Up til now "derivatives", side bets placed between banks and investors, have been on a one to one basis. The two parties to the "derivative" reach a deal between themselves and that's that. Should one party to the deal go bankrupt (can you say AIG?) the other party doesn't get paid. Realization of this fact since 2008 has reduced the number of derivative deals.
The regulatory bill coming thru Congress includes a guarantee for derivatives. The bill requires derivatives to be traded on exchanges, similar to a stock exchange. The seller and the buyer do a deal with the exchange. BUT, the exchange will guarantee the deals against default. If you buy a derivative and the seller goes bust, the exchange will pay you off.
Just what we need, guarantees on gambling. The derivatives are essentially bets that stocks will rise or fall, or that a company or country (Greece for instance) will default on it's bonds. Banks are channeling lots of money into the game 'cause a winning bet pays off big. Money spent gambling on derivatives is money that should have gone into economic development. Derivatives do not finance new factories, new businesses, new construction, inventory, accounts receivable or sales. In short money that should have gone to creating new jobs is frittered away gambling.
We should not encourage the gamblers by offering a guarantee of payoff.
Saturday, May 22, 2010
US to subsidize Brazilian cotton growers.
Talk about craziness. According to an editorial in yesterday's Wall St Journal, the US is subsidizing US cotton growers. 70% of the subsidy money goes to just 10 big cotton operations. Corporate welfare basically.
The international trade laws prohibit farm subsidies because they are a disguised tariff. Brazil sued the US for unfair trade practices and won. Unless the US drops this costly bit of corporate welfare, Brazil is legally entitled to retaliate with tariffs against American exports. The Brazilians have drawn up such a tariff and it has teeth and will hurt.
In last ditch negotiations the US has offered to pay Brazilian cotton growers the same subsidy that US cotton growers get.
This is totally crazy. In this time of federal deficit we should not be paying US farmers to grow stuff. And we should NEVER pay foreign farmers to grow stuff.
The international trade laws prohibit farm subsidies because they are a disguised tariff. Brazil sued the US for unfair trade practices and won. Unless the US drops this costly bit of corporate welfare, Brazil is legally entitled to retaliate with tariffs against American exports. The Brazilians have drawn up such a tariff and it has teeth and will hurt.
In last ditch negotiations the US has offered to pay Brazilian cotton growers the same subsidy that US cotton growers get.
This is totally crazy. In this time of federal deficit we should not be paying US farmers to grow stuff. And we should NEVER pay foreign farmers to grow stuff.
Thursday, May 20, 2010
Quoting from today's Wall St Journal. "In its last annual inspection of the Deepwater Horizon (the BP chartered oil rig that exploded and sank) last July, the Coast Guard didn't ask crew members to lower lifeboats to the water due to concerns that the test was too dangerous, Lt Cmdr. Odom told a federal panel investigating the disaster last week."
Wow! What is going on here? Lifeboat drills should be held once a month and the boats lowered into the water, just to make sure the lowering gear hasn't rusted solid. And that the crew knows how to lower the lifeboats. Granted, they ought to do lifeboat drill in good weather, but still it ought to be done, just to make sure the crew knows what to do.
Quoting further. "The Coast Guard also only ran a limited fire drill on the rig's helipad, excusing some workers who were normally supposed to take part because they were busy exploring for oil on the rig, according to testimony."
Wow again. Fire drills are supposed to be for real, and should also be done once a month.
Elsewhere in the article it states that Deepwater Horizon was not a US flag rig, it was registered in the Marshall Islands. Coast Guard checks of foreign flag rigs are completed in hours whereas inspection of US flagged rigs can take days.
That ain't right either. Coast Guard inspections should be the same for every rig out there.
And finally the article stated that standards for fire protection equipment were "of a general nature". That's bad too. Regulations should spell out in some detail how many fire pumps and of what capacity must be installed, the areas to be protected by sprinkler systems, the number and capacity of fire hoses and extinguishers. Inspectors should have the power to insist that rigs be properly equipped. Otherwise cheat skate owners will save money by skimping on safety equipment.
I'd say some tightening up is in order. When Deepwater Horizon sank it twisted the mile of drill pipe running down to the well into pretzel shapes and opened leaks in the pipe out of which oil is flowing. If the rig had stayed afloat, stopping the oil leaks would be easier. The lack of firefighting ability on board let the fire get out of control and sink the rig.
Wow! What is going on here? Lifeboat drills should be held once a month and the boats lowered into the water, just to make sure the lowering gear hasn't rusted solid. And that the crew knows how to lower the lifeboats. Granted, they ought to do lifeboat drill in good weather, but still it ought to be done, just to make sure the crew knows what to do.
Quoting further. "The Coast Guard also only ran a limited fire drill on the rig's helipad, excusing some workers who were normally supposed to take part because they were busy exploring for oil on the rig, according to testimony."
Wow again. Fire drills are supposed to be for real, and should also be done once a month.
Elsewhere in the article it states that Deepwater Horizon was not a US flag rig, it was registered in the Marshall Islands. Coast Guard checks of foreign flag rigs are completed in hours whereas inspection of US flagged rigs can take days.
That ain't right either. Coast Guard inspections should be the same for every rig out there.
And finally the article stated that standards for fire protection equipment were "of a general nature". That's bad too. Regulations should spell out in some detail how many fire pumps and of what capacity must be installed, the areas to be protected by sprinkler systems, the number and capacity of fire hoses and extinguishers. Inspectors should have the power to insist that rigs be properly equipped. Otherwise cheat skate owners will save money by skimping on safety equipment.
I'd say some tightening up is in order. When Deepwater Horizon sank it twisted the mile of drill pipe running down to the well into pretzel shapes and opened leaks in the pipe out of which oil is flowing. If the rig had stayed afloat, stopping the oil leaks would be easier. The lack of firefighting ability on board let the fire get out of control and sink the rig.
Wednesday, May 19, 2010
Off-shore drilling safety improvements
Shell oil was explaining the things it would do to make drilling in the Arctic safer. There were some surprising omissions, in view of the BP gulf disaster. It is generally acknowledged that BP's blow out preventer failed to shut off the flow of oil up the drill pipe. The blowout preventer is a giant valve installed on the sea floor to shut off oil flow in an emergency. BP's blowout preventer didn't work when activated. Reports have been circulating for some years that standard blowout preventers are not strong enough to shut off the thicker tougher pipe used in off shore work.
First thing Shell ought to propose is to test each blowout preventer on the pipe they will be using to insure that it will squeeze shut or shear off the pipe. This test ought to be down above water, before the blowout preventer is sunk to the bottom of the sea.
Second thing is to insure the blowout preventers have redundancy so that a single failure won't mean catastrophe. The blowout preventer should be required to successfully shut off a real pipe after sustaining damage. For instance, the preventer should work properly with a single hydraulic line or wire bundle cut, a single battery, or single air tank, or single hydraulic accumulator discharged, or run down. In short the preventer ought to have a dual everything, so that it works if any single item fails.
Third thing is to beef up the fire fighting capabilities of the drilling platforms. Out at sea they have plenty of water to spray on a fire. With enough pumps, water piping, sprinkler heads and fire hoses, they ought to be able to put out the worst fire. BP's platform should have been able to put its fire out. Clearly more fire fighting capacity is required.
I'm surprised that Shell mentioned none of these things.
First thing Shell ought to propose is to test each blowout preventer on the pipe they will be using to insure that it will squeeze shut or shear off the pipe. This test ought to be down above water, before the blowout preventer is sunk to the bottom of the sea.
Second thing is to insure the blowout preventers have redundancy so that a single failure won't mean catastrophe. The blowout preventer should be required to successfully shut off a real pipe after sustaining damage. For instance, the preventer should work properly with a single hydraulic line or wire bundle cut, a single battery, or single air tank, or single hydraulic accumulator discharged, or run down. In short the preventer ought to have a dual everything, so that it works if any single item fails.
Third thing is to beef up the fire fighting capabilities of the drilling platforms. Out at sea they have plenty of water to spray on a fire. With enough pumps, water piping, sprinkler heads and fire hoses, they ought to be able to put out the worst fire. BP's platform should have been able to put its fire out. Clearly more fire fighting capacity is required.
I'm surprised that Shell mentioned none of these things.
Tuesday, May 18, 2010
Seven year old girl shot and killed in no-knock raid
Detroit police raided a two family home and a little girl was shot in the neck and pronounced dead at the hospital. The cops threw a flash bang grenade into the home and a scuffle occurred as they entered. A shot was fired with tragic consequences. This was filmed live by a TV crew from Arts & Entertainment network for "First 48", a reality TV show.
Cops should not be doing no knock raids, it's just too dangerous for all concerned. If the inhabitants have a gun, they always shoot, the cops shoot back and somebody gets killed. Occasionally the inhabitants kill an officer, and then face murder charges. There is just no reason to subject citizens and officers to OK corral style shootouts.
Radley Balko wrote that Army units in Iraq are subject to much more oversight on no-knock raids than civilian police in the US. In Iraq it requires a general officer to OK a no knock raid. As general practice in Iraq the house is surrounded and then surrender is demanded. Most of the time the Iraqis surrender and come out with their hands up.
Cops should not be doing no knock raids, it's just too dangerous for all concerned. If the inhabitants have a gun, they always shoot, the cops shoot back and somebody gets killed. Occasionally the inhabitants kill an officer, and then face murder charges. There is just no reason to subject citizens and officers to OK corral style shootouts.
Radley Balko wrote that Army units in Iraq are subject to much more oversight on no-knock raids than civilian police in the US. In Iraq it requires a general officer to OK a no knock raid. As general practice in Iraq the house is surrounded and then surrender is demanded. Most of the time the Iraqis surrender and come out with their hands up.
Monday, May 17, 2010
Facebook trashes profiles
The software wienies at Facebook have been messing with the code. Most of my profile information (favorite books, movies, music etc) just dropped out of sight, like gone for good. I spent a little time typing some of it in again, but I wonder why I bother.
Sunday, May 16, 2010
Bye-bye TV
Over the air TV was converted to digital last year. That means plain old TV sets with rabbit ears do longer work. You have have cable, or a converter box ($50 now) or a nice new TV set.
Visited my daughter last weekend. As a modern art sculpture, they have three old no longer functional TV sets piled up artistically in the dining room. That house no longer does TV. They have broadband Internet but no cable TV.
I'll bet the TV networks didn't see that one coming when they were pushed on board the high def digital TV bandwagon a few years ago. In effect, the switch to high def digital has reduced the TV audience, partly from people not converting, and also because the new high def digital signal doesn't go very far. Where I am we used to get 8 over-the-air TV stations. Now that we went all digital, we only get one station over-the-air. That's seven TV stations with a smaller viewership.
Visited my daughter last weekend. As a modern art sculpture, they have three old no longer functional TV sets piled up artistically in the dining room. That house no longer does TV. They have broadband Internet but no cable TV.
I'll bet the TV networks didn't see that one coming when they were pushed on board the high def digital TV bandwagon a few years ago. In effect, the switch to high def digital has reduced the TV audience, partly from people not converting, and also because the new high def digital signal doesn't go very far. Where I am we used to get 8 over-the-air TV stations. Now that we went all digital, we only get one station over-the-air. That's seven TV stations with a smaller viewership.
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