Failure is the only option - by Richard... Saturday, November 26, 2011

Failure is the only option - by Richard... Saturday, November 26, 2011

In almost a parody of himself José Manuel Barroso is telling us that "Europe" has still not found a solution to its sovereign debt crisis that would restore investor confidence. Then, from the school of "the solution is simple, something must be done", he advocates "greater integration as the way to move forward".

"The truth is", he says, "that so far there is no response to the sovereign (debt) crisis that restores confidence to investors … as long as that does not happen we will have very serious problems and debates in Europe".

Reflecting the German hang-up on the ECB, Barroso went on to say that the bank had to remain "independent", code it would appear for refusing to allow it to become the lender of last resort.

"I can say that in the commission, we always respected the independence of the European Central Bank, it is essential to have an independent central bank which is not subject to political pressure," he says.

This is a bizarre statement, not rooted in fact. The ECB was formally absorbed as an EU institution under the Lisbon treaty, subject to the aims objectives of the European Union. It can be no more independent than the commission itself, bound as it is by the same set of rules.

Nevertheless, reading the code, the commission is acknowledging that the ECB cannot take on the role of lender of last resort, as long as Germany is blocking this development. And Germany must because its own constitution does not allow this to happen.

Despite this, there is manoeuvring aplenty, as the commission tries to square the circle on itsintegration proposals.

Says Barroso: "We though it was the time to launch the discussion. We, in the commission, have the duty to launch and propose ideas and afterwards, obviously, it is up to member states to adopt them or not". He adds that the commission "is open to treaty revision if it is to reinforce and to give greater governance and more integration in the eurozone, and not to divide Europe".

And so the grotesque ritual is being played out by people who have run out of all other options and are staring failure in the face. Failure, it seems, is their only option, even if they have yet to come to terms with it. Yet fail they will, because fail they must. There is nothing else left.

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All I want for Christmas … - by Richard... Friday, November 25, 2011

A couple of years ago, this news would have been unthinkable. Now it doesn't even make the front page. Even Failygraph hacks are predicting it, eight years after we said it would happen in our book. It is getting so serious that even The Boy is noticing, although TBF is not falling over himself with admiration at the Brogan perspicacity.

Nevertheless, there are very few truly free things in this world, but saying "I told you so" is one of them, so we might as well enjoy the moment while we can. Zerohedge paints the picture of decline. It has Jim Reid of Deutche Bank asking: Should we get excited ahead of the treaty changes? The answer is that we are undoubtedly slowly moving closer to the start of a path towards fiscal union.

"However this process, even if it runs smoothly, will likely be a long, drawn-out, arduous journey," he says. "Unfortunately markets are moving at a much, much faster pace and we probably don't have the time for a slow measured path towards fiscal union."

The "colleagues" are well and truly domed.

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Collapse of a policy - by Richard...

At the heart of the EU's attempts to reduce industrial carbon dioxide emissions is its Emission Trading Scheme. And lest we forget, the idea was gradually to increase the cost to industry of emitting CO2 to atmosphere, thereby to incentivise investment in emission reduction equipment and procedures.

In theory, the price of the EU permits was supposed to increase, providing a ratchet effect, forcing a gradual reduction of emissions in line with the piece increase.

But, as is being widely reported today the carbon price crashed to a five-year low of €7.040, a dropattributed to the effect of the sovereign debt crisis on European industrial production.

The massive drop in production means that there is a massive over-supply of permits on the market – exactly the reverse of what was supposed to apply – triggering the collapse of the price and hence the collapse of a policy.

Like everything else the EU touches, therefore, this is a disaster, both in terms of intended effect and in terms of ladling extra costs on industry to absolutely no effect.

Furthermore, the oversupply is expected to continue, by as much as 212 million tons of carbon dioxide next year, or 9.1 percent of forecast emissions, meaning that there will be no swift (or any) recovery in prices. To all intents and purposes, the effect of the policy on reducing emissions will be nil, with the eventual price expected to bottom out as low as €3, having already dropped to €5.26 for the December 2011 contract.

Bizarrely, though, the "experts" still cling to their fantasies. Janet Peace, vice president of market and business strategy at the Center for Climate and Energy Solutions, a research group and company adviser in Arlington, Virginia, declares that the falling carbon price shows the EU market is responding to changing economic circumstances, as it was designed to do.

"It doesn't mean the programme is a failure", she says. One would love to see her idea of what does constitute failure.

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Up to no good - by Richard...

What precisely went on we will never know, but you can be assured that when Sarkozy, Merkel and Italian Prime Minister Mario Monti meet, in Strasbourg of all places, they are up to no good.

The headline outcome of the "Merkonti" meeting is that France and Germany have agreed to stop arguing in public over whether the ECB should do more to rescue the eurozone from a deepening sovereign debt crisis. They would also not seek to change its inflation-fighting mandate when they propose changes to EU treaties to strengthen economic governance. The pair also demonstrated their public backing for Monti.

With the Franco-German motor of integration now in good heart, Sarkozy said Paris and Berlin would circulate joint proposals before the 9 December European Council for treaty amendments. These will include proposals for more intrusive powers to enforce EU budget rules, including the right to take delinquent governments to the ECJ. These are now being hailed as a first step towards deeper fiscal union.

Meanwhile, Reuters has polled 20 leading economists, the majority of whom have predicted that the eurozone is unlikely to survive the crisis in its current form. A break-up is expected, with the survivors forming a "core" group that would exclude Greece.

Analysts believe that sense of crisis will in the end force dramatic action. "I think we are moving closer to a policy response probably, which could be either more aggressive ECB action or the idea of euro bonds could gain some traction," says Rainer Guntermann, strategist at Commerzbank.

Nor is the sentiment being left to the experts. Riot police clashed with workers at Greece's biggest power producer protesting against a new property tax, and Portuguese workers staged a 24-hour general strike.

Credit ratings agency Fitch downgraded Portugal's rating to junk status, saying a deepening recession made it "much more challenging" for the government to cut the budget deficit, highlighting a vicious circle facing Europe's debtors.

German bonds fell to their lowest level in nearly a month after Wednesday's auction, in which the German debt agency found no buyers for half of a 6 billion euro 10-year bond offering at a record low 2.0 percent interest rate.

Outside the eurozone, a top British financial regulator said British banks should make contingency plans for a potentially disorderly break-up of the currency area, or the exit of some countries, as the sovereign debt crisis rages on.

"Good risk management means planning for unlikely but severe scenarios and this means that we must not ignore the prospect of a disorderly departure of some countries from the eurozone," Andrew Bailey, deputy head of the Prudential Business Unit at the UK's Financial Services Authority, told a conference.

And so we dig in for the long haul. Nothing fundamental changes, and it is still "when", not "if", although trench warfare seems the order of the day – even if Blitzkreig can never be ruled out.

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More skeptics - by Richard... Thursday, November 24, 2011

Says WUWT, Climategate 2.0 email 4894.txt shows just what Alex Kirby of BBC thinks of climate skeptics as he conveys it to Dr. Phil Jones. Clearly, there is an incestuous relationship between climate science and the BBC - of which more from Biased BBC.

Meanwhile, I've been continuing my gentle graze around the e-mails, looking at references toclimate skeptics. There are no smoking guns, or earth-shattering discoveries (yet), but the impression is reinforced of a climate science community feeling itself under pressure, looking over its shoulders all the way at what the skeptics are doing.

Here is the latest sample:

0636 Mike Hulme to "fast trackers". 21 April 1999

"If you believe the economic skeptics then any climate policy will have a detrimental effect on world production …"

0697 Michael E. Mann to Keith Briffa and others. 23 September 1999

"So, if we show Keith's series in this plot, we have to comment that "something else" is responsible for the discrepancies in this case. Perhaps Keith can help us out a bit by explaining the processing that went into the series and the potential factors that might lead to it being "warmer" than the Jones et al and Mann et al series?? We would need to put in a few words in this regard. Otherwise, the skeptics have an field day casting doubt on our ability to understand the factors that influence these estimates and, thus, can undermine faith in the paleoestimates".

0716 Michael E. Mann to Tom Crowley and Phil Jones, re . Soon & Baliunas. 12 March 2003

"With their LIA being 1300-1900 and their MWP, here appears (at my quick first reading) no discussion of synchroneity of the cool/warm periods. Even with the instrumental record, the early and late 20th century warming periods are only significant locally at between 10-20% of grid boxes.

Writing this I am becoming more convinced we should do something - even if this is just to state once and for all what we mean by the LIA and MWP. I think the skeptics will use this paper to their own ends and it will set paleo back a number of years if it goes unchallenged".

0717 Phil Jones to Michael E Mann. 17 September 1998

The modelling community leaders are probably about as skeptical about our paleo-reconstructions as we are of their sulphate aerosol parameterizations, flux corrections (or more worrying, supposed lack thereof in some cases!), and handling of the oh-so-important tropical Pacific ocean-atmosphere interface ... So my personal philosophy is that more than one side here can benefit from extending the olive branch, and there are a few individuals in the modeling community who could benefit from slowing down on the stone throwing from their fragile glass tower :)

0728 Mike MacCracken to Phil Jones. 27 August 2009

There were indeed a number of Skeptics, but also a lot of people across the disciplines eager for information, and of course impressed by IPCC. Were no one like me there to keep going after the Skeptics and talking to the others in the in between times, they would, it seems to me, be more likely to think there is something serious about the opposition of the Skeptics - but the way it came off, with me going after Zichichi and his skepticism, I think was helpful to the others.

0800 Phil Jones to Chris Folland. 2 January 2008

Could add a website in the press release that appears on the Met Office site to a web site where the earlier forecasts might be accessible? This isn't essential - it is just that the skeptics won't believe your 0.07 accuracy number. If a page was mentioned it might shut them up - unlikely I know!

0900 Jonathan Overpeck to Darrell Kaufman, re your Science manuscript. 28 May 2009

This paper is going to get the attention of the skeptics and they are going to get all the data and work hard to show were we messed up. We don't want this - especially you, since it could take way more of your time than you'd like, and it'll look bad.

0914 Shaopeng Huang to Phil Jones. 3 March 2000

I'm still reminded by the potential effects of land-use changes, principally in the eastern US, which could be making your North American series too cool. I realise you've taken great care with the selection, but this is a nagging doubt and will be picked up by the few skeptics trying to divide us all about the course of change over the last millennium.

0952 David Rind to Stefan Rahmstorf. 20 July 2005

There is a quantum difference between the fundamental approaches - it is not a continuum, in which there are no real differences, everything is simply a matter of opinion, there is no such thing as truth - that's the argument that greenhouse skeptics use to try to make science go away.

1071 Ben Santer to Phil Jones. 7 September 2007

Skeptics, deniers are talking things up a lot lately - misinterpreting as usual and accepting what some papers say too readily.

The last comment is so revealing. It is the first reference to "deniers", and it is obvious that to be one is to "misinterpret". No quarter can be given, no good faith can be assumed. That is what "deniers" do.