Friday, October 14, 2011
Experts are warning that an eruption could be imminent at an even more powerful Icelandic volcano than the one that paralysed air traffic last year.
Seismologists are nervously watching rumblings beneath Katla which could spew an ash cloud dwarfing the 2010 eruption that cost airlines two billion dollars (£1.27 billion) and drove home how vulnerable modern society is to the whims of nature.
Brooding over rugged moss-covered hills on Iceland's southern edge, Katla is a much bigger beast than the nearby Eyjafjallajokul volcano, which blasted ash all over Europe for several weeks in an eruption that local scientist Pall Einarsson describes nonetheless as "small".
Named after an evil troll, Katla has a larger magma chamber than Eyjafjallajokul's.
Its last major eruption in 1918 continued more than a month, turning day into night, starving crops of sunlight and killing off some livestock.
The eruption melted some of the ice-sheet covering Katla, flooding surrounding farmlands with a torrent of water that some accounts have said measured as wide as the Amazon.
Now, clusters of small earthquakes are being detected around Katla, which means an eruption could be imminent, seismologists say. The earthquakes have been growing in strength, too.
After a long period of magnitude three tremors, a magnitude four quake was detected last week.
"It is definitely showing signs of restlessness," said Mr Einarsson, a professor of geophysics at the University of Iceland.
Teams of seismologists and geologists at the university are tracking the spike in seismic activity and working with disaster officials to prepare communities near Katla like Vik, a small town of some 300 people that is flanked by black sand beaches.
Civil defence authorities have been holding regular meetings with scientists. Disaster officials have also drafted an evacuation plan and set aside temporary housing, but many fear they may have less than an hour to evacuate once the volcano erupts.
Iceland sits on a large volcanic hot spot in the Atlantic's mid-oceanic ridge. Eruptions, common throughout Iceland's history, are often triggered by seismic activity when the Earth's plates move and magma from deep underground pushes its way to the surface.
The longer pressure builds up, the more catastrophic an eruption can be. Records show that Katla usually has a large eruption twice a century. Since its last eruption was almost exactly 93 years ago, it is long overdue for another, seismologists say.
Icelanders are getting nervous as they mark the anniversary of Katla's last blast.
"We've been getting calls recently from people concerned that Katla is about to erupt because it erupted ... in 1918 on October 12," said Einar Kjartansson, a geophysicist at the Icelandic Meteorological Office.
"As scientists we don't see that much of a correlation in the date but there is most definitely increased activity. The question is whether it calms down after this or whether there is an eruption."
Of Iceland's more than 22 volcanoes, seven are active and four are particularly active - including Katla and Hekla.
Although it does not pose the same flood risk as Katla because it's not situated beneath an icecap, Hekla is one of Iceland's most active volcanoes and sits in the path of most international flight patterns.
Like Katla, Hekla is also overdue for a large eruption and could produce a disruptive and dangerous ash cloud that, in addition to disrupting air travel, could lower overall temperatures across continents by blocking out sunlight for days or weeks.
In Guatemala, at least 13 people were reported killed with four victims in Nicaragua and one in El Salvador.
Guatemala issued a "red alert" and reported at least a dozen landslides on roads and eight badly damaged bridges.
As rains drenched Central America, Hurricane Jova hit Mexico's Pacific coast, leaving at least four dead.
Guatemalan President Alvaro Colom said rising water levels in at least 12 rivers were threatening communities.
"I want to send a message to the people to be careful travelling on roads that are likely to collapse and get away from the river banks, because rivers are overflowing," he said, according to the Guatemala Times.
Mr Colom said four people had been electrocuted in floods and others had been swept away in swollen rivers and in landslides.
Guatemalan forecasters warned the heavy rain would last for another 48 hours. Mountainous areas of the country are particularly vulnerable to mudslides.
Officials in El Salvador said a 19-year-old woman was buried when a wall collapsed under heavy rain.
They said more than 2,000 people had been evacuated from flooded areas and moved to shelters.
In Nicaragua, President Daniel Ortega announced the deaths of four people. Local media said the victims included two children.
A strong earthquake struck off the Indonesian island of Bali on late Thursday morning, seismologists said, collapsing a number of buildings and injuring dozens of people. There were no immediate reports of fatalities.
The 6.8-magnitude earthquake at 11.16 a.m. local time (0316 GMT) was centered about 100 kilometers (62 miles) southwest of Denpasar, the capital city of Bali. It struck about 10 kilometers (6.2 miles) deep, making it a shallow earthquake, according to Indonesia’s seismological agency (BMKG).
The United States Geological Survey (USGS), which measured the strength of the earthquake at 6.1 on the moment magnitude scale, estimated that some 641,000 people in the region may have felt moderate shaking. Another 4.6 million people may have felt light shaking.
Eyewitnesses said panicked residents and tourists fled the buildings they were in when the earthquake struck the region. A number of buildings were damaged and some collapsed, police said, injuring at least 46 people. There were no immediate reports of fatalities.
Neither BMKG nor the Pacific Tsunami Warning Center issued a tsunami warning, although some people fled to higher ground or inland as a precaution. “[The earthquake has] no tsunami potential,” a brief text message from BMKG said, giving no other details. Earthquakes below magnitude 7 do usually not generate tsunamis.
Indonesia is on the so-called ‘Pacific Ring of Fire’, an arc of fault lines circling the Pacific Basin that is prone to frequent and large earthquakes. Volcanic eruptions also occur frequently in the region.
On December 26, 2004, one of the most powerful earthquakes ever recorded struck off the west coast of Sumatra in Indonesia. The 9.1-magnitude earthquake unleashed a deadly tsunami, striking scores of countries in the region. In all, at least 227,898 people were killed.
Most recently, on October 25, 2010, a powerful 7.7-magnitude earthquake struck just off the Mentawai Islands off the western coast of Sumatra. As a result, a wall of water killed at least 435 people on the islands and impacted more than 20 villages.
August marked the largest drop in consumer credit in almost a year according to a statement released by the Federal Reserve on Sunday.
The $9.5 billion decrease follows an $11.9 billion increase the previous month. The Feds also announced that non-revolving credit such as student loans and the financing of automobiles fell by the largest percentage in three years. Non-revolving loans were down by $7.23 billion in August.
The drop in consumer credit means Americans are either paying down old debt or simply lack the confidence based on the current economy to buy non-essential goods.
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York told Business Week:
“Consumers were cautious over taking on additional debt at the end of the summer after the volatility in the stock markets and the uncertainty caused by the failure of Congress to work together to bring down these trillion-dollar deficits.”
… but not for everyone:
Stocks Tumble; Wealthy Keep Shopping
When stock markets tumble, wealthy U.S. shoppers typically cut back their visits to such luxury emporiums as Saks Inc. (SKS) and Nordstrom Inc. (JWN). Yet even as the markets have seesawed, they’ve kept right on spending.
Exhibit A: Saks and Nordstrom yesterday reported September sales that exceeded analysts’ estimates, while luxury retailers as a whole outpaced all other segments except gasoline-selling wholesale clubs.
Affluent Americans aged 24 to 49 who have a yen for high living and bling are helping drive luxury sales, says Unity Marketing, which conducts quarterly shopper surveys. One cohort, called the “X-Fluents” — for “extremely affluent” — are responsible for 23 percent of luxury sales in the U.S., up from 18 percent in 2007, the Stevens, Pennsylvania-based firm said in a Sept. 14 client presentation it provided to Bloomberg News.
“The U.S. marketplace is more concentrated among young people,” said Unity President Pam Danziger. “They are more predisposed to luxury indulgence and represent more promising targets to luxury brands.”
X-Fluents were out in force again last month, she said.
Another group that Unity has dubbed “Aspirers” are also spending more on luxury, according to Danziger. They favor “flash, bling and status” and now account for 18 percent of luxury sales compared with 16 percent in 2007, she said.
…Their wherewithal stems from job security, bonuses and stock options, Pedraza said. Many are clustered in financial services and Silicon Valley, removed from the economic challenges other Americans face.
The Nordic country of 5 million people may decide to leave the single European currency and return to its markka if it is forced to cough up funds to support weaker euro zone members, Matthew Lynn, an analyst with Strategy Economics, wrote in a research note on Thursday.
Finland sparked worries that it may scupper a second deal to bail out Greece, reached last July, after it demanded collateral in exchange for its contribution to the euro zone's rescue fund, the European Financial Stability Facility.
The Nordic country has "a clear financial incentive to get out" of the euro and voters are "already rebelling against the cost of the bailout package," according to Lynn.
"Finland has the potential to provide the spark that will eventually pull apart Europe's increasingly unstable singe currency," he wrote.
The country runs a "healthy" current account surplus, which was 3.3 billion euros ($4.5 billion) last year, Finnish residents' total assets exceed liabilities by 28 billion euros and the government debt is just over 50 percent of gross domestic product, Lynn noted.
A country like Greece, with a huge trade deficit, would find it hard to leave the euro zone because it needs to borrow from other countries to fund the trade gap, but a state with a current account surplus doesn't face such problems, he explained.
Investors often turn to gold during times of economic uncertainty. But lately, that same fear has strengthened the U.S. dollar and seems to have brought gold prices down to US$1,672.70 per ounce level, from its US$1,900 per ounce highs.
For now though, gold looks set to keep rising. Despite improving sentiment in Europe, JP Morgan analyst John Bridges is positive on gold as "an insurance policy" because he suspects that changing the positive sentiment to actual reform would still be a difficult task.
JP Morgan London-based metals team just raised its Q4 gold price target to US$2,150 per ounce from $1,800 per ounce.
Bridges argues rising gold will benefit miners, which he thinks are priced for US$1,200 gold. He has overweight ratings on:
* Barrick Gold (ABX) - $53 price target
* Goldcorp Inc. (GG) - $63 price target
* Jaguar Mining (JAG) - $7 price target
* Kinross Gold (KGC) - $23 price target
* Newmont Mining (NEM) - $21 price target
The European Union is considering a roughly 75 percent cut in funding for a program that helps feed 18 million of its poorest citizens.
The cuts, set to take effect after New Year's, would come at a time of rising unemployment and consumer food prices in many parts of Europe, as well as overall economic turmoil on the continent. The looming cuts already have raised fears among people who rely heavily on the program.
"We poor, small people, we cannot face up to this," said Rene Waltener, 41, who is unemployed and married with four children. "We sometimes have difficulties getting through the month, so a bit of milk here, a tin of cassoulet, a bit of yoghurt — the kids are happy with that and it allows us to continue."
The Food for the Deprived program dates back to 1987. At first, it relied heavily on food surpluses from farms that benefited from a bloated and inefficient subsidy regime. But over time, as the farming became more efficient, food was increasingly purchased on the market to keep the program going.
In recent years, Germany and other countries have objected to that practice, saying the program is not living up to its original mandate of doing something useful with excess products from farms. Germany won a legal case in April to outlaw the practice of purchasing the food on the market.
The EU's 27 farm ministers will assess the program next Thursday in Luxembourg. On the table is a proposal to keep the program going at euro500 million ($690 million) through legal changes instead of moving to just euro113 million ($155 million), but at present it does not appear it will get a sufficient majority.
Harry Gschwindt of the Brussels Food Bank put the potential cut in simple terms.
"This year we received 19 different products. Next year it's only going to be four. It's tomato soup, it's rice, milk rice and chicken," he said. Gone are milk, sugar, corn and fish, and other contributions.
The problems involving the program predate the economic and currency crisis that is turning governments throughout the union towards penny-pinching measures, and EU Farm Commissioner Dacian Ciolos has said the problem is purely legal since the budget already has the funds written in.
The Czech Republic is among the countries that object to the current program's approach. Its ambassador to the EU, Milena Vicenova, said that the EU farm policy program "is not the proper and the right instrument to be used for, let's say, social help."
She said it also doesn't take national sensitivities into account. "We don't have a common explanation of what a 'poor person' really is or what it really means. Every national scheme slightly differs," Vicenova said.
Last year, a British House of Lords committee also saw no need to give to Brussels what London could do itself.
"National governments are best-placed to organize food distribution to poor people," committee chair Lord Carter of Coles said.
With winter approaching, some EU officials are hoping for an agreement that allows for the program to continue at the same level of funding.
"The money is available and can be allocated if we can get a political accord," Ciolos said earlier this month.
Standard & Poor's (S&P) has cut Spain's long-term credit rating by one notch, from AA to AA-, because of weak growth and high levels of private sector debt.
The ratings agency added that the country's high unemployment would remain a drag on the economy.
Last week, the Fitch agency also cut Spain's rating, a process that can raise a country's borrowing costs.
S&P's move comes as G20 finance ministers are due to meet on Friday to discuss the eurozone crisis.
On Thursday, Fitch downgraded the creditworthiness of UK banks Lloyds and Royal Bank of Scotland (RBS), and also Switzerland's UBS.'Weaken further'
Explaining its decision to downgrade Spain, S&P said: "Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain's main trading partners."
It noted the "incomplete state" of labour market reform, and added: "The financial profile of the Spanish banking system will, in our opinion, weaken further."
S&P also warned of a further ratings cut if Spain's economy worsens.
Its move comes as activists opposed to the Spanish government's continuing austerity measures, the so-called "indignants", are due to hold a protest march in Madrid on Saturday.
In addition to downgrading UBS, Lloyds and RBS, Fitch said it had put 12 other banks on notice that they may receive the same treatment.
The other lenders it has warned include Germany's Deutsche Bank and US group Goldman Sachs.
Fitch said it noted "increased challenges" facing the financial markets as the eurozone debt crisis and government spending cuts continue to affect banks.
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Last week, Fitch fuelled concerns about the debt crisis when it downgraded Spain and Italy, citing the "intensification" of the eurozone's economic and financial problems.
Global imbalances are as entrenched as they ever were. Budget deficits dominate the political agenda, with countries from the US to Italy to Greece still grappling unsuccessfully with their debts. Trade imbalances continue to warp economies, as consumer-heavy nations try to kick-start their manufacturing engines and exporters try to trigger a consumer boom.
The China-US trade deficit is a case in point. It hit a record $29bn in August. The US is now lurching towards protectionism, the desperate result of failed negotiations. The US Senate has approved legislation to impose penalty tariffs on Chinese products sold in the US if China does not do more to let its currency appreciate.
It’s not like France didn’t see the risks ahead. In February, Christine Lagarde, the International Monetary Fund’s managing director who was then French finance minister, warned that a failure to address the
imbalances “leads us straight into the wall of another debt crisis”. How prescient.
At the same time, with the world appearing to have turned the corner, President Nicolas Sarkozy warned against complacency. Complacency, he said, “would be the death of the G20”
At the same time, with the world appearing to have turned the corner, President Nicolas Sarkozy warned against complacency. Complacency, he said, “would be the death of the G20”
As the G20 finance ministers and central bankers gather in Paris this Friday and Saturday, a collective sense of failure will loom large. But France still has time to rescue its G20 presidency. If a deal can be struck to restore confidence in the euro area and settle the baying markets, France will have done the global economy a great service. Work has already begun in earnest, and must continue this weekend.