Weekly Round Up June 12 – 2013

Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics, the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.Edwin Lefèvre, 1923

This week’s links cover the usual topics: various bubbles and unsustainable situations, might they be ecological, political or economical. To start with, in addition to the threat of global warming, humans are slashing and burning one of the most basic and precious element of life: soil. Overproduction leads to desertification and we might find ourselves with empty plates. We will probably learn the hard way that there is no free lunch.

The NSA scandals are a wake-up call for many people, who are discovering how much of their data is effectively collected, stored and dissected. Glenn Greenwald has been providing consistent coverage of civil rights and freedom of speech for 8 years and is thus a legitimate reference regarding these topics. My favorite sentence regarding those topics: “If you believe that people with this kind of power won’t abuse it for other than counter-terrorist purposes, then you deserve to live in la-la land.”

While it seems that our techno-industrial-urbanized world is so advanced that we won’t repeat the mistakes of the past, a few articles argue that we’re just doing history all over again, except much faster and in a much more dangerous way. There are many who argue that because of trade relations and globalization, we will never go to war again. This argument has no historic backing. Did you know that capital and people flows were more international before 1914 than they are now ? In other words, the world was more globalized that it is today, for all the technology we have.

60 years of relative peace, of which about 40 were spent facing off with weapons of mass destruction, with total disaster avoided by inches (1962 or 1983) have left us quite unaware of the multiple flashpoints and potential conflicts with large scale, unforeseen consequences. As long as there are humans, there will be history, with its own rhythms and endless tragedies. We must read and understand history before working toward a common future that we want, instead of being swiped by the flow of history.

Science, General Knowledge & Environment

Experts unearth concerns over ‘peak soil’ – “The dirt beneath our feet is a nearly magical world filled with tiny, wondrous creatures. A mere handful of soil might contain a half million different species including ants, earthworms, fungi, bacteria and other microorganisms. Soil provides nearly all of our food - only one percent of our calories come from the oceans.

Return to sender: Spanish town’s solution to the dog mess problem – send it back to the owners – “Dog owners who neglect to pick up after their pooches in the Spanish town of Brunete have been receiving an unpleasant surprise in the post after the council took to mailing the mess back to them.

How to be happy: Remind yourself that you want to be happy – “Importantly, it is not just happiness that can be boosted by a daily prompt. Other behavior-focused questions like, “Did you do your best to have positive interactions with others?”, “Did you do your best to set goals today?” or “Did you do your best to make progress toward your goals?” can also be effective.

China’s Alzheimer’s time bomb revealed – Hat tip Alex – “The figures are bad news for a country where 90 per cent of the elderly must be cared for by their families – old people who still have family members living are not allowed to be admitted to a nursing home – even as widespread migration to cities has disrupted the traditional family structure.

« Sugar Man », l’incroyable résurrection de Sixto Rodriguez – Hat tip Dad & Tony – “Sugar Man relate une partie de son destin d’étoile filante du rock, comme il y en eut tant ces cinquante dernières années, sitôt écloses et déjà éteintes faute de succès. L’histoire cesserait là si les chansons de Sixto Rodriguez ne s’étaient exportées en Afrique du Sud, sous l’apartheid, suscitant un engouement dans la jeunesse blanche contestataire du début des années 1980.

The Inventory: Nassim Nicholas Taleb – “Who was or still is your mentor? My maternal aunt and paternal grand-uncle. They understand collective wisdom, the type of mistakes one may regret as opposed to good mistakes. I also have inverse mentors: people I learnt to not imitate.

NSA collecting phone records of millions of Verizon customers daily – “Privacy advocates have long warned that allowing the government to collect and store unlimited “metadata” is a highly invasive form of surveillance of citizens’ communications activities. Those records enable the government to know the identity of every person with whom an individual communicates electronically, how long they spoke, and their location at the time of the communication.

Boundless Informant: the NSA’s secret tool to track global surveillance data – “The Boundless Informant documents show the agency collecting almost 3 billion pieces of intelligence from US computer networks over a 30-day period ending in March 2013. One document says it is designed to give NSA officials answers to questions like, “What type of coverage do we have on country X” in “near real-time by asking the SIGINT [signals intelligence] infrastructure.”

Obama Defends “Big Brother” Powers – [Video] – RNN. “The NSA’s illegal gathering of almost all means of communication sacrifices privacy without improving national security. “If you believe that people with this kind of power won’t abuse it for other than counter-terrorist purposes, then you deserve to live in la-la land.”

History & Geopolitics

Nations are chasing the illusion of sovereignty - Hat tip Dad – “The paradox we are left with is a world in which state sovereignty is at once greatly prized and, when properly defined as the ability to act, increasingly ineffective. States share an unavoidable interest in replacing the old order with new arrangements to recognise mutual as well as national goals.

The year before the sky fell in – “Humanity was less shaped by the Great War than is often supposed. Rather, the world of 1913 was quite like that of 2013: modern, substantially urbanised and, even as Woodrow Wilson set about slashing import tariffs, thriving on global trade. The report of a bad harvest in Canada could mean a fall on the London stockmarket the next day, and the arrangement of imports of Russian wheat by the end of the week.

How to destroy the future – Noam Chomsky. “For the first time in the history of the human species, we have clearly developed the capacity to destroy ourselves. That’s been true since 1945. It’s now being finally recognized that there are more long-term processes like environmental destruction leading in the same direction, maybe not to total destruction, but at least to the destruction of the capacity for a decent existence.

The new masters and commanders – “China’s port strategy is mainly motivated by commercial impulses. It is natural that a country of its clout has a global shipping and ports industry. But it could become a flashpoint for diplomatic tensions. That is the pessimistic view. The optimistic one is that the more it invests, the more incentive China has to rub along better with its trading partners.

China’s sense of superiority and injustice is a potent mix – Hat tip Dad – “Clearly, China is starting to feel its strength even as its domestic troubles mount and its dependency on the outside world increases. Mr Xi is suggesting that China and the US forge “a new type of great power relationship”, hardly the proposal of a shrinking violet. Still, while the rest of the world increasingly views it as strong and invulnerable, Beijing’s own view of itself is quite the reverse.

Reading Hayek in Beijing – Hat tip Dad – “Put another way, the conventional notion that the modern Chinese system combines political authoritarianism with economic liberalism is mistaken: A more accurate description of the recipe is dictatorship and cronyism, with the results showing up in rampant corruption, environmental degradation and wide inequalities between the politically well-connected and everyone else.

Finance & Economics

Asset Price Bubbles: A Selective Survey – IMF Working Paper. A quick review of bubbles history, main assumptions, and use of behavioral models backed by empirical studies to better understand bubbles. Quick enlightening as for why bubbles form and how the different market players (rationals, feedback traders, non-sophisticated investors…) interact. Also includes some positive review of the role of short selling and the technical signs of bubbles.

Global factors in capital flows and credit growth – “‘Global liquidity’ focuses on the role of cross-border banking in the international transmission of financial conditions. This column argues that when global banks apply more lenient conditions on national banks by supplying wholesale funding, national banks transmit the more lenient conditions to their borrowers through greater availability of local credit.

Leverage Versus Debt – “Capitalism, I suspect, is doing its best to follow communism into the grave yard. Its strength was that it was not an ideology, just a practice – markets, after all, have been around for thousands of years. But the capitalist ideology of “financial deregulation” whose fruits are now so evident, the worship of markets as the solution to everything, is threatening the system itself.

The Great Reflation – “The bubble that popped in 2008 consisted mainly of government-guaranteed mortgages. This time, the mortgages are not merely government-guaranteed, but government owned. In the meantime, by blowing more air into a deflating housing bubble, the Fed is misdirecting money into a sector that investment capital should be avoiding.

The Asian Housing Bubble Burst – On Singapore, HK, South Korea, Taiwan and Malaysia. “So this is a bubble – or rather, a set of bubbles – waiting to burst. Indeed, some are already in the process of bursting. Debt levels across the economy are rising beyond the ability of the various debtors to service them. Housing debt is just one of the problem areas.

China’s Minsky moment – “Hence, the logical conclusion has to be that a non-negligible share of the corporate sector is not able to repay either principal or interest, which qualifies as Ponzi financing in a Minsky framework…some degree of credit crunch will still be unavoidable in the next three years, which lends weight to our below-consensus medium-term growth forecast.

China’s debt servicing cost and dat Minsky moment – “Apparently, debt roll-over is not a good thing either; and, it cannot explain the increase in the debt burden. Hence, the logical conclusion has to be that a non-negligible share of the corporate sector is not able to repay either principal or interest, which qualifies as Ponzi financing in a Minsky framework.

Turning Japanese: The Global Economic Trajectory? – “In recent years, popular awe of the achievements of China has increased. But it is entirely possible that China’s spectacular success could end in surprising failure, as the country fails to make the needed economic transition. The question now is can China avoid “turning Japanese”.

McKinsey Quarterly: China’s next chapter – Hat tip L*

China’s search for a new growth model – [Video] – “Experts from McKinsey’s Greater China office explore the challenges and opportunities that China faces as it fundamentally redirects its economic model away from export-led capital investment toward consumption, efficiency, and productivity.

China’s great rebalancing: Promise and peril – “China is rapidly reaching the point of diminishing economic and political returns from its investment-driven model, which is headed for change one way or another: either through a proactive rebalancing, with reforms and policy adjustments, or a forced rebalancing precipitated by rising stresses in and beyond the financial system.

Winners and losers in China’s next decade – M. Pettis. “These changes will fundamentally be driven by how China’s leadership decides to rebalance or, to put it less euphemistically, how it decides to balance the costs and benefits between powerful vested interests and the needs of the economy. It’s too early to say exactly how this will occur, but there is no question that it will drive or retard growth in many industries around the world.

Number of the day: China offers a new environmental report, filled with state secrets – Hat tip L*

  • Only 27 of 113 major cities in China had a “safe” level of air pollution according to national standards in 2012.

  • Around 30% of the country’s main rivers were “polluted” or “severely polluted.”

  • The quality of over 40% of tested groundwater was “bad;” 17% was graded “worst.”

  • Seven of the country’s nine most important bays had bad water quality and 25% of monitored lakes and reservoirs had excessive algae.

  • China’s nuclear reactors—including 29 under construction—were deemed safe.

  • Pollution in the countryside worsened in 2012 as industry and animal husbandry (the breeding of domestic animals) expanded.

  • New, tougher standards this year may have made the results look worse, but even so they were a slight improvement from last year.

  • At the national level, air and water quality improved, but pollution levels are still unsustainably high.

Picture of the day: Snakes in a FrameWeekly Round Up June 12 - 2013

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Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world. Lao Zi

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