Sub-prime 1.15 may be lurking in the financial reeds. At any given time 20 MM Americans are in attendance at US universities & colleges, 60% of them with student loans. At last report 37MM student loans were outstanding (incl. 2.2MM to people aged 60 or over), with 11% at least 90 days delinquent. In 2003 total student loans outstanding were US$250BN; today that’s US$1.066TR (implying 12+% compound annual growth). This exceeds by 20% or more each of credit card-, car-, & revolving home equity- loan outstandings. And while the latter three declined during the Great Recession as households deleveraged (although auto loan balances have started to creep up again), student loans kept growing; in fact their growth more than offset the decline in the balances of the other three combined (thereby suggesting that the household deleveraging phenomenon was a mirage perpetrated by those who didn’t look beyond the end of their noses; for this suggests that in the aggregate the household sector didn’t reduce its debt but merely altered its mix).
About 85% of all student loans outstanding are on the federal government’s tab and, as in the case of many sub-prime loans of yesteryear, were, & continue to be made, with little vetting of the creditworthiness of applicants &, more importantly, their earnings potential upon graduation (i.e. without regard for whether the applicant would study art, sociology, engineering or computer science) – it seems to have been largely a matter of ‘you are a student, you want money, here’s some, now go away’ . And not many of those taking out these loans had any inkling that student loans are very hard to get out from under, even in bankruptcy & are senior to all other consumer debt, and that collection can even be enforced by garnishees on Social Security payments.
This could have serious implications. Those with big student loan balances upon graduation may later experience difficulties accessing ‘normal’ consumer credit & car loans, saving up for their first house, & subsequently paying for it, even if they were able to. It may induce them to delay starting a family, or not to have one at all. And perhaps most important may be the consequences for universities & colleges, and public finance, and by implication for America’s competitiveness in an increasingly ‘knowledge-based’ global economy. For this huge increase in student debt helped sustain the previous decades’ growth in university budgets at twice, or more, the compound rate of growth of the CPI (in part due to the escalating cost of employee non-salary benefits) despite drastic cutbacks in government funding support for them (thus the University of Virginia’s budget grew from US$678MM in 1990 to US$2.5BN in 2011 (i.e. at a 4.3% compound annual growth rate vs. 1.8% for the CPI), while the state’s share of its revenue base shrank from 26.2% to 5.6% thereof ( i.e. at a -0.77% compound annual ‘growth’ rate). And this may have the greatest impact on the top drawer universities due to the fact there is growing evidence that the incremental cost of attending them is not necessarily reflected in the future incremental earnings capacity of their graduates. And with lower-than-expected earnings from their endowment funds they will have less money available to subsidize students from lower income families, thereby restricting their universe of potential incoming freshmen more & more to those from families of ‘independent means’.
According to The Economist Illinois is the epitome of state finances gone awry. Its unfunded pension liabilities are close to US$100BN & according to Democratic Governor Pat Quinn growing at US$17MM/day. And the State’s Commission on Government Forecasting and Accountability says its funding (assets/liabilities) ratio is 39%. This is the result of years of state underfunding & of overly optimistic assumptions of investment returns. So now in a budget in the US$30-US$35BN range, pension payments will account for US$5.1BN (almost triple the US$1.8BN in 2008) this-, & rise to US$6.1BN next-, year. While the Governor has for over a year been trying to get legislators to focus on this problem, the General Assembly adjourned on January 8th, without addressed it – in all fairness, the accounting profession must share in the blame due to its idiotic insistence that pension funds with long term liabilities must apply the same “mark-to-market” valuation to their assets as short-term traders, as does the Fed, since in a 1-2% government bond yield environment the PV of far-off liabilities skyrockets.
While retail investors have been piling into the stock market with abandon, causing it to have its best January in 16 years, corporate share buybacks have been faltering. Historically the latter have been a more dependable gauge of where the market may be headed in the short-to-medium term since corporate treasurers have insider knowledge as to the intrinsic value of their companies’ shares, and are number-, rather than emotion-, motivated in their decisions. On the other hand, this may be a special case, since dividend payouts in the Fourth Quarter were greater than usual as a hedge against the possibility the fiscal cliff negotiations would alter their tax treatment.
Retail investors have also been piling into ETFs (Exchange-Traded Funds) marketed to them as a safer, lower cost alternative to mutual funds without being made fully aware of their possible pitfalls. Thus in Canada, of the 260 ETFs in existence, half have AUM < $25MM, and therefore will lack the degree of liquidity investors need to be able to sell at any time & get a ‘fair’ price.
The head of the Edmonton Police Union is upset because he says the force has far too many internal disciplinary hearings which, he claims, is causing low morale & undue staff turnover. But the facts speak for themselves. The details of two such disciplinary hearings to have recently become public knowledge. One dealt with an officer who, while out of town on a training exercise, came back to his temporary lodging after having spent some time at a bar, got into an argument with a colleague over the latter’s behaviour during the day & urinated all over the sleeping bag the other officer had retired into. And the other involved an officer who allegedly kicked a suspect in the head while the latter was laying on the ground with his hands handcuffed behind his back – methinks the head of the union is part of the problem rather than of the solution.
A study on Québec sovereignty conducted by a Québec independence group but partly funded by the Provincial government, based on input from 1,200 people in 13 regions across the province, purports to have found 92 ways in which being part of Canada constitutes ‘soft ethnocide’, i.e. hinders the Province’s development as Québecers want it (to develop) – possibly the loopiest of the 92 is that, following the latest census 27 new ridings were created outside-, but only three within-, Québec. This is a self-inflicted wound; for decennial adjustment is based on the rate of population growth elsewhere in the country compared Québec’s; so obviously Québecers aren’t procreating enough and attracting enough new immigrants to their province (while immigration policy in its case is a hard fought-for provincial jurisdiction). So rather than being hard done by, Québec actually got an undeserved bonus since the deal made years ago fixed Québec’s number of seats in the House of Commons at 75, with the number of seats for the other provincesto be prorated off that number – so much for gratitude & for the idea that ‘a deal is a deal.!
For those interested, Philip Aldrick had a long, but very informative, article in the Sunday Telegraph entitled Mark Carney Plots Assault on the Bank of England that is unfortunately too lengthy to do justice to here in a few lines.
Last year the aggregate profits of China’s steel companies were down 98% YoY, & almost one in three actually lost money. The China Iron and Steel Association on January 25th blamed the high prices charged by foreign iron ore producers. This is disingenuous at best, & an outright lie at worst. For iron ore prices were actually lower in 2012 (a high of US$150 & an average of US$125 respectively) while the corresponding numbers for 2011 had been US$185 & US$ 170.
Yum Brand Inc’s KFC sales in China were down 6% in the Fourth Quarter, after having been up 9% in the first three quarters, on stories in its media & blogosphere that two of its suppliers got their chickens up to killing weight in just 45 days by pumping them full of dangerous hormones – anyone who saw the movie Food Inc. will remember the sequence in which chickens raised to a killing weight at a similar age towards the end of their life had to sort of drag themselves on their bellies to the feed trough when they were hungry because their bodies were too heavy for their still soft leg bones to support them (although it didn’t make the same chemical link claim, presumably upon the advice from the same lawyers who didn’t permit the inclusion of footage from the California strawberry fields where workers wear space-type suits to avoid getting sick from the chemicals used there). There have been a number of major tainted food scandals in China in recent years, involving, among others, dangerously adulterated cooking oil, baby formula laced with compounds dangerous to their health, & “exploding” water melons, that have sensitized the hoi polloi there to food quality issues to an extent that cases of mad cow disease & periodic salmonella-, e-coli-, & listeriosis poisonings have been unable to do in North America.
Next June the next round of the much-feared ‘gakao’ exams will take place in China that the BBC calls “the world’s toughest”. Officially known as the National Higher Education Entrance Exams they are written each year by 9+MM students, most of them high school seniors. In one form or another they predate the Communist regime, although over time their nature has been changed in various ways. Spread over two days they basically determine students’ career paths; so for two days the entire country suffers from ‘Gakao Fever”, with streets blocked & construction halted near exam sites so as not to distract those taking them. One market letter quotes the lifestyle of the 17 year-old daughter of a friend who in preparation for them attends school from 0730 – 2200 hrs, with a two hour lunch break and … usually … Saturday afternoons & Sunday morning off, & a news paper that of another girl who attends school from 0730 – 1700 hrs & then goes home to do six hours of homework – so, many parents who can afford it send their kids to universities abroad to eliminate the risk that, if they wrote a bad exam, they might be stigmatized for the rest of their lives.
On February 2nd Japanese Coast Guard vessels arrested the captain & 13-men crew of a Chinese fishing vessel for illegally fishing in Okinawa’s 200 mile ‘exclusive economic zone’ (not the Senkaku /Diaoyu islands). This was the first such event since September 2010 when the Japanese arrested the crew of another Chinese fishing vessel, detained them for a number of days & proposed prosecuting them, until Beijing retaliated by cutting of rare earth metal exports to Japan (which quickly made Tokyo realize which side their bread was buttered on). While this time they were released after just a few hours, this cannot help but have a negative impact on Japanese-Chinese relations, especially if Beijing were to interpret their early release as a sign of weakness.
In London house prices today are as much as 50% over their 2008 level, while elsewhere in the country they are still below it. This is due to every foreign Tom, Dick & Harry with cash to spare wanting to buy a London pied a terre. And a provision enabling foreigners to get a residency permit in a hurry if they invest a million pounds in Britain has helped to fuel this London house buying mania (last year alone thousands of Russians, & several thousand Americans, took advantage of it to establish a foothold in what still is one of the world’s most liveable & centrally-located cities).
The opening ceremonies at the 2014 Olympic Winter Games in Sochi will take place a year from today, on February 7th, 2014. Originally budgeted to cost about US$11BN, they are about to set a record for cost overruns; for so far US$37BN has been spent & the final cost is now expected to be close to 5x the original estimate. This is said to have ‘angered’ President Putin (and so it should since it does not reflect well on his managerial ability) – by comparison the cost to China of hosting the 2008 Summer Olympics, a far bigger event & also a huge national showcase ‘marquee’ extravaganza , is said to have been US$40BN and that to Canada/Vancouver of hosting the 2010 Winter Games less than US$7BN. And to top it all off, Sochi is an even more illogical a place than Vancouver was to hold Winter Games since the average winter daytime high is 11° C/50°F & night time low 4°c/39°F (which is far above that required to make artificial snow). So, when the Olympic Committee was there to inspect progress, it noticed the virtual absence of snow but was assured by the organizers that they will “store” this year’s snow under insulating cover until next year (at what cost in a place where summer time temperatures are in the 25°C+/77°F+ range?).
GLEANINGS II – 497
Thursday February 7th, 2013
LOOK WHO’S TALKING GREEN (G&M, David Runnalls)
-In his inauguration address President Obama called on Americans to take the lead in developing the technologies necessary for the emerging low-carbon economy. Then in Davos Christine Lagarde, the Managing Director of the IMF (which has always stayed clear of commenting on environmental issues), called climate change “the greatest economic challenge of the 21st century” due to the “Increasing vulnerability from resource scarcity and climate change, with the potential for major social and economic disruption. This is the wild card in the pack.” She called for “green economic growth that respects environmental sustainability” & said “Good ecology is good economics. This is one reason why getting carbon pricing right and removing fossil fuel subsidies are so important” & in response to a question she released a real zinger when she said “Unless we take action on climate change, future generations will be roasted, toasted, fried and grilled.” Also in Davos World Bank President Jim Yong Kim, a Korean-American, said “global warming imperils all … development gains we have made … the world’s top priority must be to get finance flowing and get prices right on all aspects of energy costs to support low-carbon growth.” And he warned achieving a predictable price on carbon that accurately reflects real environmental costs is key to delivering emission reductions at scale & that correct energy pricing can also provide incentives for investments in energy efficiency & cleaner energy technologies.
Carbon pricing is a ‘third rail issue’ in North America. Many Americans still feel entitled to cheap energy (largely a “want”) while happily forking over more than the price of gasoline for a bottle of water (a “need”) that comes from someone else’s tap & that they could have gotten for next to noting from their own (tap). As to climate change, despite growing numbers of climatic disasters, most Americans still suffer from the ‘boiling frog syndrome’ or, worse still, have a cynical it-will-last-out-my-lifetime attitude. So, just as America’s shortsightedness caused the US to lose the first round in the space race to the Soviet Union almost 55½ years ago, it now seems destined to lose the environmental remediation race to China, because environmental degradation there has now reached levels where it is become too visible to the hoi polloi to be ignored &, more importantly, has begun to affect the quality of life of its leaders.
CANADA’S AFRICAN ADVENTURE TAKES A COLONIAL TURN (G&M, Doug Saunders
–Few people realize that Canada is now the largest mining operator in Africa, bigger even than China. A few years ago the Harper government shifted its foreign aid focus away from Africa. But it has now done a 180 & reverted back to a large scale aid strategy for Africa, albeit one with a difference; for it seeks to piggy-back onto the presence of Canada-based resource companies to aid the “social and environmental issues of extractive development”. In theory, this makes sense; but in practice the downside of this policy is that this risks becoming, as is starting to happen to China, the face of ‘neocolonialism’ for the locals.
An old adage holds that “a man is known by the company he keeps”, and Western resource companies generally speaking, often deservedly so, don’t have a great reputation in the developing world, in part because they take advantage of the often lax environmental standards & in part because their single-minded pursuit of short-term profit maximization often collides with what the locals perceive to be their best interests. And the sad part of this is that Canada has long had a (totally underutilized) pool of goodwill in sub-Sahara Africa, in part because it does not have a colonial past. But since Mr. Harper became Prime Minister Canada’s foreign policy has been ‘Amateur Hour’ personified, as in the US under Bush 43, only more so, & for the same reason : neither man ever had a passport before they became their nation’s leader. So right now his personal priority is what might be called Free Trade 2.0, securing a free trade agreement with low growth Europe while his time & attention would have been more fruitfully spent in Canada’s long-term interest promoting trade agreements with African countries that want to diversify away from their former colonial overlords, don’t particularly care for the “Ugly America” aspects of a closer relationship with the US, and have begun to get concerned about the neo-colonialist aspects of China’s intentions.
CANADIAN EXTREMISTS LIKELY CITIZENS (G&M, Colin Freeze)
-CSIS (the Canadian Security Intelligence Service) provided under the Access to Information Act, a 21-page study entitled A Study of Radicalization : The Making of Islamist Extremists in Canada. It says, among others, that the reasons why people want to become terrorists defy explanation, but notes that, contrary to the CW, Canadian-born radicals, not immigrants, “constitute a plurality” of those identified as violent extremists, none of whom could be “assessed to be poorly integrated into Canadian society”.
This issue has been in the limelight ever since the Prime Minister of Algeria claimed that two men with Canadian passports had been among those killed after the recent attack on a gas plant in his country (although his government has yet to validate that claim & Canadian police officers there to investigate it have complained about a lack of cooperation). Canadian passports have long been the fake personal identification document of choice among evil doers, incl. Israel’s Mossad.
A LOW PROFIT FUTURE FOR BANKS (Reuters, Olaf Storbeck)
-Commerzbank, Germany’s second-largest, this week announced it will write off 560MM Euros-worth of deferred tax accruals (that therefore won’t be available anymore to offset future profits). This is part of the “new normality” CEO Martin Blessing has talked about in describing the bank’s prospects, when tougher regulation, low interest rates & more risk-averse customers will put paid to the banks’ recent, gloriously profitable past. At least it is not dithering in adjusting its business model & internal procedures : last November, it launched a cost-cutting cum reorganization plan to strengthen its domestic retail operation that, after having cut 9,000 jobs following its 2009 merger with Dresdner Bank, will see 6,000 more jobs cut by 2016, reducing its domestic staff 15%. While painful in the short run, it is expected to help the bank prosper in an era of low profits & even lower expectations
Until last November Storbeck was the International Economics Correspondent for Germany’s Handelsblatt; he now covers Germany, the Eurozone & Economics generally for Reuters.
TUNISIAN PM DISSOLVES GOVERNMENT AMID ANGER OVER ASSASSINATION
(NBCNews, Alistair Jamieson)
-On Wednesday February 6th, Tunisian opposition leader Chokri Belaid was gunned down in front of his house by someone who escaped on a motorcycle. Late that day Prime Minister Hamdi Jebali dissolved the government in the hope this would calm the widespread public fury, & the riots in the street, this assassination had prompted, proposing to replace it with an interim technocrat “caretaker” government “limited to managing the affairs of the country until elections are held in the shortest possible time … The murder of Belaid is a political assassination and the assassination of the Tunisian revolution.” But his own party rejected this move the following morning on the grounds that he “did not ask the opinion of his party. We in Ennahda believe Tunisia needs a political government now (even though last fall it had agreed to both a legislative & presidential elections, and set a date, June 23rd). We will continue discussions with other parties about forming a coalition government.”
Prior to the Arab Spring Tunisians had the best quality of life in the Arab world. Literacy rates were high & child mortality rates low (lower in fact than in the US). Women were treated as equals. There was unusual freedom of movement & expression. Per capita computer ownership was second only to South Africa on the continent. House ownership was on a par with that in Western countries. And yet the mosques were full. But since then the economy has suffered to the dismay of many, particularly secular (middle class),Tunisians. And Belaid had been vocal about his dislike of what he thought were attempts by the Islamist Ennahda-led coalition government (that includes two secularist junior partners), to impose a way of life on Tunisians that he believed Radical Islam-inspired, & he had accused the government of looking the other way as thugs that he claimed Ennahda controlled, roughed up those whom it deemed to be trouble makers.
ISLAMIC CONFERENCE CONVENES IN CAIRO (AP, Paul Taylor)
-The day after Egypt’s central bank reported January’s a further 10% drop in the country’s already distressed FX reserves to US$13.6BN, less than three months-worth of imports, President Morsi on February 6th opened a two day session of the 56-member Organization of Islamic Cooperation. Syria was not represented; it was suspended from the organization last year & a spokesman for the al-Assad regime said it had not received an invitation & wouldn’t attend. But Iran’s President Ahmadinejad did attend, making this the first time in the 34 years since diplomatic relations between the two countries were broken off following Sadat’s peace accord with Israel, that an Iranian leader has set foot in Cairo (which may not be good news for the Israelis). And, aware of Egypt’s precarious FX reserve situation he came with an offer of a “big credit line” to help out (while its own financial situation presumably is complicated by the sanctions?). But this didn’t stop Egypt’s leading Muslim scholar from castigating him very publicly for his country’s policies vis a vis the Sunni Muslim nations (in the Persian Gulf Region). And last, but by no means least, the draft communique for the meeting for all intents & purposes threw Syria’s al-Assad regime under the bus, blaming it for most of the killing of Syrian citizens in the past two years & explicitly recognizing the rebel coalition front , and urging al-Assad to enter into negotiations with the latter to form a transitional government.
President Morsi is caught in a vice. Negotiations for a US$4.8BN IMF loan have twice been suspended. That, & the political situation generally, is causing both foreign & local capital to head for the exits. The political situation is also seriously affecting tourism. As a result of both, unemployment has risen, & is continuing to rise and, as it does, this ratchets up political unrest, which prompts still more capital flight & fewer tourists, which creates more unemployment, etc., etc. And with elections scheduled for April, Morsi has little, if any scope, for meeting the IMF’s demands, especially its demand to reduce the subsidy on bread (which is benefitting far more people who don’t need it than the poor who need it) for fear it will cost his Islamist Justice & Freedom Party votes. All he can do is, as a friend of a friend used to say, is “keep a tight arse & look fierce” (which hasn’t worked very well & has made him look more & more like Mubarrak all the time, which then increases the urbanites’ sense that the wheels have come off their revolution). Meanwhile, the army leadership, which has hitherto supported his regime, is getting antsy as it watches the political situation deteriorate. As to Egypt’s FX reserves, they averaged US$23.0BN during this century’s first decade & were US$36BN on January 1st, 2011, before the onset of the Arab Spring, but were just US$13.6BN on January 31st, i.e. net of the multi-billion dollar cash injections last year by Qatar, Turkey & other Arab nations they had shrunk by over two-thirds). Meanwhile its need for imports is growing in part because domestic grain output is stagnating & the demand for bread growing.
CHINA’S VEHICLE POPULATION HITS 240 MILLION AS SMOG ENGULFS CITIES (Bloomberg)
-In 2012 new car sales numbered 15.1MM, i.e. more than the 13MM size of the country’s entire vehicle fleet in 1999. This bring the nation’s total vehicle fleet to 240MM.
So during the 1999-2012 period China’s vehicle fleet grew at a compound annual rate of 25% (& that of the US by 1.1%). Rather interestingly, the size of India’s vehicle fleet has gone from one that was about 4x as large as China’s in 1999 to one little more than half of China’s in 2012.
BEIJING SETS FIVE-YEAR TARGET FOR LAYING OUT LAND USE RIGHTS (Caixin)
-In China all land is owned by the state, and farmers & rural collectives have only mostly informal long usage rights. The first policy paper issued by the Communist Party’s Central Committee this year states that Beijing will complete a comprehensive survey & registration of rural land use rights (with)in five years. This would enshrine land use rights & facilitate their transfer between farmers. And while these have been increasing in number & value in recent years, according to Liu Shouying, a research fellow at the rural Department of the State Council’s Development Research Center “without clear land use rights’ registration farmers who migrate to the cities can only have their elders back home work in the field”, for fear that, if they contract it to other farmers, they risk losing the land.
This is an important, if not critical, issue for the regime. For it has a serious farm productivity problem which, together with the shift in dietary preferences to more animal protein foods, is undermining the country’s self-sufficiency in food production. For not only, like everywhere else in the world, is some of its most productive land being blacktopped over due to industrialization & & urbanization, and is water for irrigation becoming scarcer, but its rural population is aging even faster than the population as a whole as the younger people seek their fortune in the cities. One way to enhance farm productivity would be by leveraging the potential of those who remain on the farm by increasing the acreage each farms.
30 MASS DEMONSTRATIONS IN A SINGLE DAY (The Epoch Time)
-According to the activist website moilhua.org. on Monday January 28th there were 30 public demonstrations in 16 provinces across China. Construction workers in Lanzhou were blocking roads in a dispute over wages & property owners in Chengdu over government policy (likely the attempt to introduce real estate taxes), drivers of three-wheeled vehicles in Tongxiang were protesting about not being able to use certain roads, retirees from a military equipment factory in Nanjing had pension grievances, & villagers in Guangzhou were seeking compensation for a railway construction project (which is interesting in light of the item immediately preceding). Mass demonstrations in 2000 numbered about 40,000, by 2009 that had nearly tripled to 110,000, & again in 2010 to supposedly 280,000.
-Elsewhere in the same edition it drew attention to the fact that the ranking of 93 year-old Jiang Zemin’s name well down the list of officials’ names published on recent important occasions suggests he is now being sidelined, purportedly at his own request; for during Hu Jintao’s ten-year term his name had remained right up there, often right behind Hu’s (China watchers look for these rankings as avidly as did Soviet watchers during the Cold War era to get an idea as to whose star is rising or in decline).
The Epoch Times, now published by its own admission in 20 languages & 35 countries, is the overseas voice of the Falun Gong movement. While as such not an unbiased reporter of events in the PRC, it does provide a perspective on goings-on there that the mainstream media don’t, or won’t, report on. Having said that, the 30 demonstrations that it so breathlessly headlines suggest that January 28th was a ‘slow day’; for the 280,000 number implies a daily average of over 750 (which is sort of validated by the 500 number emanating from other sources).
JAPAN PM URGES CHINESE RESTRAINT AFTER RADAR LOCK-ON (Reuters)
-Japan reported on February 5th that on January 30th, the day after Xi Jinping had assured Prime Minister Shinzo Abe’s personal envoy he was committed to improving bilateral relations, a Chinese warship had “radar-locked” on a Japanese vessel (& that it had been the second such instance in two weeks, the first of which had targeted a Japanese military helicopter, an event it had chosen not to report). While Prime Minister Abe urged Beijing to avoid stoking tensions in the East China Sea, a Chinese government spokesperson said she wasn’t aware of the details of the incident but suggested Japan had provoked it by continuing to send warships into what she called “China’s territorial waters”.
Radar lock-ons are used to determine the range to a target before firing on it. What disturbed Tokyo most was that in each case they had lasted several minutes, suggesting it was done deliberately, not accidentally (& once locked on, it would only take one mischief maker who happened to have his finger on the firing button, acting on his own, to trigger a serious conflict; and the way popular anti-Japanese sentiments, with Being’s not-so-covert encouragement, have been rising, this possibility cannot be ruled out.
BERLUSCONI’S SIREN CALLS AND THE RETURN OF THE EUROPEAN CRISIS
(Forbes, Agustino Fontevecchia)
-Markets are underpricing the risk to the Eurozone’s financial stability of the February 24th & 25th Italian elections as Berlusconi’s right-of-centre People of Freedom Party is gaining ground on the siren call of tax-, & spending-, cuts to jump start the economy (aided & abetted by his control of most of country’s mass media). While the alliance of the left-of-centre Democratic Party led by Pier Luigi Bersani & Monti’s right-leaning With Monti for Italy group is still expected to win, the fact that an unusually high 35% of voters are still undecided & the Monte dei Paschi banking scandal have hiked the risk that the outcome of the election will be that (once again?) Italy will become ungovernable (in part because in Italy both houses of Parliament rank equally & the Bersani/Monti alliance may not have control of the Senate), thereby precipitating the next leg of Europe’s seemingly never-ending souvereign debt crisis. Berlusconi has promised to end an unpopular property tax introduced by the outgoing Monti government & denigrated Monti as a “leaderini” (Italian for “little leader”), and has called Bersani & Monti ‘puppets pushing a Germany-imposed austerity that is choking the economy’. All in all, the most recent polls gave Berlusconi’s party between 28% & 32% of the committed vote (up from just 18% a month ago), putting it second only to Bersani’s 34% to 37%, & way ahead of the 13-14% for Monti’s group (which trails the Five Start Movement (M5S) led by Beppe Grillo, a comedian turned anti-corruption activist, whose party won the recent Sicilian elections (& who on the campaign trail referred to Berlusconi with his slicked back hair & pancake face as a “dwarf zombie”).
People have short memories. Berlusconi during his long tenure as Prime Minister created much of the mess Italy is in today.
RECORDS TUMBLE AS QUEENSLAND RAINS KEEP FALLING
(ABC Rural, Caitlyn Gribbin)
-Tropical cyclone Oswald dumped as much as half a metre of rain on some parts of the state over a 48-hour period. Rockingham broke a 1939 record for the highest daily rainfall, with 400 millimetres (almost 16 inches) in a single 24-hour period, and Yeppoon & Kabia 557 & 239 millimetres respectively (& more was expected to be on the way). The rain even forced a suspension of traffic in & out of Gladstone Harbour, thereby bringing one of Australia’s largest ports to a standstill, & sent ships back out to sea for safety reasons.
This is a function of elementary physics. Even most climate change deniers accept that global temperatures are rising. And it is a scientific fact that the warmer the air, the more water it can hold; but ‘what goes up, must come down’ (another consequences of higher global temperatures is that, as water warms up, it expands, causing ocean levels to rise).
AUSTRALIA’S SHALE OIL DISCOVERYCOULD BE LARGER THAN CANADA’S OIL SANDS (Australian Broadcasting Corporation)
-Brisbane-based Linc Energy announced that independent studies had identified a large new source of shale oil around the village of Coober Pedy in the Arckaringa Basin in the far North of South Australia State that could hold as much as 223BN bbls of oil (the lion’s share of which, however, is not likely recoverable). So, while Australia, that had been ‘relatively’ self-sufficient in oil until a decade ago, today imports about half the 1MM bbld it consumes, an initial 500,000 bbld production rate would make it self-sufficient again.
Coober Pedy (population 1,695) is located 850 kms North of the State capital, Adelaide, in the heart of the continent. Hitherto it was best known as “Australia’s Opal Capital”. And it can get so hot there, that many of its inhabitants live underground to escape the heat.