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World Bank Warns Of Extreme Volatility In Oil Markets

World Bank Warns Of Extreme Volatility In Oil Markets

World Bank

After several months of oil price rises and then a sharp reversal over the last few weeks, world oil markets are in for more heightened volatility next year because of scarce spare production capacity among OPEC members. This warning comes from the World Bank, which in the latest edition of its Russia Economic Report said that OPEC was the single most important factor for oil price outlooks in the short term.

“As non-OPEC oil supply growth is expected to be greater than that of global demand, the outlook for oil prices depends heavily on supply from OPEC members,” the report’s authors noted. The level of spare capacity among OPEC members is estimated to be low at present, suggesting there are limited buffers in the event of a sudden shortfall in supply of oil, raising the likelihood of oil price spikes in 2019.”

The World Bank is not alone in seeing OPEC’s spare capacity as an important factor for oil prices going forward. Spare capacity provides a cushion against price shocks as evidenced most recently by the June decision of the cartel and Russia to start pumping more again after 18 months of cutting to arrest a too fast increase in oil prices. They had the capacity to do it and prices stopped rising, helped by downward revisions of economic forecasts.

Now, the oil market is plagued with concerns about oversupply, but this could change quite quickly if there is any sign that OPEC is nearing the end of its spare production capacity. As to the likelihood of such a sign emerging anytime soon, this remains to be seen.

…click on the above link to read the rest of the article…

World Bank Solution for Lack of Jobs: Cut Worker Protections

World Bank Solution for Lack of Jobs: Cut Worker Protections

The World Bank is in the process of completing its “World Development Report 2019: The Changing Nature of Work” and, surprisingly, the latest draft version opens with quotes from Karl Marx and John Maynard Keynes. Has the World Bank suddenly lost sight of its purpose and will now take up the cause of working people?

Well, you already know the answer to that question, didn’t you?

Only a few paragraphs down we begin to see where this paper is heading. After a bit of perfunctory hand-wringing over disruptions caused by robotics, we read the problem is “domestic bias towards state-owned or politically connected firms, the slow pace of technology adoption, or stifling regulation.” And although some jobs are disappearing, fear not because “the rise in the manufacturing sector in China has more than compensated for this loss.”

Oh, so we should all move to China to get new jobs.

Never mind that the highest minimum wage for Chinese workers, that mandated in Shanghai, is $382 per month. In some places the minimum wage is half that, if workers are fortunate enough to be paid regularly. And that millions of rural Chinese are being driven into cities to become sweatshop workers, so for now there won’t be enough work for the rest of the world. Then again, letting bosses have the upper hand is what the World Bank has in mind. No, its economists haven’t forgotten what the institution’s purpose is nor why it exists.

So what to do? The World Bank report does suggest not allowing corporations to dodge taxes to the degree that they do. Very well, but even if taxes were collected at the statutory rates, that would still leave corporations vastly under-taxed.

…click on the above link to read the rest of the article…

How much of the world’s energy is supplied by renewables?

How much of the world’s energy is supplied by renewables?

BP and the International Energy Agency (IEA) measure the contribution of renewables to the global energy mix in terms of primary energy consumed while the World Bank estimates it in terms of final energy consumed. All three give different results, with BP estimating a total renewables contribution of 9.5% in 2015 compared to IEA’s 13.7% and the World Bank’s 18.1%. The BP/IEA differences become larger when contributions are segregated by source (BP estimates almost three times as much energy from hydro as as IEA and IEA estimates four times as much energy from “other renewables” as BP). This post documents these discrepancies while making no attempt to say who is right and who is wrong – that would have to be the subject of another post. But it does raise the question of whether we really know how large a contribution renewables are making to the world’s energy mix.

The BP and IEA “primary energy” estimates

It’s important to establish exactly what primary energy is before proceeding. Fortunately there is general agreement on how to define it:

OECD: Primary energy consumption refers to the direct use at the source, or supply to users without transformation, of crude energy, that is, energy that has not been subjected to any conversion or transformation process.

United Nations: Primary energy should be used to designate energy from sources that involve only extraction or capture

Wikipedia: Primary energy is an energy form found in nature that has not been subjected to any human engineered conversion or transformation process. It is energy contained in raw fuels, and other forms of energy received as input to a system.

…click on the above link to read the rest of the article…

Local and regional community resilience building is going global

In recent years the resilience imperative has made it onto the agenda of local and national governments, business leaders and international institutions like the European Union and the United Nations. In 2010, the UN Office for Disaster and Risk Reduction launched the five-year Making Cities Resilient campaign (UNISDR, 2015).

A 2012 report to the Secretary-General of the UN, prepared by the high-level panel on global sustainability and entitled Resilient People, Resilient Planet — A Future Worth Choosing, recommends three broad strategic actions: i) empowering people to make sustainable choices, ii) working towards a sustainable economy, and iii) strengthening institutional governance (UNGSP, 2012, p.79).

The 2013 World Bank report on Building Resilience recommends that the “international community should lead by example by further promoting approaches that progressively link climate and disaster resilience to broader development paths, and funding them appropriately” (World Bank, 2013: ix). In the UK there are now community resilience officers in local councils and the National Health Service.

The Rockefeller Foundation’s 100 Resilient Cities Challenge — funded with $100 million — says it “is dedicated to helping cities around the world become more resilient to the physical, social and economic challenges that are a growing part of the 21st century”. The initiative will support 100 cities financially to enable them to employ ‘chief resilience officers’ (CROs). The city of San Francisco hired Patrick Otellini as the world’s first CRO in early 2014 and by December 2014 another 64 cities had received funding to support this important whole-systems integration role in their city councils and town halls.

The Advisory Council on Global Change (WBGU) — the German government’s foresight unit — published a 400-page report in 2011, entitled World in Transition: A New Social Contract for Sustainability. It reviews historical examples of social change and suggests that individual actors and change agents are important drivers of cultural transformation, hence their role should be taken more seriously.

…click on the above link to read the rest of the article…

How is the world ruled?

How is the world ruled?

It is Saturday evening and snowing in New York. I have nowhere to go, I do have things to do (my book!) but my memories take over.

Like for example, the simple question of how is the world ruled. I think that lots of misunderstanding among people in the world comes from inability to visualize how organizations and countries are managed: people either overestimate their singularity of purpose and scheming, or try to convince themselves that there is a full freedom of action and that things are decided on merit. Neither is true. The truth is complex, elusive and lies somewhere (somewhere!) in the middle: it is what Nirad Chaudhury called in a broader context of human history “Libertas in imperio”.

I can describe it, I am afraid, best using the examples that I know well, from my life and long association with the World Bank.

Proposition 1. The world is ruled by a cabal.

Around 1989 when Yugoslavia was in its death-throes (which were not obvious to the naïve types like myself) when on vacation there I wrote an article for an economics and politics weekly in Belgrade that argued that the best privatization strategy, under the last (sensible and brilliant) Yugoslav PM, Ante Markovic, should be such that vouchers  be distributed to all citizens of the country and citizens be allowed to buy shares in enterprises in whatever part of the country they wished. It was an utterly quixotic proposals because the national nomenklaturas were precisely then working on the break-up of the country and the last thing they wanted was to cooperate with each other which they would have to do if their citizens owned shares in companies in the other republics. So, the proposal was dead on arrival.

…click on the above link to read the rest of the article…

The Deep State: Use an Existing Crisis, or Create One

The Deep State: Use an Existing Crisis, or Create One

deepstate

Rahm Emmanuel was/is (in)famous for his alleged attribution of the quote “Never allow a good crisis to go to waste.” Nevertheless, in the manner that Chaucer’s “Canterbury Tales” is an “English echo” of “The Decameron” by Giovanni Boccaccio, the quote assigned to Emmanuel is a paraphrase of words emitted by the equally-nefarious Milton Friedman:

“Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.” – Capitalism and Freedom,” by Milton Friedman, Preface, Univ. Chicago Press, 1982.

Although he was an Economist (so-called), Friedman’s Marxist economic endeavors (germinated by the Frankfurt School of Economics “alumni”) were cracked akin to a whip throughout the world and used by the U.S. to further imperialism and fostered dependence by third-world nations. Such “dependence,” it must be added, took the form of loans through the IMF and World Bank…backed by military force. The “dependence” is almost that of the Helsinki Syndrome, in which the kidnapped captive becomes psychologically dependent upon the captor…but the captivity remains. Protection and extortion in the same vein.

These same “entangling alliances” were warned about for the fledgling United States by the Founding Fathers. Such forced alliances are easily seen for what they are: the creation of vassal states through force projection and intimidation. Even when we’re not directly involved, we “underwrite” the actions. The latest (and largest) prime example was the ousting of Ukraine’s president, Yanukovych, in 2014 and the attempt to force Ukraine to become a part of NATO, as well as another IMF-vassal in the NATO-Euro-hegemony.

…click on the above link to read the rest of the article…

Import and Die: Self-sufficiency and Food Security in India

Import and Die: Self-sufficiency and Food Security in India

India’s Vice-President M Venkaiah Naidu recently stated that the country cannot survive on imported produce for its food security. He called for a greater focus on agriculture: “We can export (agricultural produce) for the time being but the population is growing.”

Naidu pointed out what has become increasingly apparent: “People are leaving agriculture and going to other professions. An agriculturist does not want his son to continue with the profession because of uncertain monsoons, natural calamities, market exploitation, etc. All this is affecting agriculture.”

Noting that agriculture is becoming financially unviable for farmers, he called for an end to the urban-rural divide by ensuring that people living in rural areas are provided basic amenities.

There are hints of the need to achieve food self-sufficiency in what he says and that is encouraging. But there is also a World Bank-backed plan for the future of India and the majority of farmers don’t have much of a role in it. Successive administrations in India have been facilitating this plan by making farming financially unviable with the aim of moving farmers out of farming and into the cities to work in manufacturing or service sector jobs – jobs that, by the way, do not exist. It is an agenda founded on a bogus model of ‘development’.

According to this report, the number of cultivators in India declined from 166 million to 146 million between 2004 and 2011. Some 6,700 left farming each day. Between 2015 and 2022 the number of cultivators is likely to decrease to around 127 million.

The aim is to restructure agriculture according to the wishes of the US and its agribusiness corporations.

It entails displacing the existing labour-intensive system of food and agriculture with one dominated by a few transnational corporate agribusiness concerns which will control all aspects of the sector from seed to plate.

…click on the above link to read the rest of the article…

“It’s A Huge Story”: China Launching “Petroyuan” In Two Months

“It’s A Huge Story”: China Launching “Petroyuan” In Two Months 

As a reminder, nothing lasts forever…

The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank.

“The solution to this is to replace the national currency with a global currency.”

The writing is on the wall for dollar hegemony. As Russian President Vladimir Putin said almost two months ago during the BRICs summit in Xiamen,

“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”

As Pepe Escobar recently noted, ‘to overcome the excessive domination of the limited number of reserve currencies’ is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar.

Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan and convertible into gold.

This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan.

Inbuilt in the move is a true Chinese win-win; the yuan will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.

…click on the above link to read the rest of the article…

World GDP in current US dollars seems to have peaked; this is a problem

World GDP in current US dollars seems to have peaked; this is a problem

World GDP in current US dollars is in some sense the simplest world GDP calculation that a person might make. It is calculated by taking the GDP for each year for each country in the local currency (for example, yen) and converting these GDP amounts to US dollars using the then-current relativity between the local currency and the US dollar.

To get a world total, all a person needs to do is add together the GDP amounts for all of the individual countries. There is no inflation adjustment, so comparing GDP growth amounts calculated on this basis gives an indication regarding how the world economy is growing, inclusive of inflation. Calculation of GDP on this basis is also inclusive of changes in relativities to the US dollar.

What has been concerning for the last couple of years is that World GDP on this basis is no longer growing robustly. In fact, it may even have started shrinking, with 2014 being the peak year. Figure 1 shows world GDP on a current US dollar basis, in a chart produced by the World Bank.

Figure 1. World GDP in “Current US Dollars,” in chart from World Bank website.

Since the concept of GDP in current US dollars is not a topic that most of us are very familiar with, this post, in part, is an exploration of how GDP and inflation calculations on this basis fit in with other concepts we are more familiar with.

As I look at the data, it becomes clear that the reason for the downturn in Current US$ GDP is very much related to topics that I have been writing about. In particular, it is related to the fall in oil prices since mid-2014 and to the problems that oil producers have been having since that time, earning too little profit on the oil they sell.

…click on the above link to read the rest of the article…

The Fallacy of Endless Economic Growth

THE FALLACY OF ENDLESS ECONOMIC GROWTH

What economists around the world get wrong about the future.

The idea that economic growth can continue forever on a finite planet is the unifying faith of industrial civilization. That it is nonsensical in the extreme, a deluded fantasy, doesn’t appear to bother us. We hear the holy truth in the decrees of elected officials, in the laments of economists about flagging GDP, in the authoritative pages of opinion, in the whirligig of advertising, at the World Bank and on Wall Street, in the prospectuses of globe-spanning corporations and in the halls of the smallest small-town chambers of commerce. Growth is sacrosanct. Growth will bring jobs and income, which allow us entry into the state of grace known as affluence, which permits us to consume more, providing more jobs for more people producing more goods and services so that the all-mighty economy can continue to grow. “Growth is our idol, our golden calf,” Herman Daly, an economist known for his anti-growth heresies, told me recently.

In the United States, the religion is expressed most avidly in the cult of the American Dream. The gatekeepers of the faith happen to not only be American: The Dream is now, and has long been, a pandemic disorder. Growth is a moral imperative in the developing world, we are told, because it will free the global poor from deprivation and disease. It will enrich and educate the women of the world, reducing birth rates. It will provide us the means to pay for environmental remediation—to clean up what so-called economic progress has despoiled. It will lift all boats, making us all rich, healthy, happy. East and West, Asia and Europe, communist and capitalist, big business and big labor, Nazi and neoliberal, the governments of just about every modern nation on Earth: All have espoused the mad growthist creed.

…click on the above link to read the rest of the article…

Eric Peters: “If China And The World Bank Are Right, We’re Headed For A Depression”

Eric Peters: “If China And The World Bank Are Right, We’re Headed For A Depression”

“Some people blindly invested offshore and were in a rush to do so,” explained China’s central bank chief, justifying his recent capital controls.

“Some of this outbound investment was not in line with our own policies and had no real gain for China.” No doubt he’s right. The tycoons fleeing Chinese capital markets have done so selfishly. “So to regulate capital flows, I think it is normal,” concluded the central banker.

Chinese credit relative to GDP has doubled in the past decade to 300%. Which remains less than the US at 350%, but the rate of Chinese credit growth is as unsustainable as it is difficult to reverse — without tanking the economy. The tycoons are running from this dynamic. Because such loops almost always end badly. 

Anyhow, after so many years of secular stagnation fears, global investors have grown conditioned to run. They’ve been running away from fear for so long, they’ve forgotten how to run toward greed. Which has left them blindly holding over $10trln of bonds, which yield negative interest.

Now, this might make sense in a deflationary depression. But the global economy has not seen such strong synchronized cyclical growth in years. Inflation is likewise firming everywhere.

But China lowered its growth target again. As the World Bank warned that today’s strong global upswing in confidence and financial markets are not enough to pull the world out of a “low-growth trap.” If they’re right, we’re surely headed for depression. Because all this new debt requires robust economic strength to shoulder the weight.

But European debt markets are still largely priced for depression. And with JP Morgan’s CEO Jamie Dimon announcing the return of animal spirits in America’s economy, it seems more likely that this cycle ends like every other. With a blind run toward greed.

…click on the above link to read the rest of the article…

Toxic Politics Versus Better Economics

Toxic Politics Versus Better Economics

NEW YORK – The relationship between politics and economics is changing. Advanced-country politicians are locked in bizarre, often toxic, conflicts, instead of acting on a growing economic consensus about how to escape a protracted period of low and unequal growth. This trend must be reversed, before it structurally cripples the advanced world and sweeps up the emerging economies, too.

Obviously, political infighting is nothing new. But, until recently, the expectation was that if professional economists achieved a technocratic consensus on a given policy approach, political leaders would listen. Even when more radical political parties attempted to push a different agenda, powerful forces – whether moral suasion from G7 governments, private capital markets, or the conditionality attached to International Monetary Fund and World Bank lending – would almost always ensure that the consensus approach eventually won the day.

Newsart for Is Populism Being Trumped?

In the 1990s and 2000s, for example, the so-called Washington Consensus dominated policymaking in much of the world, with everyone from the United States to a multitude of emerging economies pursuing trade liberalization, privatization, greater use of price mechanisms, financial-sector deregulation, and fiscal and monetary reforms with a heavy supply-side emphasis. The embrace of the Washington Consensus by multilateral institutions amplified its transmission, helping to drive forward the broader process of economic and financial globalization.

Incoming governments – particularly those led by non-traditional movements, which had risen to power on the back of domestic unease and frustration with mainstream parties – sometimes disagreed with the appropriateness and relevance of the Washington Consensus. But, as Brazilian President Luiz Inácio Lula da Silva demonstrated with his famous policy pivot in 2002, that consensus tended largely to prevail. And it continued to hold sway as recently as almost two years ago, when Greek Prime Minister Alexis Tsipras executed an equally notable U-turn.

…click on the above link to read the rest of the article…

Demand for World Bank loans nears crisis levels

Lending forecast at £25bn for 2016 as developing countries struggle to cope with weakening global economy

A banner announces the 2016 spring meetings of the IMF and World Bank
 A banner announces the 2016 spring meetings of the IMF and World Bank in Washington DC. Photograph: Mandel Ngan/AFP/Getty Images

Ahead of its half-yearly spring meeting in Washington later this week, the Bank said it expected to lend more than $150bn (£105bn) in the four years from 2013 – a period when global economic activity repeatedly failed to match expectations.

The Bank said its growth forecast of 2.9% for 2016 already looked under threat after a deterioration in the outlook since the start of the year, adding that it was increasing its financial help to both middle-income and the least-developed countries.

Those developing countries that rely heavily on exports of commodities have been hard hit over the past two years by the slowdown in China, which has led to a crash in the cost of oil and industrial metals.

“We are in a global economy where growth is expected to remain weak, so it is critically important that the World Bank play our traditional role of helping developing countries accelerate growth,” said Jim Yong Kim, the bank’s president.

“We have an historic opportunity to end extreme poverty in the world by 2030 but the only way we can achieve this goal is if developing countries – from middle-income to low-income nations – get back on the path of faster growth that helps the poorest and most vulnerable.”

The global crisis of 2008-09 led to a surge in World Bank lending to middle-income countries that struggled as trade flows and industrial production fell at rates similar to those in the early stages of the Great Depression.

…click on the above link to read the rest of the article…

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

Under the auspices of “protecting clients from criminal activity,” JPMorgan Chase has decided to impose capital controls on . As WSJ reports, following the bank’s ATM modification to enable $100-bills to be dispensed with no limit, some customers started pulling out tens of thousands of dollars at a time. This apparent bank run has prompted Jamie Dimon to cap ATM withdrawals at $1,000 per card daily for non-customers.

Most large U.S. banks, including Chase, Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. have been rolling out new ATMs, sometimes known as eATMs, which perform more services akin to tellers. That includes allowing customers to withdraw different dollar denominations than the usual $20, typically ranging from $1 to $100.

The efforts run counter to recent calls to phase out large bills such as the $100 bill or the €500 note ($569) to discourage corruption while putting up hurdles for tax evaders, terrorists, drug dealers and human traffickers.

The Wall Street Journal reported in February that the European Central Bank was considering eliminating its highest paper currency denomination, the €500 note. Former U.S. Treasury Secretary Lawrence H. Summers also has called for an agreement by monetary authorities to stop issuing notes worth more than $50 or $100.

This move appears to have backfired and created a ‘run’ of sorts on Chase…

A funny thing happened as J.P. Morgan Chase & Co. modified its ATMs to dispense hundred-dollar bills with no limit: Some customers started pulling out tens of thousands of dollars at a time.

While it was changing to newer ATM technology, J.P. Morgan found that some customers of banks in countries such as Russia and Ukraine had used Chase ATMs to withdraw tens of thousands of dollars in a single day, people familiar with the situation said. Chase had instances of people withdrawing $20,000 in one transaction, they added.

…click on the above link to read the rest of the article…

Nobel-Prize Economist Condemns Obama’s ‘Trade’ Deals

Nobel-Prize Economist Condemns Obama’s ‘Trade’ Deals

The Nobel-Prize-winning former chief economist of the World Bank, and Chairman of the Council of Economic Advisers to the U.S. President, Joseph Stiglitz, went to England to warn the British public, and Parliament, that “no democracy” can support U.S. President Barack Obama’s proposed trade-deals, because all of these have a feature built into them, called Investor State Dispute Resolution, or ISDS, which will establish a supra-national authority that gives international corporations the power to sue any signatory nation that introduces new or increased economic regulations regarding product-safety, the environment, workers’ rights, or anything else that the corporation alleges lowers the corporation’s profits; and because these cases will be tried not in courts that are subject to the given nation’s constitution and laws, but instead by private three-person panels of mainly corporate lawyers, and their rulings will not be subject to being appealed within the given nation’s court system — the panel’s decison will be final. There will be no democratic accountability at all, regarding regulations and laws that are designed to protect the public: environmental, product-safety, and workers’ rights. The existing regulations will be, in effect, locked in stone, or else decreased — never increased, no matter how much the latest scientific findings might indicate they ought to be. That’s because the international corporations’ panels will have powers above and beyond any signatory nation’s constitution and laws. ISDS gives international corporations the right to sue taxpayers; it does not give any government the right to sue an international corporation (and that also means no right to sue such a corporation for having filed a frivolous lawsuit against the taspayers). It’s a new profit-center for international corporations, in which those profits are coming from the taxpayers of nations that lose these lawsuits — and these cases will explode in volume if Obama’s deals get passed.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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