Kasyanov, Vladimir Milov, Boris Nemtsov and Vladimir Ryzhkov, Edmonton Journal February 23, 2011

This year started quite symbolically in Russia. In the last days of 2010, government authorities decided to demonstrate their power and their intolerance for being challenged: The verdict issued at the farcical trial of Mikhail Khodorkovsky and Platon Lebedev had no relation to jurisprudence; leading opposition figures were detained for as many as 15 days on purely political grounds.

These heavy-handed actions set a peculiar stage for President Dmitry Medvedev's address at the World Economic Forum. Nevertheless, the intelligent and well-informed audience in Davos enthusiastically applauded his nice words about Russia's economic modernization and dynamic democratic development. International business leaders seem to accept his complaints that few Russians understand his great plans for the country's future, which greedy oligarchs and corrupt officials from the 1990s prevent him from undertaking.

It is obvious that Russia's economy and political system desperately need comprehensive modernization. But authorities' increasingly oppressive activities are following a different course.

Contrary to the wishful thinking many in Russia and abroad expressed when Medvedev took office -by de facto appointment -in 2008, his presidency has demonstrated no signs that his pro-democracy rhetoric might turn into real action. In fact, the opposite is true. This period was marked by increasingly restricted and falsified elections; war against Georgia; eased constraints on the use of armed forces abroad; the torture and death in custody of Sergei Magnitsky, a lawyer for the policeraided investment fund Hermitage Capital; police lawlessness and corruption; and continued oppression of political opponents and dissent. European energy consumers have experienced supply cutoffs, just one form of Russia's open pressure on its neighbours. Blatant hooliganism of pro-Kremlin youth organizations is promoted.

Medvedev has invested himself personally in this plethora of misdeeds. Together with his mentor, Prime Minister Vladimir Putin, he is directly responsible for numerous human-rights violations and further degradation of the political atmosphere in this country. He no longer deserves the benefit of the doubt. The question was asked at Davos in 2000 who Putin really is. It should be clear now to everyone who Putin and Medvedev are.

Parliamentary elections are scheduled to take place in several months, and the presidential election is due next year. But officials' authoritarian actions late last year suggest that future elections will not be better than previous ones -with winners appointed well in advance of the voting, a homunculus opposition pretending to fight while real opposition candidates are not allowed to run, election commissions producing the required results, and western short-term monitors confirming that on election day all but a few minor things were OK.

The Russian power tandem has indicated that they will soon decide which of them would become the next president for the newly established six-year term or even two consecutive terms. Nobody is asking the opinion of the Russian people, who are to go, zombie-like, to polling stations to create the appropriate TV picture. This is how democracy is understood by Russia's ruling group.

In fact, were Russian authorities left to their own devices, this country's "elections" wouldn't be any better than the recent performance in Belarus. And should that happen, Russia will lose its last chance for a peaceful return to the normal track of democratic development.

What can be done? We urge western leaders to discontinue their kisses-and-hugs "Realpolitik," which has failed, and to stop flirting with Russian rulers -behaviour that has not brought any benefits to the West and produces in Russia an impression that Putin's system is a decent one, like any other in the democratic world.

This is not just about choosing better keynote speakers for major international events. It means western leaders must stop closing their eyes to Russian leaders' clear noncompliance with international obligations, especially concerning free and fair elections and basic human rights. It means the West should cease greeting Russian rulers as equals, providing them with legitimacy they clearly do not merit. It means the West should start exposing corrupt practices by the Russian establishment, whose ability to find havens for stolen funds and leave Russia for comfortable lives in western nations is one of the regime's pillars of stability. It means western nations should introduce targeted sanctions against the officials directly abusing the rights of their compatriots.

This won't be simple. Such measures would be vehemently opposed by Putin's team, by the growing clientele for the state-owned Gazprom-Rosneft, and by some businesses that prefer smooth, if murky, dealings with Russian authorities. But the stakes require nothing less.

As leaders of the united Russian democratic opposition, we urge the West to stop undermining our cause and compromising the very principles western society is based upon. We are sure that we can achieve our goals through freedom and normal democratic process -provided we get these restored in our country.

The writers are co-chairs of the People's Freedom Party in Russia. Washington Post

Read more: http://www.edmontonjournal.com/news/West+must+through+Medvedev+Putin+charade/4330915/story.html#ixzz1ErwDv8Pi

Walter Derzko

 

When will the Recession End? part 171 China official warns of domestic unrest and "hostile" West

N.B Protests in China have been common since before the Olympics but largely ignored by the Western media.--Walter Derzko

China official warns of domestic unrest and "hostile" West

Source: http://uk.reuters.com/article/2011/02/22/uk-china-unrest-idUKTRE71L1BZ20110222

BEIJING (Reuters) - The Chinese government faces a turbulent time of domestic unrest and challenges from "hostile Western forces" that it will fight with more sophisticated controls, a Communist Party law-and-order official said.

Chen Jiping, deputy secretary general of the Communist Party's Political and Legal Affairs Committee, gave the toughly worded warning in this week's issue of Outlook Weekly, and blamed Western democratic countries for fomenting unrest.

He did not mention the protests that have rocked authoritarian governments in the Middle East, and his words reflect the Communist Party's own homegrown fears.

But the uprisings that deposed Egypt's long-time president Hosni Mubarak and are now threatening Libya's strongman Muammar Gaddafi are likely to reinforce the views of Chinese security officials like Chen.

"The schemes of some hostile Western forces attempting to Western and split us are intensifying, and they are waving the banner of defending rights to meddle in domestic conflicts and maliciously create all kinds of incidents," Chen told the magazine, which is published by the official Xinhua news agency.

"Mass incidents continue at a high rate," Chen said, using the Party euphemism for protests, riots, strikes and mass petitions.

"Our country is in a period of magnified conflicts within the populace, high crime rates and complex struggle against foes, and these features are most unlikely to change any time soon," he said. The magazine reached subscribers Tuesday.

To counter such worries, Chinese leaders have promoted more of the stringent security steps that they brandished over the weekend, when police snuffed out feeble attempts to emulate the "Jasmine Revolution" street protests that have bloomed across the Middle East.

Chen said the government was honing policies to defuse and smother unrest and crime. Those policies include more monitoring of citizens to nip threats in the bud.

"That will include comprehensive roll-out of a social stability risk assessment system that covers major projects and policies that have a direct bearing on public interests," he said.

"Before decisions are made, there'll be a double assessment -- of their economic outcome and risks to social stability."

The Party Political and Legal Affairs Committee that Chen helps run oversees the courts, police and prosecutors. Chen is also a senior official of an office that develops and enforces anti-crime and domestic security policies.

The Communist Party already spends heavily on domestic security, and experts have said that budget now rivals spending on the military, crimping outlays for welfare.

Even most dissidents and other critics of China's one-party rule see scant prospect of serious challenges to it soon. Police regularly detain or confine dissidents at sensitive times.

In 2007, China had more than 80,000 "mass incidents," up from more than 60,000 in 2006, according to sociologists at the Chinese Academy of Social Sciences. More up to date estimates are not available, but some experts think improved welfare and the abolition of a hated tax on farmers have reduced the number. (Reporting by Chris Buckley; Editing by Robert Birsel)

Walter Derzko

Quote of the week: Zbigniew Brzezinski on global political awakening and activism

Quote of the week: (hat tip to Democracy Watch in Ukraine at htt://www.peoplefirst.org.ua )

"For the first time in human history almost all of humanity is politically activated, politically conscious and politically interactive... The resulting global political activism is generating a surge in the quest for personal dignity, cultural respect and economic opportunity in a world painfully scarred by memories of centuries-long alien colonial or imperial domination... [The] major world powers, new and old, also face a novel reality: while the lethality of their military might be greater than ever, their capacity to impose control over the politically awakened masses of the world is at a historic low. To put it bluntly: in earlier times, it was easier to control one million people than to physically kill one million people; today, it is infinitely easier to kill one million people than to control one million people."

Zbigniew Brzezinski

Former U.S. National Security Advisor

Co-Founder of the Trilateral Commission

Member, Board of Trustees, Center for Strategic and International Studies

Business still uncomfortable with foresight and the future says WSJ

For U.K. Banks, a Calamity Is Born by David Enrich

LONDON—U.K. bank regulators are launching a new type of "stress test" that forces banks to consider unlikely but potentially disastrous scenarios like a flu pandemic or disruptions to the country's food-supply chain.

Disaster Planning

 

Scenarios U.K. banks are evaluating under new FSA 'stress tests' 

It is a far cry from the comparatively quaint variables, bursting property bubbles and economic downturns, that regulators traditionally have used to gauge banks' financial health.

The latest exercise, which the U.K.'s Financial Services Authority instructed banks to start conducting in mid-December, is dubbed a "reverse stress test." It requires banks to identify potentially fatal events and then to work backward to find ways to revamp their businesses so they would be better prepared to withstand such shocks.

After being caught flat-footed by the financial crisis that nearly toppled two of the U.K.'s largest banks, the FSA sees the tests as part of prudent contingency planning. The agency last year told banks that the exercise is designed to spur them to "explore more fully the vulnerabilities of their current and future business plans."

Bankers call it the latest example of regulatory overkill. Executives protest that they are wasting countless hours dreaming up outlandish doomsday scenarios.

The chief executive of a major U.K. bank said the tests are predicated on "a massive confluence [of] absurd scenarios" in which executives passively watch events unfold rather than trying to stabilize the situation.

Bankers are especially worried that the process could result in them being forced to hold more capital. The FSA said in a planning document that the tests "may result indirectly in changes to the levels of capital held by firms" if the exercise "identifies business model vulnerabilities that have not previously been considered."

An FSA spokeswoman defended the exercise. "It might seem outlandish to them, but the point is that it pushes the business model to the point it collapses," the spokeswoman said. She said the banks also should be evaluating relatively mundane situations like what they would do in the event of a major internal fraud.

The U.K. arms of foreign banks, including U.S. investment banks, also are subject to the tests, although they face a more gradual timetable than British lenders for conducting the exams. One Wall Street bank's London unit is likely to look at how it would fare in a global liquidity crisis, said a person familiar with the matter.

Meanwhile, the man likely to be Ireland's next prime minister said the government should wait until a round of stress tests on the country's banks has been completed before recapitalizing them.

In an interview Thursday, Enda Kenny said it would be "prudent and realistic" to wait "to see if there is another black hole in the banks" before they receive any new capital injections.

Under the terms of the roughly €67 billion ($92 billion) bailout it negotiated for Ireland late last year, the government had been due to inject up to €10 billion into Bank of Ireland, Allied Irish Banks and EBS Building Society by the end of this month.

But the departing finance minister, Brian Lenihan, postponed the plan Wednesday until after the election, scheduled for Feb. 25, effectively leaving the decision to the next government.

In the U.K., the griping about the reverse stress tests comes as bankers mount a counteroffensive against what they perceive as overzealous U.K. regulation, especially when it comes to the amounts of capital and funding they are required to keep on hand.

Barclays PLC Chairman Marcus Agius complained in a letter last month to Treasury chief George Osborne that the situation is "resulting in a nonlevel playing field." Mr. Agius, writing in his capacity as chairman of the British Bankers' Association, attached an eight-page report listing examples, including the reverse stress tests, that said the FSA is outpacing other regulators and international rules.

The new testing process highlights the lengths to which regulators are going to guard against a repeat of the global financial crisis, in which a confluence of events crippled banks around the world and sent many economies into recession.

In November 2008, the FSA pioneered the use of stress tests to determine how much more capital banks would need to weather a variety of unpleasant but plausible economic environments. The U.S. adopted that model in 2009 to help ease its banking crisis.

The European Union last year conducted stress tests of 91 banks, but they were widely panned for giving passing marks to almost all banks, including some that subsequently required taxpayer bailouts.

European officials now are negotiating the variables they will use in a second round of tests this spring. Those variables include factors such as economic growth rates and real-estate values.

Those exams are tame compared with the reverse stress tests getting under way at U.K. banks and other financial institutions.

In those, bank executives are supposed to run simulations of a series of scenarios and then take steps to fortify their companies to withstand such crises. Such steps could include drawing up new contingency plans, restructuring business lines or beefing up cash reserves.

The FSA doesn't dictate the terms of the exams, leaving it up to banks to choose the catastrophes that they prepare for. But those situations are subject to FSA vetting and, in at least some recent cases, agency officials have told executives they aren't looking at sufficiently severe events, according to people familiar with the matter. The FSA has insisted those banks take into account more-extreme possibilities.

The banks appear to be "having difficulty thinking of something that will satisfy the regulators," said Irving Henry, a director at the British Bankers' Association who specializes in regulatory issues.

As a result, bankers are evaluating some seemingly far-fetched possibilities, according to people involved in the process.

For example, they are calculating what would happen if a swine-flu pandemic wiped out most of their employees, contemplating questions regarding how the bank continues to operate and even who would restock cash machines.

Another scenario posed involves the potential for a Latin American coup that would knock out the bank's local operations, potentially trapping large sums of money thousands of miles away.

And at least one bank was asked to asses the impact of a full-fledged trade war between the U.S. and China.

Some scenarios are easier to imagine. Last spring, an Icelandic volcano erupted, sending a big ash cloud floating over the U.K. and other parts of Western Europe. What if a future eruption prevented air travel for months rather than weeks?

The banks maintain that they would be doing this type of contingency planning without prodding from the FSA. Having regulators looking over their shoulders, demanding clear-cut answers and the completion of hundreds of spreadsheets, is simply making the process more cumbersome, bank officials said. It is "risk planning gone mad," one bank executive said.

—Guy Chazan contributed to this article.

Write to David Enrich at david.enrich@wsj.com 

http://online.wsj.com/article/SB10001424052748704132204576136303790028750.html

 

Walter Derzko

 

Predicting early warning signals of disaster in complex systems; The Cassandra factor or Prophets of doom: The secret of soothsaying

Reposted from New Scientist magazine this month

Prophets of doom: The secret of soothsaying
02 February 2011 by Mark Buchanan
New Scientist Magazine issue 2797.

From seizures to plagues, we may have found a universal early warning system that tells us when we're headed for disaster

OF ALL the tragic protagonists of the Trojan wars, Cassandra cuts the loneliest figure. The soothsaying daughter of the king of Troy, she saw the warning signs that foretold the downfall of her city. But she was fated not to be believed - and all her knowledge could not prevent the impending catastrophe.

Fast-forward a few thousand years, and disaster looms ever larger on our horizons. Climate change, ecosystem crunches, market crashes: stability seems a fragile and transitory state, threatening at any point to tip into uncertainty and chaos.

What we wouldn't give for a way to see the future and head off disasters. "There are so many massive changes that are really important for people - the collapse of fisheries, water supply problems, desertification or species invasions - but we are typically surprised when these changes come," says ecologist Steven Carpenter of the University of Wisconsin in Madison. "Early warnings could save a lot of money and a lot of human suffering."

Carpenter is at the centre of developments that could legitimise soothsaying with solid science. As we get to grips with the dynamics of complex systems with many moving, interacting parts, from the ecosystems that Carpenter studies to financial markets and the human brain, we are beginning to see subtle similarities in how they work, and in particular how they signal stress in the lead-up to a meltdown. Look hard enough and the same precursory signals of catastrophe seem to crop up all over the place. Might they allow us to leap over Cassandra's shadow - to foretell disaster, but also act to avoid it?

The conventional view is that "tipping points" in complex systems are fundamentally unpredictable. Imagine a smouldering pile of sticks. They might smoke for a while and eventually die out, or they might suddenly kindle and burst into flames. Without knowing every detail of the pile of twigs and their surroundings - the exact arrangement of the pile, the temperature and humidity of the environment and so on - it is impossible to tell when, if at all, a flare up might occur.

Something bugging
Carpenter's first inkling that this might not be the whole story came one night seven years ago on the Caribbean island of Tobago. He and some fellow ecologists were relaxing in a bar after a conference session, and talk turned to a computer program one of the party had written to simulate outbreaks of spruce budworm. Every few decades, numbers of this conifer-munching insect explode, bringing devastating defoliation to North American forests. But there seemed to be an irritating bug in the program itself: just before an outbreak, the virtual budworm populations showed puzzling, jagged fluctuations in their numbers.

That intrigued Buz Brock, an economist colleague of Carpenter's at Wisconsin who was also present that evening. He had been working at the mathematical interfaces of economics and ecology for two decades, and he grabbed some paper and started scribbling equations. Two hours on, he had what looked like an answer to the budworm mystery - and a hint of a bigger discovery, too.

What he had jotted down were some calculations from bifurcation theory, the branch of applied mathematics used to characterise how a system's internal dynamics change, often abruptly, in response to mainly gradual changes around it. The budworm issue led him to see a new wrinkle in the equations. It seemed that the slow slide of a system into a new, potentially unstable state would first be reflected in subtle changes in the natural patterns of variability of the system, long before any tipping point was reached.

With budworms, it is easy to see why this might be the case. In the short term, the population of the insect would vary up and down, but natural feedbacks would act to keep it close to some fixed value. More budworms, for example, would mean more tasty meals for birds, who might shift their attentions from other food sources, pushing down budworm numbers once more.

In the longer term, however, gradual changes in outside conditions could bring more subtle effects into play. For example, over many years the foliage harbouring the budworms would grow thicker as trees grew and matured, making it progressively more difficult for birds to find the grubs. That gradual change, outwardly almost imperceptible, would first make itself known in how a budworm population fluctuated: each time the number of grubs was higher than average, it would take longer to sink back to its equilibrium value. Eventually, the long-term increase in foliage density, coupled with a natural short-term rise in the bug population, would be enough to render the birds' foraging strategy ineffective. Budworm numbers would start increasing exponentially and the system would tip abruptly into a radically different state, with catastrophic consequences for the forest.

This sort of "critical slowing down" in the response to natural perturbations was just the thing to explain the mysterious fluctuations in the virtual budworm populations (see diagram). It was not a new idea; something similar had been spotted in systems from atoms emitting laser light to patterns of neural activity in squid brains. But Brock was the first to suggest that it might be a consistent early warning sign of events to come. "That's when we started wondering if Buz hadn't hit on something much bigger," says Carpenter. If critical slowing down could be used to predict tipping points in budworm populations, why not also in other systems where these slowing downs occur? "The more excited we got, the more we also wondered, are we kidding ourselves?" says Carpenter.

If they were, they weren't the only ones. Around the same time, climatologists Hermann Held, Thomas Kleinen and Gerhard Petschel-Held at the Potsdam Institute for Climate Impact Research in Germany were noting something similar. They were modelling how additional fresh water, for example from melting ice caps, would alter the flow of the ocean currents that carry energy and dissolved materials around the globe. As meltwater increases, this normally highly predictable flow starts to become less regular in time and space, before eventually, at much higher meltwater influx, ceasing altogether (Ocean Dynamics, vol 53, p 53).

Such effects are not just confined to computer models. In 2006, Chih-hao Hsieh, then at the Scripps Institution of Oceanography in La Jolla, California, and his colleagues reviewed a 50-year database of fish larvae populations. Leaving overall declines aside, they found that the variability in species exploited by commercial fishing - which are more prone to devastating crashes - matched the changes predicted by theory, even when those populations had not yet been so overfished as to collapse (Nature, vol 443, p 859).

Vasilis Dakos and Marten Scheffer of the University of Wageningen in the Netherlands and their colleagues, meanwhile, were looking into eight cases of abrupt changes in Earth's past climate. These ranged from the transition from a balmy tropical state to a colder climate with ice caps 34 million years ago to an event 5000 years ago when the north African landscape switched abruptly from a savannah dotted with lakes to desert. In each case, the researchers identified a sudden increase in the autocorrelation of the temperature record in the time leading up to the transition. Autocorrelation is a mathematical sign of critical slowing: it reflects the predictability of a time series, or how closely its behaviour correlates with what it did in the recent past. As a system approaches a tipping point and its responses to natural perturbations grow slower, that autocorrelation grows larger (Proceedings of the National Academy of Sciences, vol 105, p 14308).

Induced collapse
What could be the final proof of a pervasive predictive effect came last September. Ecologists John Drake of the University of Georgia in Athens and Blaine Griffen of the University of South Carolina in Columbia induced populations of zooplankton to crash by slowly reducing the food available to some of them. In those populations destined for extinction, the predicted signs of critical slowing in their fluctuations showed up as much as eight generations before extinction (Nature, vol 467, p 456).

"This is a real landmark," says Scheffer, who was not involved in the research. "It reveals theoretically predicted signals in a real biological system in a controlled experiment."

So can we use this to our advantage? Perhaps. Scheffer and others readily admit that moving from occasional laboratory success to consistent practical application will be far from easy.

One problem is how to deal with the possibility of false predictions - something that previous experience has shown to be a tough nut to crack (see "All in the mind"). Changing tack in areas such as climate change and biodiversity to avoid assumed tipping points can incur huge costs, so policy makers will demand total confidence that when an early warning sign comes it means they must act. And even if we can guarantee total confidence in the predictions, will we be able to spot the warning signals far enough in advance to make a difference?

To find out, Carpenter, Brock and ecologist Reinette Biggs of Stockholm University in Sweden developed a computer model of a fishing ground in which they varied fishing and shoreline development policies and watched for their effects on the virtual fish stocks. Shoreline development can have a profound effect on fish numbers by depriving fish of natural habitats and increasing harmful run-offs. But once developed, a shore is not easy to undevelop, at least quickly. In this case, the warning signs of critical slowing and increased autocorrelation did indeed show up, but too late for any change in development policy to feed through and avert a collapse. "If you wait for clear evidence of negative environmental impacts, you may well be too late to do anything about it," says Brock.

In the case of simple overfishing, however, the outcome was more positive. If policies such as fishing moratoriums were implemented immediately after an early warning was received, the collapse of fish populations could be prevented. (Proceedings of the National Academy of Sciences, vol 106, p 826). This suggests that with the right high-precision data to hand we can recognise and avert impending catastrophes. "With the rapid growth in high-frequency environmental monitoring equipment, this may be more possible in the future," says Biggs.

The same possibilities and caveats apply to the largest complex system where advance, undeniable warning of impending disaster would be very useful: the global climate. In a recent review, Tim Lenton of the University of East Anglia in Norwich, UK, alongside Scheffer and others, has listed the threats most likely to cause major shifts in Earth's climate, such as the melting of the polar ice caps. Any kind of concrete early warning would be valuable, says Lenton, and better data is the key to spotting them.

Even if we were to see incontrovertible signs in time, that does not necessarily mean we will be able to agree on the right actions, says John McNeill, an ecological historian at Georgetown University in Washington DC. "Unless we know those things in convincing detail and with near-unanimity, human collective-action problems bedevil effective action," he says.

Our understanding of tipping points and the warnings we receive of their approach is undoubtedly improving in leaps and bounds. But predicting whether we can use that to sharpen up our act may be the hardest call of all.

All in the mind
One area where tipping points have a long history is in medicine, especially in studies of that most complex of systems, the human brain. As long ago as the 1970s, researchers at the McDonnell Douglas Astronautics Company in West Huntington Beach, California, built a pocket-sized EEG device that used a statistical analysis of patterns in the brain's electrical activity to give early warning of epileptic seizures - the point where the normal patterns of neuronal firing give way to excessive or synchronous activity, with incapacitating effects.

Their aim was to give people with epilepsy sufficient warning of an attack that they could cease or avoid dangerous activities - driving a car, for example, or crossing the road. Ultimately, the plan was to develop an implant that could deliver electric shocks or a drug infusion to head off a seizure.

In a small study limited to five people, their technique accurately predicted about 90 per cent of the seizures tens of seconds to minutes before they came. But it also frequently predicted seizures that never came. That risked causing unwarranted alarm and could have subjected someone to unnecessary treatments. Since then, decades of effort have gone into developing more specific ways to foresee seizures that might overcome this problem by looking at more complex features of the patterns of electrical activity within the brain. Success has been limited.

In fact, proving any kind of practical predictive ability to be more successful than random guessing isn't as easy as you might expect. When it comes to blind studies of the effectiveness of different algorithms for predicting seizures, for example, there is still no clearly accepted definition of what actually constitutes the onset of a seizure. "The idea seems simple enough," says Brian Litt of the University of Pennsylvania in Philadelphia. "You make a prediction, and then within some predetermined period a seizure either occurs or does not. But in practice you face difficult questions like 'Did a seizure really occur?'."

Financial whirl
Might financial markets also give consistent warning of their collapse? That possibility awakes intense interest given the profits to be made by any financial whizz kid who can see the future.

So far, the science is ambiguous. Economist John Geanakoplos of the University of Yale, working with physicists Doyne Farmer of the Santa Fe Institute and Stefan Thurner of the Medical University of Vienna, has studied a model of competition between hedge funds, which try to attract investors by earning higher returns than their competitors. They found that this competition can drive the market past a tipping point, triggering a sudden, self-amplifying spiral of losses. Long before that collapse occurs, however, the researchers observed ever more skittish flows of money in and out of the funds.

These model predictions seem to fit closely with the actual behaviour observed before a real-world disastrous event in August 2007 known as the "quant meltdown". But in general, reliable evidence for early warnings in financial systems is scant. Where money is at stake, any successful method of prediction would quickly invalidate its own forecasts, as investors change their strategies to avoid its predictions.

Mark Buchanan is a freelance writer based in the UK