Brilliant economist gets it

Roubini Maps Out Nightmare Scenario of Domino Debt Collapse in Europe

Published: Friday, 19 Nov 2010 | 8:18 AM ET

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By: Ash Bennington
NetNet Writer, Special to CNBC.com

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"We have too much private debt in the case of Ireland," according to Nouriel Roubini.

Robert Harding | Getty Images Dublin, Ireland

But the nub of the crisis is this: "We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt—going from 7 percent to 100 percent of GDP. Soon it will be 120 percent."

And, turning more broadly to the rest of Europe, "Greece is already at 120 percent."

Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, "Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns."

Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems.

Roubini characterizes super-sovereign intervention as merely kicking the can down the road.

He says wryly: "There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone."

But, despite the paper shuffling of debt at the national level—and at the level of supranational entities—reality ultimately intervenes: "So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent."

And then there is the case of France. "Sarkozy came to power saying 'I'm going to do lots of reform.' He has not done it. Right now, he is weak. He might lose the election. And, therefore, they are going to delay fiscal austerity and reforms."

And that, according to Roubini, is a major problem for the fiscally challenged French.

The bond vigilantes may have woken up first in Greece, Ireland, and Portugal. "But France," Roubini says, "does not look much better than the periphery."

In Roubini's view, the probability of the right steps being taken in France soon is not great. "Politically they are constrained from making reforms." For example, after the French made relatively small changes in their social welfare system—raising the retirement age from 60 to 62 —"You had massive riots in the streets."

And that, in Roubini's view, was just the beginning of the necessary austerity.

"What's going to happen when you do more radical reform? That's an open question in the case of France."

Looking beyond France to the future trajectory of the crisis, Roubini says, "The next one in line is going to be Portugal. "Due to the severity of Portuguese debt problems, Portugal is going to lose market access—and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out."

With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities.

And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.

So the point is what I have been saying for a year or so: This idiotic plan of governments forcing banks to do high risk loans, then governments taking on the losses, then bigger entities taking on their losses is a dead end. It obviously can't work. It can work for the rest of this year or something, then what? What happens when the EU and IMF are bankrupt, as Roubini asks? Space aliens arrive with money or the entire world goes bankrupt at once?

Airline take over

Just for the record, I am putting this out there right off the bat. We will slowly see that what is happening now is the beginning of the government taking over the entire airline industry and severely restricting air travel. This is their MO. They create the circumstances for a crippling crisis. They sit back and watch it unfold. They swoop in to "fix" it, which ends up looking much worse than the problem.

In this case, they have recently tangled up all the airlines in new regulations that cause them to delay and cancel flights all the time because they are required to. The airlines lose large amounts of money. The TSA at the same time is suddenly required to naked scan or severely grope every person who wants to fly. The invasiveness rapidly escalates as 15 body scanners quickly turns into 5,000 and are absolutely required. Back-of-the-hand frisks become handsy boob and crotch squeezing and hands down the pants and more within two weeks. Immediately polls are done to see if people will start to refuse to fly at all.

After 9/11 airline travel declined by 5% and several major airlines went bankrupt. What do you think full body gropes or naked photos saved in government files will do. I think airlines will start to go under within a couple of months. We can't have that. The government will have to "help." I believe they can drop air travel by at least 10-20% and bankrupt every airline. Obama and the other sleazebags will have seized control of another whole industry.

Global Warming U turn

Borrowed from the UK Daily Mail

It may be that this unabashed high priest of global warming tomfoolery is getting a conscience.

Climategate U-turn as scientist at centre of row admits: There has been no global warming since 1995

By JONATHAN PETRE
Last updated at 5:12 PM on 14th February 2010

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• Data for vital 'hockey stick graph' has gone missing
• There has been no global warming since 1995
• Warming periods have happened before - but NOT due to man-made changes

Data: Professor Phil Jones admitted his record keeping is 'not as good as it should be'

The academic at the centre of the ‘Climategate’ affair, whose raw data is crucial to the theory of climate change, has admitted that he has trouble ‘keeping track’ of the information.

Colleagues say that the reason Professor Phil Jones has refused Freedom of Information requests is that he may have actually lost the relevant papers.

Professor Jones told the BBC yesterday there was truth in the observations of colleagues that he lacked organisational skills, that his office was swamped with piles of paper and that his record keeping is ‘not as good as it should be’.

The data is crucial to the famous ‘hockey stick graph’ used by climate change advocates to support the theory.

Professor Jones also conceded the possibility that the world was warmer in medieval times than now – suggesting global warming may not be a man-made phenomenon.

And he said that for the past 15 years there has been no ‘statistically significant’ warming.

The admissions will be seized on by sceptics as fresh evidence that there are serious flaws at the heart of the science of climate change and the orthodoxy that recent rises in temperature are largely man-made.

Professor Jones has been in the spotlight since he stepped down as director of the University of East Anglia’s Climatic Research Unit after the leaking of emails that sceptics claim show scientists were manipulating data.

The raw data, collected from hundreds of weather stations around the world and analysed by his unit, has been used for years to bolster efforts by the United Nation’s Intergovernmental Panel on Climate Change to press governments to cut carbon dioxide emissions.

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• MAIL ON SUNDAY COMMENT: The professor's amazing climate change retreat

Following the leak of the emails, Professor Jones has been accused of ‘scientific fraud’ for allegedly deliberately suppressing information and refusing to share vital data with critics.

Discussing the interview, the BBC’s environmental analyst Roger Harrabin said he had spoken to colleagues of Professor Jones who had told him that his strengths included integrity and doggedness but not record-keeping and office tidying.

Mr Harrabin, who conducted the interview for the BBC’s website, said the professor had been collating tens of thousands of pieces of data from around the world to produce a coherent record of temperature change.

That material has been used to produce the ‘hockey stick graph’ which is relatively flat for centuries before rising steeply in recent decades.

According to Mr Harrabin, colleagues of Professor Jones said ‘his office is piled high with paper, fragments from over the years, tens of thousands of pieces of paper, and they suspect what happened was he took in the raw data to a central database and then let the pieces of paper go because he never realised that 20 years later he would be held to account over them’.

Asked by Mr Harrabin about these issues, Professor Jones admitted the lack of organisation in the system had contributed to his reluctance to share data with critics, which he regretted.

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But he denied he had cheated over the data or unfairly influenced the scientific process, and said he still believed recent temperature rises were predominantly man-made.

Asked about whether he lost track of data, Professor Jones said: ‘There is some truth in that. We do have a trail of where the weather stations have come from but it’s probably not as good as it should be.

‘There’s a continual updating of the dataset. Keeping track of everything is difficult. Some countries will do lots of checking on their data then issue improved data, so it can be very difficult. We have improved but we have to improve more.’

He also agreed that there had been two periods which experienced similar warming, from 1910 to 1940 and from 1975 to 1998, but said these could be explained by natural phenomena whereas more recent warming could not.

He further admitted that in the last 15 years there had been no ‘statistically significant’ warming, although he argued this was a blip rather than the long-term trend.

And he said that the debate over whether the world could have been even warmer than now during the medieval period, when there is evidence of high temperatures in northern countries, was far from settled.

Sceptics believe there is strong evidence that the world was warmer between about 800 and 1300 AD than now because of evidence of high temperatures in northern countries.

But climate change advocates have dismissed this as false or only applying to the northern part of the world.

Professor Jones departed from this consensus when he said: ‘There is much debate over whether the Medieval Warm Period was global in extent or not. The MWP is most clearly expressed in parts of North America, the North Atlantic and Europe and parts of Asia.

‘For it to be global in extent, the MWP would need to be seen clearly in more records from the tropical regions and the Southern hemisphere. There are very few palaeoclimatic records for these latter two regions.

‘Of course, if the MWP was shown to be global in extent and as warm or warmer than today, then obviously the late 20th Century warmth would not be unprecedented. On the other hand, if the MWP was global, but was less warm than today, then the current warmth would be unprecedented.’

Sceptics said this was the first time a senior scientist working with the IPCC had admitted to the possibility that the Medieval Warming Period could have been global, and therefore the world could have been hotter then than now.

Professor Jones criticised those who complained he had not shared his data with them, saying they could always collate their own from publicly available material in the US. And he said the climate had not cooled ‘until recently – and then barely at all. The trend is a warming trend’.

Mr Harrabin told Radio 4’s Today programme that, despite the controversies, there still appeared to be no fundamental flaws in the majority scientific view that climate change was largely man-made.

But Dr Benny Pieser, director of the sceptical Global Warming Policy Foundation, said Professor Jones’s ‘excuses’ for his failure to share data were hollow as he had shared it with colleagues and ‘mates’.

He said that until all the data was released, sceptics could not test it to see if it supported the conclusions claimed by climate change advocates.

He added that the professor’s concessions over medieval warming were ‘significant’ because they were his first public admission that the science was not settled

Read more: http://www.dailymail.co.uk/news/article-1250872/Climategate-U-turn-Astonishment-scientist-centre-global-warming-email-row-admits-data-organised.html?ITO=1490#ixzz14k6iF3Yl