Archive for the ‘Tools and Techniques’ Category

My name is Glenn Beck, and I need help

Thursday, September 2nd, 2010

By Kathleen Parker
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Despite all the words spilled in evaluating Glenn Beck’s tent-less revival last weekend, the real meaning may have been hiding in plain sight.
Beck’s “Restoring Honor” gathering on the Mall was right out of the Alcoholics Anonymous playbook. It was a 12-step program distilled to a few key words, all lifted from a prayer delivered from the Lincoln Memorial: healing, recovery and restoration.
Saturday’s Beckapalooza was yet another step in Beck’s own personal journey of recovery. He may as well have greeted the crowd of his fellow disaffected with:
“Hi. My name is Glenn, and I’m messed up.”
Beck’s history of alcoholism and addiction is familiar to any who follow him. He has made no secret of his past and is quick to make fun of himself. As he once said: “You can get rich making fun of me. I know. I’ve made a lot of money making fun of me.”
Self-mockery — and cash — seems to come easily to him.
Any cursory search of Beck quotes also reveals the language of the addict:
– “It is still morning in America. It just happens to be kind of a head-pounding, hung-over, vomiting-for-four-hours kind of morning in America.”
– “I have not heard people in the Republican Party yet admit that they have a problem.”
– “You know, we all have our inner demons. I, for one — I can’t speak for you, but I’m on the verge of moral collapse at any time. It can happen by the end of the show.”
Indeed. After the hangover comes admission of the addiction, followed by surrender to a higher power and acknowledgment that one is always fallen.
These may be random quotes, but they can’t be considered isolated or out of context. For Beck, addiction has been a defining part of his life, and recovery is a process inseparable from the Glenn Beck Program. His emotional, public breakdowns are replicated in AA meetings in towns and cities every day.
Taking others along for the ride, a.k.a. evangelism, is also part of the cure. The healed often cannot remain healed without helping others find their way. Beck, who vaulted from radio host to political-televangelist, now has taken another step in his ascendancy — to national crusader for faith, hope and charity.
It’s an easy sell. Meanwhile, Beck has built a movement framed by two ideas that are unassailable: God and country. Throw in some Mom and apple pie, and you’ve got a picnic of patriotism and worship.
Wait, did somebody say . . . Mom???
Sister Sarah, come on down!
Yes, Mother Superior made an appearance. Sarah Palin, whom Beck sainted a few months ago during an interview in which he declared her one of the few people who can save America, came to the Mall not to praise politics but to honor our troops.
Palin is the mother of a soldier, after all, and God bless her, and him, and all those who have served. Unassailable. As Palin said, whatever else you might say about her, she did raise a combat soldier. “You can’t take that away from me.”
Who you? Oh, that’s right, The Media. Never mind that Beck is one of the richest members of the media. Or that Palin has banked millions primarily because The Media can’t get enough of her. But what’s an exorcism without a demon? And who better to cast into the nether regions than the guys lugging camera lights?
Covering all his bases, Beck invoked the ghost of the Rev. Martin Luther King Jr., who stood in the same spot 47 years ago to deliver his most famous speech. Where King had a dream, Beck has a nightmare: “It seems as darkness begins to grow again, faith is in short supply.”
Really? When did that happen? Because it seems that people talk about God all the time these days. Even during the heyday of Billy Graham, most Americans could get through 16 or so waking hours without feeling compelled to declare where they stood on the deity.
And the darkness? Creeping communism brought to us by President you-know-who. Conspiracy theories and paranoia are not unfamiliar to those who have wrestled the demon alcohol.
Like other successful revivalists — and giving the devil his due — Beck is right about many things. Tens of thousands joined him in Washington and watch him each night on television for a reason. But he also is messianic and betrays the grandiosity of the addict.
Let’s hope Glenn gets well soon.

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David Min on Banking Regulation

Wednesday, September 1st, 2010



Why does the banking industry need better regulation?
In the absence of regulation, banking is inherently prone to bubble busts. During booms, banks tend to take on too much credit risk and then when the economy goes south, they’re prone to banking runs, as we saw in our own country’s history prior to the 1930s.
What the banking reforms in the 1930s attempted to do - successfully - was to implement a strict risk regulation on banking and also provide regulators with a means to allow banks to fail in an orderly fashion without taking down the entire banking system.
What happened in the last few decades was, due to regulation and regulatory inertia, banks or financial institutions developed what was called, shadow banking, which is derivatives, asset-backed securitization, the whole alphabet soup of financial instruments, activities and institutions that we saw during this last crisis, which effectively emulated the activities of banking, but outside of the regulations of banking. As we saw, this was prone to the same problems that unregulated banking has always been prone to. It took on too much risk during this last bubble, and then it was prone to that banking panic that we saw in the Fall of 2008.

How will legislation currently in Congress provide this oversight?
So what the Dodd legislation would do is basically impose greater risk regulation on the shadow banking system. It would allow regulators to regulate non-bank financial activities that pose risk to the banking system. Derivatives would be covered, asset-backed securitization, all of these activities that cause such great risk to the system, to the balance sheets of firms like Merril Lynch and Morgan Stanley, would be covered and regulated explicitly under this legislation. This legislation would also provide regulators with resolution authority similar to that already enjoyed by the FDIC. Instead of being faced with that “Sophie’s Choice” of having a bank fail without any supports and possibly cause a massive banking panic, or alternatively give bailouts to these banks - this would allow the regulators to take down banks in an orderly fashion, much like the FDIC now does.
This bill would also significantly improve the transparency of many financial activities that are now very opaque. Derivatives in particular would be much more transparent. One of the real problems that we saw in the last crisis was nobody really knew where the risks lied. And that created conditions for massive panic. It also made it harder for regulators to do their jobs in ascertaining who held what types of risk and how much capital should be forced to be held against those risks.
This bill would also improve consumer protection. One of the last problems we saw in the recent crisis was due to a number of misaligning incentives, there are just a proliferation of predatory lending practices. Mortgage originators in particular were paid more to originate bad and unsustainable loans and not surprisingly, we saw a lot of predatory and fraudulent practices occur. By creating a consumer financial protection agency, this bill would basically protect consumers from these types of practices and ensure that consumers are in power to make good decisions.

Will this legislation be able to prevent future crises?
This bill would certainly empower regulators to have the tools that they need to significantly prevent the likelihood of a future crisis from happening. Does it go far enough? It’s an open question I think a lot of people would like to see further legislation occur. One thing I would point out is that in the 1930s, the banking and securities regulations that we all take for granted today, really didn’t happen all at once. They happened over three or four different traunches. That might be a blueprint for today. It regulates too big to fail, it imposes a strong risk regulation on the shadow banking system, improves transparency and provides regulators with the resolution authority they need to shut down failing firms in an orderly fashion without costing taxpayers any money.

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Why didn’t Canada see the same, painful housing bubble as the United States?

Wednesday, September 1st, 2010

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Why didn’t Canada see the same, painful housing bubble as the United States? Well, because Canada didn’t let regulated lenders deal in unsafe products or banking practices, and Canadian mortgage lenders and bankers had little incentive to be unregulated.
Read the full report (pdf)

Given the relative stability of Canadian housing markets, many observers try to draw comparisons between the housing finance policies of Canada and the United States. Why is it that the United States suffered through such a painful housing bubble and bust in the last decade, while Canada did not? After all, the two countries enjoy relatively similar homeownership rates. And as American Enterprise Institute Senior Fellow Alex Pollock notes, the two countries share many other attributes as “both countries are rich, advanced, stable, have sophisticated financial systems and pioneer histories, and stretch from Atlantic to Pacific.”
The answer, quite simply, is that Canada did not become enthralled with the laissez faire ideology that dominated U.S. economic policy making in the 2000s, and thus did not allow major gaps in its regulation of housing finance to develop.
Both the American and Canadian mortgage markets had long been dominated by government-backed mortgage lending. In America, this was primarily through the explicit government guarantees on mortgage-backed securities provided by Ginnie Mae or on the implicit government guarantee on the liabilities of Fannie Mae and Freddie Mac. In Canada, this was largely through guarantees on insured mortgages as well as significant levels of government-backed securitization. But from 2003-07, the United States experienced a sudden surge in the unregulated securitization of new, exotic mortgage products such as “2/28 ARMs,” adjustable rate mortgages that reset after two years, with such features as “teaser rates” (a low introductory interest rate to attract borrowers) and “stated income” underwriting (where no documentation was required to show a borrower’s income or assets). These exotic mortgages, which were often originated by unregulated nonbank lenders, were purchased by private-securitization conduits—typically sponsored by large financial institutions such as Merrill Lynch or Citigroup—and then packaged and sold as so called “private label” mortgage-backed securities. This mortgage financing channel grew tremendously, and in lockstep with the housing bubble, rising from roughly 10 percent of the U.S. mortgage market in 2003 to almost 40 percent in 2006.
In contrast, Canada’s mortgage system did not experience such dramatic changes in its mortgage lending landscape, for reasons detailed below. As a result, while private-label mortgage securitization saw large market share increases in the United States in the last decade, this financing channel remained a negligible source of mortgage lending in Canada, remaining at less than 3 percent of the Canadian market during the 2000s.
These are telling differences between the two countries’ housing finance markets, but at the outset it is important to urge caution in drawing overly strong conclusions from the Canadian experience, due to the relatively small size of the Canadian mortgage markets. Canada has a total population of about 34 million (larger than Texas but smaller than California), and total residential mortgage debt of slightly less than $1 trillion (as opposed to slightly more than $14 trillion in the United States). Nonetheless, there are some important lessons to be learned from Canada’s experience, which boast implications for the future of housing finance in our country.
First, the many important similarities between our two countries’ mortgage market policies undermine the various arguments that it was moral hazard caused by U.S. government guarantees on mortgage-backed securities and other debt securities issued by Fannie Mae and Freddie Mac, or their affordable housing goals, which caused the mortgage crisis. Indeed, central to Canada’s mortgage finance system is the government-chartered and government-backed Canada Mortgage and Housing Corporation, which resembles in many important ways our own government-sponsored entities Fannie Mae and Freddie Mac.
CMHC has a public mission of helping “Canadians in all parts of the country to access a wide range of innovative and affordable financing choices.” CMHC boasts affordable housing goals that are similar in many ways to those of Fannie and Freddie. Similarly, CMHC historically dominated the Canadian mortgage markets, leaving it open to the criticism that it distorts the efficient operations of the free markets. While CMHC historically focused on providing government-backed mortgage insurance, it also engages in significant levels of the government-backed securitization that is the core business of Fannie Mae and Freddie Mac, with this government-backed securitization reaching some 25 percent of all Canadian mortgage loans outstanding as of year end 2008.
The Canadian government further supports the mortgage market through its guarantee on mortgage insurance, which is required on all mortgages with down payments less than 20 percent. Canadian mortgage insurance is heavily regulated, and issued by either one of two private firms or through CMHC. The Canadian government explicitly guarantees 90 percent of the mortgage insurance obligations of the two private insurers and stands 100 percent behind the obligations of the government agency CMHC. The government guarantee behind mortgage insurance, like the federally guaranteed securitization we have in the United States, effectively passes credit risk from the lender to the government, an appealing feature for lending institutions.
Perhaps as a result of this transfer of risk, insured mortgages are very popular in Canada, accounting for roughly 45 percent of all outstanding mortgage debt in the country. Between the government guarantee on mortgage insurance and the government-guaranteed securitization, as much as 70 percent of all Canadian mortgages were guaranteed in one form or another by the Canadian government at the end of 2008.
This is not to say that all of the shared attributes that the Canadian and U.S. mortgage system have are laudable. Certainly there are legitimate criticisms to be made in both countries about the lack of “skin in the game” among mortgage market participants and the heavy reliance on government guarantees by the private mortgage industry. But given the relatively positive experience of Canada there would seem to be a compelling argument that elements of the U.S. system that also existed in Canada were not the driving cause of the U.S. mortgage market meltdown. Specifically:

  • If it were affordable housing goals of Fannie and Freddie that caused the mortgage crisis, as some have claimed, then why didn’t Canada, which has similar goals, experience the same problems?
  • If it were government-backed securitization that caused the mortgage bubble, then why didn’t Canada, which experienced tremendous growth in government-backed securitization during the 2000s, have a similar problem?
  • If it were moral hazard caused by government interference in the ordinary functioning of the “free markets” that was instrumental in causing the credit crisis, then why didn’t Canada, which had similar or more governmental intervention through its guarantee of mortgage insurance, experience a similar outcome?

While differences between the U.S. and Canadian mortgage systems may provide some important insights into why the United States experienced a mortgage crisis while Canada did not, many of the differences pointed out so far are relatively minor and it is hard to understand how these would be significant enough factors to explain the dramatically different experiences of the two countries. For instance, some observers highlight the fact that Canada allows prepayment penalties against borrowers and that it allows full recourse against defaulting borrowers as major reasons why Canada suffered through less housing market turmoil than the United States. Others note the predominance of the five-year mortgage in Canada, as opposed to the 30-year standard mortgage in the United States. While these differences exist, they do not well explain why the United States had such a drastically different experience than Canada.
The most important difference between the U.S. and Canadian mortgage markets is in their relative exposure to unregulated lending channels and products—and it is this difference that best explains why Canada avoided the credit crisis that plagued the United States. During the 2000s, Canada experienced very limited amounts of lending financed by private securitization (and its alphabet soup of ABS, assetbacked securities; CMOs, collateralized mortgage obligations; CDS, credit default swaps; SIVs, structured investment vehicles, and the like), whereas that lending channel grew to immense heights in the United States, growing from around 10 percent at the beginning of the 2000s to nearly 40 percent at the height of the bubble.
In the United States, this financing channel was notable for introducing mortgages with exotic features—such as negative amortization (in which the principal balance grew, rather than shrank, over time), interest-only payments, and so-called “no documentation” underwriting—into the mass market. So why did Canada experience so little private-label securitization, and thus the toxic loan products this mortgage finance practice introduced into the U.S. market?
The answer is complex, but appears to be related to two key factors. First, the Canadian mortgage system is well regulated for risk and product safety. Second, the Canadian system encourages lenders to become and remain regulated through the benefits it provides them, most importantly in the form of government-guaranteed mortgage insurance. In other words, Canada did not allow regulated lenders to deal in unsafe products or banking practices, and Canadian mortgage lenders and bankers had little incentive to be unregulated. The combination of the two ensured that Canada had little of the problematic unregulated lending that characterized the U.S. mortgage bubble.
If you believe the critics of the U.S. mortgage finance model, then Canada should have been a poster child for a mortgage crisis. Canada’s mortgage market is supported by the government to a degree even greater than that of the United States (prior to the credit crisis), and is rife with the “market distortions” and “moral hazard” that many critics of the U.S. system blame for the U.S. bubble. Canada relies heavily on CMHC, a government-backed institution, to provide a significant proportion of its housing finance needs. Canada actively promotes policies meant to promote the availability of affordable housing and affordable mortgage finance among low-income and minority communities, both among CMHC and private lenders. And CMHC engaged in significant levels of government-backed securitization, the core business of the U.S. government-sponsored enterprises Fannie Mae and Freddie Mac.
Given all of these factors, Canada’s mortgage markets should have experienced the same mortgage crisis that the United States did, according to these critics. Instead, Canada has been relatively calm throughout the global credit bubble and ensuing bust.

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Five years after Katrina satellites monitor flood defences

Tuesday, August 31st, 2010

The disaster that hit New Orleans in the wake of Hurricane Katrina was caused by poor flood defences. Some levees were too low, others lacked the necessary robustness and still others had been built on marshy soil. To make matters worse, no-one knew the exact status of the levees. What lessons have we learned five years after Katrina? Engineering company Hansje Brinker, spinoff from Delft University of Technology (TU Delft, The Netherlands) operates a system that systematically monitors the status of various levees around the world by satellite.

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Method

Radar signals from European satellites rebound on the levee surface and are picked up again in space. These signals are measured every few weeks to check out the condition of the levees and to register any changes on a scale of millimetres.

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Monitoring of the Dutch Houtribdijk

Monitoring for defects

After the disaster in New Orleans it emerged that deformation had occurred years ago at many of the locations where the levees had failed, sometimes at a rate of several centimetres a year. So, there were already signs of defects.
In the Netherlands an experimental levee revealed that flood defences undergo small deformations before they give way. So, deformation-monitoring is an effective means of detecting weak areas.

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The experimental dike ‘IJkdijk’ after collapse (www.ijkdijk.eu)

Hansje Brinker

This method, which systematically monitors flood defences in the Netherlands with pinpoint precision, was developed by Delft engineering agency Hansje Brinker - named after the world-famous youth who averted a flood by spotting a hole in a levee. Measurements are performed every week, for various levees around the world.

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Meet the Microbes Eating the Gulf Oil Spill

Monday, August 30th, 2010

81ecf32c-a90a-18ec-43de193b61fad461_1ALCANIVORAX BORKUMENSIS:
A rod-shaped bacterium, A. borkumensis has played a role in oil spill cleanups from Alaska (Exxon Valdez) to the Mediterranean waters near Spain (Prestige). Although it persists in low numbers at all times, the bacterium blooms after an oil spill—and has the ability to both break down the alkanes that make up part of the oil as well as spread a biodispersant that helps other microbes feast on other constituents of the spill. As a result, scientists have been attempting to “soup up” this oil-eater via genetic manipulation in order to make a spill-fighting supermicrobe. So far, they have not improved on evolution’s design.

81ecf32c-a90a-18ec-43de193b61fad461_2DREDGING FOR CYCLOCLASTICUS:
Some of the most dangerous constituents of an oil spill are polycyclic aromatic hydrocarbons—volatile molecules that can be highly toxic. Fortunately, at least 23 strains of the bacterial genus Cycloclasticus native to the Gulf of Mexico can degrade such nasty oil constituents by tapping them for energy. Even better, some members of the rod-shaped group can eat other aromatic hydrocarbons that are even more toxic, such as toluene. And they have tiny flagella to help them move from source to source, cleaning up toxics as they go. As a result, scientists are busily decoding Cycloclasticus pugettii, a strain found in the waters of the Puget Sound and being dredged for here, in the hopes of improving its toxic avenger abilities.

81ecf32c-a90a-18ec-43de193b61fad461_3COLWELLIA (GENUS):
This clan of oil-eating microbes can be found from cold Arctic and Antarctic waters to the balmy seas of the Gulf of Mexico. It also has the ability to thrive in a variety of habitats, from marine sediments to Arctic sea ice—making it one of the more adaptable spill fighters. Given that oil in sediments—or cold waters—is much harder to break down, scientists are in hot pursuit of this wide-ranging extremophiles’ spill-fighting traits.

81ecf32c-a90a-18ec-43de193b61fad461_4OCEANOSPIRILLALES (ORDER):
This order of microbes—part of the Proteobacteria phylum, named after the shape-shifting Greek god Proteus—assume a number of forms and roles in eliminating an oil spill. The most famous oil-eating member of the order is the aforementioned A. borkumensis, but other members can play a role in eliminating petroleum as well. Pictured here is the salt-loving Halomonas elongata, which grows best in extreme environments but does not eat oil.

81ecf32c-a90a-18ec-43de193b61fad461_5OLEISPIRA (GENUS):
Another alkane eater (like A. borkumensis), various Oleispira turn oil into more and more Oleispira cells, along with carbon dioxide and water. One unintended side effect can be local “dead zones,” as the industrious microbial consortia, like the one pictured here, consume much of the dissolved oxygen in the seawater as they feast on the oil. Another extremophile species in this genus has been found in Antarctic waters (Oleispira antarctica) as well as the subtropical waters into which the Macondo well has been spilling.

81ecf32c-a90a-18ec-43de193b61fad461_6NEPTUNOMONAS (GENUS):
Some members of this genus attack the carcinogenic constituents found in most oil deposits—the aforementioned polycyclic aromatic hydrocarbons—and can be found throughout the planet’s oceans. Members of the genus play a role not only in cleaning up oil spills—but also the fatty acid residue of whale carcasses, like Neptunomonas japonica pictured here. Other microbial genuses that contribute to such toxic tidying are Pseudomonas and Vibrio, although they may not be as abundant as Neptunomonas or Cycloclasticus.

81ecf32c-a90a-18ec-43de193b61fad461_7THALASSOLITUUS OLEIVORANS:
Much like A. borkumensis, T. oleivorans makes its living by turning the alkanes in oil into microbial cells, CO2 and water—and can be found from the Black Sea to the Gulf of Mexico, as can other members of the Thalassolituus genus. Unfortunately, such similarly-minded bacterium don’t cooperate; some experiments show that adding T. oleivorans reduces the activity of A. borkumensis and other oil-eating microbes as the tiny bacteria vie for oil-ingesting supremacy. Humans aren’t the only species waging chemical warfare in the Gulf.

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Federal Reserve is prepared to act if the economy continues to weaken

Saturday, August 28th, 2010

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Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl. Mr. Bernanke made clear that while the Fed could take various steps, including large purchases of government debt, “central bankers alone cannot solve the world’s economic problems.” Speaking at the Fed’s annual symposium here, he hinted broadly that political leaders had to take steps to tackle the deficit and the trade imbalance.
Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.
While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.
Mr. Bernanke said the Fed, having kept short-term interest rates at nearly zero since 2008, had essentially four options:

  1. It can purchase more government debt and long-term securities.
  2. It can try to coax down long-term interest rates by announcing its intention to keep short-term rates extremely low for even longer than the markets currently expect.
  3. It can lower the interest rate it pays on the funds banks hold at the Fed.
  4. And it can raise its medium-term target for inflation, which would discourage banks from sitting on their cash.

Mr. Bernanke suggested that the first of those options was the most likely, and all but ruled out the last two.

While the Fed committee that sets monetary policy was prepared to take new steps “if the outlook were to deteriorate significantly,” he said, it “has not agreed on specific criteria or triggers for further action.” As Mr. Bernanke’s remarks were released publicly, stock prices immediately fell, a sign that investors were hoping for some concrete signs that the Fed would step in to try to bolster the economy. But as the market digested the chairman’s full remarks, prices rebounded and the Dow Jones industrial average rose 164.84 points, or 1.65 percent, to 10,150.65. The yield on the benchmark 10-year Treasury note rose to 2.64 percent, from 2.48 percent. The revised second-quarter growth data came after a week that showed that the economic retrenchment that began in the second quarter had spilled into the summer, with a sharp slowdown in new-home sales and a drop in sales of factory goods.
Consumer spending rose 2 percent in the second quarter — slightly better than the Commerce Department had initially projected. And a closely watched survey by the University of Michigan and Thomson Reuters showed that consumer sentiment ticked up marginally in August, while remaining well below levels seen during the previous six months.
In his first public remarks since the Fed took a modest step on Aug. 10 to lift the economy — a decision to invest proceeds from its huge mortgage-bond portfolio in long-term Treasury securities — Mr. Bernanke tried in some respects to dampen expectations that the Fed could make significant headway against the economic sluggishness.
Alan S. Blinder, a former Fed vice chairman and a Princeton professor, noted that Mr. Bernanke focused his remarks on the costs as well as the benefits of additional action to help the economy. “The Fed has run out of the strong tools, and is turning to the weak ones,” Mr. Blinder said in an interview here. “When you’re fighting in a foxhole and you’ve used up the machine guns and hand grenades, then you pull out the swords and start throwing rocks.” Mr. Blinder said that the economy seemed “substantially worse” than it did three months ago — and that Mr. Bernanke had acknowledged the deterioration, cautiously.
The Obama administration is looking to the Fed to do more to spur the recovery, since its own options are few, given the political paralysis in Congress as midterm elections approach. President Obama, vacationing on Martha’s Vineyard, discussed the economy for about 15 minutes with Mayor Michael R. Bloomberg of New York before the two men played golf.
Mr. Bernanke avoided wading into the rancorous political debates over fiscal policy, instead focusing on the two objectives that form the Fed’s legal mandate: price stability and maximum employment.
Inflation has been running well below the Fed’s unofficial target rate of 1.5 to 2 percent. While conceding that inflation had fallen “slightly below” the desirable level, Mr. Bernanke said deflation was “not a significant risk” right now. He said the Fed would “strongly resist deviations from price stability in the downward direction.”
Mr. Bernanke predicted the economy would continue to grow the rest of this year, “albeit at a relatively modest pace.” He said the “preconditions for a pickup of growth in 2011 appear to remain in place,” as banks increase lending, worries over the European sovereign debt crisis abate and consumers save more.
Strikingly, Mr. Bernanke acknowledged that the traditional tradeoff between inflation and employment had become all but obsolete, at least for now. “There is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability,” he said.
Mr. Bernanke explained in detail the Fed’s decision to use money from its mortgage bonds to buy government debt. The Fed has gobbled up $1.25 trillion in mortgage-backed securities and $175 billion in debts owed by Fannie Mae and other government entities — a major reason mortgage rates are at historic lows.
So far, the Fed has received about $140 billion through repayments of the principal on its holdings of those debts. An additional $400 billion or so could be repaid by the end of 2011. If the Fed had not taken the step it did, the central bank’s balance sheet would have gradually shrunk, which would amount to a passive tightening of monetary policy — what Mr. Bernanke called “a perverse outcome.” He said the Fed’s purchases of longer-term securities had helped bring down long-term interest rates and lower the cost of borrowing, contributing to the modest recovery that began in the spring of 2009.
However, such purchases seemed to be most effective in times of financial stress, and additional purchases would further complicate the Fed’s future “exit strategy” when the time came to return to normal monetary policy, he said.
The Fed has said since March 2009 that “exceptionally low” levels of the fed funds rate, the benchmark short-term interest rate, would be warranted for “an extended period.” The Fed could try to lengthen those expectations, as central banks in Canada and Japan have tried. But Mr. Bernanke cautioned that the Fed might find it “difficult to convey the committee’s policy intentions with sufficient precision and conditionality.”
The Fed currently pays 0.25 percent interest on excess reserves that banks keep at the Fed. But Mr. Bernanke said that slashing that rate even to zero might do no more than lower the fed funds rate by another 0.10 to 0.15 percentage points. He said doing so would harm the liquidity of short-term money markets.
Mr. Bernanke said he saw “no support” on the committee for setting a higher inflation target, as some economists have suggested. He called the strategy “inappropriate for the United States in current circumstances.”

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Net neutrality and the future of the Internet

Wednesday, August 25th, 2010



Tim Wu is aware that it is a cliché, but, to ensure that the Internet remains open and free, citizens must make their own voices heard. Wu is one of the most famous proponents of internet-neutrality the principle that all Internet data packets are transmitted equally. Chile rose last month as the first country in the world to net-neutrality by law. This will prevent an ISP to handle certain websites with preferential treatment (such as companies that pay for, or subsidiaries of the provider).

The American Wu, professor of copyright and communications at Columbia Law School in New York, wants his country embraces net-neutrality. According to Wu, there are two things to happen. “There should be a law on net-neutrality, including the right to freedom of expression. But more important is that the public is committed to value net-neutrality” Wu said through the phone program Skype. “If the public is not massively protesting, the big companies decide how the Internet will look and feel like. The organization that should enforce net-neutrality, regulator FCC, needs courage to be a match for the industry.”

In April a judge ruled that the Federal Communications Commission has no authority to judge on net-neutrality. The FCC had criticized the ISP Comcast because access to BitTorrent, a music and movie exchange bank, was limited. Since then, the FCC talked with Internet and telecom companies to reach a compromise, but those talks have failed earlier this month.

According to Wu, co-author of the standard work on the operation of the Internet “Who Controls the Internet?” is the struggle for net-neutrality of a fight against a powerful lobby. “The FCC maintains oversight of all communications since 1934, so now on the internet too. But committee members fear that there is nowhere to go after their job in the FCC. “The FCC’s discussions with the Internet and telecom companies were discontinued shortly before telecom company Verizon and Internet company Google presented a policy proposal for a net-neutrality law. In that proposal, mobile Internet and potential new Internet services should be exempt from the rule to be neutral towards information sent. Google, received strong criticism of the proposal.

People are increasingly using mobile devices to access the Internet and while neutrality should be protected, Wu said “I think Google has made a mistake with the policy. Google probably thought it could make Verizon opener. But who converts who? ”

In November, a new book of Wu comes out titled “The Master Switch: The Rise and Fall of Information Empires”. In it he describes the history of media openness. “Every time there was a similar pattern. A new medium started idealistic, but large companies took over and it became a closed medium. Gloomy, yes. But I hope we can still save the internet. “

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Well to Be Sealed After Labor Day

Saturday, August 21st, 2010

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The final sealing of BP’s stricken well in the Gulf of Mexico will be delayed until after Labor Day, officials said on Thursday, so that the company can replace equipment that contributed to the well’s failure.
Thad W. Allen, the retired Coast Guard admiral who is leading the federal response to the oil spill, said at a briefing in Washington that after lengthy discussions between BP engineers and government scientists, BP had agreed to remove the damaged blowout preventer — the device that failed when the Deepwater Horizon drill rig exploded in April — and the new cap that was installed atop it last month.
They will be replaced by another blowout preventer that Admiral Allen said would be better able to handle any pressure changes that might occur when a relief well intercepts the stricken well and pumps mud and cement into it in a final “bottom kill” operation. Leaving the original preventer in place “is not the most favorable choice,” he said.
The delay means that the well may be declared officially dead about a month later than expected. But Admiral Allen said this was necessary to ensure that the bottom kill procedure did not further damage the well. “We are getting very close to putting this well away,” he said. “I have no problem as the national incident commander with an overabundance of caution.”
One concern is that there are now about 1,000 barrels of oil trapped in the outer portion of the well, called the annulus, between seals at the top and cement at the bottom that was pumped in as part of a “static kill” procedure this month. If more mud is pumped in through the relief well, the pressure in the well could rise and the top seals or cement might be damaged. That could allow oil and gas to travel up into the damaged blowout preventer and, potentially, into the gulf.
Energy Secretary Steven Chu, who was involved in the discussions about replacing the original blowout preventer, said in an interview that he remained concerned that the cementing of the well during the static kill might be flawed.
“It wasn’t perfect,” Dr. Chu said. “There were mechanical issues and the rate of flow of cement wasn’t as high as they wanted.” If the seal at the top of the well is weak, he said, the pressure from the relief well could blow it off and release large amounts of oil and gas.
In a briefing in Houston, Kent Wells, a senior vice president for BP, said that technicians had filled the original preventer and cap with seawater and that they were testing them to determine whether oil or gas was coming up from the bottom of the well. Mr. Wells said that beginning Saturday, using a procedure known as fishing, technicians will try to remove some of the drill pipe that was in the well when the blowout occurred to make it easier to swap out the blowout preventers.
Admiral Allen said that once the new preventer — which was used by the rig drilling a backup relief well — was installed, there were other steps to be taken before the relief well could resume drilling and intercept the Macondo well. “If you add all those sequences up, it logically leads you to a point sometime after Labor Day” for the completion of the bottom kill, he said.
Once the original blowout preventer is brought to the surface it will be analyzed by various investigative bodies, including the Coast Guard, the Interior Department’s Bureau of Ocean Energy Management and the Justice Department. The government expects to bring in outside experts to assess the damage as part of its efforts to reconstruct the accident.
Investigators will also try to determine whether the device had any unauthorized modifications that may have led to its failure, said Ken Salazar, the interior secretary.

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Rachel Armstrong: Saving Venice with Living Architecture

Wednesday, August 11th, 2010



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Next giant leaps for NASA tech

Wednesday, August 11th, 2010

on-orbit_refill Rocket refueling stations and new kinds of engines for deep-space travel are high up on NASA’s wish list for new technologies. So is a heavy-lift launch vehicle, which happens on Congress’ wish list as well. But exactly what kind of next-generation rocket will NASA get? As far as Bobby Braun is concerned, the answer to that question is best left to engineers rather than lawmakers.

Braun, who is the space agency’s chief technologist, discussed heavy-lifters and more today in a teleconference conducted during his visit to NASA Ames Research Center in California’s Silicon Valley. Braun’s main task is to get NASA’s high-tech mojo working again, decades after the space agency made Tang, Teflon and Velcro famous.
NASA didn’t actually invent Velcro fasteners, Teflon coating or Tang powdered drink mix - instead, it took those commercial innovations and adapted them for high-profile applications in outer space. Those applications, in turn, heightened public awareness and acceptance of new technologies. Something similar could happen again if NASA pushes through a new burst of technological innovation.
Today, NASA does spaceflight using a space transportation system that’s been updated through the years, but really isn’t dramatically different from what it was nearly 30 years ago. With the impending retirement of the space shuttle fleet, Braun and his fellow technology planners at NASA have an opportunity to do things in a radically different fashion.
During today’s telecon, Braun said the new NASA will be spreading out its technological bets a lot more. “If we’re going after grand challenges, which we are in the space technology program. … For us to do that, we’re going to have to take a little bit of risk,” he said.
That means taking a risk-balancing “portfolio approach” to high-tech development. Some of the technologies NASA is betting on will result in new, even revolutionary, solutions to space challenges. “But frankly, we have to admit up front that some will not, and that has to be OK,” he said.
The latest NASA-backed Centennial Challenge competitions, announced last month, focus on the kinds of technologies the space agency is looking for. The Nano-Satellite Launch Challenge, for instance, would award $2 million to folks who can demonstrate new ways to launch small satellites into orbit quickly and reliably. “Small sat is an important part of space technology,” Braun said. “We actually called it out as a separate program, because in the formulation of space technology, I was worried, frankly, that if we didn’t … it would get lost in the larger technology pieces.”
Other prize programs are aimed at producing more efficient solar-powered rovers as well as interplanetary robots capable of collecting soil samples without human intervention. Such technologies would be needed for more ambitious Mars missions … and would surely be put to good use on Earth as well.
Braun’s office is also reviving the NASA Institute for Advanced Concepts, or NIAC, under a new name (NASA Innovative Advanced Concepts). He said NASA is refocusing the program on research that could produce real-world technologies in less than a 40-year time frame. “One of the problems that NIAC had previously, because it was so revolutionary, is that there were no technology programs to carry on that NIAC innovator’s idea,” he said. “There was no place for that idea to go.”
Finally, there’s human spaceflight: Although Braun isn’t in charge of how astronauts get into space and back, he said he serves as NASA Administrator Charles Bolden’s “primary advocate” for technology matters throughout NASA. And he has some definite ideas about how spaceflight technology should be done:

• Rocket refueling in orbit: Last year’s review by an independent panel highlighted on-orbit fuel depots as a new approach for facilitating trips beyond Earth orbit, and it sounds as if Braun is totally on board with the idea. “When we send a human mission to Mars one day, we already know that about 80 percent of the mass in low Earth orbit for that mission is propellant,” he told me. “So if we had technologies for propellant transfer and storage, you can imagine a lot of ways to get that propellant to low Earth orbit. Maybe it goes on one heavy-lift launch. Maybe it goes on many smaller-vehicle launches and is stored and transferred about in low-Earth orbit for the ultimate vehicle.”

• New in-space propulsion systems: Braun noted that rocketeers have been talking about a wide range of architectures for future spaceships, ranging from shuttle-derived launch systems to kerosene-fueled approaches to experimental plasma propulsion systems such as VASIMR. Heck, you could even talk about solar sails or ion drives. “We need an in-space propulsion system, and you could imagine a number of advanced technologies, whether they be low-thrust or medium-thrust or high-thrust systems, to enable us to travel out beyond low Earth orbit. Now, the more efficient those systems are, the less mass we need to lift on the heavy-lift vehicle.”

• In-situ resource utilization: “When we get to our destinations,” Braun told me, “are we going to bring everything with us to an asteroid or to Mars? Or are we going to use the resources available on those bodies … perhaps for consumables like life support, perhaps for propellant for the return journey home. Perhaps for materials, to manufacture a variety of devices at these destinations. Answers to these technology questions inform our beyond-low-Earth-orbit exploration architecture … and greatly impact the requirements for the heavy-lift vehicle.”

• Heavy-lift launch vehicles: That leads up to the multibillion-dollar question … what kind of heavy-lifter should be designed and built? Legislation now making its way through Congress would provide NASA with an answer: Build a new rocket capable of putting 70 to 100 metric tons of payload into orbit by 2016. That’s more than twice the weight of the space shuttle’s biggest payload, but significantly less than the capacity of the Saturn 5 moon rocket.

Braun indicated that he didn’t care for the idea of setting a legislative requirement for future rockets, because so much was dependent upon the other elements of a next-generation space transportation system:

“NASA is filled with technically strong people who could study the heavy-lift problem and relatively quickly determine the way forward. The agency is in the middle of doing that. In fact, we had a heavy-lift and propulsion technology broad agency announcement that was released by the Exploration Systems Mission Directorate. We’re in the process of reviewing the industry inputs to inform our decision process. To make the most efficient and best use of taxpayer dollars … I think that’s NASA’s job to think about these things, and to make the proper technical decisions on the proper time scale.”

When it comes to revolutionary propulsion technologies, Braun said “there are some approaches out there that appear to show some promise.” He declined to provide details, however, because NASA is in the midst of a competitive industry cycle.
“On top of that, I would like to look at it from a systems perspective,” he said. “It’s not all about the rocket. It’s about getting beyond low Earth orbit.”
Will Braun and NASA get it done? And on what time frame? A lot of questions about that will be hanging in the air over the weeks and months (and years?) to come … but you don’t have to wait until 2016. Feel free to weigh in with your own suggestions and observations in the comment space below.

The San Jose Mercury News mentions a couple of technology programs that NASA Ames Research Center will be working on: a spacecraft that can fly off a runway like an aircraft and carry up to 20 metric tons (44,000 pounds) into orbit, and an inflatable system that can shield spacecraft from the intense heat of atmospheric re-entry.
There’s also a project to be conducted jointly with the Pentagon’s Defense Advanced Research Projects Agency, looking into beam-powered space propulsion. That follows up on NASA’s Power Beaming Challenge, which paid out $900,000 to the Seattle-based LaserMotive team during last year’s Space Elevator Games.

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