European Commission Trying to Seize Control of Euro


I reported previously that the European Commission is seeking to take the clearing of the Euro derivative transactions from London and move them to Paris. The European Central Bank (ECB) is warning that it must secure strong access rights for the supervision of the cross-border settlement of financial transactions after the departure of Great Britain from the EU. About 90%+ of all euro derivatives transactions are settled via clearing houses in London such as LCH.Clearnet. In the middle of a crisis, the ECB would have no power to shut the market to protect the euro from the free market forces. Of course, what they fail to grasp here is trying to seize the euro clearing and move it by decree to Paris will only undermine the euro even more. What will they do next? Forbid the euro to trade in New York, Chicago, or Asia? Do that and the euro will become a massive short.

The ECB actually came clean and the papers filed at the Commission seems to suggest that the central bank indeed expects the possibility of a very major and serious financial crises ahead. That reflects what I have been warning about that they are trapped. Once Draghi stops buying government debt, we may see a meltdown in the euro altogether. The ECB wrote: “It is to be expected that significant developments on both the global and the European level will increase the risks posed by clearing systems.”

Keep in mind that the European Commission has already outlawed naked short-selling of the sovereign debt and European shares. The ECB is now focusing on clearing houses of financial products to control any emergency they see against the euro.  Mario Draghi has been ringing the warning bell that they would have at best minor oversight of the UK-based clearing houses after a BREXIT. He believes they can simply muscle the markets to prevent a collapse.

The ECB estimates that repo transactions denominated in euro in the daily volume of €101 billion and open positions in interest rate swaps in euro reach daily trading volume of €33 trillion are cleared through clearing houses in Great Britain. Draghi has proposed that Article 22 of the ESCB Statute be amended in such a way that, even after the BREXIT, they still have sufficient control rights over euro clearing. Draghi wants it both ways. He wants the euro to be a world class currency, but then wants absolute control to shut down any undesirable counter trends.

Wow – Standard and Poor’s Threaten Illinois With Municipal “Junk Bond” Status – First State Ever Facing “Junk Bond” Status…


There was a widely read Chicago Tribune op-ed written a few days ago outlining an approach to dissolve the entire state and apportion the geography to Wisconsin, Indiana, Kentucky, Missouri and Iowa. –SEE HERE–  It was written tongue-in-cheek, but with an uncomfortable level of reality behind it.

Illinois has been struggling with its finances for a long, long time.

The Illinois long-term labor pension liabilities are ridiculous in the extreme.  However, things just went from bad to jaw-droppingly, gobsmackingly, unbelievably worse.

 

According to the latest financial media reports, Standard and Poors Global Ratings agency has positioned Illinois bonds to drop below “investment” grade; that would make Illinois the first state in the nation to achieve “junk bond” status.

(Via ABC) Illinois is on track to become the first U.S. state to have its credit rating downgraded to “junk” status, which would deepen its multibillion-dollar deficit and cost taxpayers more for years to come.

S&P Global Ratings has warned the agency will likely lower Illinois’ creditworthiness to below investment grade if feuding lawmakers fail to agree on a state budget for a third straight year, increasing the amount the state will have to pay to borrow money for things such as building roads or refinancing existing debt.

The outlook for a deal wasn’t good Saturday, as lawmakers meeting in Springfield for a special legislative session remained deadlocked with the July 1 start of the new fiscal year approaching.

That should alarm everyone, not just those at the Capitol, said Brian Battle, director at Performance Trust Capital Partners, a Chicago-based investment firm.

“It isn’t a political show,” he said. “Everyone in Illinois has a stake in what’s happening here. One day everybody will wake up and say ‘What happened? Why are my taxes going up so much?’”  (read more)

Ouch !

Global Warming – Yes Prime Minister


ECB Declares Two Italian Banks Have Failed


The European Central Bank (ECB) has announced as of June 23rd, that it was declaring two Italian banks insolvent. Veneto Banca SpA and Banca Popolare di Vicenza SpA have failed since the two banks repeatedly violated the regulatory capital requirements. The determination was made in accordance with Article 18 (1a) and Article 18 (4a) of the Uniform Resolution Mechanism Regulation.

The European banking crisis continues.

Chicago Police Pension Goes Bust


Chicago’s police pension fund won’t have enough money to pay benefits to retirees in 2021, according to a projection by Local Government Information Services (LGIS). At the end of 2020, LGIS estimates that the Policemen’s Annuity and Benefit Fund of Chicago will have less than $150 million in assets to pay $928 million promised to 14,133 retirees the following year.

This is the fate of state and local pension funds. There is a storm gathering on the horizon and of course these state and local governments will be raising taxes to try to stay afloat. The system is collapsing and it is totally unsustainable. This is the very same crisis that destroyed the Roman Empire.

London Fire May Have Been Caused by EU Regulations


It turns out that the Grenfall tower fire may have been caused by Europe’s Global Warming regulations. To fight CO2 climate change, the EU Energy efficiency directive was passed into British law by the Blair Government back in 2010. The directive imposed energy efficiency  to be applied to buildings. They were directed to place cladding on the outside of the building which the poor blamed the rich to make the building look better. The wrapping of buildings in the cladding has been done all over the UK and Europe.

The Grenfell Tower fire in west London is one of at least a dozen such fatal fires that have occurred since 2000 involving cladding. The Plasco Building, Tehran, Iran was a 17-story building in January 2017 which collapsed after a fire that started on the ninth floor. The Address Downtown Dubai Hotel, pictured above, caught fire in December 2015. There the fire broke out on the 20th floor of 63-story hotel and residential tower. This was the second tallest building in Dubai.  Videos posted on social media initially showed a smallish fire above the podium section of the building. However, it then spread very rapidly up the tower in a narrow vertical column. It never spread very far sideways into the building. Dubai’s Civil Defense chief, quoted in Gulf News, said the blaze damaged “only the external interface”. It was the outside cladding that the fire traveled outside and straight up. The Residential tower in Baku, Azerbaijan also went up in a blaze during May 2015. this was a 16-story building in the Azerbaijan capital.

The Grenfell Tower fire was similar to that which took place in Dubai because of this cladding. The question becomes, will government accept the blame for this cladding to lower Co2 that was ordered by Brussels’ Global Warming legislation? The cladding used had passed building regulations and was manufactured in France. I would not hold my breath.

The Plight of Junk Science in All Fields


Junk Science is the real crisis we face as so many people think that Global Warming is caused by man and Co2. Of course, those who really believe this is the problem that will destroy the world perhaps should just commit suicide and take the dog with them. Since we exhale Co2 that would reduce the problem in their mind and save the world by setting a good example.

Junk Science plagues us in every field of science be it economics to health. For 25 years we were told that eggs are bad. How many people ordered egg whites only. Then the Junk Science was revised, but after 25 years, nobody noticed. When scientists learned that high blood cholesterol was associated with heart disease, they immediate black-listed all foods with high cholesterol content. It took 25 years of study to figure out – oops, we were wrong! You just didn’t really hear the “oops we were wrong” but instead you heard of another great danger – saturated fat! It became evident that cholesterol in food by itself was not the culprit after all — the real great evil was saturated fat, This is what had a much bigger effect on blood cholesterol when it was discovered that full-fat dairy products and fatty meats are loaded with saturated fat and that triggers the body to produce cholesterol.

This is the problem with analysis. The can conclude that everyone who has eaten a carrot eventually dies. That is an absolutely correct statement. They study one component and draw a correlation and thus produce the definitive relationship. They did that with interest rates. Higher rates means the stock market will decline. Oops. The Fed just raised rates and the Dow made a new high. Interesting! See it is the carrot paradox.

Money Theory

In economics, we had the Quantity of Money Theory that has driven central banks into Quantitative Easing expecting inflation and after 10 years of desperately trying to stimulate inflation, they have been beaten to a pulp by deflation. As always, they make a false simple assumption at the outset which then leads to the false result. They also fail to comprehend that there is the contraction within the economy creating deflation from technology advances. The work force is stagnant and unless they stay current with technology, they will quickly find themselves UNEMPLOYABLE with no useful skills.

Welcome to Deflation


People are just starting to grasp why deflation is also present in the USA. Despite all the screaming about Quantitative Easing, most remain confused why hyperinflation has not taken place. Most are obvious to the fact that there is a dynamic process involved that is a lot more complex than traditional economics teaches in school. Sorry, but the quantity of money theory does not work. It is way too simplistic and this has led to massive confusion. Even the central bankers are staring to call for help.

The latest news that Amazon was buying Whole Foods saw a plunge in retail and grocery stocks. Amazon put book stores on the list of bankruptcy victims and we see similar troubles for Sears, the company that made its name using the railroads to deliver goods by mail order. The deflationary tone has been in place since 2015.75 and it is a combination of problems one of which is the technology advancement. Many people see the advance of robots displacing jobs. However, the reason unemployment rose dramatically to 25% during the Great Depression was not from the collapse of industry. It was (1) the advancement of technology with the combustion engine that wiped out agricultural jobs (aside from the horse industry) and (2) the vast dust bowl which then wiped out farms entirely.

The Amazon takeover of Whole Foods is highlighting this technology shift. The jobs of the future will be more in the technology programming area. All the office spaces I looked at for moving our office were, without exception, law firms closing down. Lawyers are now far too common and we are seeing the saturation reducing the once high paying jobs that enticed kids into law school.

Cyclically, everything evolves. Retail stores are declining and Amazon has been opening showrooms rather than stores. You get to go touch the product and it will be delivered to your home. They are also bringing in fully automated stores. You will have an app on your phone, walk into a store, take whatever you want, and your card will be billed as you walk out the door. There go the store clerks.

Things are changing rapidly. The high cost of labor because of Obamacare has been destroying a lot of jobs. The first thing your account tells you is not to higher employee number 26. Technology is helping to reduce the high cost of labor, which is being driven up because of taxes and healthcare which the employee never sees.

Improving you skills for the future is absolutely paramount to survive

Top Executives of Barclays Charged


The British Serious Fraud Office (SFO) has brought charges against Barclays and four former executives surrounding the Qatari investment during the 2008 financial crisis. You may remember at the time Lloyds and RBS were offered UK government support with certain strict conditions attached. However, Barclays declined the government offer and instead turned to Qatar which eventually became the biggest single shareholder, with around 6%.

The rumor around the financial markets at the time was that the UK government offer was better for the shareholders (unqualified) but the restrictions imposed meant that no board members would receive bonus payments until monies had been repaid. Talk at the time was that faced with that proposition of spending bank money to secure future bonus payments – the board declined the UK Government offer and went with the Qatari investment. The SFO also charged former top Barclays executives after investigating a two-part fundraising that included a $3 billion Barclays loan to the Qatar Gulf state.

The men are the most senior bankers ever to be charged in Britain for alleged crimes during the financial crisis. They face jail sentences of up to 10 years if found guilty.

Analysis of Global Temperature Trends, May, 2017, what’s really going on with the Climate?


The analysis and plots shown here are based on the following two data series. First NASA-GISS estimates of a global temperature shown as an anomaly (converted to degrees Celsius) as shown in their table Land Ocean Temperature Index (LOTI) and shown in the following Chart as the red plot labeled NASA. This plot is shown as a twelve month moving average to minimize the large monthly swings and better show trends; the scale for the temperatures is on the left. Second NOAA-ESRL Carbon Dioxide (CO2) values in Parts Per Million (PPM) which are shown in the following Chart as a black plot labeled NOAA. This plot is shown exactly as the data from NOAA is presented and there is no need for a moving average the scale for CO2 is shown on the right.

NASA published data as stated in the first paragraph is shown as an anomaly, but what is a temperature anomaly?  An anomaly is a deviation from some base value normally an average that is fixed. There were two problems with the system that NASA picked which were number one there is no “actual” global temperature and two since climate is a variable there cannot be a real base to measure from. NASA known for its science and engineering expertise back in the day thought it could get around these issues and created a system to do so. First they developed a computer model which took readings from all over the planet and made significant adjustments to them called homogenization and came up with the estimated global temperature. Second they picked the period 1950 to 1980 (30 years) and averaged the values and came up with 14.00 degrees Celsius and make that their base.  Then they took the calculated temperature and subtracted the base from it which gave them the anomaly. The problem is that both the base and the anomaly are arbitrary.

Now that we have a base to work with we are going to add to the previous Chart three things. The first is a trend line of the growth in CO2 since that is the entire basis for climate change according to the government through NASA and NOAA. That plot is superimposed over the black plot of the actual NOAA CO2 values as the cyan line labeled as the CO2 Model and one can see there is a very good fit to the actual NOAA values so there should be no dispute about its validity.  This plot allows us to make projections as to future global temperatures according to the projected level of CO2. The second added item is James E. Hansen’s Scenario B data, which is the very core of the IPCC Global Climate models (GCM’s) and which was based on a CO2 sensitivity value of 3.0O Celsius per doubling of CO2. This plot is shown here in lavender and is part of a presentation that Hansen showed to congress in 1988 when the UN was about to set up the International Panel on Climate Change (IPCC) and this plot is labeled as Hansen Scenario B which Hansen stated was the most likely to happen based on his theories’.  The third item is the current plot of the most likely temperature of the planet based on the growth of CO2 published by the IPCC. This plot is shown in Red and is labeled as IPCC AR5 A2 as that is the table where the data was found. This plot is a GCM computer projection of the planets temperature based to the complex relationships developed on the levels of CO2 by the IPCC primarily though NASS and NOAA.

It can be seen in this Chart that the lavender plot and the Hansen plot are very close from 1965 to around 2000 after that, from 2000 to 2014, there is a very large and growing deviation reaching close to .5 degrees Celsius in 2014, which is not an insubstantial number.  Also of note is that there doesn’t seem to be a good correlation between the growth in CO2 and the increase in the planets temperature. The CO2 is going up in a log function and the Temperature was going down in a log function until recently where it reversed in 2015 and is now going up in a log function. That unexplained and major change in temperature direction appeared to have occurred between 2013 and 2014 and is the subject of this monthly paper.

The next Chart is developed from the raw data from NASS and NOAA as shown in the first Chart.  This plot was made first by adding ten years blocks of temperature and CO2 as indicated in the Chart and diving by 120 to give an average for each.  Then the average Temperature was divided by the average CO2 to give degrees of temperature increase per PPM of CO2. After that was plotted it appeared that there were two different curves the first was from block 1965-1974 through block 2004-2014 shown as Black Dots and the second was from block 1995-2004 through block 2005-2016 shown as Black Dashes. When trend lines were added they were both almost perfect fits to the raw data and so you cannot see the data points very well on the Chart.  These blocks were picked to represent the entire period of time where we had both NASA temperature data and NOAA CO2 levels.

On the following Chart are two sets of color coded information. The first is Cyan plot and the Cyan box with the equation in it along with the R2 value of 1.0 are for the first series from block 1965-1974 through block 2004-2014. The other is the Red plot and the Red box with the equation in it along with the R2 value of 1.0 which are for the first series from block 1965-1974 through block 2004-2016. We can speculate on how this change has happened but it cannot be said that the plot change is not real; however additional data over the next few years will be required to actually prove that something has changed.

In summary the Cyan data set indicates a diminishing effect of CO2 on global temperature for about 54 years and the Red data set represents an increasing effect of CO2 on global temperature for the past 2 years. Since both data sets have an R2 value of 1.00 the trend lines cannot be in question.

Before we get into a possible explanation to the drastic change from the Cyan data to the Red data that occurred in 2014 we need to consider other factors than CO2 on Climate change.  The fault that occurred in the work that was done in the 1980’s was in assuming that there was an optimum or constant global temperature and therefore any change that was being observed was from the increasing amount of CO2 in the atmosphere.  There may have been correlation but it was never proved that there was causation (high R2 value) between CO2 and global temperatures. With that assumption, which limited options, we moved from true science into the realm of political science.  True science has an open mind and finds relationships that work in matching observations with predictions.  Political science changes history and/or facts to match the desires of the politicians. Since the politicians control the money political science is what we get; which means that what we get may not be technically correct.

A decade ago when I started looking at “climate” change the first thing I did was look at geological temperature changes since it is well known that the climate is not a constant; I learned that 52 years ago in my undergrad geology and climatology courses in 1964. The next paragraph explains currently observed patterns in climate related to this subject and is historical accurate.

Ignoring the last Ice Age which ended some 11,000 years ago when a good portion of the Northern hemisphere was under miles of ice the following observations give a starting point to any serious study on the subject of climate. First, there is a clear up and down movement in global temperatures with a 1,000 some year cycle going back at least 3,000 to 4,000 years; probably because of the apsidal precession of the earth’s orbit of about 20,000 years for a complete cycle. However about every 10,000 years the seasons are reversed making the winter colder and the summer warmer in the northern hemisphere. 10,000 years from now the seasons will be reversed again. Secondly, there are also 60 to 70 year cycles in the Pacific and the Atlantic oceans that are well documented. These are known as the Atlantic MultiDecadal Oscillations (AMO) in the Atlantic and as La Nina and El Nino in the Pacific. Thirdly, we also know that there are greenhouse gases such as carbon dioxide that can affect global temperatures. Lastly the National Academy of Sciences (NAS) estimated that carbon dioxide had a doubling rate of 3.0O Celsius plus or minus 1.5O Celsius in 1979 when there were only two studies available and one for sure and maybe both were not per reviewed.

The result of looking objectively at the three possible sources of global temperature changes was a series of equations based on these observations that when added together produced a sinusoidal curve that seemed to follow NASA published temperatures very closely when first developed in 2007.  Since this curve was based on observed temperature patterns it was called a Pattern Climate Model (PCM) which has been described in previous papers and posts on my blog and since it is generated by “equations” many assume it is some form of least squares curve fitting, which it is not. It does seem to be related to ocean currents where the baulk of the planet’s surface heat is stored.

As can be seen in the following Chart the PCM has a 69.1 year cycle that moves the trend line up and then down a total of 0.29O Celsius and we are now in the downward portion of that trend (-.01491O C per year) which will continue until around ~2035.  This short cycle is clearly observed in the raw NASA data in the LOTI table going back to 1880. Then there is a long trend, 1036.7 years with an up and down of 1.65O Celsius (.00396O C per year) also observed in the NASA data. Lastly, there is CO2 currently adding about .0079O Celsius per year so together they all basically wash out at -.0039O C per year, which matched the current holding pattern we were experiencing until 2014. After about 2035 the short cycle will have bottomed and turn up and all three will be on the upswing again duplicating what was observed in the 1980’s.  Note: the values shown here are only representative as the actual model uses many more places than what are shown here.

When using the 12 month running average for global temperatures up until 2014 the PCM model was within +/- .01 degrees of what NASA was publishing in their LOTI table since the early 1960’s as shown in the next Chart. Further the back projection of the PCM plot matched historical records and global temperatures going back past the time of Christ. It should also be consider that geologically CO2 levels have reached levels many times that of the current 400 ppm without destroying the planet so the current hysteria over the current small numbers can only be explained by political science not real science.

The nest step in this analysis is to put all of the known data and projections into one Chart which will contain: NASA’s table LOTI global temperature estimates, NOAA’s actual CO2 values, the CO2 model projections, the PCM model global temperature plot, Hansen’s Scenario B 1988 global temperature plot, and lastly the IPCC AR5 A2 global temperature plot. With that done we can look at the results and try to make some sense of what is going on with the various arms of the federal government that are promoting that carbon based fuels be eliminated since they are responsible for the global temperature level  going up.  As previously started when the government pours money into the sciences the sciences respond with technical papers the support the governments views, this is what I call political science verses real science as was done prior to the 1980’s; money talks and BS walks as everyone on the street knows.  This Chart views a good overview of the current situation showing all the facts and all the projections.

This Chart contains no manipulation of the data and the only change that was made was to convert the NASA anomalies back to degrees Celsius to make it more readable to lay people.  This is only a change in units and has no bearing on the look.  A subject not broached here is that of the NASA homogenization process itself and the base period from 1950 to 1980. The portion in the black circle contains the NASA base period of 14.00 degrees Celsius and the reason it’s brought up here is that the Homogenization process causes the global temperatures to move around since the entire data base all the way back to 1880 is recalculated each month.  But since the base has to stay at 14.00 degrees Celsius the program must be set to not allow changes in that period of time. I’m sure the programmers have fun with that. Prior work here has shown how this creates a teeter totter effect with the data plots, some of which have recently been significant.

The next Chart will be a look at the period from 2010 to 2020 so we can see the detail of the past few years where a change in CO2 of only a few ppm has caused a major change in the global temperature way beyond anything previously shown in any published NASA data. There are two black ovals on the Chart one at the top of the Chart which is a black oval around the CO2 levels for 2012, 2013, 2014, 2015 and part of 2016 and it’s very obvious that there has been very little change, maybe 7 ppm or about 1.9%. Then at the bottom of the Chart is another black oval around the NASA global temperature levels for 2012, 2013, 2014, 2015 and part of 2016 and its very obvious that there has been a very large change, almost .50 degrees Celsius or about 3.1%. There has never been such a large increase in temperature from such a small increase in CO2.

By contrast the previous comparable period of the last part of 2010 through 2013 shows about the same increase for CO2 at 1.1% but no increase for global temperature but actually small decrease. Worse it appears that this current strange upward trend will continue as the values shown here are based on a 12 month moving average and the current values being published by NASA have been very high for the past 7 months and therefore I would expect the NASA plot to be well over 15.00 Celsius within a few months and certainly before the end of 2016 and that is exactly what happened. After COP21 the need for Fake Warming was no longer needed and so we are now seeing a downward trend developing. With the new administration we may see the end of data manipulation from NOAA and NASA and a return to real science political science.

In summary, the IPCC models were designed before a true picture of the world’s climate was understood. During the 1980’s and 1990’s CO2 levels were going up and the world temperature was also going up so there appeared to be correlation and causation. The mistake that was made was looking at only a ~20 year period when the real variations in climate all move in much longer cycles of decades and centuries.  Those other cycles can be observed in the NASA data but they were ignored for some reason.  By ignoring those trends and focusing only on CO2 the models will be unable to correctly plot global temperatures until they are fixed.

Lastly, the next chart shows what a plot of the PCM model, in yellow, would look like from the year 1400 to the year 2900. This plot matches reasonably well with recorded history and fits the current NASA-GISS table LOTI data, in red, very closely, despite homogenization.  I understand that this model is not based on physics but it is also not true curve fitting. It’s based on observed reoccurring patterns in the climate. These patterns can be modeled and when they are, you get a plot that works better than any of the IPCC’s GCM’s. If the conditions that create these patterns do not change and CO2 continues to increase to 800 ppm or even 1000 ppm than this model will work well into the foreseeable future.  150 years from now global temperatures will peak at around 15.750 to 16.000 C and then will be on the downside of the long cycle for the next ~500 years.

The overall effect of CO2 reaching levels of 1000 ppm or even higher will be about 1.50 C which is about the same as that of the long cycle.  The Green plot on the Chart shows the observed pattern with no change in CO2 from the pre-industrial era of ~280 ppm. CO2 cannot affect global temperatures more than 1.500 C +/- no matter what the ppm level of CO2 is. The reason being that the CO2 sensitivity value is not 3.00 per doubling of CO2 but under 1.00 C per doubling of CO2 as shown in more current scientific work.

The purpose of this post is to make people aware of the errors inherent in the IPCC models so that they can be corrected. 

The Obama administration’s “need” for a binding UN climate treaty with mandated CO2 reductions in Europe and America was achieved as predicted at the COP12 conference in Paris in December 2015. To support this endeavor NASA was forced to show ever increasing global temperatures that will make less and less sense based on observations and satellite data which will all be dismissed or ignored.  Within a few years the manipulation will be obvious even to those without knowledge in the subject, but by then it will be to late the damage to the reputation of science will have been done.

In closing keep this in mind. The current panic generated by the government using political science is that the current global temperature of around 15.0O Celsius is an increase of 7.14% from the 1960’s when the global temperature was 14.0O Celsius; and that does seem like a lot. However those views would be in error as the actual increase in thermal energy, as measured by temperature, would be only .35% because we must use Kelvin not Celsius when working with heat energy. When we use kelvin the temperature goes from 287.15O K to 288.15O K which is only .35% not 7.14% about 1/20 of what is implied by the IPCC.

 

Sir Karl Raimund Popper (28 July 1902 – 17 September 1994) was an Austrian and British philosopher and a professor at the London School of Economics. He is considered one of the most influential philosophers for science of the 20th century, and he also wrote extensively on social and political philosophy. The following quotes of his apply to this subject.

If we are uncritical we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories.

Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve.

… (S)cience is one of the very few human activities — perhaps the only one — in which errors are systematically criticized and fairly often, in time, corrected.