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Friday, March 2, 2012

New 'thinking cap' technologies that control weaponry 'a step closer'

Researchers believe that new "thinking caps", could help provide super-human strength, highly enhanced concentration or thought-controlled weaponry.

A British ethics group is investigating the ethical dilemmas posed by inventions that interfere with the brain's inner workings.

The Nuffield Council on Bioethics (NCB) has launched a consultation on the risks posed by such new technologies, the global market for which it says is worth $8bn (£5bn) and "growing fast.

With the prospect of future conflicts between armies controlling weapons with their minds, the Council, an independent body, is wanting to identify what issues that come with blurring the lines between humans and machines.

Applications range from medicine to warfare and even human enhancement while some techniques such as deep brain stimulation (DBS) are already used by thousands of patients.

The consultation will look at whether having decisions affected by a computer chip in the brain could lead to a sense of diminished responsibility amongst users.

"Intervening in the brain has always raised both hopes and fears in equal measure," said Prof Thomas Baldwin, from York University, who is leading the study.

"Hopes of curing terrible diseases, and fears about the consequences of trying to enhance human capability beyond what is normally possible.

"These challenge us to think carefully about fundamental questions to do with the brain: What makes us human? What makes us an individual? And how and why do we think and behave in the way we do?"

He added: "It is not just science fiction... I don’t think it is unrealistic if you have the unlimited funds of the Pentagon to project ourselves towards some kind of Star Wars future.

"Setting pharmaceuticals aside, the value of the market for the devices and technologies we are dealing with is something in the region of $8 billion, and growing fast."

The NCB, which investigates ethical issues raised by new developments in biology and medicine, wants to focus on three main areas of neurotechnologies that change the brain.

These include brain-computer interfaces (BCIs), neurostimulation techniques such as deep brain stimulation (DBS) or transcranial magnetic stimulation (TMS), and neural stem cell therapy.

These technologies are already at various stages of development for use in the treatment of medical conditions including Parkinson's disease, depression and stroke.

Experts believe they could bring significant benefits, especially for patients with severe brain disease or damage.

Alena Buyx, of the Nuffield Council, said: "A trial in the UK showed it improved performance in maths and there have been calls for it to be introduced for children in education. We know of children prescribed ritalin [a drug for attention deficit hyperactivity disorder] to boost their school performance. Should we try to create individuals with superhuman abilities?"

In the military, BCIs are being used to develop weapons or vehicles controlled remotely by brain signals. Experts say there is there is big commercial scope in the gaming industry with the development of computer games controlled by people's thoughts.

Kevin Warwick, a professor of Cybernetics at the University of Reading and a supporter of more neurotechnology research, said some experimental brain technologies had great potential in medicine.

"From the brain signals, a brain computer interface could translate a person's desire to move ... and then use those signals to operate a wheelchair or other piece of technology," he said.

"For someone who has locked-in syndrome, for example, and cannot communicate, a BCI could be life-changing."

But the pair stressed there are concerns about safety of some experimental techniques that involve implants in the brain, and about the ethics of using such technology in other medicine and other fields.

Prof Baldwin said: "If brain-computer interfaces are used to control military aircraft or weapons from far away, who takes ultimate responsibility for the actions? Could this be blurring the line between man and machine?" .

The Telegraph

France's Sarkozy Holes Up In Bar To Escape Protesters

French President Nicolas Sarkozy (center) was surrounded by security staff after a crowd in the Basque city of Bayonne became unruly Thursday.

Several hundred angry protesters booed President Nicolas Sarkozy, forcing him to take refuge in a cafe protected by riot police as he campaigned Thursday in France's southwest Basque country.

Riot police surrounded the Bar du Palais in central Bayonne where Sarkozy holed up to get away from the protesters some of them Basque nationalists, others carrying posters of rival Socialist candidate Francois Hollande.

Inside the cafe, Sarkozy denounced "the violence of a minority and their unacceptable behavior."

He remained in the cafe for about an hour, meeting with residents of Bayonne. Some of the protesters outside threw eggs toward the barrier of riot police guarding the cafe.

The conservative Sarkozy trails Hollande, the front-runner, in the two pronged April and May presidential election.

"Here, we're in France, on the territory of the French republic, and the president of the republic will go everywhere," Sarkozy said once inside the cafe. "And if that doesn't please a minority of troublemakers, too bad for them."

The narrow streets of the historic center of Bayonne, in the French Basque country, were packed with supporters and protesters following Sarkozy during his visit. Tension mounted as Basque separatists threw pieces of paper at him. They were joined by others holding portraits of Hollande and his presidential program.

"If this is the concept of democracy, that the Socialists associate with Basque separatists, if this is it, the country they have in mind, it doesn't make you want to get there," Sarkozy said to reporters inside the cafe.

Sarkozy left the cafe escorted by riot police and protected by an umbrella.

The president's campaign spokeswoman, Nathalie Kosciusko-Morizet, asked Socialists to "respect the rules of democratic debate."

"It's not because you don't have ideas that you have to stop others from expressing theirs," she said.

Sarkozy declared his candidacy on Feb. 15. The latest polls show him narrowing the gap in the first round but lagging far behind in the final round. With the president now actively on the campaign trail, the debate has grown increasingly bitter with harsh denunciations by supporters on both sides.


'Missiles on Israel preferable to nuclear Iran'

The mathematics of war: A missile salvo on the greater Tel Aviv area, thousand of rockets fired at northern Israel, terror attacks against Israeli targets overseas, scores of Israeli casualties and countless others in bomb shelters – that is how a former top Israeli official described Iran's possible reaction to an Israeli strike on its nuclear facilities.

According to a Thursday report in Yedioth Ahronoth, the former official – speaking anonymously with the New York Times – detailed the formula by which Israel assessed the magnitude of Tehran's response: "1991 + 2006 + Buenos Aires, times three-to-five."

In other words: The combined result of Saddam Hussein's missile attack on Israel in 1991, Hezbollah's missiles attacks on Israel during the 2006 Second Lebanon War and the terror attacks in Argentina's capital in the early 1990s – times three.

These attacks claimed the lives of hundreds of Israelis and Jews and the damage to the Israeli economy amounted to billions of dollars.

"Forty missiles fired at Israel are no small matter – but it's better that a nuclear Iran," he said.

The New York Times said that the assessment is based on the premise that while Iran would aspire to meet any strike with force, it would prefer not to ignite a regional war.

US defense experts, however, qualified the statement, saying the West's ability to accurately predict Iran's moves was limited.

Washington, the report said, believes that a strike on the Islamic Republic would result in a missile barrage on Israel; but it also believes that Iran would try to somehow disguise its connection to such a counter-attack, possibly by promoting terror attacks on nations who support Israel.

The Americans also believe it is likely Iran will use any such strike as a pretext to close off the Strait of Hormuz.

US defense sources said that Tehran is likely to try and avoid a direct attack on American interests, because the regime knows that an American military strike will inflict significant damage.

Washington does, however, think Iran will opt for an indirect assault against its interests worldwide, or against oil production facilities in the Persian Gulf.

Meanwhile, the Los Angeles Times reported that the Obama Administration is unlikely to change its stance on Iran.

The White House believes that the US must stop Iran from getting a nuclear weapon, but that does not mean it is ready to declare that the US will impede Iran's desire for "nuclear capabilities."

A proposal to that effect has already been brought before Congress, and is widely backed by AIPAC.

US President Barack Obama is set to speak at the next AIPAC conventions in Washington, where he is expected to detail the US' "red lines" on Iran.


revolution or military coup

John Taylor Warns Of A "Highly Disastrous, Totally Uncontrollable Inflationary Conflagration"

During the past few years, the activist strain of central banking has spread around the world like wildfire, but the impact of this change on the future course of the global economy is very unclear. The number of countries involved now covers the developed world, the multitude of interventions in the financial market has expanded dramatically, and the amounts involved are exponentially higher than they were in 1979 when the Chrysler bailout began the process. Back then, the US Treasury guaranteed a $1.5 billion loan to the automaker, but the government demanded and received $2 billion in concessions from labor, the company, and other stakeholders
The star-crossed team of Treasury Secretary G. William Miller and President Jimmy Carter fell to Lee Iacocca’s political pressure 15 months before the 1980 election. This outcome differed dramatically from that of the Penn Central collapse, nine years before, as Congress had turned down its bailout request. By the mid-1980’s, the Chrysler rescue was seen as a great success, while everyone knew that the Penn Central refusal ended as a black hole, with many billions poured into Conrail and Amtrak just to keep the trains running.
With the arrival of Alan Greenspan activism took a big step forward, as he reversed the stock market crash of 1987, rescued Mexico with Bob Rubin in 1995, South East Asia in 1997, and then the global banking system, as it got in too deep with Long Term Capital (LTCM) in 1998. There were some failures, most notably Russia in 1998, but these interventions led directly to a feeling of complacency among investors as moral hazard, the Greenspan ‘put,’ and the President’s Working Group on Financial Markets became a widely perceived reality. Buy risk, you were safe, was the only way to go. Still, the monetary base, heart of the fractional reserve system, was largely untouched. 
Now, 14 years after LTCM, we know that the previous quarter century was just child’s play. The central banks have to pay a lot more for optimism today. Loans aren’t enough; now they must give the money away. Printing presses are running flat out (I know this is different than Zimbabwe, but…) and the developed world monetary base is almost three times higher than it was at the start of 2008.
All this money sloshing around is nothing but kindling. This is enough to start one hell of a large inflationary fire, but probably not until we have a deflationary panic first – which will add even more kindling to the pile. The progression from the $1.5 billion Chrysler rescue to the current multi-trillion dollar worldwide financial support operations seems to parallel the march from the first US forestry service attempts to limit forest fires about a century ago to the far more sophisticated efforts possible today. Although the forestry service is successful limiting small fires, the longer they suppress them, the higher the probability of a highly disastrous, totally uncontrollable conflagration. Studies have shown that the onset of that catastrophe is almost totally unpredictable. By suppressing small fires, the forests approach an unstable state where the dead wood, resulting from the natural cycle of birth and death in the wild, is piled high, ready to explode into flames if the conditions are right. The central banks and other governmental authorities have piled the money so high that bubbles are popping up everywhere. 
This might be different than the explosion in the cost of a can of beans in Zimbabwe, but it is an inflation nevertheless and it impoverishes those who do not own these inflating assets. Furthermore, as those assets are in a bubble, a sharp reversal in price could appear at any time, just like the fire might begin in the forest. With so many bubbles and so much kindling, volatility in price is a sure thing. As research has shown that the timing of these dramatic breakdowns, whether a forest fire, an earthquake, or a market crash cannot predicted, or mitigated as it runs its course, the time to control these crises is way before they start. The US Forestry Service knows that, please tell Bernanke!

Zero Hedge

Arizona sheriff Arpaio unveils findings of Obama birth certificate probe

Maricopa County Sheriff Joe Arpaio has unveiled preliminary results of an investigation, conducted by members of his volunteer cold-case posse, into the authenticity of President Obama's birth certificate.

At a news conference, Arpaio said the probe revealed that there was probable cause to believe Obama's long-form birth certificate released by the White House in April is a computer-generated forgery. He also said the selective service card completed by Obama in 1980 in Hawaii also was most likely a forgery.

Read more: http://www.foxnews.com/politics/2012/03/01/arizona-sheriff-arpaio-unveils-findings-obama-birth-certificate-probe/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews/politics+(Internal+-+Politics+-+Text)&utm_content=Google+Reader#ixzz1nzGRIDyU

Payments ruled out on Greek credit default swaps

The restructuring of Greek government debt will not trigger payouts of billions of euros to holders of insurance on the bonds, known as credit default swaps. At least, not yet.

The ruling Thursday, by a panel of the International Swaps and Derivatives Association, was expected. But it still sent a shudder through the sovereign debt market, driving up already high yields on the bonds of Italy and other troubled countries. If market participants lose confidence that they can collect on their default protection, they will demand higher yields to cover the added risks, analysts said.

“There is now a high degree of risk that sovereign CDS will not pay off and that using this vehicle to hedge is worthless,” said John Braive, vice-chairman of CIBC Global Asset Management Inc.

Major bond-rating agencies have already determined that Greece will be in “selective default” on its obligations as soon as a deal is completed for major private creditors to take a hefty haircut in excess of 70 per cent on their Greek bond holdings. Officials expect it to be wrapped up by mid-March, freeing up the €130-billion ($170.58-billion Canadian) rescue funds and enabling Athens to meet a bond repayment of €14.5-billion due on March 20.

The restructuring is designed to trim more than €100-billion from the beleaguered country’s mountain of debt. But the ISDA has ruled that because the cuts are voluntary, the plan does not constitute a “credit event” that would require payouts on the swaps contracts.

The derivatives industry lobby group also ruled that another part of the rescue package involving a bond swap with the European Central Bank does not leave other creditors in a subordinate position, which would normally amount to a default. Under the deal, the central bank, the largest holder of Greek debt, will do a straight swap of new bonds for old, but will not be subject to the cuts reluctantly accepted by the private-sector banks and other institutional creditors.

But the ISDA said in a statement that the situation in Greece “is still evolving” and it did not discount the possibility of a “credit event” occurring in future “as further facts come to light.”

The trigger would almost certainly be a planned Greek government move to retroactively impose newly legislated collective action clauses (CACs), which would compel all bondholders to accept the same losses as those participating in the voluntary transaction.

“The assumption in the market is that it will be deemed a credit event if and when the CACs are activated,” said Beat Siegenthaler, senior foreign-exchange strategist with UBS in Zurich. “At that point, it will be crucial to trigger a payout, as otherwise CDS would lose most of their value as an insurance instrument, which in turn would adversely affect other euro-zone sovereigns.”

Athens is expected to use the CACs to mop up the 5 per cent or so of bonds on which holders have so far refused to accept losses. Some of these bonds are held by hedge funds eager to trigger a payout of the default swaps, which cover more than $3-billion (U.S.) of Greek debt, slightly more than half the level of a year ago.

The ISDA’s more than 800 members include all the major global derivatives players, including JPMorgan Chase, which has a seat on the committee that ruled on the Greek default issue. Another member is bond fund powerhouse Pacific Investment Management Co., which holds no Greek debt.

The committee probably faces at least one more vote on the Greek question. “It’s not a slam dunk,” Bill Gross, Pimco’s co-chief investment officer, told Bloomberg television. “We expect the next few days, perhaps next few weeks, to ultimately send the ISDA committee back for one final vote.”

The Globe and Mail

Mosques spread across country despite hostility since Sept. 11

NEW YORK — The number of American mosques has increased dramatically in the last decade despite protests aimed at Muslim houses of worship in the wake of the Sept. 11 terrorist attacks, according to a new study.

Researchers conducting the national count found a total of 2,106 Islamic centers, compared to 1,209 in 2000 and 962 in 1994, the increase reflecting Muslims moving into the suburbs and the arrival of newer immigrants from Africa, Iraq and elsewhere.

About one-quarter of the centers were built between 2000-2011, as the community faced intense scrutiny by government officials and a suspicious public. In 2010, a protest against a mosque near the former World Trade Center site erupted into a national debate over Islam, extremism and religious freedom. Anti-mosque demonstrations spread to Tennessee, California and other states.

Ihsan Bagby, a professor at the University of Kentucky and lead author of the study, said the findings show Muslims are carving out a place for themselves despite the backlash.

“This is a growing, healthy Muslim community that is well integrated into America,” he said. “I think that is the best message we can send to the world and the Muslim world in particular.”

The report released Wednesday, “The American Mosque 2011,” is a tally based on mailing lists, websites and interviews with community leaders, and a survey and interviews with 524 mosque leaders. The research is of special interest given the limited scholarship so far on Muslim houses of worship, which include a wide range of religious traditions, nationalities and languages.

Researchers defined a mosque as a Muslim organization that holds Friday congregational prayers called jumah, conducts other Islamic activities and has operational control of its building.

Buildings such as hospitals and schools that have space for Friday prayer were not included. Chapters of the Muslim Student Association at colleges and universities were included only if they had space off-campus or had oversight of the building where prayer was held.

The overwhelming majority of mosques are in cities, but the number located in suburbs rose from 16 percent in 2000 to 28 percent in 2011. The Northeast once had the largest number of mosques, but Islamic centers are now concentrated in the South and West, the study found.

New York still has the greatest number of Islamic centers - 257 - followed by 246 in California and 166 in Texas. Florida is fourth with 118. The shift follows the general pattern of population movement to the South and West.

The study found the ethnic makeup of mosque participants largely unchanged from 2000. South Asians comprise about one-third of participants, while Arabs and blacks are about one-quarter each. Mr. Bagby found a slight increase in the percentage of Muslims from West Africa and Somalia.

An influx of Iraqi and Iranian refugees is behind a jump in the number of Shiite mosques since the 1990s, though Shiites still represent a very small percentage of the U.S. Muslim population.

The Washington Times

China slashes proportion of foreign reserves held in $US assets

CHINA has made a sharp shift away from purchases of US securities, slashing the dollar's share of the country's foreign reserves in what may signal a change in strategy for managing the massive cash pile, Dow Jones calculations indicate.

The portion of China's reserves parked in the US appears to have sunk to a decade low of 54 per cent as of end-June from 65 per cent in 2010 and 74 per cent in 2006, according to the Dow Jones calculations. The calculations are based on data on China's holdings of US securities from an annual US Treasury survey, and China's own data on the value of its FX reserves.

The exact allocation of China's $US3.2 trillion ($2.96 trillion) reserves - by far the world's biggest war chest - has always been a mystery. But the Treasury survey provides the best guide as to how much the State Administration of Foreign Exchange - the organisation charged with managing those reserves - has invested in dollar assets.

Given the size of China's reserves, and the growing global importance of the world's second-biggest economy, Beijing's allocation of its reserves is both a key political issue and a potentially huge factor for foreign-exchange and sovereign debt markets.

The US data show China's holdings of US securities edged up $US115 billion on year to $US1.726 billion at the end of June, but this equates to a much smaller share of the total as China's reserves were growing rapidly during the period. The purchases of US securities equalled just 15 per cent of the growth in China's reserves, a substantial fall from 45 per cent in 2010 and an average of 63 per cent over the last five years.

Calculating the dollar's share in the allocation of flows into China's reserves is complicated by the impact of currency movements on the value of China's reserves. But even accounting for valuation effects, the downshift in dollar purchases appears pronounced.

The new numbers lend credibility to hints from Chinese and European government officials over the last two years that Beijing is ramping up its purchases of European sovereign debt. In February, speaking at the EU-China summit Premier Wen Jiabao said: "Europe is a main investment destination for China to diversify its foreign exchange reserves."

As the eurozone crisis rumbles on, it suggests that funds from China's reserves could be a critical factor in keeping a lid on rising bond yields in the debt-ridden eurozone periphery, and in funding Europe's bailout facilities.

Analysts caution that the US data need to be taken with a grain of salt. The Treasury International Capital system collects data on millions of records to calculate foreign holdings of US. securities. But correcting for biases in the data, in particular correctly identifying country ownership of securities held in custody in third countries, is difficult. Typically the result of this bias is to underestimate China's holdings of Treasurys.

The Australian

Fidelity Says Money Fund Reform Will 'Destroy' Industry

Fidelity Investments ratcheted up its rhetoric against money-market fund reform, warning U.S. regulators on Thursday that proposed changes would "ultimately destroy" the $2.7 trillion industry and disrupt financing for American businesses.

In a comment letter to the U.S. Securities and Exchange Commission, the largest U.S. money fund sponsor said proposals that include requiring more capital and placing restrictions on investor redemptions would be disruptive to the industry and put even greater strain on the federal guarantees that back bank deposits.

"In particular, we continue to believe that proposals such as floating (net asset value), imposing onerous capital requirements or adding burdensome redemption restrictions will ultimately destroy the money market fund industry," Fidelity said.

"The demise of money-market funds would remove important short-term financing capacity form the markets, inevitably resulting in less credit extension that would impact businesses large and small," Fidelity said.

Fidelity and other money-market fund sponsors fear that tighter regulations under review by the SEC would drive investors to other investment vehicles, particularly banks.

Another big money fund sponsor, Federated Investors , has threatened to file a lawsuit to block reforms.

Fidelity's letter to the SEC stressed that reforms the SEC put in place in 2010 after the credit crisis has made money-market funds stronger and more liquid than ever.

Both companies say the funds' ability to survive investor withdrawals last summer during the European sovereign debt crisis shows their new resilience.


Farage: we've got to fight back against entrapment of global government

Greek Default Payouts May Bring Some Costly Surprises THIS IS VERY IMPORTANT

A restructuring of Greece's colossal debt is widely expected to trigger insurance payouts— and investment banks and hedge funds are working out who will be the winners and losers.

If the restructuring goes ahead as planned under the terms of Greece's second international bailout, it could involve Athens forcing some bondholders to accept a much lower value.

Credit Default Swaps (CDS) — financial instruments purchased to insure buyers against default — could offer some solace to those banks, fund managers and institutional investors that would see the value of their bonds dramatically cut.

While there is a growing expectation that the CDS will be triggered, question marks over the pay-out process could mean costly surprises for those who must pay up and for those who might be disappointed by their insurance windfall.

In principle, Greece's debt restructuring deal is voluntary. But Athens has already approved a law with so-called Collective Action Clauses (CACs), which, if needed, allows it to impose the same conditions on all bondholders — willing or not.

A committee of the International Swaps and Derivatives Association (ISDA), consisting of 10 CDS dealers and 5 which are mainly hedge funds, is expected to decide in the coming weeks that the restructuring is a "credit event", which means pay-out on a default insurance contract will be triggered.

The committee could make a decision as early as Thursday at talks about whether more favourable treatment the European Central Bank , one of Greece's main creditors, is getting over other lenders qualifies as a "credit event".

If this is not decided at Thursday's talks, analysts at Credit Suisse [CS 27.06 0.24 (+0.89%) ]and at other banks still expect the CDS to be triggered around March 9 when Greece is expected to use the collective action clauses to impose terms on all bondholders.

Overall, holders of Greek government bonds are facing a 74 percent write off in the value of their portfolios now that paperwork for a 200-billion-euro ($268 billion) debt swap has been sent out to try and tackle the debt crisis.

If the CDS are triggered the maximum that could change hands as a result of a Greek default is $3.25 billion, according to the Depository Trust & Clearing Corporation, a clearing and settlement company. That compares to a net value of the euro zone sovereign CDS market of $109 billion, according to the latest DTCC data.

Many politicians mistrust CDS because of their role in the 2007 finanical crisis when they were used to construct some of the most toxic debt instruments, and due to suspicions that hedge funds used them to derail government finances.

"A Few Percentage Points"

The payout to CDS holders is determined by a complex auction process administered according to ISDA guidelines.

"Even a few percentage points difference is a relatively big deal," said Michael Hampden-Turner, credit strategist at Citigroup, referring to the auction-determined rate.

As CDS contracts are not traded at an exchange, there is little clarity over who has bought the insurance, and which financial market participants stand to foot the bill if a payout is triggered.

Less than a year ago, Europe was adamant that a Greek default should be avoided at all cost for fear it would cause market mayhem, similar to the panic that followed the collapse of investment bank Lehman Brothers in 2008.

Former European Central Bank President Jean-Claude Trichet famously said last July that rating agencies should never openly put a default sign on Greece, and that a payout of default insurance through triggering CDS was equally taboo.

Politicians — and even bankers such as Deutsche Bank [DB 47.91 1.17 (+2.5%) ] Chief Executive Josef Ackermann — were similarly critical.

But the first has now happened, and the second looks likely, without having caused much of a market stir.

Hedge Funds

Much of that has to do with the relatively small size of the expected pay-out of the CDS, and the fact that the market for highly complicated debt instruments that blew up at the time of the Lehman collapse has largely dried up.

The expected roughly $3.25 billion CDS pay-out looked "completely tiny" when compared to the 100-billion-euro loss for bondholders on the Greek debt restructuring deal, said Alessandro Giansanti, a fixed income strategist at ING Groep.

But even if the numbers are small for international markets, financial consequences for individual players could be big.

In one example of how banks positioned themselves ahead of the recent Greek debt agreement, dealers in late October used a so-called "swap box" trading mechanism, that enabled them to match short Greek bond positions with long ones in a bid to make the unwinding as orderly as possible.

Euroclear, the settlement house that facilitated the newly devised tool, said it was currently looking into whether there was demand to use the "swap box" mechanism a second time.

Hedge fund managers — many of whom are thought to have been buying up Greek bonds in the past few months - are also busily positioning themselves, depending on whether or not they have bought protection on the bonds.
For those who have, a CDS pay-out will not only soften the blow of a default. It will also show that CDS represent a viable financial instrument to protect against governments running out of money to pay their debts.

"It will be positive for the CDS market because it will mean that there is an efficient function of the CDS market," said ING's Giansanti. "If you buy CDS you want to be rewarded if a credit event happens."


British bank chief warns quantitative easing is 'laying seeds for next crisis'

A leading British banker has warned that the huge sums of money being pumped into western economies to underpin banks and promote financial stability risk "laying the seeds for the next crisis".

As central bankers on both sides of the Atlantic played down expectations that they were poised to unleash a fresh round of money creation, Peter Sands, the chief executive of Standard Chartered bank, warned it was "going to take time for the rich West to sort itself out".

But Sands's main concern was that support operations by western central banks, which have seen trillions of dollars pumped into the financial system through so-called quantitative easing, could set the scene for more trouble in the years ahead.

Breaking ranks from his fellow bosses, Sands, whose bank is focused mainly in Asia, said: "Banks are still going to have to refinance their loans in three years time. It's not clear what the exit strategy is, nor is it possible to predict what the long-term consequences will be."

He added that the crisis and the west's policy response had accelerated the shift in "power and dynamism" from the developed world to emerging markets.

Some economists have argued pump-priming the economy kicks the problem further down the road, while others fear an inflation time bomb has been created.

Sands said: "The risks to financial stability from this kind of intervention [by central banks and government] is unknown. But intervention on this scale will have repercussions."

Sands's outspoken comments came as central bankers across the west were in the spotlight over policy decisions.

US Federal Reserve chairman Ben Bernanke, who has authorised $2.3 trillion worth of bond buying to prop up the system, speaking in Washington on Wednesday, played down hopes that he will support further QE after official figures showed the world's largest economy expanding faster than first thought at the end of 2011.

In its latest estimate of fourth quarter growth, the US Commerce Department said GDP expanded at an annual pace of 3% – up from its last estimate of 2.8%.

In one of his twice-yearly so-called Humphrey Hawkins testimonies to Congress, Bernanke made clear he and his fellow Fed governors were still weighing up the strength of the US economy.

"In light of somewhat different signals received recently from the labour market than from indicators of final demand and production ... it will be especially important evaluate incoming information to assess the underlying pace of the economic recovery," he said.

The price of safe haven assets such as gold and silver fell sharply as Bernanke spoke, with the gold price down by almost $70 an ounce at one point. The FTSE100 also fell in afternoon trading to finish down 56 points.

The Bank of England governor, Mervyn King, also poured cold water on suggestions that a further round of QE in Britain, where £325bn has been pumped into the system so far, was on the cards later this year. Taking questions from Commons cross-party Treasury Committee, King said: "By and large, I don't think there's any hard and fast expectation that we're inevitably going to do much more."

Their comments came after the European Central Bank in Frankfurt announced that it had handed out another €530bn of cheap loans to eurozone financial markets, helping to push stock prices up in morning trading.

The ECB's long-term refinancing operation (LTRO), which offers banks three-year loans at an interest rate of 1%, was the key crisis measure introduced by its governor Mario Draghi, last year to stave off the risk of a full-blown eurozone credit crunch.

The Frankfurt-based lender said on Wednesday, a day after banks were invited to bid for the loans, that 800 financial institutions had borrowed a total of €529.53bn, in line with market forecasts, taking the total borrowed under the LTRO to more than €1trn.

Michel Martinez, a eurozone economist at SocGen, described it as a "goldilocks allocation" – neither too large nor too small to alarm financial markets.

"The amount allocated at the ECB's second three-year LTRO seems to strike a good balance between a very large number that may have been seen as a sign of weakness of the banking sector and a small number that would have been seen as not making much difference to risk assets," he said.

Analysts also said the large number of borrowers suggested smaller banks had been able to tap the cheap loans, as well as the large institutions that were seen as the main beneficiaries of the previous round of funding.

But some banks, including Standard Chartered and ING, were keen to distance themselves from the operation, stressing that they had not taken any of the cash.

In the first LTRO, in December, the ECB lent just under €500bn. The measure was widely seen as critical to restoring calm to financial markets – and mending the finances of ailing European banks. Italian and Spanish lenders used the funds to buy their governments' bonds, helping bring yields down to more manageable levels.

However, some economists have echoed Sands's concerns by warning that the LTRO is storing up huge problems for the future if the eurozone banks have failed to recover strongly enough by the end of the three-year period to wean themselves off public support.

Investors had warned that a higher-than-expected take-up of the LTRO could signal distress among eurozone banks.

Christel Aranda-Hassel, economist at Credit Suisse, said the ECB was likely to hold fire for the time being from offering a fresh boost to the economy — by resuming interest rate cuts, for example. "We expect the ECB to take a back seat now and assess the effect of its liquidity injection."

The Guardian

US Air Force prepared if diplomacy with Iran fails

The United States has powerful bombs at the ready in the case of possible military action against Iran and work is under way to bolster their firepower, the air force chief said Wednesday.

General Norton Schwartz, air force chief of staff, declined to say whether US weapons -- including a 30,000-pound massive ordnance penetrator (MOP) bomb -- could reach nuclear sites in Iran that were concealed or buried deep underground.

"We have an operational capability and you wouldn't want to be there when we used it," said Schwartz, when asked about the MOP bomb.

"Not to say that we can't continue to make improvements and we are," he told defense reporters.

Amid speculation that a nuclear site dug into the side of a mountain near Qom is beyond the reach of American weapons, Defense Secretary Leon Panetta has acknowledged shortcomings with the giant MOP bomb and said the Pentagon was working to improve the explosive.

"The bottom line is we have a capability but we're not sitting on our hands, we'll continue to improve it over time," Schwartz said.

Asked about recent comments from retired senior officers that some targets in Iran are immune from US air power, Schwartz said: "It goes without saying that strike is about physics. The deeper you go the harder it gets."

But he added that the US arsenal "is not an inconsequential capability."

The former vice chairman of the Joint Chiefs of Staff, retired general James Cartwright, suggested last week that one nuclear facility in Iran could not be taken out in a bombing campaign.

Cartwright appeared to be referring to the Fordo plant built deep inside a mountain near the Shiite shrine city of Qom, some 150 kilometers (90 miles) south of Tehran.

Schwartz also declined to say whether air power would be effective against Iran's nuclear program but said that the outcome of any preemptive attack would depend on the goal of the strike.

"What is the objective? Is it to eliminate, is to delay, is to complicate? I mean what is the national security objective. That is sort of the imminent argument on all of this," he said.

"There's a tendency I think for all of us to get tactical too quickly and worry about weaponeering and things of that nature."

The general's carefully calibrated remarks coincided with a visit to Washington this week by Israel's defense minister, Ehud Barak, amid renewed speculation of a potential Israeli strike on Iran's nuclear program.

Netanyahu takes Iran nuclear fears to Washington
Jerusalem (AFP) Feb 29, 2012 - Israeli premier Benjamin Netanyahu will carry his warnings on the dangers of a nuclear Iran to the White House next week for talks amid renewed speculation over an Israeli attack on the Islamic Republic.

Netanyahu has already made clear that Iran's nuclear programme, which Israel fears masks a weapons drive, will top his agenda in Washington.

"There is no doubt that one issue will be at the centre of our talks, and that is, of course, the continued strengthening of Iran and its nuclear programme," he told his cabinet on Sunday.

Experts in Israel say Netanyahu's discussions with President Barack Obama will be a chance for the allies to sound each other out on their sometimes divergent positions on Tehran's nuclear programme.

"The prime minister wants to make Iran the central subject and I think the president this time does as well," Israeli political scientist Jonathan Rynhold told AFP.

"There is a major disagreement between the (US) administration and the Israeli government about where the red line is on the Iranian nuclear programme," said Rynhold, of Bar Ilan University, near Tel Aviv. "That will be a major issue of tension."

Netanyahu and Obama are to meet on Monday and the Israeli premier will address a convention of the American Israel Public Affairs Committee lobby group that evening.

It will be his first visit to the United States since September, when he met the president on the fringes of the UN General Assembly.

Obama is to speak to AIPAC on Sunday, when Netanyahu arrives in Washington, after a weekend stopover in Canada, where he will meet Prime Minister Stephen Harper, a keen backer of Israel.

"It's basically a courtesy call and a thank you call in terms of Canada's outspoken support for Israel," Zachariah Kay, a scholar at Jerusalem's Hebrew University and founder member of the Israel Association for Canadian Studies, said of the Ottawa visit. "Keeping friends intact is the important point."

Some of its other friends have been piling pressure on Israel to desist from attacking Iran and allow time for a regime of international sanctions to kick in.

US military chief Martin Dempsey, in an interview with CNN earlier this month, warned that it would be "premature" to launch military action against Iran.

"Israel will be under a lot of pressure to give these sanctions time to work," Rynhold said, adding that the United States could offer its own guarantees to the Jewish state.

"I think that if the administration were to give the Israeli government the impression that they would actually use force to prevent Iran going nuclear then that would definitely serve to tip the balance in the Israeli government in terms of waiting considerably longer."

"I think that in any event Israel's unlikely to do anything in the next three months because President Obama will make a very strong case that sanctions have to be given time and I think that argument is likely to win, at least in the short term."

Iran has topped the agenda in US-Israel talks of recent weeks, which have included visits here by US National Security Adviser Tom Donilon and US intelligence chief James Clapper.

Israeli Defence Minister Ehud Barak left for Washington on Monday on a two-day US trip expected to include meetings with Vice President Joe Biden, Defence Secretary Leon Panetta, and Donilon.

The United States is not alone in wanting to rein in Israel, the sole if undeclared nuclear power in the Middle East.

British Foreign Secretary William Hague has said it would not be "wise" for Israel to take military action against Iran, echoing comments earlier this month by French President Nicolas Sarkozy.

In 1981, Israel launched a pre-emptive strike on the unfinished Osirak reactor outside Baghdad, leaving US officials stunned and earning it a sharp rebuke from its American ally.

For now, Israel says it is keeping all options open for dealing with Iran's nuclear programme, which much of the international community fears masks a weapons drive, despite Tehran's denials.

"The state of Israel is a sovereign state; it has the right and capacity to defend (itself) against any threat," President Shimon Peres said last week. "When we say that all options are on the table, we really mean it."

Space War