Sunday, June 13, 2010
BP's Deepwater Oil Spill - An Even Longer Term Problem
June 13, 2010
There doesn't really seem to be much info on TOD that furthers more complete understanding of what's really happening in the GOM.
As you have probably seen and maybe feel yourselves, there are several things that do not appear to make sense regarding the actions of attack against the well. Don't feel bad, there is much that doesn't make sense even to professionals unless you take into account some important variables that we are not being told about. There seems to me to be a reluctance to face what cannot be termed anything less than grim circumstances in my opinion. There certainly is a reluctance to inform us regular people and all we have really gotten is a few dots here and there...
First of all...set aside all your thoughts of plugging the well and stopping it from blowing out oil using any method from the top down. Plugs, big valves to just shut it off, pinching the pipe closed, installing a new bop or lmrp, shooting any epoxy in it, top kills with mud etc etc etc....forget that, it won't be happening..it's done and over. In fact actually opening up the well at the subsea source and allowing it to gush more is not only exactly what has happened, it was probably necessary, or so they think anyway.
So you have to ask WHY? Why make it worse?...there really can only be one answer and that answer does not bode well for all of us. It's really an inescapable conclusion at this point, unless you want to believe that every Oil and Gas professional involved suddenly just forgot everything they know or woke up one morning and drank a few big cups of stupid and got assigned to directing the response to this catastrophe. Nothing makes sense unless you take this into account, but after you do...you will see the "sense" behind what has happened and what is happening. That conclusion is this:
The well bore structure is compromised "Down hole".
That is something which is a "Worst nightmare" conclusion to reach. While many have been saying this for some time as with any complex disaster of this proportion many have "said" a lot of things with no real sound reasons or evidence for jumping to such conclusions, well this time it appears that they may have jumped into the right place...
TOP KILL - FAILS:
This was probably our best and only chance to kill this well from the top down. This "kill mud" is a tried and true method of killing wells and usually has a very good chance of success. The depth of this well presented some logistical challenges, but it really should not of presented any functional obstructions. The pumping capacity was there and it would have worked, should have worked, but it didn't.
It didn't work, but it did create evidence of what is really happening. First of all the method used in this particular top kill made no sense, did not follow the standard operating procedure used to kill many other wells and in fact for the most part was completely contrary to the procedure which would have given it any real chance of working.
When a well is "Killed" using this method heavy drill fluid "Mud" is pumped at high volume and pressure into a leaking well. The leaks are "behind" the point of access where the mud is fired in, in this case the "choke and Kill lines" which are at the very bottom of the BOP (Blow Out Preventer) The heavy fluid gathers in the "behind" portion of the leaking well assembly, while some will leak out, it very quickly overtakes the flow of oil and only the heavier mud will leak out. Once that "solid" flow of mud is established at the leak "behind" the well, the mud pumps increase pressure and begin to overtake the pressure of the oil deposit. The mud is established in a solid column that is driven downward by the now stronger pumps. The heavy mud will create a solid column that is so heavy that the oil deposit can no longer push it up, shut off the pumps...the well is killed...it can no longer flow.
Usually this will happen fairly quickly, in fact for it to work at all...it must happen quickly. There is no "trickle some mud in" because that is not how a top kill works. The flowing oil will just flush out the trickle and a solid column will never be established. Yet what we were told was "It will take days to know whether it
worked"...."Top kill might take 48 hours to complete"...the only way it could take days is if BP intended to do some "test fires" to test integrity of the entire system. The actual "kill" can only take hours by nature because it must happen fairly rapidly. It also increases strain on the "behind" portion and in this instance we all know that what remained was fragile at best.
Early that afternoon we saw a massive flow burst out of the riser "plume" area. This was the first test fire of high pressure mud injection. Later on same day we saw a greatly increased flow out of the kink leaks, this was mostly mud at that time as the kill mud is tanish color due to the high amount of Barite which is added to it to weight it and Barite is a white powder.
We later learned the pumping was shut down at midnight, we weren't told about that until almost 16 hours later, but by then...I'm sure BP had learned the worst. The mud they were pumping in was not only leaking out the "behind" leaks...it was leaking out of someplace forward...and since they were not even near being able to pump mud into the deposit itself, because the well would be dead long before...and the oil was still coming up, there could only be one conclusion...the wells casings were ruptured and it was leaking "down hole"
They tried the "Junk shot"...the "bridging materials" which also failed and likely made things worse in regards to the ruptured well casings.
"Despite successfully pumping a total of over 30,000 barrels of heavy mud, in three attempts at rates of up to
80 barrels a minute, and deploying a wide range of different bridging materials, the operation did not overcome the flow from the well."
http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7062487
80 Barrels per minute is over 200,000 gallons per hour, over 115,000 barrels per day...did we seen an increase over and above what was already leaking out of 115k bpd?....we did not...it would have been a massive increase in order of multiples and this did not happen.
"The whole purpose is to get the kill mud down,” said Wells. “We'll have 50,000 barrels of mud on hand to kill this well. It's far more than necessary, but we always like to have backup."
Try finding THAT quote around...it's been scrubbed...here's a cached copy of a quote...
http://webcache.googleusercontent.com/search?q=cache:WDj-HORTmIoJ:www.chron.com/disp/story.mpl/business/deepwaterhorizon/7006870.html+%E2%809CThe+whole+purpose+is+to+get+the+kill+mud+down,%E2%80%9D+said+Wells.+%E2%80%9CWe'll+have+50,000+barrels+of+mud+on+hand+to+kill+this+well.+It's+far+more+than+necessary,+but+we+always+like+to+have+backup.%E2%80%9D&cd=1&hl=en&ct=clnk&gl=us
"The "top kill" effort, launched Wednesday afternoon by industry and government engineers, had pumped enough drilling fluid to block oil and gas spewing from the well, Allen said. The pressure from the well was very low, he said, but persisting."
"Allen said one ship that was pumping fluid into the well had run out of the fluid, or "mud," and that a second ship was on the way. He said he was encouraged by the progress."
http://www.houmatoday.com/article/20100527/ARTICLES/100529348
Later we found out that Allen had no idea what was really going on and had been "Unavailable all day"
http://www.realclearpolitics.com/articles/2010/05/27/interview_with_coas...
So what we had was BP running out of 50,000 barrels of mud in a very short period of time. An amount far and above what they deemed necessary to kill the well. Shutting down pumping 16 hours before telling anyone, including the president. We were never really given a clear reason why "Top Kill" failed, just that it couldn't overcome the well.
There is only one article anywhere that says anything else about it at this time of writing...and it's a relatively obscure article from the wall street journal "online" citing an unnamed source.
"WASHINGTON—BP PLC has concluded that its "top-kill" attempt last week to seal its broken well in the Gulf of Mexico may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor.
The disk, part of the subsea safety infrastructure, may have ruptured during the surge of oil and gas up the well on April 20 that led to the explosion aboard the Deepwater Horizon rig, BP officials said. The rig sank two days later, triggering a leak that has since become the worst in U.S. history.
The broken disk may have prevented the heavy drilling mud injected into the well last week from getting far enough down the well to overcome the pressure from the escaping oil and gas, people familiar with BP's findings said. They said much of the drilling mud may also have escaped from the well into the rock formation outside the wellbore.
As a result, BP wasn't able to get sufficient pressure to keep the oil and gas at bay. If they had been able to build up sufficient pressure, the company had hoped to pump in cement and seal off the well. The effort was deemed a failure on Saturday.
BP started the top-kill effort Wednesday afternoon, shooting heavy drilling fluids into the broken valve known as a blowout preventer. The mud was driven by a 30,000 horsepower pump installed on a ship at the surface. But it was clear from the start that a lot of the "kill mud" was leaking out instead of going down into the well."
http://online.wsj.com/article/SB1000142405274870487560457528013357716426...
There are some inconsistencies with this article.
There are no "Disks" or "Subsea safety structure" 1,000 feet below the sea floor, all that is there is well bore. There is nothing that can allow the mud or oil to "escape" into the rock formation outside the well bore except the well, because it is the only thing there.
All the actions and few tid bits of information all lead to one inescapable conclusion. The well pipes below the sea floor are broken and leaking. Now you have some real data of how BP's actions are evidence of that, as well as some murky statement from "BP officials" confirming the same.
I took some time to go into a bit of detail concerning the failure of Top Kill because this was a significant event. To those of us outside the real inside loop, yet still fairly knowledgeable, it was a major confirmation of what many feared. That the system below the sea floor has serious failures of varying magnitude in the complicated chain, and it is breaking down and it will continue to.
What does this mean?
It means they will never cap the gusher after the wellhead. They cannot...the more they try and restrict the oil gushing out the bop?...the more it will transfer to the leaks below. Just like a leaky garden hose with a nozzle on it. When you open up the nozzle?...it doesn't leak so bad, you close the nozzle?...it leaks real bad,
same dynamics. It is why they sawed the riser off...or tried to anyway...but they clipped it off, to relieve pressure on the leaks "down hole". I'm sure there was a bit of panic time after they crimp/pinched off the large riser pipe and the Diamond wire saw got stuck and failed...because that crimp diverted pressure and flow to the rupture down below.
Contrary to what most of us would think as logical to stop the oil mess, actually opening up the gushing well and making it gush more became direction BP took after confirming that there was a leak. In fact if you note their actions, that should become clear. They have shifted from stopping or restricting the gusher to opening it up and catching it. This only makes sense if they want to relieve pressure at the leak hidden down below the seabed.....and that sort of leak is one of the most dangerous and potentially damaging kind of leak there could be. It is also inaccessible which compounds our problems. There is no way to stop that leak from above, all they can do is relieve the pressure on it and the only way to do that right now is to open up the nozzle above and gush more oil into the gulf and hopefully catch it, which they have done, they just neglected to tell us why, gee thanks.
A down hole leak is dangerous and damaging for several reasons.
There will be erosion throughout the entire beat up, beat on and beat down remainder of the "system" including that inaccessible leak. The same erosion I spoke about in the first post is still present and has never stopped, cannot be stopped, is impossible to stop and will always be present in and acting on anything that is left which has crude oil "Product" rushing through it. There are abrasives still present, swirling flow will create hot spots of wear and this erosion is relentless and will always be present until eventually it wears away enough material to break it's way out. It will slowly eat the bop away especially at the now pinched off riser head and it will flow more and more. Perhaps BP can outrun or keep up with that out flow with various suckage methods for a period of time, but eventually the well will win that race, just how long that race will be?...no one really knows....However now?...there are other problems that a down hole leak will and must produce that will compound this already bad situation.
This down hole leak will undermine the foundation of the seabed in and around the well area. It also weakens the only thing holding up the massive Blow Out Preventer's immense bulk of 450 tons. In fact?...we are beginning to the results of the well's total integrity beginning to fail due to the undermining being caused by the leaking well bore.
The first layer of the sea floor in the gulf is mostly lose material of sand and silt. It doesn't hold up anything and isn't meant to, what holds the entire subsea system of the Bop in place is the well itself. The very large steel connectors of the initial well head "spud" stabbed in to the sea floor. The Bop literally sits on top of the pipe and never touches the sea bed, it wouldn't do anything in way of support if it did. After several tens of feet the seabed does begin to support the well connection laterally (side to side) you couldn't put a 450 ton piece of machinery on top of a 100' tall pipe "in the air" and subject it to the side loads caused by the ocean currents and expect it not to bend over...unless that pipe was very much larger than the machine itself, which you all can see it is not. The well's piping in comparison is actually very much smaller than the Blow Out Preventer and strong as it may be, it relies on some support from the seabed to function and not literally fall over...and it is now showing signs of doing just that....falling over.
If you have been watching the live feed cams you may have noticed that some of the ROVs are using an inclinometer...and inclinometer is an instrument that measures "Incline" or tilt. The BOP is not supposed to be tilting...and after the riser clip off operation it has begun to...
This is not the only problem that occurs due to erosion of the outer area of the well casings. The way a well casing assembly functions it that it is an assembly of different sized "tubes" that decrease in size as they go down. These tubes have a connection to each other that is not unlike a click or snap together locking action. After a certain length is assembled they are cemented around the ouside to the earth that the more rough drill hole is bored through in the well making process. A very well put together and simply explained process of "How to drill a deep water oil well" is available here:
http://www.treesfullofmoney.com/?p=1610
The well bore casings rely on the support that is created by the cementing phase of well construction. Just like if you have many hands holding a pipe up you could put some weight on the top and the many hands could hold the pipe and the weight on top easily...but if there were no hands gripping and holding the pipe?...all the weight must be held up by the pipe alone. The series of connections between the sections of casings are not designed to hold up the immense weight of the BOP without all the "hands" that the cementing provides and they will eventually buckle and fail when stressed beyond their design limits.
These are clear and present dangers to the battered subsea safety structure (bop and lmrp) which is the only loose cork on this well we have left. The immediate (first 1,000 feet) of well structure that remains is now also undoubtedly compromised. However.....as bad as that is?...it is far from the only possible problems with this very problematic well. There were ongoing troubles with the entire process during the drilling of this well. There were also many comprises made by BP IMO which may have resulted in an overall weakened structure of the entire well system all the way to the bottom plug which is over 12,000 feet deep. Problems with the cementing procedure which was done by Haliburton and was deemed as “was against our best practices.” by a Haliburton employee on April 1st weeks before the well blew out. There is much more and I won't go into detail right now concerning the lower end of the well and the troubles encountered during the whole creation of this well and earlier "Well control" situations that were revieled in various internal BP e-mails. I will add several links to those documents and quotes from them below and for now, address the issues concerning the upper portion of the well and the region of the sea floor.
What is likely to happen now?
Well...none of what is likely to happen is good, in fact...it's about as bad as it gets. I am convinced the erosion and compromising of the entire system is accelerating and attacking more key structural areas of the well, the blow out preventer and surrounding strata holding it all up and together. This is evidenced by the tilt of the blow out preventer and the erosion which has exposed the well head connection. What eventually will happen is that the blow out preventer will literally tip over if they do not run supports to it as the currents push on it. I suspect they will run those supports as cables tied to anchors very soon, if they don't, they are inviting disaster that much sooner.
Eventually even that will be futile as the well casings cannot support the weight of the massive system above with out the cement bond to the earth and that bond is being eroded away. When enough is eroded away the casings will buckle and the BOP will collapse the well. If and when you begin to see oil and gas coming up around the well area from under the BOP? or the area around the well head connection and casing sinking more and more rapidly? ...it won't be too long after that the entire system fails. BP must be aware of this, they are mapping the sea floor sonically and that is not a mere exercise. Our Gov't must be well aware too, they just are not telling us.
All of these things lead to only one place, a fully wide open well bore directly to the oil deposit...after that, it goes into the realm of "the worst things you can think of" The well may come completely apart as the inner liners fail. There is still a very long drill string in the well, that could literally come flying out...as I said...all the worst things you can think of are a possibility, but the very least damaging outcome as bad as it is, is that we are stuck with a wide open gusher blowing out 150,000 barrels a day of raw oil or more. There isn't any "cap dome" or any other suck fixer device on earth that exists or could be built that will stop it from gushing out and doing more and more damage to the gulf. While at the same time also doing more damage to the well, making the chance of halting it with a kill from the bottom up less and less likely to work, which as it stands now?....is the only real chance we have left to stop it all.
It's a race now...a race to drill the relief wells and take our last chance at killing this monster before the whole weakened, wore out, blown out, leaking and failing system gives up it's last gasp in a horrific crescendo.
We are not even 2 months into it, barely half way by even optimistic estimates. The damage done by the leaked oil now is virtually immeasurable already and it will not get better, it can only get worse. No matter how much they can collect, there will still be thousands and thousands of gallons leaking out every minute, every hour of every day. We have 2 months left before the relief wells are even near in position and set up to take a kill shot and that is being optimistic as I said.
Over the next 2 months the mechanical situation also cannot improve, it can only get worse, getting better is an impossibility. While they may make some gains on collecting the leaked oil, the structural situation cannot heal itself. It will continue to erode and flow out more oil and eventually the inevitable collapse which cannot be stopped will happen. It is only a simple matter of who can "get there first"...us or the well.
We can only hope the race against that eventuality is one we can win, but my assessment I am sad to say is that we will not.
The system will collapse or fail substantially before we reach the finish line ahead of the well and the worst is yet to come.
Sorry to bring you that news, I know it is grim, but that is the way I see it....I sincerely hope I am wrong.
We need to prepare for the possibility of this blow out sending more oil into the gulf per week then what we already have now, because that is what a collapse of the system will cause. All the collection efforts that have captured oil will be erased in short order. The magnitude of this disaster will increase exponentially by the time we can do anything to halt it and our odds of actually even being able to halt it will go down.
The magnitude and impact of this disaster will eclipse anything we have known in our life times if the worst or even near worst happens...
We are seeing the puny forces of man vs the awesome forces of nature.
We are going to need some luck and a lot of effort to win...
and if nature decides we ought to lose, we will....
Reference materials:
On April 1, a job log written by a Halliburton employee, Marvin Volek, warns that BP’s use of cement “was
against our best practices.”
An April 18 internal Halliburton memorandum indicates that Halliburton again warned BP about its practices,
this time saying that a “severe” gas flow problem would occur if the casings were not centered more carefully.
Around that same time, a BP document shows, company officials chose a type of casing with a greater risk of
collapsing.
http://www.nytimes.com/2010/06/06/us/06rig.html.
Mark Hafle, the BP drilling engineer who wrote plans for well casings and cement seals on the Deepwater
Horizon's well, testified that the well had lost thousands of barrels of mud at the bottom. But he said models
run onshore showed alterations to the cement program would resolve the issues, and when asked if a cement
failure allowed the well to "flow" gas and oil, he wouldn't capitulate.
Hafle said he made several changes to casing designs in the last few days before the well blew, including the
addition of the two casing liners that weren't part of the original well design because of problems where the
earthen sides of the well were "ballooning." He also worked with Halliburton engineers to design a plan for
sealing the well casings with cement.
http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/hearings_bp_ce...
graphic of fail
http://media.nola.com/news_impact/other/oil-cause-050710.pdf
Casing joint
http://www.glossary.oilfield.slb.com/files/OGL00001.gif
Casing
http://www.glossary.oilfield.slb.com/files/OGL00003.gif
Kill may take until Christmas
http://preview.bloomberg.com/news/2010-06-02/bp-gulf-of-mexico-oil-leak-...
BP Used Riskier Method to Seal Well Before Blast
http://www.nytimes.com/2010/05/27/us/27rig.html
BP memo test results
http://energycommerce.house.gov/Press_111/20100512/Internal.BP.Email.Reg...
Investigation results
The information from BP identifies several new warning signs of problems. According to BP there were three flow
indicators from the well before the explosion.
http://energycommerce.house.gov/documents/20100525/Memo.BP.Internal.Inve...
BP, what we know
http://energycommerce.house.gov/documents/20100512/BP-What.We.Know.pdf
What could have happened
1. Before or during the cement job, an influx of hydrocarbon enters the wellbore.
2. Influx is circulated during cement job to wellhead and BOP.
3. 9-7/8” casing hanger packoff set and positively tested to 6500 psi.
4. After 16.5 hours waiting on cement, a negative test performed on wellbore below BOP.
(~ 1400 psi differential pressure on 9-7/8” casing hanger packoff and ~ 2350 psi on
double valve float collar)
5. Packoff leaks allowing hydrocarbon to enter wellbore below BOP. 1400 psi shut in
pressure observed on drill pipe (no flow or pressure observed on kill line)
6. Hydrocarbon below BOP is unknowingly circulated to surface while finishing displacing
the riser.
7. As hydrocarbon rises to surface, gas break out of solution further reduces hydrostatic
pressure in well. Well begin to flow, BOPs and Emergency Disconnect System (EDS)
activated but failed.
8. Packoff continues to leak allowing further influx from bottom.
Confidential
http://energycommerce.house.gov/documents/20100512/BP-What.Could.Have.Ha...
T/A daily log 4-20
http://energycommerce.house.gov/documents/20100512/TRO-Daily.Drilling.Re...
Cement plug 12,150 ft SCMT logging tool
SCMT (Slim Cement Mapping Tool)
Schlumberger Partial CBL done.
http://energycommerce.house.gov/documents/20100530/BP-HZN-CEC018441.pdf
Schlum CBL tools
http://www.slb.com/~/media/Files/production/product_sheets/well_integrit...
Major concerns, well control, bop test.
http://energycommerce.house.gov/documents/20100530/BP-HZN-CEC018375.pdf
Energy & commerce links to docs.
http://energycommerce.house.gov/index.php?option=com_content&view=articl...
well head on sea floor
http://nca-group.com/bilder//Trolla/A.%20GVI%20of%20Trolla%20prior%20to%20WHP002%20(2).jpg
Well head on deck of ship
http://nca-group.com/bilder//Trolla/DSC_0189.JPG
BP's youtube propoganda page, a lot of rarely seen vids here....FWIW
http://www.youtube.com/user/DeepwaterHorizonJIC
http://www.godlikeproductions.com/forum1/message1097505/pg1
Net neutrality advisory forum wants engineers to hash it out
By Nate Anderson | Ars Technica
The FCC has stirred up plenty of controversy with its own "third way" approach to regulating network neutrality, with ISPs routinely arguing that decisions about network management should be made by their experts and their engineers, not by a government agency. To that end, companies like Time Warner cable, Verizon, Google, Intel, Microsoft, Comcast, AT&T, and others today joined forces and announced the Broadband Internet Technical Advisory Group.
The inelegantly acronymed BITAG will serve as an industry-driven forum to “develop consensus on broadband network management practices or other related technical issues that can affect users' Internet experience, including the impact to and from applications, content and devices that utilize the Internet.”
That's a fancy way of saying that the forum allows engineers to seek consensus on proper network management practices in a less adversarial forum than an FCC rulemaking. The forum will be overseen by Dale Hatfield, a well-respected former FCC Chief Technologist and current director of the Silicon Flatirons Center at the University of Colorado-Boulder. Government staffers are welcome to observe the group's works.
Getting ISPs and Internet companies like Google together to hash out network management guidance is all well and good, but what about Internet users, who are not represented in the group? Google's top telecom lawyer Rick Whitt said that "we welcome the involvement of other interested entities, especially those representing the Internet user community."
He also stressed that, at least in Google's view, BITAG was not some attempt to privatize FCC oversight. "Rather, we hope the BITAG can bring together some of the smartest technical minds in this space to provide some useful guidance to policymakers and Internet stakeholders alike," he said.
The new group would, however, work to “inform federal agencies in their industry oversight functions." Free Press, one of the groups that complained the loudest about Comcast's P2P blocking, worries that BITAG is an attempt to undermine the FCC and replace "public interest" regulation with corporate-focused rules.
“Allowing industry to set its own rules is like allowing BP to regulate its drilling," said Free Press Policy Counsel Chris Riley. "The Comcast BitTorrent case shows that without government oversight, Internet Service Providers will engage in what are already deemed by engineers to be bad practices.
"There must be a separate FCC rulemaking process, which can take the recommendations of this or any other voluntary advisory group into account, but rubber-stamping those recommendations would ignore the agency's mandate to create public policy in the public interest. "
The Open Internet Coalition, made up of public interest groups and Internet companies like Google, Skype, and Amazon, doesn't want BITAG to sap energy from the FCC's current net neutrality plan.
"We strongly feel as with all self-regulatory regimes, this can only be effective with a legal backstop to enforce voluntary industry rules at the FCC," said the group in a statement. "Without such a backstop, this approach will be toothless and ultimately ineffective."
The FCC has stirred up plenty of controversy with its own "third way" approach to regulating network neutrality, with ISPs routinely arguing that decisions about network management should be made by their experts and their engineers, not by a government agency. To that end, companies like Time Warner cable, Verizon, Google, Intel, Microsoft, Comcast, AT&T, and others today joined forces and announced the Broadband Internet Technical Advisory Group.
The inelegantly acronymed BITAG will serve as an industry-driven forum to “develop consensus on broadband network management practices or other related technical issues that can affect users' Internet experience, including the impact to and from applications, content and devices that utilize the Internet.”
That's a fancy way of saying that the forum allows engineers to seek consensus on proper network management practices in a less adversarial forum than an FCC rulemaking. The forum will be overseen by Dale Hatfield, a well-respected former FCC Chief Technologist and current director of the Silicon Flatirons Center at the University of Colorado-Boulder. Government staffers are welcome to observe the group's works.
Getting ISPs and Internet companies like Google together to hash out network management guidance is all well and good, but what about Internet users, who are not represented in the group? Google's top telecom lawyer Rick Whitt said that "we welcome the involvement of other interested entities, especially those representing the Internet user community."
He also stressed that, at least in Google's view, BITAG was not some attempt to privatize FCC oversight. "Rather, we hope the BITAG can bring together some of the smartest technical minds in this space to provide some useful guidance to policymakers and Internet stakeholders alike," he said.
The new group would, however, work to “inform federal agencies in their industry oversight functions." Free Press, one of the groups that complained the loudest about Comcast's P2P blocking, worries that BITAG is an attempt to undermine the FCC and replace "public interest" regulation with corporate-focused rules.
“Allowing industry to set its own rules is like allowing BP to regulate its drilling," said Free Press Policy Counsel Chris Riley. "The Comcast BitTorrent case shows that without government oversight, Internet Service Providers will engage in what are already deemed by engineers to be bad practices.
"There must be a separate FCC rulemaking process, which can take the recommendations of this or any other voluntary advisory group into account, but rubber-stamping those recommendations would ignore the agency's mandate to create public policy in the public interest. "
The Open Internet Coalition, made up of public interest groups and Internet companies like Google, Skype, and Amazon, doesn't want BITAG to sap energy from the FCC's current net neutrality plan.
"We strongly feel as with all self-regulatory regimes, this can only be effective with a legal backstop to enforce voluntary industry rules at the FCC," said the group in a statement. "Without such a backstop, this approach will be toothless and ultimately ineffective."
India launches offensive against ACTA, cites "due process"
By Nate Anderson | Ars Technica
We mentioned recently that India was rounding up opposition to the Anti-Counterfeiting Trade Agreement (ACTA) and that it wanted to stop the deal from being made outside of existing international institutions. This week, it made good on its promise to object.
The new standards envisioned by ACTA "could short-change legal process, impede legitimate competition and shift the escalated costs of enforcing private commercial rights to governments, consumers and taxpayers," said an Indian representative at the World Trade Organization. "They also represent a systemic threat to the rights of legitimate traders and producers of goods, and fundamental rights of due process of individuals."
One key area of concern is ACTA's permission for customs agents to seize goods "in transit" between countries, even if those goods are legal in both the sending and receiving countries. "Let me give an example," said the Indian rep. "India's right to exercise flexibilities, such as granting compulsory licenses, would be interfered with by the mandatory application of border measures to goods in transit. Indian exporters could be constrained from shipping goods produced under its own exception to countries where there is no applicable IPRs protection because transit may be blocked by an intervening transit country’s application of domestic IPRs."
Generic pharmaceuticals are the big concern here. Countries like India sometimes create "compulsory licenses" in which drug firms can pay a set amount to the government and can legally use another organization's patented material, whether that organization wants them to or not. The US has similar compulsory licenses for things like music.
India also expressed irritation over the fact that "plurilateral processes like ACTA completely bypass the existing multilateral processes" at the WTO and elsewhere.
In the end, ACTA looks like overreach. "The released ACTA text shows a general shift in the locus of enforcement which enhances the power of IPRs holders beyond reasonable measure," said India. "Politicians, civil society and IP experts in ACTA members countries, have expressed concern regarding the substance and modus operandi of ACTA negotiations... Even the US Government Accountability Office (GAO) has recently raised serious questions concerning the data that has been relied on by proponents of the ACTA to support the effort."
India demanded that the WTO take up these issues and not "remain a silent observer to such a development."
We mentioned recently that India was rounding up opposition to the Anti-Counterfeiting Trade Agreement (ACTA) and that it wanted to stop the deal from being made outside of existing international institutions. This week, it made good on its promise to object.
The new standards envisioned by ACTA "could short-change legal process, impede legitimate competition and shift the escalated costs of enforcing private commercial rights to governments, consumers and taxpayers," said an Indian representative at the World Trade Organization. "They also represent a systemic threat to the rights of legitimate traders and producers of goods, and fundamental rights of due process of individuals."
One key area of concern is ACTA's permission for customs agents to seize goods "in transit" between countries, even if those goods are legal in both the sending and receiving countries. "Let me give an example," said the Indian rep. "India's right to exercise flexibilities, such as granting compulsory licenses, would be interfered with by the mandatory application of border measures to goods in transit. Indian exporters could be constrained from shipping goods produced under its own exception to countries where there is no applicable IPRs protection because transit may be blocked by an intervening transit country’s application of domestic IPRs."
Generic pharmaceuticals are the big concern here. Countries like India sometimes create "compulsory licenses" in which drug firms can pay a set amount to the government and can legally use another organization's patented material, whether that organization wants them to or not. The US has similar compulsory licenses for things like music.
India also expressed irritation over the fact that "plurilateral processes like ACTA completely bypass the existing multilateral processes" at the WTO and elsewhere.
In the end, ACTA looks like overreach. "The released ACTA text shows a general shift in the locus of enforcement which enhances the power of IPRs holders beyond reasonable measure," said India. "Politicians, civil society and IP experts in ACTA members countries, have expressed concern regarding the substance and modus operandi of ACTA negotiations... Even the US Government Accountability Office (GAO) has recently raised serious questions concerning the data that has been relied on by proponents of the ACTA to support the effort."
India demanded that the WTO take up these issues and not "remain a silent observer to such a development."
Google wants to face single mega-lawsuit over WiFi snafu
By Jacqui Cheng | Ars Technica
Google is attempting to consolidate the growing number of lawsuits against the company as a result of its "accidental" WiFi data collection. Meanwhile, a privacy group has analyzed an independent analysis of the situation and is now accusing Google of having "criminal intent" with the whole debacle.
Google filed a motion in the US Judicial Panel on Multidistrict Litigation this week, seeking to roll all eight lawsuits (plus any that might pop up in the future) pertaining to the data collection situation into one case. "All of the complaints in the Google Wi-Fi Cases assert claims under the federal Wiretap Act," wrote Google. "All of the complaints make very similar factual allegations, and thus any necessary discovery will be of common facts."
Because the cases span different jurisdictions, with some making claims under specific state laws, Google argues in its motion that there's potential for conflicting pretrial rulings, "especially with respect to the proper scope and extent of discovery, class certification and other factual and legal matters." Google would like a single, monster suit to be filed in the US District Court of Northern District of California—the company's home turf.
Meanwhile, Privacy International has turned up the heat on Google after having analyzed an independent report (PDF) on the situation conducted by technical services firm Stroz Friedberg. The report details what kind of data Google's code did and did not collect, as well as how it was processed and stored. Put simply, a program called "gslite" sniffed packets from unprotected WiFi networks as Google's Street View cars rolled down the street, separating out encrypted and unencrypted content. The encrypted data was dumped while the unencrypted data was then written to the car's hard drive.
Because of this specific behavior of the program, PI says it's clear that Google made no mistake at all—"It is a criminal act commissioned with intent to breach the privacy of communications," wrote PI. The group says that some jurisdictions allow for accidental interception of data, but that Google clearly had "intent to intercept" and therefore is in violation of criminal law.
Google CEO Eric Schmidt spoke openly last week about the company's gaffes, noting that he hoped Google's honesty would help reassure the public that it wouldn't happen again. Though most of the 600GB of data collected globally probably consists primarily of lolcats and fart app downloads, Google has definitely struck a sensitive nerve among users, privacy groups, and lawmakers alike.
Google is attempting to consolidate the growing number of lawsuits against the company as a result of its "accidental" WiFi data collection. Meanwhile, a privacy group has analyzed an independent analysis of the situation and is now accusing Google of having "criminal intent" with the whole debacle.
Google filed a motion in the US Judicial Panel on Multidistrict Litigation this week, seeking to roll all eight lawsuits (plus any that might pop up in the future) pertaining to the data collection situation into one case. "All of the complaints in the Google Wi-Fi Cases assert claims under the federal Wiretap Act," wrote Google. "All of the complaints make very similar factual allegations, and thus any necessary discovery will be of common facts."
Because the cases span different jurisdictions, with some making claims under specific state laws, Google argues in its motion that there's potential for conflicting pretrial rulings, "especially with respect to the proper scope and extent of discovery, class certification and other factual and legal matters." Google would like a single, monster suit to be filed in the US District Court of Northern District of California—the company's home turf.
Meanwhile, Privacy International has turned up the heat on Google after having analyzed an independent report (PDF) on the situation conducted by technical services firm Stroz Friedberg. The report details what kind of data Google's code did and did not collect, as well as how it was processed and stored. Put simply, a program called "gslite" sniffed packets from unprotected WiFi networks as Google's Street View cars rolled down the street, separating out encrypted and unencrypted content. The encrypted data was dumped while the unencrypted data was then written to the car's hard drive.
Because of this specific behavior of the program, PI says it's clear that Google made no mistake at all—"It is a criminal act commissioned with intent to breach the privacy of communications," wrote PI. The group says that some jurisdictions allow for accidental interception of data, but that Google clearly had "intent to intercept" and therefore is in violation of criminal law.
Google CEO Eric Schmidt spoke openly last week about the company's gaffes, noting that he hoped Google's honesty would help reassure the public that it wouldn't happen again. Though most of the 600GB of data collected globally probably consists primarily of lolcats and fart app downloads, Google has definitely struck a sensitive nerve among users, privacy groups, and lawmakers alike.
Panel Recommends Nearly $1 Trillion in "Defense" Cuts
by Roxana Tiron
Friday, June 11, 2010 by The Hill
WASHINGTON - A panel commissioned by Rep. Barney Frank (D-Mass.) is recommending nearly $1 trillion in cuts to the Pentagon’s budget during the next 10 years.
An Ohio-class nuclear submarine. The Sustainable Defense Task Force, a commission of scholars from a broad ideological spectrum appointed by Frank, the House Financial Services Committee chairman, laid out actions the government could take that could save as much as $960 billion between 2011 and 2020.
The Sustainable Defense Task Force, a commission of scholars from a broad ideological spectrum appointed by Frank, the House Financial Services Committee chairman, laid out actions the government could take that could save as much as $960 billion between 2011 and 2020.
Measures presented by the task force include making significant reductions to the F-35 Joint Strike Fighter program, which has strong support from Defense Secretary Robert Gates; delaying the procurement of a new midair refueling tanker the Air Force has identified as one of its top acquisition priorities; and reducing the Navy’s fleet to 230 ships instead of the 313 eyed by the service.
Shipbuilding has strong support in the congressional defense committees, which write the Pentagon bills. Efforts to reduce the number of ships would run into resistance from the Pentagon and the shipbuilding lobby.
Frank on Friday warned that if he can’t convince Congress to act in the “general direction” of the task force recommendation, “then every other issue will suffer.” Not cutting the Pentagon's budget could lead to higher taxes and spending cuts detrimental to the environment, housing and highway construction.
The acceptance of the recommendations would depend on a “philosophical change" and a “redefinition of the strategy,” Frank said at press conference on Capitol Hill.
He said the creation of the deficit reduction commission offers the best opportunity for the reduction recommendations. Frank wants to convince his colleagues to write to the deficit reduction commission and warn that they would not approve any of the plans suggested by the commission unless reduction of military spending is included.
The task force has looked at various options to trim the Pentagon’s budget in order to reduce the deficit. Those include a reduction in Army and Marine Corps end-strength by cutting back on personnel stationed in Europe and Asia; and rolling back Army and Marine Corps personnel as the wars in Iraq and Afghanistan end.
The panel also looked into reforming military compensation, which could save about $55 billion; saving $60 billion by reforming the military healthcare system; and reducing recruiting expenditures once the wars wind down to preserve about $5 billion.
All of these recommendations would be expected to engender congressional opposition.
The task force also suggested canceling the V-22 Osprey program and the Marine Corps’s troubled Expeditionary Fighting Vehicle.
The U.S. nuclear arsenal would also be on the chopping block, under the panel’s suggestions.
The task force recommends reducing the U.S. nuclear warhead total to 1,050.
Launchers would include 160 Minuteman missiles and seven Ohio-class submarines with 24 missiles (each with five warheads).
The panel also recommends retiring the Air Force bombers — “the bomber leg of the nuclear triad,” which includes land-based missiles and nuclear submarines — and ending work on the Trident II missile.
Frank acknowledged Friday that making cuts to the military’s healthcare system, known as Tricare, would be a “non-starter” with his congressional colleagues. But he said that suggestions on how to handle the nuclear arsenal and missile defense could get a “great deal” of support on the Hill.
Frank requested the creation of the task force in cooperation with Reps. Walter Jones (R-N.C.) and Ron Paul (R-Texas) and Sen. Ron Wyden (D-Ore.).
The Project on Defense Alternatives coordinated the work of the task force, which included the following members: Carl Conetta, Project on Defense Alternatives; Benjamin Friedman, Cato Institute; William Hartung, New America Foundation; Christopher Hellman, National Priorities Project; Heather Hurlburt, National Security Network; Charles Knight, Project on Defense Alternatives; Lawrence J. Korb, Center for American Progress; Paul Kawika Martin, Peace Action; Laicie Olson, Center for Arms Control and Non-Proliferation; Miriam Pemberton, Institute for Policy Studies; Laura Peterson, Taxpayers for Common Sense; Prasannan Parthasarathi, Boston College; Christopher Preble, Cato Institute, and Winslow Wheeler, Center for Defense Information.
Friday, June 11, 2010 by The Hill
WASHINGTON - A panel commissioned by Rep. Barney Frank (D-Mass.) is recommending nearly $1 trillion in cuts to the Pentagon’s budget during the next 10 years.
An Ohio-class nuclear submarine. The Sustainable Defense Task Force, a commission of scholars from a broad ideological spectrum appointed by Frank, the House Financial Services Committee chairman, laid out actions the government could take that could save as much as $960 billion between 2011 and 2020.
The Sustainable Defense Task Force, a commission of scholars from a broad ideological spectrum appointed by Frank, the House Financial Services Committee chairman, laid out actions the government could take that could save as much as $960 billion between 2011 and 2020.
Measures presented by the task force include making significant reductions to the F-35 Joint Strike Fighter program, which has strong support from Defense Secretary Robert Gates; delaying the procurement of a new midair refueling tanker the Air Force has identified as one of its top acquisition priorities; and reducing the Navy’s fleet to 230 ships instead of the 313 eyed by the service.
Shipbuilding has strong support in the congressional defense committees, which write the Pentagon bills. Efforts to reduce the number of ships would run into resistance from the Pentagon and the shipbuilding lobby.
Frank on Friday warned that if he can’t convince Congress to act in the “general direction” of the task force recommendation, “then every other issue will suffer.” Not cutting the Pentagon's budget could lead to higher taxes and spending cuts detrimental to the environment, housing and highway construction.
The acceptance of the recommendations would depend on a “philosophical change" and a “redefinition of the strategy,” Frank said at press conference on Capitol Hill.
He said the creation of the deficit reduction commission offers the best opportunity for the reduction recommendations. Frank wants to convince his colleagues to write to the deficit reduction commission and warn that they would not approve any of the plans suggested by the commission unless reduction of military spending is included.
The task force has looked at various options to trim the Pentagon’s budget in order to reduce the deficit. Those include a reduction in Army and Marine Corps end-strength by cutting back on personnel stationed in Europe and Asia; and rolling back Army and Marine Corps personnel as the wars in Iraq and Afghanistan end.
The panel also looked into reforming military compensation, which could save about $55 billion; saving $60 billion by reforming the military healthcare system; and reducing recruiting expenditures once the wars wind down to preserve about $5 billion.
All of these recommendations would be expected to engender congressional opposition.
The task force also suggested canceling the V-22 Osprey program and the Marine Corps’s troubled Expeditionary Fighting Vehicle.
The U.S. nuclear arsenal would also be on the chopping block, under the panel’s suggestions.
The task force recommends reducing the U.S. nuclear warhead total to 1,050.
Launchers would include 160 Minuteman missiles and seven Ohio-class submarines with 24 missiles (each with five warheads).
The panel also recommends retiring the Air Force bombers — “the bomber leg of the nuclear triad,” which includes land-based missiles and nuclear submarines — and ending work on the Trident II missile.
Frank acknowledged Friday that making cuts to the military’s healthcare system, known as Tricare, would be a “non-starter” with his congressional colleagues. But he said that suggestions on how to handle the nuclear arsenal and missile defense could get a “great deal” of support on the Hill.
Frank requested the creation of the task force in cooperation with Reps. Walter Jones (R-N.C.) and Ron Paul (R-Texas) and Sen. Ron Wyden (D-Ore.).
The Project on Defense Alternatives coordinated the work of the task force, which included the following members: Carl Conetta, Project on Defense Alternatives; Benjamin Friedman, Cato Institute; William Hartung, New America Foundation; Christopher Hellman, National Priorities Project; Heather Hurlburt, National Security Network; Charles Knight, Project on Defense Alternatives; Lawrence J. Korb, Center for American Progress; Paul Kawika Martin, Peace Action; Laicie Olson, Center for Arms Control and Non-Proliferation; Miriam Pemberton, Institute for Policy Studies; Laura Peterson, Taxpayers for Common Sense; Prasannan Parthasarathi, Boston College; Christopher Preble, Cato Institute, and Winslow Wheeler, Center for Defense Information.
New PM Warns Japan At “Risk Of Collapse” Under Massive Debt Load
Published on 06-11-2010
Source: Zero Hedge
A week ago Hungary had the unfortunate mishap of telling the truth when it compared itself to Greece, resulting in a massive selloff of the Forint and leading to fresh lows for the euro. Today, it is Japan which is using the very same strategy in an attempt to devalue its own currency. So far it’s working. The BBC reports that Naoto Kan has been a little truthier than the G-20 plenary sessions generally allow. We now look for the PM’s reign of truth to be even shorter than that of his thousands of predecessors during the past couple of years: “Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis.”Our country’s outstanding public debt is huge… our public finances have become the worst of any developed country,” he said.” Obviously, none of this is news. However, the market certainly does not appreciate when it is told that what it sees day after day in the non-mainstream media is actually the truth and nothing but the truth. What next – Tim Geithner coming out to say that a downgrade of the US is actually long overdue?
More from BBC:
Source: Zero Hedge
A week ago Hungary had the unfortunate mishap of telling the truth when it compared itself to Greece, resulting in a massive selloff of the Forint and leading to fresh lows for the euro. Today, it is Japan which is using the very same strategy in an attempt to devalue its own currency. So far it’s working. The BBC reports that Naoto Kan has been a little truthier than the G-20 plenary sessions generally allow. We now look for the PM’s reign of truth to be even shorter than that of his thousands of predecessors during the past couple of years: “Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis.”Our country’s outstanding public debt is huge… our public finances have become the worst of any developed country,” he said.” Obviously, none of this is news. However, the market certainly does not appreciate when it is told that what it sees day after day in the non-mainstream media is actually the truth and nothing but the truth. What next – Tim Geithner coming out to say that a downgrade of the US is actually long overdue?
More from BBC:
After years of borrowing, Japan’s debt is twice its gross domestic product.Yet, just like with the SNB’s CHF intervention, the market did not respond at all to this, at least so far. Do the HFT algos need a realism translator when they are not focusing on ephemeral data such as consumer confidence (the US consumer is confident that after once again cutting spending, they may eventually buy that 5th iPad at some point in the future). Or does nobody even care about any fundamentals anymore? Is the entire market a bubble chamber where one bout of buying or selling is all that’s needed to set off the appropriate algo engines?
“It is difficult to continue our fiscal policies by heavily relying on the issuance of government bonds,” said Mr Kan, Japan’s former finance minister.
“Like the confusion in the eurozone triggered by Greece, there is a risk of collapse if we leave the increase of the public debt untouched and then lose the trust of the bond markets,” he said.
“Fiscal austerity measures are long overdue,” said Chris Scicluna, deputy head of economics at Daiwa Capital Markets in London.Yet just as Albert Edwards has been pointing out for months now, grey clouds may be forming over Japan’s so far glitchless selling of trillions in bonds, courtesy of the relentless demographic shift:
He forecasts that the government’s budget deficit will be 8% of GDP this year, a number that Mr Kan has promised to reduce to zero by the end of the decade.
However, Mr Scicluna said the government does not face any immediate fiscal crisis, unlike some European countries, and probably will not start tackling its budget deficit for at least another year or two.
Unlike Greece or Spain, Japan is a net lender to the rest of the world, to the tune of 2.5% of its GDP last year.
Some 95% of the government’s debts are held by Japanese investors, and the government can currently borrow for 30 years at a mere 2% interest rate.That’s ok Japan, we are confident that the ECB will be happy to buy up all your bonds as well. Just look at how well they performed in the past week when they were the bidder of first and last resort for all sorts of toxic Italian, Spanish and Portuguese paper. Better yet, you will soon be able to pledge your JGBs to J-C Trichet, whose balance sheet is increasingly starting to look like a used Charmin’ store.
But Mr Scicluna says Japan does have serious medium-term problems related to its ageing population.
As more and more Japanese citizens retire in the next few years, they are likely to start selling their government bonds to pay for their retirements.
This means that Japan will need to start borrowing from the rest of the world, and the government may have a hard time convincing foreign lenders to let it borrow at such a low interest rate.
BP Official Admits to Damage BENEATH THE SEA FLOOR
| Published on 06-13-2010 | |
| Source: Washington's Blog There is growing evidence that BP's oil well - technically called the "well casing" or "well bore" - has suffered damage beneath the level of the sea floor. The evidence is growing stronger and stronger that there is substantial damage beneath the sea floor. Indeed, it appears that BP officials themselves have admitted to such damage. This has enormous impacts on both the amount of oil leaking into the Gulf, and the prospects for quickly stopping the leak this summer. On May 31st, the Washington Post noted:Sources at two companies involved with the well said that BP also discovered new damage inside the well below the seafloor and that, as a result, some of the drilling mud that was successfully forced into the well was going off to the side into rock formations.On June 2nd, Bloomberg pointed out: Plugging the well is another challenge even after BP successfully intersects it, Robert Bea, a University of California Berkeley engineering professor, said. BP has said it believes the well bore to be damaged, which could hamper efforts to fill it with mud and set a concrete plug, Bea said.Bea is an expert in offshore drilling and a high-level governmental adviser concerning disasters. On the same day, the Wall Street Journal noted that there might be a leak in BP's well casing 1,000 feet beneath the sea floor: BP PLC has concluded that its "top-kill" attempt last week to seal its broken well in the Gulf of Mexico may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor. *** The broken disk may have prevented the heavy drilling mud injected into the well last week from getting far enough down the well to overcome the pressure from the escaping oil and gas, people familiar with BP's findings said. They said much of the drilling mud may also have escaped from the well into the rock formation outside the wellbore.On June 3rd, The Canadian Press quoted the top government official in charge of the response to the oil spill - Admiral Thad Allen, the commandant of the Coast Guard - as pointing to the same possibility: The failure of the so-called top kill procedure - which entailed pumping mud into the well at high velocity - suggested "there actually could be something wrong with the well casing, and there could be open communication in the strata or the rock formations below the sea floor," Allen said.On June 7th, Senator Bill Nelson told MSNBC that he's investigating reports of oil seeping up from additional leak points on the seafloor: Senator Bill Nelson (D-FL): Andrea we’re looking into something new right now, that there’s reports of oil that’s seeping up from the seabed… which would indicate, if that’s true, that the well casing itself is actually pierced…underneath the seabed. So, you know, the problems could be just enormous with what we’re facing. Andrea Mitchell, MSNBC: Now let me understand better what you’re saying. If that is true that it is coming up form that seabed, even the relief well won’t be the final solution to cap this thing. That means that we’ve got oil gushing up at disparate places along the ocean floor. Sen. Nelson: That is possible, unless you get the plug down low enough, below where the pipe would be breached. Indeed, loss of integrity in the well itself may explain why BP is drilling its relief wells more than ten thousand feet beneath the leaking pipes on the seafloor (and see this). Yesterday, recently-retired Shell Oil President John Hofmeister said that the well casing below the sea floor may have been compromised: [Question] What are the chances that the well casing below the sea floor has been compromised, and that gas and oil are coming up the outside of the well casing, eroding the surrounding soft rock. Could this lead to a catastrophic geological failure, unstoppable even by the relief wells?As noted yesterday in The Engineer magazine, an official from Cameron International - the manufacturer of the blowout preventer for BP's leaking oil drilling operation - noted that one cause of the failure of the BOP could have been damage to the well bore: Steel casing or casing hanger could have been ejected from the well and blocked the operation of the rams.Oil industry expert Rob Cavner believes that the casing might be damaged beneath the sea floor, noting: The real doomsday scenario here… is if that casing gives up, and it does come through the other strings of pipe. Remember, it is concentric pipe that holds this well together. If it comes into the formation, basically, you‘ve got uncontrolled [oil] flow to the sea floor. And that is the doomsday scenario.Cavner also said BP must "keep the well flowing to minimize oil and gas going out into the formation on the side": | |
Antidepressant use rises in UK as recession feeds wave of worry
Published on 06-13-2010
Source: Guardian
The number of antidepressants prescribed by the NHS has almost doubled in the last decade, and rose sharply last year as the recession bit, figures reveal.
The health service issued 39.1m prescriptions for drugs to tackle depression in England in 2009, compared with 20.1m in 1999 – a 95% jump. Doctors handed out 3.18m more prescriptions last year than in 2008, almost twice the annual rise seen in preceding years, according to previously unpublished statistics released by the NHS's Business Services Authority.
The increase is thought to be due in part to improved diagnosis, reduced stigma around mental ill-health and rising worries about jobs and finances triggered by the economic downturn.
But tonight doctors warned that some people are being put on the drugs unnecessarily, especially those with milder symptoms of depression, partly because there is too little access to "talking therapies", which use discussion rather than drugs to tackle problems.
"I'm concerned that too many people are being prescribed antidepressants and not being given counselling and cognitive behaviour therapy, because access to those therapies, while it is improving, is still patchy," said Professor Steve Field, the chairman of the Royal College of General Practitioners, which represents the UK's family doctors.
"More people are being diagnosed with depression, but many of them would be treated better by having access to talking therapies, especially those with mild to moderate depression. I'm concerned that these people are being treated with medication unnecessarily," he added.
GPs felt "cornered" into giving patients antidepressants because of a lack of alternatives, he said.
"Talking therapies are just a good [as medication] for treating mild depression, and CBT can be just as good for more serious depression. But the provision for these therapies hasn't been good," said Field. However, more GPs were gaining more of a choice between tablets and talking treatments, he said.
Peter Byrne, the director of public education at the Royal College of Psychiatrists, whose 12,450 members include the UK's 6,300 consultant psychiatrists, echoed Field's concern. It said it was unsurprising that prescriptions were rising after a decade of investment in mental health services. "The optimistic view is that more people are being uncovered and treated. My concern is that people with mild depression should not be put on antidepressants," he said.
Consultant psychiatrist Tim Kendall, director of the National Collaborating Centre for Mental Health, which drafts NHS guidance on the drugs, said: "Antidepressants are offered too frequently in primary care because the waiting lists for alternative treatments are too long. Doctors need to think hard about putting people on these drugs because they can be hard to get off and have significant side-effects."
The NHS does not record how many people take antidepressants, but up to one in six people suffers from some form of depression during their life. The recession has produced greater demand for NHS help with mental health problems.
"In 2009 all of us – whether we work in general practice, general hospitals or specialist services – are seeing an increase in referrals from the recession. The stresses of the downturn are the last straw for many people," said Byrne.
The Labour government invested hundreds of millions of pounds in "talking therapies", in an effort to help jobless people with chronic problems get back into work and couples negotiate relationship difficulties. The Lib-Con coalition has promised to continue prioritising such treatments. But Byrne disputed claims about long waiting times.
The falling cost of antidepressants may have an effect. Ten years ago each prescription cost £16, but this has fallen to just £6 today, which means the NHS spend has fallen, from £315m in 1999 to £230m last year.
Dr Hugh Griffiths, the government's mental health tsar, said that while the causes of, and risk factors for, depression were complex "the recession can have an impact. A rise in prescriptions might also reflect a greater awareness and willingness to seek support and better diagnosis by GPs".
"Psychological therapies, which can be offered alongside or as an alternative to medication, provide choice in treatment. We are closely looking at how we can improve access", said Griffiths.
A survey in March for the mental health charity Mind, which asked people if they had sought help for work-related stress since the downturn began, found 7% had begun medical treatment for depression and 5% had started counselling.
A spokeswoman for Mind, Alison Cobb, said the fact antidepressants are now licensed for use in a wider range of conditions, such as social anxiety and post traumatic stress, was also a factor.
Source: Guardian
The number of antidepressants prescribed by the NHS has almost doubled in the last decade, and rose sharply last year as the recession bit, figures reveal.
The health service issued 39.1m prescriptions for drugs to tackle depression in England in 2009, compared with 20.1m in 1999 – a 95% jump. Doctors handed out 3.18m more prescriptions last year than in 2008, almost twice the annual rise seen in preceding years, according to previously unpublished statistics released by the NHS's Business Services Authority.
The increase is thought to be due in part to improved diagnosis, reduced stigma around mental ill-health and rising worries about jobs and finances triggered by the economic downturn.
But tonight doctors warned that some people are being put on the drugs unnecessarily, especially those with milder symptoms of depression, partly because there is too little access to "talking therapies", which use discussion rather than drugs to tackle problems.
"I'm concerned that too many people are being prescribed antidepressants and not being given counselling and cognitive behaviour therapy, because access to those therapies, while it is improving, is still patchy," said Professor Steve Field, the chairman of the Royal College of General Practitioners, which represents the UK's family doctors.
"More people are being diagnosed with depression, but many of them would be treated better by having access to talking therapies, especially those with mild to moderate depression. I'm concerned that these people are being treated with medication unnecessarily," he added.
GPs felt "cornered" into giving patients antidepressants because of a lack of alternatives, he said.
"Talking therapies are just a good [as medication] for treating mild depression, and CBT can be just as good for more serious depression. But the provision for these therapies hasn't been good," said Field. However, more GPs were gaining more of a choice between tablets and talking treatments, he said.
Peter Byrne, the director of public education at the Royal College of Psychiatrists, whose 12,450 members include the UK's 6,300 consultant psychiatrists, echoed Field's concern. It said it was unsurprising that prescriptions were rising after a decade of investment in mental health services. "The optimistic view is that more people are being uncovered and treated. My concern is that people with mild depression should not be put on antidepressants," he said.
Consultant psychiatrist Tim Kendall, director of the National Collaborating Centre for Mental Health, which drafts NHS guidance on the drugs, said: "Antidepressants are offered too frequently in primary care because the waiting lists for alternative treatments are too long. Doctors need to think hard about putting people on these drugs because they can be hard to get off and have significant side-effects."
The NHS does not record how many people take antidepressants, but up to one in six people suffers from some form of depression during their life. The recession has produced greater demand for NHS help with mental health problems.
"In 2009 all of us – whether we work in general practice, general hospitals or specialist services – are seeing an increase in referrals from the recession. The stresses of the downturn are the last straw for many people," said Byrne.
The Labour government invested hundreds of millions of pounds in "talking therapies", in an effort to help jobless people with chronic problems get back into work and couples negotiate relationship difficulties. The Lib-Con coalition has promised to continue prioritising such treatments. But Byrne disputed claims about long waiting times.
The falling cost of antidepressants may have an effect. Ten years ago each prescription cost £16, but this has fallen to just £6 today, which means the NHS spend has fallen, from £315m in 1999 to £230m last year.
Dr Hugh Griffiths, the government's mental health tsar, said that while the causes of, and risk factors for, depression were complex "the recession can have an impact. A rise in prescriptions might also reflect a greater awareness and willingness to seek support and better diagnosis by GPs".
"Psychological therapies, which can be offered alongside or as an alternative to medication, provide choice in treatment. We are closely looking at how we can improve access", said Griffiths.
A survey in March for the mental health charity Mind, which asked people if they had sought help for work-related stress since the downturn began, found 7% had begun medical treatment for depression and 5% had started counselling.
A spokeswoman for Mind, Alison Cobb, said the fact antidepressants are now licensed for use in a wider range of conditions, such as social anxiety and post traumatic stress, was also a factor.
Is there a Global War between Financial Theocracy and Democracy?
Senate and House conferees are about to reconcile a financial reform bill that is virtually designed to institutionalize “too big to fail.” And when they do we’ll lose another battle in the ongoing war between global financial markets and democratic nation-states.
This war has been going on for decades — but democracy hasn’t always been in full retreat.
The New Deal Conquest:
During the Great Depression democratic forces gained the upper hand in the war. We realized that financial markets, which are driven by the largest banks and financiers, had to be tightly controlled. We knew that global speculation on currencies only deepened the Depression and had to be strictly limited. We knew that an iron curtain was needed between commercial and investment banking to protect Main Street depositors from market madness (that was the Glass-Steagall Act). And most importantly we knew that the key to preventing economic upheaval was to limit the wealth of the super-rich and to increase the wealth of working people through progressive taxes, Social Security, wage and hour laws, and the promotion of unionization. The Bretton Woods agreements forged by the Allies during WWII set up strict rules for global finance, rules that kept financiers in check for more than a quarter century.
And it worked pretty damn well. As economist Joseph Stiglitz points out, this era saw only one financial crisis (Brazil, 1964), and working people in western democracies made huge gains. Since the era of deregulation took hold in the late 1970s, the world has suffered over a hundred financial crises and middle-class incomes have stagnated.
The Deregulatory Counter-Offensive:
By the late 1970s, bankers regained the advantage through the spread of a new faith in self-regulated markets. The economic apostles of unfettered markets lobbied against progressive taxes, unions, and social welfare programs. The new orthodoxy was: Let the elites collect the money–they’ll invest wisely (instead of consuming), and all boats will rise. This near-religious revolution rapidly spread through the economic and policy establishment. Regulations were dismantled right and left, and the revolving door between government and Wall Street started spinning. The American financial catechism ruled the world. And on Wall Street, the money tap was open. It did not trickle down.
Then, suddenly, in 2008, the market gods destroyed themselves as the unregulated financial casinos crashed and burned, just like they did in 1929. For a few months, it seemed like the deregulatory theology become a global heresy. It was obvious that Wall Street’s reckless speculation and its bold new wave of financial engineering had caused the Great Recession. (See The Looting of America for an accessible account.). It was also clear that if government didn’t come to the rescue, Wall Street would lay in ruins, along with the rest of the economy. This was the perfect moment for democracy reassert democratic control on financial markets, just as we did during the New Deal. We blew it.
The Victory at Too Big to Fail:
At the moment when Wall Street was on its knees, we decided to bypass serious reform. Instead, we rebuilt Wall Street, using taxpayer money and guarantees – more than $10 trillion worth. We let bankers use our bailout money to pay themselves $150 billion in bonuses — at a moment when over 29 million Americans were jobless or forced into part-time jobs. We allowed the top hedge fund managers to walk off with over $900,000 an hour (not a typo) in 2009. Windfall profits taxes? No. In fact we let hedge fund honchos pay an extra-low tax rate by calling their income “capital gains.” We didn’t restore Glass-Steagall, we didn’t break up “too big to fail” financial institutions. In fact the biggest banks became even bigger, courtesy of the U.S. government.
The Invasion against Democracy:
The war is escalating. Right now, financial elites aren’t just fighting a defensive battle against new regulations. They’re playing offense: They’re whipping up deficit hysteria around the globe and calling for drastic cuts in middle class programs. Why? They want to ensure that their loans to governments aren’t threatened by rising public debt. Ironically, the public debt they’re so worried about was created in large part by them — the result of huge bailouts and other expenses stemming from the crash they caused. Although the bankers want us to dismantle what remains of our worker-oriented policies, welfare for the financial elites is still fine and dandy.
This is the most dangerous counter attack in the history of finance. We had better know a great deal more about the attackers. Who makes up this shadowy force called “global markets”? Who fights their battles? Do they have a high command?
Not really. There is no executive committee of financial elites. There’s no international conspiracy, no Elders of Zion. Instead these markets are pulled and pushed by about 50 very large banks and financial institutions. This is where much of the nation’s $2 trillion in hedge fund money roams. This is where the top six US banks frolic. They don’t have to sit around a table strategizing. They instantly sense threats to their power. They instantly smell profitable openings and they’re poised to grab what they can, whenever they can. They thrive on turmoil, which gives them new “proprietary” trading opportunities to exploit. Volatility means big bucks, especially now that the largest players know that the government will back up even their wildest gambles. History has just proven that they are way too big to fail.
Of course they still have to lobby government officials–many of whom either were bankers, or will be once they leave office. But their most powerful lever on government is through the market itself:
Here, by moving vast quantities of money around, they can instantly veto policies they don’t like. If the EU talks seriously about financial transaction taxes, the markets go down the Euro grows weaker, and interest rates rise–making it more expensive for governments to borrow the money they need to operate. Politicians have learned to “listen” to the markets and are conditioned to placate them.
Should a nation state get out of line (Greece, Italy, Spain, Portugal, etc), the markets slap them silly. Politicians rush to the scene and start slicing social spending. If instead they demand new taxes on financial elites to reduce public debt, the markets respond with even more fury. Money flees.
All the external machinery of democracy still clanks along. We still pull the levers in the voting booth. But the decisions that affect us the most are made in a profoundly undemocratic way. Faceless financial markets exercise far more control over politicians than the voters who elected them.
So the problem isn’t just the corporate campaign contributions, or corporate media control or the academic consensus supporting our financial theocracy. It’s the raw power of the markets. They’ve been roaming free and virtually unregulated for more than a generation, and now their power is unparalleled. Just months after they brought our economy crashing down, they’re right back to their old tricks, setting the stage for the next crash and the next bailout while getting filthy rich along the way.
Bill Clinton nailed it on the head when he reportedly said:
There’s no room for pacifists in this war. Clearly, Wall Street and its global minions are not seeking a truce. Instead, they’re coming after our Social Security, Medicare and Medicaid programs. They want us to work longer before we retire and get less when we do.
They want us to pay more for health care and get less of it. They want less public money to go to schools, teachers and public infrastructures. And they want us to get used to a jobless recovery with double digit unemployment rates. (And when millions and millions of people are unemployed, we can’t maintain high labor standards, and our wages and benefits erode.) In short, they want to undermine all the policies and programs that have built and sustained middle class life.
Already government officials in the UK, Germany and here are telling us we must endure austerity for “decades to come.” As Fed Chair Ben Bernanke candidly put it:
We shouldn’t kid ourselves about the pitched battles ahead. Fighting back won’t be easy, and winning will be even harder. People in country after country will have to mobilize themselves in defense of real democracy, in defense of each nation’s right to provide its people with a decent quality of life. In my opinion, that includes sustainable jobs with decent benefits and a solid public infrastructure that promotes equity, protects the vulnerable and enriches the environment.
Unfortunately, no one can guarantee that democracy will prevail in the war against financial theocracy — just recall the totalitarian chaos in Europe during the Great Depression. But don’t count it out, either. It’s true that many of us regular folks have been diverted by the media, distracted by the Internet or lulled into a stupor by pharmaceuticals. But when we realize that we’ve been shoved into a corner with no way out, we’ll act. A popular struggle will begin. And when it does, we’ll at least have a fighting chance to recapture our democratic souls.
This war has been going on for decades — but democracy hasn’t always been in full retreat.
The New Deal Conquest:
During the Great Depression democratic forces gained the upper hand in the war. We realized that financial markets, which are driven by the largest banks and financiers, had to be tightly controlled. We knew that global speculation on currencies only deepened the Depression and had to be strictly limited. We knew that an iron curtain was needed between commercial and investment banking to protect Main Street depositors from market madness (that was the Glass-Steagall Act). And most importantly we knew that the key to preventing economic upheaval was to limit the wealth of the super-rich and to increase the wealth of working people through progressive taxes, Social Security, wage and hour laws, and the promotion of unionization. The Bretton Woods agreements forged by the Allies during WWII set up strict rules for global finance, rules that kept financiers in check for more than a quarter century.
And it worked pretty damn well. As economist Joseph Stiglitz points out, this era saw only one financial crisis (Brazil, 1964), and working people in western democracies made huge gains. Since the era of deregulation took hold in the late 1970s, the world has suffered over a hundred financial crises and middle-class incomes have stagnated.
The Deregulatory Counter-Offensive:
By the late 1970s, bankers regained the advantage through the spread of a new faith in self-regulated markets. The economic apostles of unfettered markets lobbied against progressive taxes, unions, and social welfare programs. The new orthodoxy was: Let the elites collect the money–they’ll invest wisely (instead of consuming), and all boats will rise. This near-religious revolution rapidly spread through the economic and policy establishment. Regulations were dismantled right and left, and the revolving door between government and Wall Street started spinning. The American financial catechism ruled the world. And on Wall Street, the money tap was open. It did not trickle down.
Then, suddenly, in 2008, the market gods destroyed themselves as the unregulated financial casinos crashed and burned, just like they did in 1929. For a few months, it seemed like the deregulatory theology become a global heresy. It was obvious that Wall Street’s reckless speculation and its bold new wave of financial engineering had caused the Great Recession. (See The Looting of America for an accessible account.). It was also clear that if government didn’t come to the rescue, Wall Street would lay in ruins, along with the rest of the economy. This was the perfect moment for democracy reassert democratic control on financial markets, just as we did during the New Deal. We blew it.
The Victory at Too Big to Fail:
At the moment when Wall Street was on its knees, we decided to bypass serious reform. Instead, we rebuilt Wall Street, using taxpayer money and guarantees – more than $10 trillion worth. We let bankers use our bailout money to pay themselves $150 billion in bonuses — at a moment when over 29 million Americans were jobless or forced into part-time jobs. We allowed the top hedge fund managers to walk off with over $900,000 an hour (not a typo) in 2009. Windfall profits taxes? No. In fact we let hedge fund honchos pay an extra-low tax rate by calling their income “capital gains.” We didn’t restore Glass-Steagall, we didn’t break up “too big to fail” financial institutions. In fact the biggest banks became even bigger, courtesy of the U.S. government.
The Invasion against Democracy:
The war is escalating. Right now, financial elites aren’t just fighting a defensive battle against new regulations. They’re playing offense: They’re whipping up deficit hysteria around the globe and calling for drastic cuts in middle class programs. Why? They want to ensure that their loans to governments aren’t threatened by rising public debt. Ironically, the public debt they’re so worried about was created in large part by them — the result of huge bailouts and other expenses stemming from the crash they caused. Although the bankers want us to dismantle what remains of our worker-oriented policies, welfare for the financial elites is still fine and dandy.
This is the most dangerous counter attack in the history of finance. We had better know a great deal more about the attackers. Who makes up this shadowy force called “global markets”? Who fights their battles? Do they have a high command?
Not really. There is no executive committee of financial elites. There’s no international conspiracy, no Elders of Zion. Instead these markets are pulled and pushed by about 50 very large banks and financial institutions. This is where much of the nation’s $2 trillion in hedge fund money roams. This is where the top six US banks frolic. They don’t have to sit around a table strategizing. They instantly sense threats to their power. They instantly smell profitable openings and they’re poised to grab what they can, whenever they can. They thrive on turmoil, which gives them new “proprietary” trading opportunities to exploit. Volatility means big bucks, especially now that the largest players know that the government will back up even their wildest gambles. History has just proven that they are way too big to fail.
Of course they still have to lobby government officials–many of whom either were bankers, or will be once they leave office. But their most powerful lever on government is through the market itself:
Here, by moving vast quantities of money around, they can instantly veto policies they don’t like. If the EU talks seriously about financial transaction taxes, the markets go down the Euro grows weaker, and interest rates rise–making it more expensive for governments to borrow the money they need to operate. Politicians have learned to “listen” to the markets and are conditioned to placate them.
Should a nation state get out of line (Greece, Italy, Spain, Portugal, etc), the markets slap them silly. Politicians rush to the scene and start slicing social spending. If instead they demand new taxes on financial elites to reduce public debt, the markets respond with even more fury. Money flees.
All the external machinery of democracy still clanks along. We still pull the levers in the voting booth. But the decisions that affect us the most are made in a profoundly undemocratic way. Faceless financial markets exercise far more control over politicians than the voters who elected them.
So the problem isn’t just the corporate campaign contributions, or corporate media control or the academic consensus supporting our financial theocracy. It’s the raw power of the markets. They’ve been roaming free and virtually unregulated for more than a generation, and now their power is unparalleled. Just months after they brought our economy crashing down, they’re right back to their old tricks, setting the stage for the next crash and the next bailout while getting filthy rich along the way.
Bill Clinton nailed it on the head when he reportedly said:
“You mean to tell me that the success of the economic program and my reelection hinges on the Federal Reserve and a bunch of fxxxing bond traders?” (SeeAgenda by Bob Woodward)No Retreat, No Surrender?
There’s no room for pacifists in this war. Clearly, Wall Street and its global minions are not seeking a truce. Instead, they’re coming after our Social Security, Medicare and Medicaid programs. They want us to work longer before we retire and get less when we do.
They want us to pay more for health care and get less of it. They want less public money to go to schools, teachers and public infrastructures. And they want us to get used to a jobless recovery with double digit unemployment rates. (And when millions and millions of people are unemployed, we can’t maintain high labor standards, and our wages and benefits erode.) In short, they want to undermine all the policies and programs that have built and sustained middle class life.
Already government officials in the UK, Germany and here are telling us we must endure austerity for “decades to come.” As Fed Chair Ben Bernanke candidly put it:
“We can see what problems can arise in a country if investors lose confidence in the fiscal position of that country, so it is very important that we address this problem.”Of course, he’s not going to point out that this austerity is only for the masses, definitely not for the financial elites. Or that the underlying cause of the debt investors are so worried about is the giant economic crater caused by the very same financial elites who now might “lose confidence” in financing a middle class society.
We shouldn’t kid ourselves about the pitched battles ahead. Fighting back won’t be easy, and winning will be even harder. People in country after country will have to mobilize themselves in defense of real democracy, in defense of each nation’s right to provide its people with a decent quality of life. In my opinion, that includes sustainable jobs with decent benefits and a solid public infrastructure that promotes equity, protects the vulnerable and enriches the environment.
Unfortunately, no one can guarantee that democracy will prevail in the war against financial theocracy — just recall the totalitarian chaos in Europe during the Great Depression. But don’t count it out, either. It’s true that many of us regular folks have been diverted by the media, distracted by the Internet or lulled into a stupor by pharmaceuticals. But when we realize that we’ve been shoved into a corner with no way out, we’ll act. A popular struggle will begin. And when it does, we’ll at least have a fighting chance to recapture our democratic souls.
Signs Of An Inflationary Depression?
Peter Schiff
In recent months, GDP numbers have rebounded - primarily as a result of record low interest rates reliquifying the credit market and government stimulus jolting consumer spending. Although the "positive growth" has delighted Obama's economic brain trust, it has done little to boost the fortunes of Main Street. As I have said many times, GDP largely measures spending, and spending is not growth.
Last Friday we received the latest indication that the real economy is not recovering in the slightest. The Labor Department reported that non-farm payrolls increased by 431,000 jobs in May. In a press statement, the President himself crowed at the news, noting that the official employment rate fell to 9.7% from 9.9%. However, just inches below the headline, red flags were everywhere. Only 41,000 of those jobs were generated in the private sector - far below the median forecast of 180,000. Even more troubling was the fact that the Census Bureau alone accounted for 411,000 new jobs, which were almost exclusively temporary positions.
Rather than a recovery, the jobs data seems to indicate that we are still mired in the first economic depression since the 1930s. Back in 1931, two full years after the Crash of 1929, there were still very few people who thought that the recession then underway would one day be called the Great Depression.
Increased spending, financed by unprecedented borrowing, will prove to be just as temporary as a US census job (unless, in the name of stimulus, Obama decides to make "people counting" a permanent function of the US government.). When the bills come due, the next leg down will be even more severe than the last.
The swelling ranks of the government payroll, and the shrinking number of private taxpayers footing the bill, will guarantee larger deficits and a weaker economy for years to come. In addition, the artificial spending has prevented a much-needed restructuring from taking place, leaving our economy far less efficient than before the crisis began. In other words, we have dug ourselves into a much deeper hole while failing utterly to build any means to climb out.
One reason that we have thus far been spared the full wrath of Washington's poor decisions is that we are still benefiting from problems abroad, particularly in the eurozone. As sovereign debt issues have temporarily caused a flight to the dollar, our economy has benefited from lower interest rates and restrained consumer prices.
However, EU member-states have shown some willingness to confront their problems by cutting government spending - correctly ignoring US government suggestions that they do the opposite.
Just today, newly elected UK Prime Minister David Cameron prepared his constituents for austerity. Citing a budget deficit that is currently running at 11 percent of GDP, Cameron indicated that government spending would have to fall in order to maintain solvency and a high standard of living.
Cameron went on to say, "Greece stands as a warning of what happens to countries that lose their credibility, or whose governments pretend that difficult decisions can somehow be avoided." This type of realistic sentiment is completely absent in our current leadership in Washington, even though the US deficit is 9.9 percent of GDP and mounting. Meanwhile, the tough decisions being made by European governments will start to rebuild investor confidence in the euro.
Once the euro finally stabilizes against the dollar, I expect commodity prices to resume their rise, especially oil. Normally, the uncertainty created by the disastrous oil spill in the gulf, and the resulting moratorium on deep-water drilling, would have sent crude oil prices skyrocketing. However, fears of a global slowdown, euro weakness, and general risk aversion have held prices in check. As Asia continues its growth and Europe regains its footing, I expect a delayed surge in oil prices, which will put yet another obstacle on the road to US recovery.
Our last remaining leg of support has been the activity of Asian central banks, who have continued in their herculean efforts to prop up the dollar and bail out Americans with low interest rates and cheap imports. However, when sovereign credit risk eventually rears its head in America, look for Asian policymakers to finally wise up. Once that prop is removed, there will be no questions about the gravity of our situation - and little dispute that it amounts to a depression.
The real danger will be if we follow our own foolish advice that Europe appears to have rejected. Treasury Secretary Timothy Geithner has bluntly suggested that European governments should print and spend money in order to keep their economies out of recession. In reality, cutting government spending is a far better stimulus. Maintaining lavish budgets through the use of the printing press will only result in disaster. Not only will such action fail to avert a double-dip recession, but it will practically ensure an inflationary depression.
As I have said before, we can't simultaneously grow the economy and grow government. The latest jobs report shows that we are just growing government. If that trend doesn't soon reverse, investors will start betting on the collapse of the dollarzone.
In recent months, GDP numbers have rebounded - primarily as a result of record low interest rates reliquifying the credit market and government stimulus jolting consumer spending. Although the "positive growth" has delighted Obama's economic brain trust, it has done little to boost the fortunes of Main Street. As I have said many times, GDP largely measures spending, and spending is not growth.
Last Friday we received the latest indication that the real economy is not recovering in the slightest. The Labor Department reported that non-farm payrolls increased by 431,000 jobs in May. In a press statement, the President himself crowed at the news, noting that the official employment rate fell to 9.7% from 9.9%. However, just inches below the headline, red flags were everywhere. Only 41,000 of those jobs were generated in the private sector - far below the median forecast of 180,000. Even more troubling was the fact that the Census Bureau alone accounted for 411,000 new jobs, which were almost exclusively temporary positions.
Rather than a recovery, the jobs data seems to indicate that we are still mired in the first economic depression since the 1930s. Back in 1931, two full years after the Crash of 1929, there were still very few people who thought that the recession then underway would one day be called the Great Depression.
Increased spending, financed by unprecedented borrowing, will prove to be just as temporary as a US census job (unless, in the name of stimulus, Obama decides to make "people counting" a permanent function of the US government.). When the bills come due, the next leg down will be even more severe than the last.
The swelling ranks of the government payroll, and the shrinking number of private taxpayers footing the bill, will guarantee larger deficits and a weaker economy for years to come. In addition, the artificial spending has prevented a much-needed restructuring from taking place, leaving our economy far less efficient than before the crisis began. In other words, we have dug ourselves into a much deeper hole while failing utterly to build any means to climb out.
One reason that we have thus far been spared the full wrath of Washington's poor decisions is that we are still benefiting from problems abroad, particularly in the eurozone. As sovereign debt issues have temporarily caused a flight to the dollar, our economy has benefited from lower interest rates and restrained consumer prices.
However, EU member-states have shown some willingness to confront their problems by cutting government spending - correctly ignoring US government suggestions that they do the opposite.
Just today, newly elected UK Prime Minister David Cameron prepared his constituents for austerity. Citing a budget deficit that is currently running at 11 percent of GDP, Cameron indicated that government spending would have to fall in order to maintain solvency and a high standard of living.
Cameron went on to say, "Greece stands as a warning of what happens to countries that lose their credibility, or whose governments pretend that difficult decisions can somehow be avoided." This type of realistic sentiment is completely absent in our current leadership in Washington, even though the US deficit is 9.9 percent of GDP and mounting. Meanwhile, the tough decisions being made by European governments will start to rebuild investor confidence in the euro.
Once the euro finally stabilizes against the dollar, I expect commodity prices to resume their rise, especially oil. Normally, the uncertainty created by the disastrous oil spill in the gulf, and the resulting moratorium on deep-water drilling, would have sent crude oil prices skyrocketing. However, fears of a global slowdown, euro weakness, and general risk aversion have held prices in check. As Asia continues its growth and Europe regains its footing, I expect a delayed surge in oil prices, which will put yet another obstacle on the road to US recovery.
Our last remaining leg of support has been the activity of Asian central banks, who have continued in their herculean efforts to prop up the dollar and bail out Americans with low interest rates and cheap imports. However, when sovereign credit risk eventually rears its head in America, look for Asian policymakers to finally wise up. Once that prop is removed, there will be no questions about the gravity of our situation - and little dispute that it amounts to a depression.
The real danger will be if we follow our own foolish advice that Europe appears to have rejected. Treasury Secretary Timothy Geithner has bluntly suggested that European governments should print and spend money in order to keep their economies out of recession. In reality, cutting government spending is a far better stimulus. Maintaining lavish budgets through the use of the printing press will only result in disaster. Not only will such action fail to avert a double-dip recession, but it will practically ensure an inflationary depression.
As I have said before, we can't simultaneously grow the economy and grow government. The latest jobs report shows that we are just growing government. If that trend doesn't soon reverse, investors will start betting on the collapse of the dollarzone.
What are Crashes and Bubbles?
by Investopedia
A bubble is a type of investing phenomenon that demonstrates the frailty of some facets of human emotion. A bubble occurs when investors put so much demand on a stock that they drive the price beyond any accurate or rational reflection of its actual worth, which should be determined by the performance of the underlying company. Like the soap bubbles a child likes to blow, investing bubbles often appear as though they will rise forever, but since they are not formed from anything substantial, they eventually pop. And when they do, the money that was invested into them dissipates into the wind.
A crash is a significant drop in the total value of a market, almost undoubtedly attributable to the popping of a bubble, creating a situation wherein the majority of investors are trying to flee the market at the same time and consequently incurring massive losses. Attempting to avoid more losses, investors during a crash are panic selling, hoping to unload their declining stocks onto other investors. This panic selling contributes to the declining market, which eventually crashes and affects everyone. Typically crashes in the stock market have been followed by a depression.
The relationship between bubbles and crashes is similar to the relationship between clouds and rain. Since you can have clouds without rain but you can't have rain without clouds, bubbles are like clouds and market crashes are like the rain. Historically, a market crash has always precipitated from a bubble (pun intended), and the thicker the clouds or the bigger the bubble, the harder it rains.
It is important to note the distinction between a crash and a correction, which can be a bit sticky at times. A correction is supposedly the market's way of slapping some sense into overly enthusiastic investors. As a general rule, a correction should not exceed a 20% loss of value in the market. Surprisingly, some crashes have been erroneously labeled as corrections, including the terrifying crash of 1987. But a "correction," however, should not be labeled as such until the steep drop has halted within a reasonable period.
Now that we're familiar with the definitions of crashes and bubbles, we can look at how they occurred throughout history:
A bubble is a type of investing phenomenon that demonstrates the frailty of some facets of human emotion. A bubble occurs when investors put so much demand on a stock that they drive the price beyond any accurate or rational reflection of its actual worth, which should be determined by the performance of the underlying company. Like the soap bubbles a child likes to blow, investing bubbles often appear as though they will rise forever, but since they are not formed from anything substantial, they eventually pop. And when they do, the money that was invested into them dissipates into the wind.
A crash is a significant drop in the total value of a market, almost undoubtedly attributable to the popping of a bubble, creating a situation wherein the majority of investors are trying to flee the market at the same time and consequently incurring massive losses. Attempting to avoid more losses, investors during a crash are panic selling, hoping to unload their declining stocks onto other investors. This panic selling contributes to the declining market, which eventually crashes and affects everyone. Typically crashes in the stock market have been followed by a depression.
The relationship between bubbles and crashes is similar to the relationship between clouds and rain. Since you can have clouds without rain but you can't have rain without clouds, bubbles are like clouds and market crashes are like the rain. Historically, a market crash has always precipitated from a bubble (pun intended), and the thicker the clouds or the bigger the bubble, the harder it rains.
It is important to note the distinction between a crash and a correction, which can be a bit sticky at times. A correction is supposedly the market's way of slapping some sense into overly enthusiastic investors. As a general rule, a correction should not exceed a 20% loss of value in the market. Surprisingly, some crashes have been erroneously labeled as corrections, including the terrifying crash of 1987. But a "correction," however, should not be labeled as such until the steep drop has halted within a reasonable period.
Now that we're familiar with the definitions of crashes and bubbles, we can look at how they occurred throughout history:
Subscribe to:
Posts (Atom)