What If We Could Eliminate All Our Debt Today?

Next phase of financial crisis may be the hardest (Reuters) – It took $5 trillion and an unprecedented global coalition of G20 countries to stabilize the economy after investment bank Lehman Brothers collapsed in 2008. Quelling the next phase of the financial crisis may be even harder.To stop the panic that erupted nearly two years ago, governments transferred a mountain of debt from private to public accounts. Now, those government debts are distressing financial markets and there is nowhere left to shift the burden. Europe’s clumsy response to Greece’s debt woes highlighted the economic and political headaches that await debt-laden countries and those who finance their borrowing. European leaders have yet to convince investors that they have a credible short-term plan to contain government deficits and a long-term answer to the region’s slow growth.

Sand Berm Approved to Fight Oil; Scientists Skeptical -The state of Louisiana is poised to begin a large experiment in blocking oil from reaching its fragile wetlands. On 27 May, the Army Corps of Engineers granted an emergency permit to build several sand berms along 70 kilometers of barrier islands. Experts are concerned that the project will be neither durable nor effective. Oil is much easier to clean from a sandy beach than from a wetland, where removing it would probably cause additional harm to the fragile ecosystem. But Louisiana’s barrier islands—long skinny beaches that are dozens of kilometers offshore—have been greatly damaged by storms. In some places, the Chandeleur Islands have been eroded into shallow shoals. Louisiana Governor Bobby Jindal proposed that engineers build a 2-meter-tall berm in front of the islands. In addition to catching oil, the berms would also shunt oily waters towards tidal inlets, making it more efficient for booms and boats to collect the oil. Jindal proposed 160 kilometers of berms at an estimated cost of $350 million

Toxicity Aside, Dispersants Could Undermine Natural Oil-Eaters – Right now, the biggest dispute between the government and BP over dispersants concerns their toxicity. Using planes and subs, BP crews have applied more than 37,850 liters of the chemical to the gulf over the past month, a small portion of it in the deep ocean. But neither the government nor BP expected the gusher to spew oil for this long, and concerns over the toxic effects of the dispersants have been growing. In the past few days, the government has pressured BP to scale back its dispersant use on the ocean surface and to look for less-toxic alternatives; the government said it will also look for more benign alternatives. In lab tests, toxicologists have found that concentrations of Corexit, BP’s dispersant of choice, can kill shrimp or fish. But the real-world effects remain unclear, as no one has ever spread this much dispersant in one place before. The tussle, and the studies, continue. But there’s another risk apart from toxicity, says David Valentine, a biogeochemist at the University of California, Santa Barbara: A chemical may undermine the cleanup effort’s own microbial allies.

 Land prices and the Chinese public sector – On the morning of May 29 my group was taken to see the village of Cha’an outside Dalian. Or perhaps I should say the former village. What happened, essentially, is that back in 2006 the former “village” of rudimentary structures was razed and the government constructed a large and extremely nice park (it’s in a very scenic area), reforested the hillsides, and constructed a series of apartment complexes. The former villagers now live in modest but up-to-date structures. You see some stories of Chinese people being serious dispossessed in this kind of process, but in the case of Cha’an the local authorities seem to have decided (wisely, in my view, as well as fairly) that it doesn’t make sense to treat people poorly. So people who lost homes in the reconstruction were compensated with multiple homes in the new Cha’an.This all naturally raises the question of how the village government was able to finance all this. The answer is that they used the rising price of land near prosperous Chinese cities to do it.

 How far will Europe’s economic tremors reach? – From one financial angle, troubles in Greece and elsewhere in Europe may have little effect on America’s economy. THE debt crisis in Europe has already had a significant psychological impact on Wall Street, sending the Standard & Poor’s 500-stock index down 10.5 percent from its April high. But if investors are afraid that Europe’s woes could retard the recovery in the United States, a question arises: What does the crisis in Europe really mean for domestic growth? The answer depends on which aspect of the crisis you’re looking at. The possibility of another shock to global financial institutions is certainly cause for concern, as we shall see. But if investors focus solely on the fundamental health of Europe’s economy, and its ties to the United States, the situation may not look all that worrisome. To be sure, Europe is a major customer for the goods of American manufacturers. In fact, the 16 countries that use the euro represent around 13 percent of total United States exports. But the nations that are hit hardest by this crisis account for only a small fraction of that.

What If We Could Eliminate All Our Debt Today? – One of the first questions David asked me was (something like):  well, couldn’t we just pay off all of the national debt today, by (somehow) collecting an average of about $40,000 per person?  (David’s $40,000 figure signaled what he was proposing to do was to pay off the $13 trillion in gross debt, not just the net–in other words, repaying the trust funds and not just our creditors.)  To which I responded that it might be theoretically possible to do that, but economically it would be stupid; unless it were done very progressively such that only old and idle wealth were confiscated (rather than income), it would cripple the economy.  (Note that the $13 trillion in gross debt is about 90 percent of GDP.)  But let’s assume we could do it without destroying our nation; let’s assume we could go “poof” and wipe the debt slate clean.  What would paying off the debt entirely today accomplish in terms of fiscal sustainability?  Not nearly as much as it would seem

BP bused in 100s of temp workers for Obama visit, state official says  – Perhaps you saw news footage of President Obama in Grand Isle, La., on Friday and thought things didn’t look all that bad. Well, there may have been a reason for that: The town was evidently swarmed by an army of temp workers to spruce it up for the president and the national news crews following him. Jefferson Parish Councilman Chris Roberts, whose district encompasses Grand Isle, told Yahoo! News that BP bused in "hundreds" of temporary workers to clean up local beaches. And as soon as the president was en route back to Washington, the workers were clearing out of Grand Isle too, Roberts said."The level of cleanup and cooperation we’ve gotten from BP in the past is in no way consistent to the effort shown on the island today," Roberts said by telephone. "As soon as the president left, they were immediately put back on the buses and sent home."

Why deep-water oil spills do their damage deep down – Surface slicks may account for as little as 2 per cent of the oil now spilling into the Gulf of Mexico, according to a study of a controlled deep-water spill conducted in 2000 by the US Minerals Management Service and a consortium of oil companies, including BP. In June 2000, Project Deep Spill released hydrocarbons into the sea off the coast of Norway at a depth of about 800 metres. The tests included releases of 60 cubic metres of crude oil and 60 cubic metres of diesel fuel over separate 1-hour periods.The study challenges the estimate by federal officials, based on the amount of oil on the sea surface, that around 5000 barrels (800 cubic metres) of oil per day are pouring into the sea from the site where the BP-operated drilling rig Deepwater Horizon was destroyed by fire last month. It also adds weight to reports of massive underwater oil plumes that government officials are now downplaying.


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