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Written by Juliette Jowit
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Wednesday, 12 May 2010 00:01 |
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The "alarming" rate at which species are being lost could have a severe effect on humanity, conservationists warned today. Targets set eight years ago by governments to reduce biodiversity loss by 2010 have not been met, experts confirmed at a UN meeting in Nairobi, Kenya.
The third Global Biodiversity Outlook report said loss of wildlife and habitats could harm food sources and industry, and exacerbate climate change through rising emissions.
Achim Steiner, the executive director of the United Nations Environment Programme (UNEP), said: "Humanity has fabricated the illusion that somehow we can get by without biodiversity or that it is somehow peripheral to our contemporary world: the truth is we need it more than ever on a planet of 6 billion [people], heading to over 9 billion by 2050. Business as usual is no longer an option if we are to avoid irreversible damage to the life-support systems of our planet."
The report confirms what a coalition of 40 conservation organisations said last month, when they claimed there have been "alarming biodiversity declines". The coalition said that pressures on the natural world from development, over-use and pollution have risen since the ambition to reduce the rate of biodiversity loss was set out in the 2002 Convention on Biological Diversity (CBD).
The first formal assessment of the target, published at the end of April in the journal Science, is the basis of today's formal declaration. This week's meeting will see governments pressed to take the issues as seriously as climate change and the economic crisis.
"Since 1970 we have reduced animal populations by 30%, the area of mangroves and sea grasses by 20% and the coverage of living corals by 40%," said Prof Joseph Alcamo, chief scientist of the UNEP.
"These losses are clearly unsustainable, since biodiversity makes a key contribution to human wellbeing and sustainable development."
The Science study compiled 30 indicators of biodiversity, including changes in populations of species and their risk of extinction, the remaining areas of different habitats, and the composition of communities of plants and animals.
"Our analysis shows that governments have failed to deliver on the commitments they made in 2002: biodiversity is still being lost as fast as ever, and we have made little headway in reducing the pressures on species, habitats and ecosystems," said Stuart Butchart, the paper's lead author.
"Our data shows that 2010 will not be the year that biodiversity loss was halted, but it needs to be the year in which we start taking the issue seriously and substantially increase our efforts to take care of what is left of our planet."
The failure to meet the CBD target will not be a surprise to experts or policymakers, who have warned for years that too little progress was being made. Last month the head of the IUCN species survival commission, Simon Stuart, told the Guardian that for the first time since the dinosaurs, species were believed to be becoming extinct faster than new ones were evolving.
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Written by Kevin Drawbaugh
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Thursday, 22 April 2010 23:27 |
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The Senate bill would tighten the regulatory screws on banks and capital markets after the 2008-2009 financial crisis. Approval was considered likely, but not absolutely certain.
Republicans are still trying to water down the bill, which won Senate committee approval last month.
The House of Representatives approved a bill in December. It would have to be merged with whatever the Senate produces before a final measure could go to Obama to be signed into law. Analysts say that could happen by mid-year.
Below are snapshots of the major reform proposals.
PREVENTING MORE BAILOUTS
* Objective: Squash idea that some financial firms are "too big to fail." Prevent future bailouts like AIG's.
But also, prevent disaster that can come from refusing to bail out troubled firms, as Bush administration did in 2008 with Lehman Brothers. Its collapse froze markets worldwide.
Seeking a middle ground between bailout and bankruptcy, Senate bill sets up "orderly liquidation" process for large firms in distress. Authorities could seize and dismantle them.
Bill creates $50-billion fund to pay for such actions. Firms with assets above $50 billion would pay into fund.
Republicans object to this. Fund could borrow from Treasury if it ran short of money. "Backdoor bailout," Republicans say.
* House-Senate dynamic: House bill, like Senate's, sets up new liquidation process, but it's simpler and bigger.
House wants a $200-billion fund. Firms with assets over $50 billion would pay $150 billion into it. Fund could borrow another $50 billion from the Treasury if needed.
* Winners and losers: If new strategy works, economy is better protected from damaging financial sector crises. Big financial firms likely take a hit by having to pay fees.
Some Republicans want to kill liquidation fund idea entirely, but "orderly liquidation" needs financing.
There is wide, bipartisan support for a new liquidation process. Someone will have to pay for it. With congressional elections set for November, it probably won't be taxpayers.
PROTECTING CONSUMERS
* Objective: Stop abusive home mortgages, credit cards.
Senate bill creates financial consumer protection bureau inside Federal Reserve to regulate such products.
Obama, many Democrats want more, namely a watchdog that is an independent agency, with more power than a Fed unit.
House-Senate dynamic: House bill calls for independent agency. Senate bill puts it in Fed to appease Republicans.
House bill exempts many businesses from watchdog's oversight. Senate bill has fewer outright exemptions.
Winners and losers: Consumers can expect stronger protections. Credit card firms, mortgage lenders face tougher regulatory regime ahead, regardless of where watchdog set up.
VOLCKER RULE
* Objective: Ban risky trading, unrelated to customers' needs, at banks with cost-of-capital edge conferred by their being backed by taxpayers, either directly or otherwise.
Obama proposed this ban on "proprietary trading" in January, along with his adviser, former Fed chairman Paul Volcker. It may become law, but probably not as written.
Provisions embodying "Volcker rule" are in Senate bill, but it leaves door open to regulators watering it down later.
* House-Senate dynamic: Volcker rule not in House bill.
* Winners and losers: Too soon to say. Volcker says enacting rule would avert next financial crisis. Large firms could lose profits if rule is enacted. But Senate bill, as written, falls well short of making that a certainty.
OVER-THE-COUNTER DERIVATIVES
* Objective: Police $450-trillion over-the-counter derivatives market. A hothouse for risk during boom years, it greatly amplified the financial crisis.
Senate bill proposes new rules along lines sought by Obama. He wants to push as much OTC derivatives traffic as possible through exchanges, electronic platforms and clearinghouses, boosting transparency, risk comprehension, price competition.
* House-Senate dynamic: Two bills similar, but House exempts wide range of end users from mandatory central clearing. Issue complicated by involvement of House and Senate agriculture committees, which have their own bills.
* Winners and losers. Wall Street mega-firms -- Goldman Sachs, JPMorgan Chase, Citi, Bank of America and Morgan Stanley -- dominate market. The fat profits they reap from it would be reduced.
SYSTEMIC RISK
* Objective: Create new entity to spot and head off next crisis. Senate bill sets up nine-member council of regulators, chaired by the Treasury secretary.
* House-Senate dynamic: House bill proposes council chaired by the Treasury, as well, but gives Fed a bigger role.
* Winners and losers: Big banks and financial firms would be forced into tighter regulatory straitjacket.
POLICING BANKS
* Objective: Rationalize jigsaw-puzzle bank supervision system to stop problems from festering in the cracks.
Senate bill lets Fed keep oversight of large bank holding companies with assets over $50 billion. But Fed would lose power over state banks with less than $50 billion in assets.
Those would shift to Federal Deposit Insurance Corp, which would be in charge of all state banks and thrifts, as well as holding companies of state banks under $50 billion.
National banks with assets below $50 billion would be under Office of the Comptroller of the Currency, which would also absorb Office of Thrift Supervision, which would close.
* House-Senate dynamic: Big differences -- House bill preserves Fed's and FDIC's bank supervision roles.
* Winners and losers: OTS will close -- both House and Senate bills call for that. Otherwise, banks would lose ability to shop around for weakest regulator.
EXECUTIVE PAY AND SHAREHOLDER RIGHTS
* Objective: Give shareholders more say on executive pay and more clout in electing directors.
* House-Senate dynamic: Both bills back these ideas, but House less forceful than Senate bill on director nominations.
* Winners and losers: Corporate managers' could lose their strangle-hold on director nomination process. Shareholders could gain more say on pay, but it would largely be symbolic.
REGULATING HEDGE FUNDS
* Objective: Hedge funds must register with government, opening their books to more scrutiny, but Senate bill exempts venture capital funds and private equity funds.
* House-Senate dynamic: House bill calls for registration of hedge funds worth $150 million or more. Senate's cut-off level is $100 million. House bill exempts venture capital funds from full registration, while requiring offshore funds to register. Senate bill does not do this.
* Winners and losers: Regulators would gain window into murky market. An estimated 55 percent of hedge funds are already registered. Those that are not would have to do so.
FIXING SECURITIZATION
* Objective: Make securitization market more transparent and accountable. Senate bill forces securitizers to keep baseline 5 percent of credit risk on securitized assets.
* House-Senate dynamic: Bills similar.
* Winners and losers: Investors in securitized products would be better protected. Securitizers -- from lenders to Wall Street bundlers -- face stricter oversight.
CRACKING DOWN ON CREDIT RATING AGENCIES
* Objective: Boost SEC's power over credit rating agencies. Senate bill also reduces instances in law that mandate use of unneeded ratings, and exposes raters to more legal risk.
* House-Senate dynamic: Bills similar.
Winners and losers: Major rating agencies -- Moody's Corp, Standard & Poor's, Fitch Ratings -- face stricter oversight, but their business models survive. |
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Last Updated on Thursday, 22 April 2010 23:29 |
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Written by PAUL KRUGMAN
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Monday, 15 March 2010 19:45 |
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Tensions are rising over Chinese economic policy, and rightly so: China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done.
To give you a sense of the problem: Widespread complaints that China was manipulating its currency — selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China’s exports artificially competitive — began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account — a broad measure of the trade balance — of $46 billion.
Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.
And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.
So how should we respond? First of all, the U.S. Treasury Department must stop fudging and obfuscating.
Twice a year, by law, Treasury must issue a report identifying nations that “manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” The law’s intent is clear: the report should be a factual determination, not a policy statement. In practice, however, Treasury has been both unwilling to take action on the renminbi and unwilling to do what the law requires, namely explain to Congress why it isn’t taking action. Instead, it has spent the past six or seven years pretending not to see the obvious.
Will the next report, due April 15, continue this tradition? Stay tuned.
If Treasury does find Chinese currency manipulation, then what? Here, we have to get past a common misunderstanding: the view that the Chinese have us over a barrel, because we don’t dare provoke China into dumping its dollar assets.
What you have to ask is, What would happen if China tried to sell a large share of its U.S. assets? Would interest rates soar? Short-term U.S. interest rates wouldn’t change: they’re being kept near zero by the Fed, which won’t raise rates until the unemployment rate comes down. Long-term rates might rise slightly, but they’re mainly determined by market expectations of future short-term rates. Also, the Fed could offset any interest-rate impact of a Chinese pullback by expanding its own purchases of long-term bonds.
It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies, such as the euro. But that would be a good thing for the United States, since it would make our goods more competitive and reduce our trade deficit. On the other hand, it would be a bad thing for China, which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, not the other way around.
So we have no reason to fear China. But what should we do?
Some still argue that we must reason gently with China, not confront it. But we’ve been reasoning with China for years, as its surplus ballooned, and gotten nowhere: on Sunday Wen Jiabao, the Chinese prime minister, declared — absurdly — that his nation’s currency is not undervalued. (The Peterson Institute for International Economics estimates that the renminbi is undervalued by between 20 and 40 percent.) And Mr. Wen accused other nations of doing what China actually does, seeking to weaken their currencies “just for the purposes of increasing their own exports.”
But if sweet reason won’t work, what’s the alternative? In 1971 the United States dealt with a similar but much less severe problem of foreign undervaluation by imposing a temporary 10 percent surcharge on imports, which was removed a few months later after Germany, Japan and other nations raised the dollar value of their currencies. At this point, it’s hard to see China changing its policies unless faced with the threat of similar action — except that this time the surcharge would have to be much larger, say 25 percent.
I don’t propose this turn to policy hardball lightly. But Chinese currency policy is adding materially to the world’s economic problems at a time when those problems are already very severe. It’s time to take a stand. |
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Written by ALLAN H. MELTZER
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Thursday, 28 January 2010 01:41 |
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Federal Reserve Chairman Ben Bernanke has explained his exit strategy to prevent future inflation. The Fed recently began to pay interest to banks on the reserves they hold in their vaults. Using this new tool, it claims the ability to get banks to keep the money instead of lending it out, thus containing the money supply and inflation.
I don't believe this will work, and no one else should.
The exit strategy is incomplete. Proponents are guilty of practicing economics without prices. They never say what the interest rate on reserves must be to get banks to hold the approximately $1 trillion of reserves above the minimum they're legally required to hold. That's the critical question.
The efforts to reduce inflation during the 1970s failed because they ended prematurely. And they ended prematurely when business, unions, Congress and the administration objected loudly to the rising unemployment accompanying higher interest rates. Today's high current and prospective unemployment rates pose a similar dilemma.
No economist doubts that the Fed can induce banks to hold some more reserves by paying interest. But how much?
Normally, banks' principal business is lending, and the interest rate they can get on their loans is more important than the interest they might get on their reserves. Once borrowing resumes, banks will increase loans and expand deposits. The current massive volume of excess reserves will melt into a greater money supply, and later higher inflation.
When will inflation start? The date is uncertain. But the triggering event will be either a sustained increase in bank lending or a large increase in Fed purchases of government debt. Perhaps both. Either one would trigger a sustained increase in money growth.
With the exception of the early years after Paul Volcker became Fed chairman in 1979, the Fed has paid no attention to money growth. There have always been some Fed bank presidents concerned about too much or too little money growth, but they have not affected decisions. That problem remains.
The Federal Reserve has a well-known dual mandate to prevent both inflation and unemployment. It chooses to act on only one part of its mandate at a time. That cannot be the best way to achieve both targets, and it has failed repeatedly to bring low inflation and low unemployment. For example, the policy implied by the famous Phillips Curve—which says you can trade off higher inflation for lower unemployment—failed in the 1970s. We got rising inflation and higher unemployment.
Mr. Volcker publicly and privately discarded the Phillips Curve in favor of bringing inflation down by high interest rates and better control of the money supply. The result: about 15 years of low inflation and low unemployment. But the Fed abandoned its success by keeping interest rates too low after 2003. And now the Phillips Curve is back in fashion, with strong support from the Fed Board of Governors.
Christina Romer, chairman of the Council of Economic Advisers, reminds us regularly about the Fed and the Treasury's tight-money mistakes in 1937 which aborted the recovery, and she warns against repeating these mistakes. The principle drivers behind the recovery in 1934-36 were the veterans' bonus in 1936 and a gold inflow following the 1934 devaluation of the dollar—accomplished by unilaterally raising the gold price. The bonus ended, and the Treasury began to sterilize gold inflows in 1937 by selling securities, while the Fed doubled reserve requirements. Monetary policy shifted from excessive ease to excessive restraint.
Nothing of the kind is called for today. Instead, the Fed should announce a policy for preventing inflation that reduces the enormous stock of excess reserves, such as by selling securities. And the Treasury or the Office of Management and Budget should announce a credible policy for reducing deficits. That would help to reduce the uncertainty about future taxes, spending and inflation.
Policies without prices hide the serious problem posed by excessive debt and reserves, and are not credible. Policy makers should develop and announce credible plans now. |
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Last Updated on Thursday, 28 January 2010 01:49 |
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