2011

Banks and WikiLeaks – The whistle-blowing Web site WikiLeaks has not been convicted of a crime. The Justice Department has not even pressed charges over its disclosure of confidential State Department communications. Nonetheless, the financial industry is trying to shut it down.  Visa, MasterCard and PayPal announced in the past few weeks that they would not process any transaction intended for WikiLeaks. Earlier this month, Bank of America decided to join the group, arguing that WikiLeaks may be doing things that are “inconsistent with our internal policies for processing payments.”  The Federal Reserve, the banking regulator, allows this. Refusing to open an account for some undesirable entity is seen as reasonable risk management. The government even requires banks to keep an eye out for some shady businesses — like drug dealing and money laundering — and refuse to do business with those who engage in them.  But a bank’s ability to block payments to a legal entity raises a troubling prospect. A handful of big banks could potentially bar any organization they disliked from the payments system, essentially cutting them off from the world economy.

Bundle Up, It’s Global Warming – THE earth continues to get warmer, yet it’s feeling a lot colder outside. Over the past few weeks, subzero temperatures in Poland claimed 66 lives; snow arrived in Seattle well before the winter solstice, and fell heavily enough in Minneapolis to make the roof of the Metrodome collapse; and last week blizzards closed Europe’s busiest airports in London and Frankfurt for days, stranding holiday travelers. The snow and record cold have invaded the Eastern United States, with more bad weather predicted.  All of this cold was met with perfect comic timing by the release of a World Meteorological Organization report showing that 2010 will probably be among the three warmest years on record, and 2001 through 2010 the warmest decade on record.  How can we reconcile this? The not-so-obvious short answer is that the overall warming of the atmosphere is actually creating cold-weather extremes. Last winter, too, was exceptionally snowy and cold across the Eastern United States and Eurasia, as were seven of the previous nine winters.

December Arctic Sea Extent actually decreases, goes to lowest level ever recorded for the month of December – click on graph to enlarge

Expect more extreme winters thanks to global warming, say scientists – Some climate scientists believe that the dramatic retreat of the Arctic sea ice over the past 30 years has begun to change the wind patterns over much of the northern hemisphere, causing cold, Arctic air to be funnelled over Britain during winter, replacing the mild westerly airstream that normally dominates the UK’s weather. The study was carried out in 2009, before last year’s harsh winter started to bite, and is all the more prescient because of its prediction that cold, snowy winters will be about three times more frequent in the coming years compared to previous decades. The researchers used computer models to assess the impact of the disappearing Arctic sea ice, particularly in the area of the Barents and Kara seas north of Scandinavia and Russia, which have experienced unprecedented losses of sea ice during summer. Their models found that, as the ice cap over the ocean disappeared, this allowed the heat of the relatively warm seawater to escape into the much colder atmosphere above, creating an area of high pressure surrounded by clockwise-moving winds that sweep down from the polar region over Europe and the British Isles. Vladimir Petoukhov, who carried out the study at the Potsdam Institute for Climate Impact Research in Germany, said the computer simulations showed that the disappearing sea ice is likely to have widespread and unpredictable impacts on the climate of the northern hemisphere.

Stimulus, Without More Debt, by Robert Shiller, Commentary, NY Times: The $858 billion tax package signed into law this month provides some stimulus for our ailing economy. With the unemployment rate at 9.8 percent, more will certainly be needed, yet further deficit spending may not be a politically viable option.Instead, we are likely to see a big fight over raising the national debt ceiling, and a push to reverse the stimulus we already have. We don’t need to go deeper into debt to stimulate the economy more; a concept known as the “balanced-budget multiplier theorem” states that national income is raised, dollar for dollar, with any increase in government expenditure on goods and services that is matched by a tax increase. The reasoning is very simple: On average, people’s pretax incomes rise because of the business directly generated by the new government expenditures. If the income increase is equal to the tax increase, people have the same disposable income before and after. So there is no reason for people, taken as a group, to change their economic behavior. But the national income has increased by the amount of government expenditure, and job opportunities have increased in proportion.

China Raises Rates, Citing Inflation Fears – China’s central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.  The People’s Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.  The central bank said in a statement on its website (www.pbc.gov.cn) that the latest rate rise would take effect on Sunday.  The move came after Beijing said earlier in December it was switching to a "prudent" monetary policy, from its earlier "moderately loose" stance.

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