Month: March 2016

There has been some confusion in recent months about the unprecedented M&A buying spree unleashed by Chinese investors on international, but mostly U.S. targets, a spree which has already resulted in a record amount of Chinese outbound M&A capital, manifesting in $41 billion in US deals in just the first quarter, already double the full amount for 2015…

 

… funded by just as ridiculous amounts of debt:

 

The truth is that there is nothing confusing about this: M&A is merely the last surviving loophole allowing domestic oligarchs to bypass Chinese capital controls and park billions in equity on U.S. and international soil. It also explains the complete lack of price sensitivity when Chinese bidders rush to purchase any desired target as can be seen in the most recent example involving global hotel chain Starwood and its Chinese acquiror, shady insurance company Anbang. The reason is that contrary to conventional M&A where the transaction IRR is determined by the purchase price (the lower the better), for Chinese “bizarro M&A” deals, the more capital that can be invested offshore, the better – it simply means that even more capital will evade the Chinese financial system.

In many ways, Chinese “bidders” are now the full-blown replica of what Japanese buyers were in the 1980s, when at the height of the Japanese stock bubble, every US assets was fair game, including golf courses and, of course, the the Rockefeller Center.

* * *

So what U.S. assets are these rabid Chinese buyers after? Here, courtesy of Bloomberg, is a sample of what Chinese money is buying.

Luxury Hotels

Strategic Hotels & Resorts Inc.’s portfolio includes Four Seasons properties in Austin and Silicon Valley, as well as the Intercontinental Miami and Chicago. China’s Anbang Insurance Group Co. is paying about $6.5 billion to buy the hotel group from Blackstone Group LP—just three months after the New York-based private equity firm acquired it.

 

More Luxury Hotels

Anbang is also currently the lead bidder for Starwood Hotels & Resorts Worldwide Inc., after twice topping Marriott International Inc.’s bid. Starwood owns real estate valued at about $4 billion, including the St. Regis in New York. Anbang’s latest offer values Starwood at about $14 billion.

 

Refrigerators, Dishwashers, and Coffee Machines

General Electric Co. agreed to sell its appliances business to China’s Haier Group Co. for $5.4 billion in January—$2 billion more than Electrolux AB had agreed to pay for the business before the deal collapsed amid opposition from the U.S. Justice Department. Haier will need antitrust approval from authorities in the U.S., Mexico, Canada, and Colombia.

 

Cranes

Zoomlion Heavy Industry Science & Technology Co., a Chinese industrial machinery manufacturer, is pursuing Westport, Conn.-based cranemaker Terex Corp. After Terex agreed to a merger with Finnish competitor Konecranes Oyj, Zoomlion made an unsolicited counter-bid in January; last week it upped the offer to $31 a share.

 

The Dark Knight’s Hollywood Producer

China’s richest man agreed in January to buy Legendary Entertainment LLC, producer of Godzilla and the Dark Knight trilogy and co-producer of Jurassic World, for as much as $3.5 billion. Wang Jianlin is set to become the first Chinese person to control a Hollywood film company.

 

Software Distributors

Computer, networking, and software distributor Ingram Micro Inc. was snapped up in February by an arm of China’s HNA Group Co. for an equity value of about $6 billion. Ingram Micro will continue to be run from Irvine, Calif., and will become part of the Chinese conglomerate that acquired airport luggage handler Swissport International AG last year and missed out on London City Airport last month.

 

A Gay Dating App

Beijing Kunlun Tech Co., an Internet games company that helped introduce Angry Birds to China, bought a majority stake in Grindr, the world’s biggest gay social networking app. Chairman Zhou Yahui’s company offered $93 million in cash for 60 percent of New Grindr LLC and is now scouting for other potential U.S. investments.

 

A Stock Exchange

The Chicago Stock Exchange said in February that a Chinese investor group, Chongqing Casin Enterprise Group, agreed to acquire it. The 134-year-old bourse handles only about 0.5 percent of U.S. stock trading, but the deal, which needs regulatory approval, would be the first Chinese acquisition of a U.S. exchange.

* * *

And lest there is any confusion that the acquiring companies are nothing but frauds, make that mega frauds, here is an excerpt from the NYT’s profile of China’s Anbang, and its chairman Wu Xiaohui, one of China’s richest men:

He is often compared in the media to Warren E. Buffett. Like the American billionaire, he is leveraging his control of an insurance company to become one of the biggest names in global finance. Like Mr. Buffett, he looks to be acquiring an immense personal fortune. But that is where the comparisons between Wu Xiaohui, the chairman of the Anbang Insurance Group of China, and Mr. Buffett come to a halt.

 

 

Mr. Wu has links to some of the most powerful families in China. He married Zhuo Ran, the granddaughter of Deng Xiaoping, China’s former paramount leader in the 1980s and much of the 1990s. That name, uncommon in Chinese, appears in corporate records tied to at least two of the 37 holding companies.

 

His exact holdings in Anbang are not clear. A close examination of Anbang’s shareholding structure shows that the 37 companies control more than 93 percent of Anbang, while two Chinese state-owned companies own the rest. The 37 shareholders are linked by common phone numbers, email addresses and interlocking ownership, according to company records filed with the Chinese government and available online.

 

* * *

 

One Anbang shareholder — a coal mining company in China’s western region of Xinjiang — is owned by another mining company, Zhongya Huajin, that listed a Zhuo Ran as its first legal representative, though that person has since resigned.

 

Zhongya Huajin shares an official website address with a different Anbang shareholder, a Beijing real estate company. Collectively, those companies own nearly 4.6 billion shares of Anbang, or more than 7 percent. The companies could not be reached for comment, and their common website now contains only links to pornography and gambling services.

 

Five shareholders list the same legal email address in government filings. Phones at those companies rang unanswered, and a message to that address was not returned.

 

Calls to Anbang’s listed phone number were not answered. Nobody replied to a list of questions delivered to its Beijing headquarters, with its enormous lobby — the size of several basketball courts — and its large chandelier. An Anbang employee said the company did not answer media questions.

And there you have it: global money laundering at an absolutely epic scale, now masked as Mergers and Acqusitions.

via Zero Hedge http://ift.tt/1UDOF7i Tyler Durden

It appears the messaging from The People's Bank Of China to The Fed was heard loud and understood. Having exercised its will to weaken the Yuan (implying turmoil is possible), Janet Yellen delivered the dovish goods and so China 'allowed' the Yuan to rally back. In a double-whammy for everyone involved the biggest 3-day strengthening of the Yuan fix since 2005 also pushed Yuan forwards back to their richest relative to spot since Aug 2014 – once again showing their might against the dastardly speculative shorts.

As we warned previously, it appeared a 'message' was being sent to The Fed via Yuan weakness  – first ahead of The FOMC meeting and then, as several hawks got vocal, ahead of Janet's speech. Her uber-dovishness was rewarded as China 'allowed' the Yuan to rise and thus the USDollar to weaken…

 

And since Janet delivered, PBOC has strengthened the Yuan Fix by the most since 2005!!

 

Crushing shorts as Yuan forwards collapse back to their 'richest' relative to spot since Aug 2014…

 

And just like Keyser Soze, they were gone. So while the old mantra of "Don't fight The Fed" may apply to some, it most certainly does not apply to The PBOC…

via Zero Hedge http://ift.tt/1UDOFnJ Tyler Durden

Submitted by Nick Giambruno via InternationalMan.com,

Today, I’m going to share one of the most important things I’ve learned traveling around the world: There’s a crucial difference between committing a real crime and breaking the law.

I’ve seen it firsthand in the Middle East as well as many other places.

The difference is huge and few people understand it.

While laws vary dramatically across countries, almost every country in the world universally considers real crimes immoral. A real crime involves harm or the threat of harm to person or property. Think murder, theft, or arson.

Virtually every government prohibits real crimes. Most also prohibit a lot of other things…

When someone breaks the law, it’s often not a real crime at all. He may have merely violated a particular government’s law without threatening or harming anyone or anything.

Keep in mind that the idea of a victimless crime is an oxymoron. If there is no victim, there is no real crime.

Insulting the Dear Leader in North Korea, being a woman who’s driving a car in Saudi Arabia, or possessing certain plants in the U.S. government all violate laws. But none of these activities harm or threaten people or property. They’re not real crimes. They simply violate the laws of certain governments.

Of course, I am not suggesting that anyone break the law anywhere, even if it wouldn’t harm people or property. As a practical matter, it’s foolhardy to violate any government’s laws while you’re within its reach. That is, unless you prefer the lifestyle of an outlaw or a martyr.

It would be risky to disparage the Dear Leader while in North Korea, or to possess an unapproved plant in the U.S., and so forth.

Distinguishing between real crimes (i.e., harming or threatening to harm people or property) and breaking the law is critical to your personal freedom. The next step is for you to minimize your exposure to arbitrary, make-believe “crimes” invented by your home government.

You can do this by diversifying internationally. That means moving some of your savings abroad in the form of physical gold to a safe jurisdiction, owning real estate in another country, opening foreign bank/brokerage accounts, and obtaining a second passport, among other things. Taking these steps will significantly dilute the power bureaucrats in your home country have over you.

This is what this publication is all about: maximizing your personal freedom and worldwide financial opportunities.

The more laws, regulations, and edicts your home government subjects you to, the more important it is to diversify internationally.

This problem is particularly obvious in the U.S., where every level of government is continually passing more laws…especially the federal government. There are so many vague, overly broad federal laws criminalizing mundane activities that it’s impossible for anyone to be 100% compliant.

Many people think felonies only consist of major crimes like robbery and murder. But that isn’t true. An ever-expanding mountain of laws and regulations has criminalized even the most mundane activities.

It’s not as hard to commit a felony as you might think. Many victimless “crimes” are felonies.

A study by civil liberty lawyer Harvey Silverglate found that the average American inadvertently commits three felonies a day.

Today, there are thousands of federal crimes, and the number is constantly increasing. It brings to mind the words of the great Roman historian Tacitus: “The more corrupt the state, the more numerous the laws.”

Here’s what Doug Casey says.

Corruption can be defined as the taking of bribes of one type or another by officials in order to allow subjects to avoid taxes or regulations. Political corruption doesn't, therefore, occur in totally free markets simply because there's no taxation or regulation to avoid. Inevitably, and completely predictably, the more taxed and regulated a society is, the more necessarily corrupt it is.

Today in the U.S., the government won’t necessarily go after you if you break a law. After all, most everyone has technically broken some law. Instead, the government decides whom to go after and chooses which laws to enforce. A creative prosecutor can always find some crime to charge you with if he looks hard enough.

This doesn’t sound like the land of freedom and opportunity. It sounds like an out-of-control government.

If you think it’s bad now, just wait until American politicians get even more financially desperate. Like most governments in financial trouble, we think the U.S. will keep choosing the easy option…money printing on a massive scale.

This is a huge threat to your financial security. Politicians are playing with fire and inviting a currency catastrophe. The socio-political consequences are likely to be even more severe than the financial ones.

This is a big reason why we think everyone should own some gold. Gold is the ultimate form of wealth insurance. It has preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.

via Zero Hedge http://ift.tt/1MUz7Uu Tyler Durden

After The Fed jawboned the world into the largest aggregate net short position in Treasuries in Q4 since 2010, its rapid realization that all is not well in the real world – and subsequent talking (and walking) back of rate-hike expectations – has sparked the biggest short-squeeze in 6 years and sent Treasuries up by the most since 2012. With odds collapsing for any more rate-hikes in 2016, as Yellen admits their forecasts are worthless, it seems – just as in 2010 – the bonds shorts have a way to go.

The Fed should “proceed cautiously” in raising interest rates, Yellen said in New York. The chance of a move by the end of 2016 has declined to 64 percent, from 73 percent at the end of last week, futures prices compiled by Bloomberg indicate.

The 10-year note yield slumped eight basis points on Tuesday, the most in seven weeks, and fell two basis points earlier Wednesday. U.S. government securities have returned 3 percent this quarter, based on Bloomberg World Bond Indexes.

 

 

Yellen’s speech "was more dovish than I expected,” said Wontark Doh, head of overseas fixed-income investment in Seoul at Samsung Asset Management Co. Ltd., which manages $200 billion. “The upside for Treasury yields is limited."

 

"Yellen came out as dovish and as forceful as she was" at the Fed meeting in March, when officials kept rates unchanged and scaled back forecasts for how high they’ll rise this year, said Barra Sheridan, a rates trader at Bank of Montreal in London. "I didn’t think April was a live meeting before Yellen spoke yesterday and I definitely don’t now — nor does the market."

All driven by the biggest Treasury short-squeeze in 6 years (which was forced upon investors by The Fed's jawboning)…

And finally, the constant jabber from The Fed demandingthat investors short bonds continues…

Central-bank policies have pushed long-term Treasury yields to “very low” levels, San Francisco Fed Bank President John Williams said in Singapore before Yellen’s appearance. He said the threat of a “pretty big correction” in bonds supports the argument for gradual rate increases.

How's that working out for you? It appears fighting The Fed in bond-land has worked very well recently.

As The Wall Street Journal reports, bond traders are confused and concerned…

“It is confusing because the recipe keeps on changing,” said Anthony Cronin, a Treasury bond trader at Societe Generale. “I think it does create more volatility because there is just so much uncertainty over what is important to the Fed.”

 

Most concerning to Mr. Cronin was Ms. Yellen discussion of “potential global risks.’”

 

This uncertainty “can do more harm in itself and become self-fulfilling,’” he said. “Why would a company commit to investing in their business if the Fed Chair is worried about the economy slowing from overseas developments?”

 

The Fed’s mixed messages rippled through U.S. government bond yields, the dollar and gold over the past week.

 

…

 

“I believe that Yellen really believes that the downside risks of tightening too soon far outweigh the risk of waiting and maybe being a little late,” said Tom di Galoma, managing director at Seaport Global Securities LLC. “The Fed is market dependent at this point and not data dependent.”

As we have said for a long time, The Fed is Dow Data-Dependent.

via Zero Hedge http://ift.tt/1TjJmbw Tyler Durden

This won’t exactly come as a surprise: the global oil industry is corrupt. 

We are, after all, talking about the most financialized commodity in the history of the world, and up until a few years ago, it was controlled by a cartel comprised entirely of nations run by caricatures and stereotypes that the Western public generally regarded as a kind of necessary evil in a world that revolves around fossil fuels.

More recently, we’ve seen how oil funds terrorism and how crude prices are manipulated by the Gulf monarchies to secure “ancillary diplomatic benefits” in the never-ending quest to perpetuate Sunni hegemony in the Arabian Peninsula.

In short, blood money and oil money are synonymous concepts and at the end of the day, any geopolitical dispute that can’t be explained by sectarianism, tribalism, or some other ancient cultural rift, can very likely be explained by a dispute over energy. 

Given the above, we weren’t at all shocked to learn that a heretofore obscue firm based in Monaco has made a killing by perfecting the art of oil market bribery and corruption. But even if the story isn’t surprising, it is nonetheless intriguing and with that in mind we present below excerpts from “The Company The Bribed The World,” a collaborative piece by Huff Post and Fairfax Media.

*  *  * 

From The Huffington Post

A massive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft.

After a six-month investigation across two continents, Fairfax Media and The Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai.

The investigation centres on a Monaco company called Unaoil, run by the jet-setting Ahsani clan. Following a coded ad in a French newspaper, a series of clandestine meetings and midnight phone calls led to our reporters obtaining hundreds of thousands of the Ahsanis’ leaked emails and documents.

The trove reveals how they rub shoulders with royalty, party in style, mock anti-corruption agencies and operate a secret network of fixers and middlemen throughout the world’s oil producing nations.

The leaked files expose as corrupt two Iraqi oil ministers, a fixer linked to Syrian dictator Bashar al-Assad, senior officials from Libya’s Gaddafi regime, Iranian oil figures, powerful officials in the United Arab Emirates and a Kuwaiti operator known as “the big cheese”.

It is the Monaco company that almost perfected the art of corruption.

It is called Unaoil and it is run by members of the Ahsani family – Monaco millionaires who rub shoulders with princes, sheikhs and Europe’s and America’s elite business crowd. At the head are family patriarch Ata Ahsani and his two dashing sons, Cyrus and Saman.

Their charities support the arts and children, and Ahsani family members sit on the boards of NGOs with ex-politicians and billionaires. Ten years ago, a spreadsheet showed they had cash, shares and property worth 190 million euros. They are members of the global elite.

Bankers in New York and London have facilitated Unaoil’s money laundering, while the Ahsanis have built a major property investment business in central London. Since 2007, Unaoil has been certified by anti-corruption agency Trace International. This in itself raises serious questions about the worth of such international accreditation.

But for the western companies confronted with questions under anti foreign bribery laws in their own jurisdictions, Unaoil appears to be a reputable and discrete middle-man, giving listed businesses what is known as “plausible deniability”.

via Zero Hedge http://ift.tt/233d1sj Tyler Durden

On Tuesday, Janet Yellen delivered what some observers called her finest “performance” since ascending to the monetary throne in February of 2014.

Of course in the post-crisis world, central bankers are only praised when they make dovish pronouncements. Hawks are heretical. To tighten is to sin.

The conundrum for Yellen is that she appears to have been talked into going along with the global easing bias for a few more months at the G20 – data be damned. That is, despite the fact that the US economy is about to hit full employment (and we’ll ignore the fact that the numbers are goalseeked and that the only jobs being created are lowly service sector positions), Yellen has to find an excuse to avoid adopting too steep a “flight path” for rates, lest the dollar should soar causing commodities to plunge anew and triggering massive outflows from EM.

With no way to justify a dovish tilt based on the dual mandate (inflation isn’t exactly where the FOMC would like it to be, but compared to Japan and Europe it looks rather robust), Yellen did the only thing she could this month: she admitted (just as she did in September) that the reaction function now includes international financial markets and, more specifically, China.

That admission was greeted with a high degree of skepticism last autumn, but it would appear that now, having proven that it’s at least possible to hike 25 bps without the entire world coming to an end, the market is more than happy to see the Fed stand pat if it means forestalling global turmoil. As we noted this morning, some Fed officials didn’t get the message and so on Tuesday, Yellen the “mother lion” was forced to “swat her misbehaving cubs back into line” (to quote Bloomberg’s Richard Breslow) with an uber dovish speech at the Economic Club of New York.

The message the vaunted Fed chair sought to drive home was simple: it wouldn’t matter if the unemployment rate dropped to 1% and inflation expectations spiked above the FOMC’s target overnight – it’s simply too dangerous out there for the Fed to lean hawkish. Or, as BofA puts it in a new note: “It’s a big scary world out there.” Excerpts are below.

*  *  *

From BofA:

It’s a big scary world out there

Fed Chair Janet Yellen, in her speech and subsequent Q&A at the Economic Club of New York, was very clear in conveying her message that the weak global backdrop is preventing the Fed from hiking rates very much. While the Fed’s baseline economic scenario was roughly unchanged between the December and March FOMC meetings – given appropriate monetary policy accommodation – uncertainties are higher due to a weaker path of projected global growth. In other words the reduction in the dot plot to two rate hikes this year at the March meeting, from four hikes in December, is thought appropriate to mitigate the impacts of the weaker global backdrop. That reinforces the impression from the last FOMC meeting that the Fed is willing to risk higher inflation over the longer term in order reduce shorter term uncertainties. Hence the increase in 5-year, 5-year forward inflation expectations and simultaneous decline in equity vol following today’s comments by Chair Yellen (Figure 1).

Why the Fed matters

To illustrate why the Fed’s clear shift to a more dovish stance is so effective in reducing uncertainties in financial markets, consider our recent survey of US credit investors. Arguably at least three – if not all – of the top-4 investor concerns – China, Oil prices, Geopolitical risk and Slow recovery (in that order, Figure 2) – are mitigated to some extent by the more dovish Fed. First of all a more aggressive Fed rate hiking cycle would likely accelerate China’s capital flight which, with an open capital account, leads to the equivalent of monetary policy tightening in China at a time where the weak economy needs the opposite. Furthermore, to stem such capital flight incentivizes the PBOC to pursue more aggressive currency depreciation, which is very deflationary through commodities. Second the stronger dollar associated with a more aggressive Fed puts downward pressure on oil prices – instead the USD weakened 0.8% today. Third to some extent even geopolitical risk is related to lower oil prices. Fourth the stronger dollar and lower oil prices could initially be negative for the US economy through the manufacturing sector – before consumers eventually do react to lower prices at the pump.

via Zero Hedge http://ift.tt/1PGznGq Tyler Durden

In this morning’s media frenzy story du jour, a 15-year-old girl, who was protesting at a Trump rally in Wisconsin, ended up being pepper sprayed, or at least that’s how most of the media portrayed the incident. Since we were unsure what had happened, we specifically stated that “who knows what actually happened here and we won’t endeavor to speculate although it does appear that the pepper spraying was in retaliation for an initial provocation by the young girl.”

 

There was, however, more to the story than headlines such as this one from Time Magazine “15-Year-Old Girl Assaulted at Donald Trump Rally, Police Say” suggest.

As the following Youtube clip from Rebel Pundit reveals, the unnamed female #NeverTrump protester was only maced after she first punched an elderly man in the face: the moment is clearly caught on tape 28 seconds into the following clip.

 

Andrew Marcus, who works on these video projects with Rebel Pundit, posted this image.

.@NYCitySasha Here’s the elderly man who the 15yr old #NeverTrump fanatic punched in the face UNPROVOKED. http://pic.twitter.com/epw4pdG4XS

— Andrew Marcus (@ImAndrewMarcus) March 30, 2016

 

As the LegalInsurrection website notes, “I don’t know the man’s age, but in many states a physical assault on a person over a certain age (usually 60 or 65) get accelerated charging, turning what would be a misdemeanor battery into a felony.”

‘we saw this extensively when Trump’s Chicago rally was shut down after near riots by anti-Trump activists who infiltrated the rally venue. And we saw it yesterday at a Trump rally in Janesville, WI….  It’s the same agenda used against the Tea Party — to portray an overwhelmingly peaceful group of people as violent, and to portray the violent leftist perpetrators as victims.”

And speaking of the Janesville WI, protest, we wonder if the young girl was being compensated (to the tune of $15/hour) by anonymous sources, the same ones who had previously put up the following CraigsList posting seeking to recruit “Paid Protesters at Trump Rally.”

via Zero Hedge http://ift.tt/1ZLZsvj Tyler Durden

Submitted by Chris Martenson via PeakProsperity.com,

Right now I'm on a Metro North train heading the NYC. I’ve been invited to sit on an advisory council at the UN on building a sustainable energy future.

I’ll let you know how the meeting goes, after I take a few selfies to immortalize the experience in case I'm not invited back. 

Why might I not? Because I can either be a good boy, hold my tongue, and get to serve on more committees (maybe); or I can speak the truth as I see it.

It's not a hard decision: I'll be going with the latter. I really don’t know how to do differently any more; it’s a matter of internal integrity.

Now, I may not understand the ‘truth’ any better than the next person. But I do have access to a lot of data that seems to confirm this one idea: Humanity is not going to painlessly wean itself off of fossil fuels.

Instead, we’ll hit some sort of a wall: be it a food/population crisis, a climate crisis, or a debt/fiscal/economic crisis.  Each of those candidates has it roots in our global society's addition to fossil fuels.

No growth in fossil fuels and we get no growth in our debt-based economy. Translation: we’ll have a debt/financial crisis.

No fossil fuels and our entire method of industrial agriculture breaks down. Food crisis anyone?

Now, we won’t suddenly run out of fossil fuels. But we are going to find it increasingly difficult to extract more and more of them. And other limits like oceanic acidification and climate change may force us to move away from fossil fuels for a totally different set of reasons.

No matter the path we take, we need to transition sooner or later. We should know that.

Poor Math

One of the things I did in the book version of The Crash Course was to run the basic numbers to make the case that, unless we immediate decide to pursue the equivalent of a Manhattan Project (times) an Apollo Project (times) some whole number like 10, we're not going to make anything even remotely resembling a seamless transition to alternative energy.

Fortunately, there are now more groups carefully studying the math and making the same case:

Renewable energy demands the undoable

Mar 27, 2016

 

LONDON, 27 March, 2016 – The world is increasingly investing in renewable energy. Last year, according to UN figures, global investment in solar power, wind turbines and other renewable forms of energy was $266 billion.

 

But right now, the report says, renewable energy sources deliver just 10.3% of global electrical power. Neither the report’s authors nor anyone else thinks that is enough to slow climate change driven by rising global temperatures as a consequence of greenhouse gas emissions from fossil fuels.

 

In the last century, this has already climbed by 1°C. In Paris in December 2015, 195 nations agreed on a global plan to limit global warming to a figure no more than 2°C above the long-term average for most of human history.

 

This will be difficult, according to Glenn Jones, professor of marine sciences at Texas A&M University in the US.

 

In 2015, the world installed the equivalent of 13,000 five-megawatt wind turbines. But to contain global warming to a figure less than 2°C nations would have to ramp up renewable investment by 2028 to the annual equivalent of 485,000 such wind turbines.

 

“That’s a 37-fold increase in the annual installation rate in only 13 years just to achieve the wind power goal,” Professor Jones said.

(Source)

There’s some really important information in this study, not the least of which is the realization that, to achieve just the wind power goal, the world would have to increase its rate of wind tower installation by 3,700% (or 37 fold).

This translates into going from installing 36 towers per day (the current rate) to 1,329 per day. Every day. 365 days a year. For 13 years straight. With no breaks.

But our fossil fuel addiction goes well beyond the desire/need for electricity. Transportation fuels are just as essential to our current human condition.

The article continues:

He and a colleague argue in the journal Energy Policy that during each hour of every day 3.7 million barrels of oil are pumped from wells; 932,000 tons of coal are dug; 395 million cubic metres of natural gas are piped from the ground; and 4.1 million tons of CO2 is released into the atmosphere.

 

In that same hour, another 9,300 people are added to the global population. By 2100, the world will be home to 11 billion of us.

 

“It would require rates of change in our energy infrastructure and energy mix that have never happened in world history and that are extremely unlikely to be achieved,” he says.

 

“So the question becomes, how will they be fed and housed and what will be their energy source? Currently 1.2 billion people in the world do not have access to electricity, and there are plans to try to get them on the grid. The numbers you start dealing with become so large that they are difficult to comprehend,” Professor Jones says.

 

“To even come close to achieving the goals of the Paris Agreement, 50% of our energy will need to come from renewable sources by 2028, and today it is only 9%, including hydropower. For a world that wants to fight climate change, the numbers just don’t add up to do it.”

3.7 million barrels of oil per hour, along with nearly a million tons of coal and 400 million cubic meters of gas.  Every day, for 365 days a year.  

The numbers are indeed difficult to comprehend. But they just don’t measure up to our hopes for the future. At the current pace of energy transition, we’re not only going to miss the climate targets we've set, but we’re also going to miss the chance gracefully deal with the continued growth in both our debt pile and population.

This chart explains why.  As fast as renewable energy sources have grown, fossil fuels have grown, too. They remain ~80% of the world's total energy consumption:

(Source – Gail Tverberg)

While people excitedly point out the growth rates in energy renewables, they often fail to note either/both the scale involved and/or the fact that a tiny percentage growth in fossil fuels will utterly dwarf a large percentage gain in renewables.

This is the dynamic that the numbers in the above study are warning us of. Loudly.  

It’s nothing personal. It’s just math. But it’s going to get very personal over the next years and decades as the world is finally forced to confront the idiocy of attempting infinite growth on a (quite) finite planet.

And it's for this reason I am going to have a hard time being a good little committee member and sign off on some cheery report suggesting we can achieve a sustainable energy future if we all just try a little harder.

We’re going to need to try harder than any generation has ever had to try on anything, ever in all of history, to remake our energy infrastructure.

Meanwhile…

The Predicament That Stares Us In The Face

These days it’s very hard to scan the headlines without running into seriously troubling ecological data.

The two ocean related articles below recently jumped out at me, both of which are related to the implications of oceanic warming:

Underwater Heat Wave Devastates Great Barrier Reef

Mar 29, 2016

 

CANBERRA, Australia—An underwater heat wave is devastating huge swaths of Australia’s Great Barrier Reef, marine researchers have found.

 

An aerial survey of the chain of 3,000 coral outcrops—a Unesco world-heritage site and the only living system visible from space—found 95% of its northern area, roughly half the reef’s length, had been hit by a bleaching event that began six months ago. Damage to the southern area is still being assessed.

 

“This has been the saddest research trip of my life,” said Terry Hughes, a professor at Australia’s James Cook University and expert in coral bleaching. “Almost without exception, every reef we flew across showed consistently high levels of bleaching, from the reef slope right up onto the top of the reef.”

(Source)

This bleaching is caused by the loss of the symbiotic algae upon which coral depends, causing the coral organisms to die from starvation.

Another important bottom-of-the-food-chain organism, phytoplankton, has been disappearing from a variety of ocean basins with the Indian Ocean being one that recently made the news:

OCEAN PASTURES OF INDIAN OCEAN DISAPPEARING RAPIDLY

Feb 2, 2016

 

Research reveals that phytoplankton stocks in the region fell an alarming 30 percent over just the last 16 years. This most recent tally of the collapse of this vital ocean pasture ecosystem compounds the observed collapse that has been documented since the early 1950’s!

 

The collapse of ocean pasture ecosystems is taking place in all of the world’s ocean, not just in the Indian Ocean. Indeed many of those ocean basins are in a much worse condition of pasture collapse than the Indian Ocean.

(Source)

As the study itself concluded, the cause was due to hot surface water blocking mixing with the nutrient dense(er) lower waters:

We find that these trends in chlorophyll are driven by enhanced ocean stratification due to rapid warming in the Indian Ocean, which suppresses nutrient mixing from subsurface layers. Future climate projections suggest that the Indian Ocean will continue to warm, driving this productive region into an ecological desert.

(Source)

These are by no means rare exceptions plucked from a sea of otherwise positive news.  The world’s ecosystems are having a really rough time absorbing the scope and the pace of changes that humans are creating.

The grief expressed above by the scientists who study these ecosystems tells the tale.   

Conclusion

The world is just not yet serious enough about the urgency of transitioning away from fossil fuels.  The math says that without a tremendous change in behavior, far greater than anything currently on display, we simply won’t “get there” waiting for market forces to do the job for us.

We’ll have to make and adhere to very different priorities. Such as completely redirecting our entire defense budgets to the process of retooling our entire relationship to energy.

We’ll need our buildings to use less energy. And we’ll need to live closer to where we work and play.

Our food will have to be grown differently. And it will have to travel less far to get to our plate.

Electricity will have to come from sources other than fossil fuels too.

Is it possible to figure this out in time? Well, whether it is or not is sort of beside the point. Because these changes are going to be forced on us anyways if we don't.

So I guess I could be an optimist on the UN panel by telling them that I have 99% confidence that humans will someday be powering 100% of their energy needs from the sun.

I’ll just leave out that what I mean is that, in 100 or 200 years, humans will have painfully reverted back to a 1600’s-style subsistence farming lifestyle.

The point of this article is to refocus our attention on the need for each of us to lead the way, to begin our own individual energy transitions without waiting for some top-down solutions to come forward. The calvary simply isn't going to show up.

In our podcasts with Joel Salatin, Singing Frogs farm and Toby Hemenway, we've been surfacing examples of the ways in which we can begin farming regeneratively and relationally today.  You can do this on your own if you garden. Or you can support local farmers/CSAs that will do this for you. 

Anybody paying into a pension or trying to manage an endowment that needs to be there in 30 or 40 years (or forever, as is the case for university endowments) needs to understand that projections based on prior rates of economic growth are fantasies, hatched when we had the luxury of pretending there were no energy limits.

The restructuring of our energy economy, if taken under our own terms and on our own timelines, will utterly crush traditional economic growth as we’ve come to know and love it.

If taken under more dire terms, there may not even be a recognizable economy for a very long time.  

These are serious matters. They deserve serious consideration and even more serious answers.

Every little step each of us can make, both for its direct impact and for its leadership effects, is actually vitally important.

So one question we might ask ourselves is: How can I use less energy today, enjoy life just as much (if not more), and be part of the solution?

The future is gong to be very different from the past. And the only thing that could come along to ameliorate the situation from an energy-food-survival standpoint would be a brand new source of energy. Something along the lines of workable, scalable fusion or if LENR (Low-Energy Nuclear Reaction) pans out and is quickly adopted.

As long as we are collectively relying on ~80% of our primary energy coming from fossil fuels, we're on the opposite path from creating a world worth inheriting.

And the extent to which we fail to run he numbers and appreciate the scale and the scope and the timing involved, preferring perhaps to content ourselves with just the renewables side of the story, is the extent to which we are failing to appreciate the challenges we face.

So my challenge for myself is to see how much I can further cut back my own energy use — something I've already done in good measure by heating my water using the sun, insulating my home, and having a relatively efficient vehicle.  But there’s still a lot more I can do. 

How about you?

via Zero Hedge http://ift.tt/1M1CkXx Tyler Durden

On Tuesday, embattled Brazilian President Dilma Rousseff was dealt a bitter blow when PMDB – the party of VP Michel Temer and House Speaker Eduardo Cunha – officially left the coalition government.

“Dialogue, I regret to say, has been exhausted,” Tourism Minister Henrique Eduardo Alves, a PMDB leader and former speaker of the lower house of Congress, said on Monday as he resigned from Rousseff’s cabinet.

To let the market tell it, a complete political meltdown is great news. As we showed yesterday and as we’ve discussed on a number of occasions this month, the more precarious things get politically in Brazil, the harder the BRL and Brazilian risk assets rally. Why? Because the assumption is that when it comes to the country’s floundering economy, anything is preferable to the current arrangement. With output in free fall, inflation running in the double digits, and unemployment marking an inexorable rise, it’s difficult to imagine how things could possible get any worse.

Indeed, the prospect that Rousseff and Lula will be sent packing has created so much upward pressure on the BRL that the central bank has begun selling reverse swaps to keep a lid on the currency lest its rapid appreciation should end up short circuiting a much needed economic adjustment.

Meanwhile, Brazilian stocks have soared this year amid the turmoil. Of course this state of affairs simply isn’t sustainable. As Craig Botham, an emerging markets economist at Schroder Investment Management put it, “you don’t invest in a place where you don’t know who’s in charge.“

Right. And you also don’t invest in a place where the economic fundamentals get worse by the day.

Just this morning, for instance, we got the latest read on the fiscal deficit and it was, for lack of a better word, a disaster. The budget gap was the largest on record and came in wildly above expectations. Long story short, the primary deficit printed at 2.1% in February, up from 1.75% the previous month. “While revenues are falling sharply due to the economic situation, at a rate of 12 to 13 percent (a year), expenses continue to grow,” Tulio Maciel, head of the central bank’s economic research department told reporters on Wednesday.

Meanwhile, debt-to-GDP continues to rise. Here’s Goldman with the full breakdown of today’s dismal data:

The overall public sector fiscal deficit (primary surplus minus interest payments) remained broadly stable at a very large 10.8% of GDP in February, substantially above the 6.6% deficit recorded a year ago. The 12-month net interest bill dropped to 8.6% of GDP in February compared to 9.1% of GDP in January. The consolidated public sector primary fiscal deficit climbed to 2.1% of GDP from 1.75% of GDP the month before.

 

Gross general government debt worsened to 67.6% of GDP in February, up from 67.4% of GDP in February and 57.2% of GDP at end-2014.

 

 

A deep, permanent, structural fiscal adjustment remains front-and-center on the policy agenda to restore both domestic and external balance. In our assessment, at the end of the fiscal consolidation process Brazil needs to end up with a primary surplus of 3.0% to 3.5% of GDP. This would be the level of primary surplus that would put gross public debt on a clear declining trajectory, something that is required forBrazil to rebuild fiscal buffers and regain room to use fiscal policy counter-cyclically, whenever needed and appropriate.

 

Ultimately, a weaker BRL and a deep structural fiscal adjustment are key pillars to restore domestic (i.e., lower inflation) and external balance (i.e., to promote and consolidate the adjustment of the current account). However, given the very modest scope and slow pace of fiscal consolidation, and its far-from-ideal quality, the burden of current account adjustment will likely continue to fall disproportionately on monetary policy and the BRL.

Now obviously, there’s a long, long way to go for Brazil to get back to primary surplus at all, let alone push the black ink up to 3% of GDP. The idea that this is going to turn around the second Rousseff leaves the Presidential palace is laughable at best. And speaking of laughable, have a look at this rather amusing bit from Citi: 

• Rousseff impeachment won’t sustain Brazil rally
• As the likelihood of President Dilma Rousseff’s impeachment increases “investors will take a step back.
• “It might be the case of buying the rumor and selling the fact.”

In other words: investors might suddenly wake up to the fact that an intractable political crisis is most assuredly not risk positive.

Meanwhile, Rousseff is back on the tape likening the impeachment proceedings to a coup. “Presidents must be chosen in free elections,” she proclaimed on Wednesday. Countdown to impeachment: around 45 days. 

Finally, it’s worth noting that according to the latest figures, NBC has sold $1 billion in national ads for the Summer Olympics in Rio. “We’ve surpassed the $1 billion mark four months ahead of (the 2012 Summer Games in) London,” Seth Winter, NBC Sports’ executive vice president of advertising sales, said in a statement.

$1 billion. That’s a lot of refunds, Seth.

via Zero Hedge http://ift.tt/1V7fRtn Tyler Durden