Science: Water Shortages Loom as Northern China’s Aquifers Are Sucked Dry and more

In This Issue...


Science: Water Shortages Loom as Northern China’s Aquifers Are Sucked Dry

Of all China’s environmental woes, the biggest threat to livelihoods and food security may be looming water shortages. China’s freshwater resources amount to 2220 cubic meters per person, just a quarter of the world average. For years, the central government focused on declining river flows and rising pollution, largely ignoring what has now become an acute problem: vanishing groundwater. “It was a question of ‘out of sight, out of mind,’” says environmental scientist Chen Jining, vice president of Tsinghua University here.

The outlook is especially dire on the North China Plain (NCP), an area encompassing six provinces and the Beijing and Tianjin metropolitan areas.

Science: Water Shortages Loom as Northern China’s Aquifers Are Sucked Dry

 

Is the market forecasting war? – Todd Harrison – MarketWatch

 

I don’t claim to be a geopolitical expert — I leave that for the smart folks at Stratfor — but I’ve been fingering the pulse of world psychology for over 20 years. See: Handicapping the global economic recovery

When I see Germany squaring off against the euro zone (with words more than actions, for now), Russian Prime Minister Vladimir Putin calling the United States a “parasite” and China blasting our leaders for their “debt addiction,” you don’t have to be an expert in foreign affairs to see the evolution; you just have to be awake.

Is the market forecasting war? – Todd Harrison – MarketWatch

“You just have to be awake.” He’s right. Just get down to the basics. Something is terribly wrong in the world today. At the same time, America is reducing its nuclear arsenal to dangerously low levels. Russia and China are building, or have built, many underground nuclear bunkers. Time to get worried.

 


Why China’s Debt Problems Are Worse Than America’s – The Daily Beast

Despite all the apocalyptic pronouncements about America’s budget problems, the reality is that the U.S. has a higher credit rating than China and, unlike Beijing, has never repudiated its sovereign debt. More important, the People’s Republic has been understating its debt for years to avoid global attention and criticism.

Indeed, China claims its debt-to-GDP ratio—the standard measure of sustainability—was a healthy 17 percent at the end of last year. Yet Beijing-based Dragonomics, a well-respected consultancy, put China’s ratio at 89 percent—about the same as America’s. Worse still, a growing number of analysts think the Chinese ratio was really 160 percent. At that astronomical level, China looks worse than Greece.

Why China’s Debt Problems Are Worse Than America’s – The Daily Beast

 

Iran Moving Centrifuges to Fordow

After many months of delay, Iran has finally begun moving centrifuges
from the Natanz enrichment plant for installation at the fortified
Fordow facility near Qom.  On August 22, the head of Iran’s Atomic
Energy Organization, Fereydoun Abbasi-Davani, said that some centrifuges
had been transferred and the facility is being prepared under the
supervision of the International Atomic Energy Agency (IAEA). 

ISIS previously assessed
that Iran’s plans to move 20 percent enrichment to Fordow and triple
its production of this material would lead to an expected large
stockpile with no logical or immediate use.  This strategy could
represent part of an on-going, slow moving effort to acclimatize the
international community to conditions that would make breakout to
nuclear weapons more feasible and quicker.  Iran’s activities at Fordow
bear close watching. 

On August 23, Iranian ambassador to the IAEA, Ali Asghar Soltanieh, also
announced the visit of IAEA Deputy Director General of Safeguards,
Herman Nackaerts, who recently visited
five nuclear sites in Iran, including Natanz and the Arak heavy water
production plant, the latter which Iran has not previously allowed the
IAEA to inspect and remains an outstanding issue
for the Agency.  According to Soltanieh, during the visit, the two
sides also agreed on a monitoring plan for the Fordow enrichment site. 

In a potential breakthrough, an Iranian envoy said that Iran had allowed
Nackaerts access to a facility for developing advanced centrifuges
during this tour.  The IAEA, according to the Reuters report, had no
comment on what Nackaerts saw or learned. 

ISIS NuclearIran › Iran In Brief

 

Japan protests over China ships in disputed waters | Reuters

Japan’s Coast Guard notified the Chinese vessels that they are in Japan’s territorial waters, to which the Chinese side responded by saying they are in Chinese waters and just conducting their official duties, a Coast Guard spokeswoman said.

Japan protests over China ships in disputed waters | Reuters

 

“We the people” are corrupt, in religion and politics | Washington Times Communities

What is happening in India today is a mostly urban frenzy that appears to be peaceful for now, but an enraged citizenry is attempting to bring an elected government to its knees because it is fed up with being ruthlessly exploited.

America and the world’s other democracies should pay close attention to India’s convulsions.

Corruption is suddenly the big story on India’s TV news channels, but Indians know that it is an everyday affair. They can’t stop corruption, because bribe-giving and taking is embedded in the system and in their lives. The “Jan Lokpal” demand for an omniscient, super ombudsman cannot really tackle the evil of dishonesty.

Bribe-takers and givers are not just top bureaucrats and businessmen. They are us: ordinary, corrupt Indians from every level of society.

“We the people” are corrupt, in religion and politics | Washington Times Communities

 

Expanding Deserts, Falling Water Tables, and Toxic Pollutants Driving People from Their Homes

In Iran, villages abandoned because of spreading deserts or a lack of water number in the thousands. In Brazil, some 250,000 square miles of land are affected by desertification, much of it concentrated in the country’s northeast. In Mexico, many of the migrants who leave rural communities in arid and semiarid regions of the country each year are doing so because of desertification. Some of these environmental refugees end up in Mexican cities, others cross the northern border into the United States. U.S. analysts estimate that Mexico is forced to abandon 400 square miles of farmland to desertification each year.

In China, desert expansion has accelerated in each successive decade since 1950. Desert scholar Wang Tao reports that over the last half-century or so some 24,000 villages in northern and western China have been abandoned either entirely or partly because of desert expansion.

China is heading for a Dust Bowl like the one that forced more than 2 million “Okies” to leave their land in the United States in the 1930s. But the dust bowl forming in China is much larger and so is the population: China’s migration may measure in the tens of millions. And as a U.S. embassy report entitled Grapes of Wrath in Inner Mongolia noted, “unfortunately, China’s twenty-first century ‘Okies’ have no California to escape to-at least not in China.”

Investorideas.com Newswire – Expanding Deserts, Falling Water Tables, and Toxic Pollutants Driving People from Their Homes

 

Iran in Brazil, Paraguay and Uruguay :: Hudson New York

While the world is busy with the economic crisis and the uprising in the Middle East, Iran silently continues its penetration into Latin America. Iran’s Deputy Foreign Minister, Ali Ahani, recently visited Brazil, Paraguay and Uruguay with the goal to further strengthen political and economic relations. The visit of Ahani to Uruguay comes in the aftermath of the Iranian Ambassador’s declarations denying the Holocaust — causing outrage throughout the Jewish communities in Latin America.

Iran in Brazil, Paraguay and Uruguay :: Hudson New York

 

Fukushima and the Doomsday Clock | Bulletin of the Atomic Scientists

I wouldn’t trust the scientists at the Bulletin of Atomic Scientists to come anywhere close to getting it right concerning the setting of the clock. And what does Fukushima have to do with the clock setting?

First, the concept of using a clock to denote the probability of nuclear war is a waste of time. It’s mind-numbingly meaningless. What does 6 minutes to midnight mean? Second, the setting of the clock tends to be based on specific events which masks the relentless march toward war. Third, too many of the scientists at the Bulletin have a liberal bias. That means they cannot properly recognize external threats until it is too late.

A calendar is a much better tool to denote the probability of war. Each day we march a little closer toward war. A key determinate for war is when key players reach a tipping point. For example, the decline of America, and instability in Russia and China. The date for doomsday can be moved around as events warrant.

Based on what we know today, where would you set a doomsday calendar? America, Europe and Japan are at an economic tipping point. China and Russia are at a tipping point. The Middle East is at a tipping point with part of it collapsing. Could nuclear war happen within the next 5 or 10 years? Many of you think nuclear war between key players (America, Russia and China) is just about impossible. Perhaps you would set the calendar 100 years into the future.

Currently I have set the 1913 Intel Doomsday Calendar for May 7, 2012. This date is based on nuclear war in the Middle East by the end of summer 2011, and retaliation coming the following spring. If nuclear war in the Middle East doesn’t happen then I will push the doomsday calendar date to May 6, 2013. The day is around the middle of spring, on a Monday and between May Day (May 1) and the Victory Day parade (May 9).

Yes, I honestly believe that nuclear war is very close because so many key players are at a tipping point. I hope that you will take action in your personal life to prepare. Many believe – what’s the point in preparing? Well, there is a good chance you will live through the initial strike. Then the real suffering starts for you and your family.

When dreadful events occur, reporters, readers, and interested citizens contact the Bulletin of the Atomic Scientists asking whether we will move the minute hand of the Doomsday Clock. The alarming nuclear disaster at the Fukushima Daiichi Power Station on March 11 prompted e-mails and calls to our office seeking the Bulletin’s reaction as well as accurate information about what was happening in Japan. The Bulletin responded by devoting its website to daily briefings from experts in Japan and to news from Bulletin writers on what they were hearing about this second-worst disaster in the history of the nuclear power industry. Additionally, the Bulletin will take deeper dives into the lessons and impacts of Fukushima in the September/October issue of its digital journal.

Still, the larger question remains: Should we move the hand of the Doomsday Clock? What does the Fukushima event imply for humanity’s future on the planet?

Fukushima and the Doomsday Clock | Bulletin of the Atomic Scientists

 

‘Very Muted Growth’ Coming for Next 10 Years: Faber – CNBC

Both the U.S. and Europe are facing a decade of slow growth brought on primarily by the blunders of central banks, noted doomsayer Marc Faber said.

Investors should protect themselves by buying plenty of physical gold and putting it in a secure location, preferably outside the U.S., the author of the Gloom, Boom and Doom newsletter told CNBC.

‘Very Muted Growth’ Coming for Next 10 Years: Faber – CNBC

 

Ground Zero Mosque Funded by Insurance Fraud?

Ground Zero Mosque developers have been scamming Americans by claiming that the mosque won’t be a symbol of Islamic triumphalism and that Islam is a religion of peace. Why not scam Americans for money as well?

NY POST–The self-proclaimed leading moneyman behind the Ground Zero mosque ran a $5.1 million insurance scam that cashed in on car-accident injuries, a lawsuit alleges.

Hisham Elzanaty, 52, ran the “highly developed and sophisticated kickback scheme” for years, Allstate Insurance claims in a federal suit on Long Island.

The scheme routinely submitted inflated medical bills to Allstate and involved illegal fee-splitting, court papers say.

Allstate claimed that Elzanaty fraudulently incorporated medical professional corporations in The Bronx — which were then used to bill the company for care of patients involved in wrecks.

The operations were fraudulent because Elzanaty is not a licensed medical professional, as required by law, court papers say.

Answering Muslims: Ground Zero Mosque Funded by Insurance Fraud?

 

European ‘No-Go’ Zones for Non-Muslims Proliferating: “Occupation Without Tanks or Soldiers” :: Hudson New York

Islamic extremists are stepping up the creation of “no-go” areas in European cities that are off-limits to non-Muslims.

Many of the “no-go” zones function as microstates governed by Islamic Sharia law. Host-country authorities effectively have lost control in these areas and in many instances are unable to provide even basic public aid such as police, fire fighting and ambulance services.

The “no-go” areas are the by-product of decades of multicultural policies that have encouraged Muslim immigrants to create parallel societies and remain segregated rather than become integrated into their European host nations.

European ‘No-Go’ Zones for Non-Muslims Proliferating: “Occupation Without Tanks or Soldiers” :: Hudson New York

 

China’s Summer of Discontent | The Diplomat

The Chinese public’s tolerance for the government’s high-speed, low-quality growth strategy is wearing thin. Can China’s leaders avert a political crash?

These three disparate incidents portend an important political trend in China: the rise of citizen activism. To be sure, this trend isn’t new. But its recent intensification suggests that Chinese politics is entering a more fluid phase during which the old playbook for keeping the Communist Party in power may no longer work.

China’s Summer of Discontent | The Diplomat

 

Syria’s Chemical Weapons Arsenal: A Proliferation Nightmare?

The continued unrest in Syria, coupled with President Barack Obama’s call for President Bashar al-Assad to leave power, has thrown the future of the country into flux. Among the most troubling uncertainties is the fate of Syria’s chemical weapons arsenal, which, if not protected properly, could fall into the wrong hands, with catastrophic results.

Syria is one of a handful of states that the U.S. government believes possess large stocks of chemical agents in militarized form — that is, ready for use in artillery shells and bombs. The arsenal is thought to be massive, involving thousands of munitions and many tons of chemical agent, which range, according to CIA annual reports to Congress, from the blister gases of World War I — such as mustard gas — to advanced nerve agents such as sarin and possibly persistent nerve agents, such as VX gas.

Assad’s Chemical Romance – By Leonard Spector | Foreign Policy

 

The Growing Threat From China’s Air Force – WSJ.com

China watchers have been fixated on the maiden voyage of Beijing’s first aircraft carrier this month. However, U.S. and Asian defense planners should take care not to ignore another aspect of China’s growing military might. The Chinese Air Force may one day play the most significant role in challenging America’s military presence in the Asia-Pacific. At the same time, looming cuts to the U.S. Air Force may wind up reducing its ability to protect American interests.

Michael Auslin: The Growing Threat From China’s Air Force – WSJ.com

 

Report: North Korea sent nuclear software to Iran – Haaretz Daily Newspaper

North Korea sent Iran software that could be used to develop nuclear weapons, a German news report said Wednesday, citing unidentified Western intelligence sources.

North Korea also sent a team of scientists to Iran in February to train about 20 employees of its Defense Ministry in the operation of the neutron flow simulation program, the Sueddeutche Zeitung reported.

Report: North Korea sent nuclear software to Iran – Haaretz Daily Newspaper | Israel News

 

Inhofe: Iran capable of delivering WMD to US East coast by 2015 – The Hill’s Floor Action

Sen. James Inhofe (R-Okla.) warned on Monday that Iran will be capable of delivering a weapon of mass destruction to the eastern U.S. by 2015.

“We know — and it is not even classified for me to tell you today — that Iran will have the capability of delivering a weapon of mass destruction to western Europe and the eastern United States by 2015,” said Inhofe, as reported by The Tulsa World.

Inhofe: Iran capable of delivering WMD to US East coast by 2015 – The Hill’s Floor Action

 

Flaxseed Might Protect Against Death from Radiation | LiveScience

Flaxseed may protect against the damaging effects of radiation, whether from a terrorist’s dirty bomb or a routine cancer treatment, a new study in mice suggests.

Mice that ate flaxseed either before or up to six weeks after receiving a large radiation dose to the chest were more likely to survive and had fewer lung problems than mice not given flaxseed. Four months after receiving radiation, up to 88 percent of mice that ate flaxseed were still alive, compared with just 40 percent of mice who did not eat flaxseed.

One group of mice ate a diet of 10 percent flaxseed before radiation. In people, this would be the equivalent of eating four tablespoons of whole-grain flaxseed per day, the researchers said. …

Flaxseed Might Protect Against Death from Radiation | Flaxseed Radiation Protection, Terrorist & Nuclear Attacks | LiveScience

 

Iranian missile capabilities – Iran Today – YouTube

On June 27th 2011, Iran’s revolutionary guard launched a ten day military maneuver.

Various missiles were tested. Among them were Shahab 3A and 3B, Iran’s first medium-range ballistic missiles. Nine Zelzal solid propellant missiles and the Fateh 110, which is a single stage solid- propellant, surface to surface missile with very high accuracy.

This episode of Iran Today reviews the Iranian missile capabilities.

Iranian missile capabilities-Iran Today-07-08-2011 -- YouTube

www.youtube.com/watch?v=SdAdPe1U3vA

 

The Pizkuny Wall: An Iron Curtain in the East – SPIEGEL ONLINE

The collapse of the Soviet Union divided a community on the border between Lithuania and Belarus. Now the village straddles a more significant border, between the eastern EU and Europe’s last dictatorship. But where are people happier?

The Pizkuny Wall: An Iron Curtain in the East – SPIEGEL ONLINE – News – International

 

Putin ignores gathering storm

The foreboding in the middle classes translates into the deepening and widening urge to move away from the crumbling “stability”. …

It was the military-industrial complex that bankrupted the oil-based Soviet economy in the 1980s, and now it is the corrupt bureaucracy that proceeds along the same track. Putin is both the master and the servant of this system that has extracted from Russia value exceeding the limits of economic self-reproduction, and he is set to preside over the unraveling.

Asia Times Online :: Putin ignores gathering storm

 

Get ready for Armageddon – Mark Steyn – Macleans.ca

The world’s last superpower is on a joyride to oblivion. An exclusive excerpt from Mark Steyn’s new book, “After America.”

Get ready for Armageddon – Mark Steyn – Macleans.ca

 

The march of China’s new middle class – Telegraph

Despite the ranks of riot police, they came in their thousands: marching through the streets of the elegant port city of Dalian to demand the closure of a coastal chemical plant that came within a whisker of a major toxic leak.

The march of China’s new middle class – Telegraph

 

John Stossel: Freeloaders

Putin’s Russia: ‘Evil Empire’ 2.0? – YouTube

Why have Russian-American relations been on shaky ground over the last few years? According to military historian Victor Davis Hanson, it’s all thanks to an “angry” Vladimir Putin. Hanson argues that Russia deliberately sets itself at odds with American policy not out of rational self-interest, but because of a sense of lingering Cold War enmity against the United States.

—--

Beginning with an explanation of why the post-Cold War New World Order is rapidly breaking apart, Victor Davis Hanson sees a world where nations are returning to the ancient passions, rivalries, and differences of past centuries. In light of this world transformation, Hanson looks at key challenges the United States faces around the globe: in Europe, Asia, Russia, Mexico, and Iran. -- Hoover Institution

Putin’s Russia: ‘Evil Empire’ 2.0? -- YouTube

www.youtube.com/watch?v=1S3iA8m4KWU

Watch the entire episode here: http://fora.tv/2010/10/04/Uncommon_Knowledge_Victor_Davis_Hanson

 

The Lost Lessons of Freedom – By Nina L. Khrushcheva | Foreign Policy

The march toward openness and democracy in the Soviet Union began under my great-grandfather, Nikita Khrushchev, flowered under Mikhail Gorbachev, and has nearly been erased in Vladimir Putin’s Russia.

Sadly, this lesson is completely lost on contemporary Russia. Putin’s effort to restore the national self-respect he sees as being shattered by the bitter loss of superpower status in 1991, has been focused on cowing Europe into submissively accepting Russia’s sphere of “privileged interest” among the post-Soviet nations. By increasing oil and gas prices or limiting supplies in Ukraine and Belarus, by flexing its military muscle in Georgia or sending ships to Cuba and Venezuela to parade Russia’s power on the world stage, Putin is eager to show that Russia is back.

Yet this façade has only achieved exposing Russia as an unreliable partner, and confirming that 50 years after the Berlin Wall and 20 after the coup that brought down the Soviet Union, Russia has yet to learn the lessons of freedom.

The Lost Lessons of Freedom – By Nina L. Khrushcheva | Foreign Policy

 

Ex-Yeltsin aide says Russia risks collapse – Yahoo! News

Russia could break up like the Soviet Union did 20 years ago if its leaders fail to modernize the country, one of the main architects of Russian reforms in the early 1990s said.

Gennady Burbulis, who was with Russian President Boris Yeltsin when he climbed on to a tank to lead resistance to a hardline Communist coup in August 1991, said there was a lack of democracy, civil society and media freedoms 20 years later.

“My main anxiety 20 years on is the threat of the Russian Federation falling apart,” Burbulis, a top Yeltsin aide until late 1992, told Reuters in an interview marking the failed coup’s 20th anniversary.

Ex-Yeltsin aide says Russia risks collapse – Yahoo! News

 

The Myth of Russia’s Resurgence

Russia will seek to defend what it perceives to be its interests, in the Arctic for instance, which holds the promise of attaining access to vast untapped hydrocarbon resources which its economy so relies upon. And it will do so with regular salvos of nationalist bombast that the Russian electorate is susceptible to. Russian bomber planes and submarines will occasionally penetrate European airspace and harass their allied counterparts but militarily, the “petro dinosaur” is largely irrelevant except for its nuclear weapons arsenal—which it has been willing to reduce in negotiations with the Americans.

The Myth of Russia’s Resurgence

 

Laser Advance in Uranium Enrichment May Risk Bomb Spread – NYTimes.com

In a little-known effort, General Electric has successfully tested laser enrichment for two years and is seeking federal permission to build a $1 billion plant that would make reactor fuel by the ton.

That might be good news for the nuclear industry. But critics fear that if the work succeeds and the secret gets out, rogue states and terrorists could make bomb fuel in much smaller plants that are difficult to detect.

Iran has already succeeded with laser enrichment in the lab, and nuclear experts worry that G.E.’s accomplishment might inspire Tehran to build a plant easily hidden from the world’s eyes.

Laser Advance in Uranium Enrichment May Risk Bomb Spread – NYTimes.com

 

9/11 brought changes to skyscrapers and high-rises

A decade after 9/11, could any of the nation’s 21,000 high-rises withstand an attack like those that caused New York’s twin towers to collapse? Could the thousands of people inside find a way to safety?

At Chicago’s Willis Tower, like other skyscrapers around the country, much has changed since two hijacked jets slammed into the World Trade Center. North America’s tallest building now has concrete barriers, metal detectors and sophisticated security cameras that trace every nearby movement.

But those measures might do little to prevent a calamity on the scale of Sept. 11. …

The Associated Press: 9/11 brought changes to skyscrapers and high-rises

 

NYU’s Nouriel ‘Dr. Doom’ Roubini: Social Unrest Will Spread – International Business Times

The popular demonstrations and social unrest seen in the Arab World, in Israel, in Greece and most recently, in the United Kingdom, will not end there — soon enough, they will hit other advanced economies and emerging markets, so says economist Nouriel “Dr. Doom” Roubini.

NYU’s Nouriel ‘Dr. Doom’ Roubini: Social Unrest Will Spread – International Business Times

 

Sinai crisis could spark Egypt-Israel war

Israelis and Palestinians are observing an uneasy truce after five days of fighting in southern Sinai but the clashes underlined how a security crisis brewing since Egyptian President Hosni Mubarak was toppled Feb. 11 could explode into a wider conflict.

Since the ouster of Mubarak, who actively supported Egypt’s historic 1979 peace treaty with Israel, Israelis have watched with alarm as the Muslim Brotherhood and other Islamists have made political gains.

Sinai crisis could spark Egypt-Israel war

 

The Path to Tyranny

While free societies often descend into tyranny because of the choices they make, the people never actually choose tyranny. Instead, demagogues and ideologues promising freedom, equality, and wealth lead them to it. Today, politicians promise the right to high quality education, the right to free and affordable health care and housing, and many more so-called rights. These are not genuine rights. They are benefits at the expense of others. The rights to private property, free speech, and freedom of religion are true tights because they have no cost. The “rights” to education, housing, and health care cost the providers who must supply them for free or at a discount, or they must cost other taxpayers to reimburse the providers. As a result of the government providing these new “rights”, the people have fewer choices as the government rations goods and services, businesses are burdened with more regulation and more bureaucracy is added to the system. Instead of the greater freedom and wealth promised, the people are poorer and become slaves to the government.

Ana the Imp: Past Futures

 

The Recession of 2011?

It was relatively easy for me to forecast the recessions of 2001 and late 2007 over a year in advance. We had an inverted yield curve for 90 days at levels that have ALWAYS heralded a recession in the US. Plus there were numerous other less accurate (in terms of consistency) indicators that were “flashing red.” (For new readers, an inverted yield curve is where long-term rates go below short-term rates, a [thankfully] rare condition.)

And since stocks drop on average more than 40% in a recession, suggesting that you get out of the stock market was not such a challenging call. Although, when Nouriel Roubini and I were on Larry Kudlow’s show in August of 2006, we got beaten up for our bearish views. And you know what? The stock market then proceeded to go up another 20% in the next six months. Ouch. That interview is still on YouTube at http://www.youtube.com/watch?v=9AUoB7×2mxE. Timing can be a real, um, problem. There is no exact way to time markets or recessions.

My view then was based on the inverted yield curve (as an article of faith) and, not much later in 2006, my growing alarm as I realized the extent of the folly of the subprime debt debacle and how severe a crisis it would become. I changed my assessment from a mild recession to a serious one in early 2007 as my research revealed more and more fault lines and the damning interconnection of the global banking system (which has NOT been fixed, only made worse since then). I should note that my early views were rather Pollyannaish, as I thought (originally) that losses to US banks would only be in the $400 billion range. I keep telling people that I am an optimist.

With the Fed artificially holding down rates on the short end of the curve, we are not going to get an inverted yield curve this time, so we have to look for other indicators to come up with a forecast for the US economy. We grew at less than 1% in the first half of the year. That is close to stall speed. And that was with a full dose of QE2! So now, let’s look at a series of charts that cause me to be very concerned about the near-term health of the economy. Then we turn to Europe and problems compounding there.
The Streettalk/Mauldin Economic Output Index
Last year I was having a discussion with Lance Roberts of Streettalk Advisors in Houston about how to build an indicator that might give us a clue as to the direction of the economy. Most indicators use one or two data points and thus can be suspect.

For instance, the Philly Fed Economic Index went from 3.2 in July to -30.7 in August, helping to tank the market. Almost every subcomponent (new orders, employment, etc.) was not just down but negative. This was truly a shocker. You can see the gory details at http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2011/bos0811.cfm.

The Empire Index (New York) went from -3.8 to -7.7. The Empire Index suggests that the August ISM manufacturing number will be 49, or in a state of negative growth. The Philly Index suggests a very dismal 42, which if true would suggest we are already in recession. But these are regional indexes.

Now, just for fun, let’s look at a combined index that David Rosenberg created from the Philly Index plus the Michigan Consumer Confidence Index. (Those of us old enough can remember Jack Nicholson playing the Joker in Batman back in 1989. When Batman escaped with the help of something from his tool kit, Nicholson said, “Where does he get all those wonderful toys?” When I read Rosie’s newsletter, I have the same reaction. “Where does he get all those wonderful charts?” He swears he makes them himself. I stand in awe.)

Notice that with Rosie’s combined index where it is today, we are either at the beginning of a recession or already in one. And the Philly Fed Index is consistent with a 90% chance of a recession.

And that is again consistent with the following chart from Rich Yamarone, which I used last month but that bears looking at again. Rich is chief economist at Bloomberg. (By the way, for Conversation subscribers, I just recorded a powerhouse session with Rich, which will be available as soon as we can get it transcribed.)
Is There a Recession in Our Future?
I previously wrote, in late July:

“And the last chart is one I had not seen before, and is interesting. Rich notes that if year-over-year GDP growth dips below 2%, a recession always follows. It is now at 2.3%.”

Oops. Last week David Rosenberg updated that chart. This from Rosie:

If Rich is right, then the next revisions to second-quarter GDP will be down from an already abysmal 1.3%. And the growth in the second half is not going to be all that good for jobs and consumer spending

But these are charts of single data points. You can quibble that the Philly Fed could be influenced by something local or that the 1.6% number might be different this time. So Lance Roberts of Streettalk Advisors (with me looking over his shoulder) created an index that combines a number of economic indexes in an effort to build an index that is not subject to single (or double) indicators. The Streettalk/Mauldin Economic Output Index is composed of a weighted average of the following indexes:

Chicago Fed National Activity Index
Chicago PMI
The Streettalk ISM Composite Index
Richmond Fed Manufacturing Survey
Philly Fed Survey
Dallas Fed Survey
Kansas City Fed Survey
The National Federation of Independent Business Survey
Leading economic indicators

Note that there are six regional and national indicators, plus the NFIB survey, which is national. Lance’s index is not driven by one region or index or survey. When the combined indicator falls below 30, it has always indicated either that we are in a recession or about to be in one. The chart is overlaid, below, against GDP and LEI (leading economic indicators) – both tend to have a fairly high correlation to our Economic Output Composite Index. And LEI is currently supported by the yield spread and money supply (more on that below).

A few quick notes before the chart. First, note the increases in the index with the onset of QE1 and QE2 and the sharp drops when QE ends. The red at the end of the chart is the recent drop, and it takes us into recession territory. Recessions are indicated by gray bands

Note: I will be speaking at the Streettalk conference on October 14 in Houston, and tickets are currently on sale at www.streettalklive.com. David Rosenberg will also be speaking. They put on a very good conference at a reasonable price.

Now, a comment on the uptick in the leading economic indicators this week. Even the ECRI noted that it was because two of the financial components added to the positive numbers. One was the sharp rise in M2 money supply. But a lot of that is because people are going to cash, which is not all that positive from a macro viewpoint. The other is the steepness of the yield curve, which is being manipulated at the short end. Without their positive contributions, the index would be down 0.5%, down three of the last four months, and in a pattern that led to a recession in late 2007. Coincidence?

One last chart from Batman, I mean Rosie. Here he gives us the latest data from Larry Meyer’s Macroeconomic Advisers, where they track the real GDP index (inflation-adjusted). It is also in recession territory.

Housing is terrible. Existing-home sales were bad. The inventory for homes for sale grew, even as mortgage rates are at all-time lows. A 30-year mortgage is at 4.15%. It is possible we could see a 30-year mortgage with a “3” handle if we slip into recession. I could go on and on about the negative data, and may do so in future letters, but I will resist writing another book tonight, as we have a few other topics to cover.
The Bright Side of Europe’s Dysfunctionality
To say that the government of Europe is dysfunctional is an no-brainer. The bright side is that it makes the US government look slightly better, and that’s not saying a lot. This past week Nicholas Sarkozy asked Angela Merkel out, so they could decide what to do about the euro crisis. What they said was, we need yet another eurozone governing body overseeing fiscal debt and promises by governments not to run large deficits – like that has ever worked. And they unequivocally said “non” and “nein” to the idea of eurobonds, which everyone else says is vital if the euro is to survive. Oh, and we will harmonize our tax structures within five years. As if that solves the crisis today. Note to Nick and Angela: the problem is not tax structures, it is debt that cannot be repaid.

Lars Frisell is the chief economist for the Swedish group that regulates that nation’s banking system. Yesterday he was quoted as saying:

“It won’t take much for the interbank market to collapse. It’s not that serious at the moment, but it feels like it could very easily become that way and that everything will freeze.” (hat tip, Art Cashin)

My friend Porter Stansberry wrote today:

“In Europe, the problem is a bit different … and slightly more technical. Most of the debt in Europe is held by the big banks, not the sovereigns. Look at just two French banks, for example. Credit Agricole and BNP Paribas have combined deposits of a little more than 1 trillion euro. But they hold assets of 2.5 trillion euro. Those assets equal France’s entire GDP.

“And those are only two of France’s banks. Right now, the tangible capital ratios of these banks have fallen to levels that suggest they are probably bankrupt – like UniCredit in Italy and Deutsche Bank in Germany. BNP’s tangible equity ratio is 2.85%. Credit Agricole’s tangible equity ratio is 1.41%. (UniCredit’s is 4.42%, and Deutsche Bank’s is 1.92%).

“These banks have long been instruments of state policy in Europe. They’ve funded all kinds of government projects and favored industries. Making loans is far more popular with politicians than demanding repayment for loans. As a result, these banks are left with nothing in the kitty to repay their depositors. If there’s a run on these banks (and there will be), how will they come up with money that’s owed?”

I totally agree (although Porter is wrong about US debt). If there is a sovereign debt credit crisis in Europe, it is entirely possible that 80% of Europe’s banks will be technically insolvent, depending on the level of the crisis. Frisell could be eerily prescient. We gave them subprime; they may pay us back with their own crisis and in spades, as Dad used to say.

I really need to do a whole letter on Europe again soon. The next real crisis in Europe that is not bought off with yet more debt will push the world into recession. It is that serious. That is why the ECB keeps ignoring its charter and taking on bank debt and buying sovereign debt they know will be marked down.

The entire world economy now swings on the German voters and whether they will take on all of Europe’s debt, risking their own AAA status and putting themselves at serious risk. Supposedly, Finland wants collateral from Greece if it contributes its portion of a guarantee. Think every other country will not want some of that action? I simply do not have the space to go into it tonight, but this is VERY serious. Maybe next week. And just as I was getting ready to hit the send button, economy.com sent me an email entitled “Article: Europe’s Leaders Know the Way but Lack the Will, by Tu Packard. Summary: The stability facility lacks credibility.”

That more than sums it up. Dysfunctional indeed.

We now need to turn to Governor Perry, our newest candidate for president.
The “Treasonous” Fed
I have been asked many times what I think about Governor Perry getting into the presidential race. Over six months ago he told me personally there was no way he would run, and he was serious when he said it. I believed him. But what I think happened in the interim is that he looked at the field of candidates and said, “I can play in that league.” And as long as he can keep from making any more gaffs like he did with his Fed comments, he can indeed play in the current field. He has the charm of being plainspoken and blunt, and that might just play well this year. Whether the country is ready for another Texan is a different question.

(Sidebar: my personal bet is that there are at least two and possibly three other potential candidates who would be taken seriously if they got into the race. They, too, have got to be saying, “Is this all I’m up against? I can play in this league. In fact, I might just be the MVP.” The lure of the presidency is a powerful one. My bet is we have not seen the final field of candidates. And it is not impossible that a challenger emerges on the Democratic side as well. Obama’s poll numbers, even among Democrats, are not good. This is a very interesting political year and as wide open as I can remember.)

But however injudicious Perry’s actual remarks were, he is right to call into question Fed actions. Why do I as your humble analyst get that right and politicians don’t? Let me be clear. I want a VERY independent Fed. I do not want Congress or the President dictating Fed policy. I do not like Senators holding up Fed nominations for political gain, whether it was Dodd fighting Bush over his nominees or current GOP senators fighting Obama over his. That is simply wrong in every way. But I think Fed actions are fair game for comment and disagreement. And I agree with Perry that QE2 was not helpful. It was not very wise policy – but that is a long way from “treasonous.” Let’s see if the electorate gives him a “mulligan” on that comment.

Think about this. The Fed announced this week that it would extend low rates until 2013. They are practically pushing people into higher-risk assets in a search for yield, at PRECISELY the time we may be slipping into recession, which will put those assets at their highest risk. I think this could end in tears and land those who are close to retirement in even worse shape.

Note to Governor Perry: If you want to learn how to properly criticize the Fed and the US government, go read the last ten speeches of another Texan, Dallas Fed President Richard Fisher (who should be the next Fed chair!). Let’s take a look at a few paragraphs from his latest speech, this week (again, hat tip Art Cashin).

“I have spoken to this many times in public. Those with the capacity to hire American workers?small businesses as well as large, publicly traded or private?are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decision makers frozen in their tracks.

{Mauldin note: Opera buffa (Italian; plural, opere buffe) is a genre of opera. It was first used as an informal description of Italian comic operas variously classified by their authors as ‘commedia in musica.’ Us Texans have our literary abilities.}

“I would suggest that unless you were on another planet, no consumer with access to a television, radio or the Internet could have escaped hearing their president, senators and their congressperson telling them the sky was falling. With the leadership of the nation?Republicans and Democrats alike?and every talking head in the media making clear hour after hour, day after day in the run-up to Aug. 2 that a financial disaster was lurking around the corner, it does not take much imagination to envision consumers deciding to forego or delay some discretionary expenditure they had planned.

“Instead, they might well be inclined to hunker down to weather the perfect storm they were being warned was rapidly approaching. Watching the drama as it unfolded, I could imagine consumers turning to each other in millions of households, saying: ‘Honey, we need to cancel that trip we were planning and that gizmo or service we wanted to buy. We better save more and spend less.’ Small wonder that, following the somewhat encouraging retail activity reported in July, the Michigan survey measure of consumer sentiment released just recently had a distinctly sour tone.

“Importantly, from a business operator’s perspective, nothing was clarified, except that there will be undefined change in taxes, spending and subsidies and other fiscal incentives or disincentives. The message was simply that some combination of revenue enhancement and spending growth cutbacks will take place. The particulars are left to one’s imagination and the outcome of deliberations among 12 members of the Legislature.

“Now, put yourself in the shoes of a business operator. On the revenue side, you have yet to see a robust recovery in demand; growing your top-line revenue is vexing. You have been driving profits or just maintaining your margins through cost reduction and achieving maximum operating efficiency. You have money in your pocket or a banker increasingly willing to give you credit if and when you decide to expand.

“But you have no idea where the government will be cutting back on spending, what measures will be taken on the taxation front and how all this will affect your cost structure or customer base. Your most likely reaction is to cross your arms, plant your feet and say: ‘Show me. I am not going to hire new workers or build a new plant until I have been shown what will come out of this agreement.’

“Moreover, you might now say to yourself, ‘I understand from the Federal Reserve that I don’t have to worry about the cost of borrowing for another two years. Given that I don’t know how I am going to be hit by whatever new initiatives the Congress will come up with, but I do know that credit will remain cheap through the next election, what incentive do I have to invest and expand now? Why shouldn’t I wait until the sky is clear?’”

You can read the whole speech at http://www.dallasfed.org/news/speeches/fisher/2011/fs110817.cfm. In addition to his reasoning for his latest dissent at the Fed, Fisher also goes into detail about the Texas job-growth machine, which is what Perry will be touting.

Again from Art Cashin:

Bullard, of the St. Louis Fed, said “Policy should be set by the state of the economy, not according to the calendar,” pointing to the Fed’s decision to stand pat until mid-2013.

Next came the Philly Fed’s Plosser, who said, “There is a price to be paid” for monetary policy and that the Fed’s decision was “inappropriate policy at an inappropriate time.”

Now that, Rick, is how to take the Fed to task.
Some Final Thoughts
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash (and cash is a position, as I often remind readers).

If we go into recession, we’ll know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.

It is not unusual for a recession to last a year, which means it could well take us into next summer and election season. And while the NBER (the people who are the “official” recession scorecard keepers) will tell us when the recession started, about nine months after it has, it is unlikely they will give an all-clear before the election.

There is little stomach for more fiscal stimulus. The drive is to cut spending. Fed policy is impotent. Unemployment will rise yet again and tax receipts will fall and expenses related to unemployment benefits will rise, putting further pressure on the deficit. Already, 40 million of our citizens are on food stamps. Wal-Mart notes that shoppers come into their stores late at night on the last day of the month and wait until midnight, when their new allotment of food stamps is activated.

It is hard to see at this moment what pulls us out, other than the blood, sweat, and tears of American entrepreneurs. Fisher is right; the US government should create certainty, create policies to foster new business, and get out of the way.

So, I guess I am going out on a limb, without any help from an inverted yield curve, and saying that we will be in recession within 12 months, if we are not already in one. This will be unlike any recession we have seen, as there is not much that can be done, other than to just get through it as best we can. Sit down and think about your own situation and prepare.

And frankly, for those of us who are entrepreneurs, this will offer some very interesting opportunities. I am not one for digging a hole and crawling in it. Stay aware of what can be done and create your own solutions!
Some Hope and Needed Help, Plus Travels
I will be the keynote speaker and honoree in Atlanta at the Hedge Funds Care Southeast Benefit on November 9th. The online registration link is http://www.hedgefundscare.org/event.asp?eventID=74. This group raises money for abused children, and their numbers are growing as the economy gets worse. You participation is appreciated. They are doing a special small private lunch with me as well, so take a look.

I will also be speaking at the Singularity Summit in New York, October 15-16. Rather than focusing on the bad news, this conference looks at how wonderful and bright our future is. I love these guys and am honored to be included. You can find out more and register at http://www.singularitysummit.com/program. If you are interested at all in the future, you should consider coming.

I am home for another 30+ days, and I need it. Starting in late September, my schedule once again gets crazy. Europe (Ireland for four days on a fact-finding trip, as I think Ireland is the true “ground zero” in Europe; but that’s just me) plus Geneva and London. It looks like a quick trip to South Africa (seeing Dubai as a long layover on the way), Houston, New York, New Orleans, San Francisco, some place in Maryland, and then Atlanta. I am enjoying my time in Dallas. One of the twins (Amanda) and her husband moved down last week, so now six of seven kids are near Dad. Just one more to go, and she should graduate in December.

Even being home, this has been a very busy week and tough all the way around. It seems that the demands on my personal bandwidth just keep increasing, even as my growing staff takes on more and more of the load. Without them I would crash and burn. I am not complaining, as many in our industry are looking for work. I know I am blessed beyond any reasonable measure.

There are 243 emails in my personal inbox. If one of them is yours, I will try and get to it as soon as I can. But I do enjoy hearing from my readers, as it keeps me grounded. I intend to catch up some this weekend, even while making it to the gym. I am taking the time while home to make sure I get into the gym.

Have a great week. And remember, we get through this. Time passes faster every year. We will get through this decade and then be set up for the biggest bull market of our lives. Patience, grasshopper.

Your wishing he had better news analyst,

John Mauldin
John@FrontlineThoughts.com

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Brazil’s Nuclear Ambitions, Past and Present

On May 6, 2006, Brazil inaugurated a controversial uranium enrichment facility at Resende, 90 miles to the west of Rio de Janeiro.[1]

The plant, which will enrich uranium for Brazil’s nuclear power plants and eventually for sale on the international civilian market, first received attention during a 2004 dispute with the International Atomic Energy Agency (IAEA). In early 2004, Brazilian authorities refused to give IAEA inspectors full visual access to the Resende uranium enrichment facility, which was under construction at the time.

IAEA officials who visited the plant alleged that some of the plant’s equipment was sealed from view by walls and coverings. Brazilian authorities admitted to covering up part of the equipment inside the plant, citing the need to protect proprietary technology. As a member of the nuclear Non-Proliferation Treaty (NPT), Brazil is subject to IAEA safeguards including mandatory inspections of nuclear facilities, as stated in Article III of the NPT, which provides that safeguards be implemented in a manner that “avoids hampering the economic and technological development of the parties.”

The Brazilians persisted in refusing to grant the IAEA inspectors full access to the Resende plant, resulting in an impasse that lasted until November 2004, when an agreement was reached that satisfied both parties; still, questions persist about the extent and purpose of Brazil’s nuclear program.

This issue brief will review the history of Brazil’s nuclear program up to its 2004 dispute with the IAEA; it concludes with an overview of Brazil’s current nuclear program and facilities, including its nuclear submarine plans.

Issue Brief: Brazil’s Nuclear Ambitions, Past and Present

 

Mexico’s Sinaloa drug cartel: DEA unravels a cocaine cartel web – latimes.com

As drug smugglers from the Sinaloa cartel in Mexico sent a never-ending stream of cocaine across the border and into a vast U.S. distribution web in Los Angeles, DEA agents were watching and listening.

Mexico’s Sinaloa drug cartel: DEA unravels a cocaine cartel web – latimes.com

 

Soybeans now rule the range on Argentina plains – latimes.com

In a country famous for its beef, ranchers are trading their livestock for soy crops, a safer, faster and more lucrative business.

Soybeans now rule the range on Argentina plains – latimes.com

 

Hezbollah Official: Destroy Israel After U.S. Leaves Iraq | FrontPage Magazine

When an enemy gives insight into his strategic thinking, it pays to listen. A Hezbollah member of Lebanon’s parliament, retired Brigadier-General Walid Sakariya, predicts that Israel will be destroyed by a “Shiite crescent” in a war with hundreds of thousands of deaths. This war, he says, can only commence once two things happen: Iraq is absorbed into Iran’s bloc after a U.S. withdrawal and the Syrian regime is saved.

Hezbollah Official: Destroy Israel After U.S. Leaves Iraq | FrontPage Magazine

 

The Coming Crisis in the Middle East

The gap between dominant Western perceptions of the Middle East and the region’s reality is dangerously wide. While the “Arab Spring” is celebrated as an advance for moderation and democracy, in fact the advance is going to revolutionary Islamists. Developments in Turkey and Egypt especially threaten to plunge the Middle East back into an era of conflict, instability, and the worst threats to Western interests in decades.

THE COMING CRISIS IN THE MIDDLE EAST

 

Problems with One.Com: Entering Domain Hell

1913Intel has been down for about 11 days. The reason for this outage is that I have entered domain hell with One.Com. Part of my overall strategy is to migrate this website and domain name out of the United States. While the website migration went well, the domain name migration (transfer) descended  into domain hell.

Upon transferring the domain name (1913Intel.Com) to One.Com I ran into a problem. It did not want me because I wasn’t hosting my website there. It took about 5 days to transfer the domain name over. At that time, it would normally take me about 1 to 2 minutes to set the name servers causing the domain name to point to the correct place. Unfortunately, One.Com would not give me the ability to set the name servers. When I asked them do it, they basically said take a hike. OK, they would do it if I sent in additional personal information and wait a couple of days, but they recommended that I just leave. I was stunned. I couldn’t believe it.

Now I have my website sitting there, but my domain name points to the wrong place. So I started the transfer process all over again. However, now my website was down. Once I got the transfer process completed, I was delayed because I couldn’t find the right screen to properly update the name servers. Anyway, after 11 days I am finally back up.

Ultimately, I failed to move my domain name out of the US. That means I will have to transfer it again at a later date. I will do a better job researching next time to make sure there is no problem.

 

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