The era of governments losing faith in gold -- which led Australia to sell off 167 tonnes in 1997 at an average of $US350 an ounce (against its present value of more than $US1600/oz)
WSJ
Monday, October 24, 2011
Libya's liberation: interim ruler unveils more radical than expected plans for Islamic law
Mustafa Abdul-Jalil, the chairman of the National Transitional Council and de fact president, had already declared that Libyan laws in future would have Sharia, the Islamic code, as its "basic source".
But that formulation can be interpreted in many ways - it was also the basis of Egypt's largely secular constitution under President Hosni Mubarak, and remains so after his fall.
Mr Abdul-Jalil went further, specifically lifting immediately, by decree, one law from Col. Gaddafi's era that he said was in conflict with Sharia - that banning polygamy.
In a blow to those who hoped to see Libya's economy integrate further into the western world, he announced that in future bank regulations would ban the charging of interest, in line with Sharia. "Interest creates disease and hatred among people," he said.
Gulf states like the United Arab Emirates, and other Muslim countries, have pioneered the development of Sharia-compliant banks which charge fees rather than interest for loans but they normally run alongside western-style banks.
The Telegraph
What's the Largest Earthquake that Could Strike the United States?
Several earthquakes struck the United States Friday (Oct. 22), including a 4.0-magnitude quake near San Francisco, Calif., a 4.8-magnitude temblor in central Texas, and a 3.2-magnitude quake in Hawaii. Though experts say the small burst of seismic activity on U.S. soil isn't all that unusual, it has likely led some people to wonder how much worse things could get.
Geophysicists estimate that the Cascadia Subduction Zone, an intersection of tectonic plates just off the northwestern coast that stretches from the northern tip of California up to Canada, is capable of generating an earthquake with a magnitude as high as a 9.0.
"There were hardly any people living on the Pacific Northwest Coast in 1700," said Heidi Houston, a seismologist at the University of Washington's Department of Earth & Space Sciences. "But it generated a huge tsunami that traveled to Japan and destroyed coastal villages there. The Japanese records show that the causative earthquake could only be our Cascadia Subduction Zone and it had to have been a magnitude-9.0."
By analyzing sedimentary deposits in low-lying areas along the coast, paleoseismologists have determined that large tsunamis (almost definitely produced by large earthquakes) strike the Pacific Northwest about every 500 years, give or take 200 years. Because the last one happened in 1700, "that means sometime in the next 400 years it will happen again," Houston told Life's Little Mysteries.
"The low-lying areas have deposits that give a record of repeated history of tsunami inundations, and how big they were. That means you may know the likelihood on the order of hundreds of years, but it doesn't give the likelihood in the next few years," Bangs explained.
A 9.0 earthquake is also possible in Alaska, the most earthquake-prone state in the U.S. In 1964, the Aleutian fault separating the Pacific and North American plates ruptured near the city of Anchorage, resulting in a 9.2-magnitude earthquake – the second largest ever recorded on a seismograph.
The San Andreas Fault, commonly perceived to be more dangerous than the Cascadia Fault because of the proximity of several major California coastal cities including San Francisco, is not actually capable of generating a 9.0-magnitude earthquake. "The biggest one there would be just under 8.0," said Houston.
Live Science
The single currency is close to collapse
Yet again, Europe stands on the brink of abject disaster, apparently unable to resolve its differences. A monetary union that was meant to bring former enemies together, binding them to each other via irreversible economic integration, is succeeding only in tearing them apart. It is a crisis that this newspaper has consistently warned of since the single currency’s creation; it gives no pleasure to see our predictions come true.
With a meltdown in the sovereign debt markets fast metastasising into an all-embracing economic and political calamity, the Continent’s position has rarely seemed quite so imperilled since the days of the Second World War. Most worrying is that the Franco-German partnership which lies at the heart of the European project is fracturing as never before, with deep divisions over almost every aspect of the grand rescue plan.
It has already been conceded that this weekend’s meeting of EU leaders in Brussels – billed as the summit to end all summits – will be unable to agree anything of importance. Few have any confidence that a separate meeting on Wednesday will do much better. Whatever is agreed is almost guaranteed to fall short of expectations. Solutions that might have worked if enacted at an earlier stage are being rendered progressively obsolete by fast-deteriorating economic conditions and debt dynamics. Even Germany now seems to be slipping back into recession.
No longer is it possible to rely on the post-war assumption that, while Europe’s leaders may quarrel and disagree, they will always – in extremis – find a way through. Continental solidarity is being tested to its very limits, and the differences could be intractable.
The detail of the disputes over bank bail-outs and the scale of the European rescue fund is tortuous and convoluted. But the underlying problem is simple enough. Europe’s political elites know that for the euro to survive in its present form, it must move – with speed – towards full fiscal and political integration. Yet national leaders, and the voters they answer to, are as yet unwilling to accept the loss of sovereignty, and indeed the shared liabilities, that such a revolution demands.
The Telegraph
Nicolas Sarkozy tells David Cameron: shut up over the euro
David Cameron has begun a week of intense political infighting over Europe by becoming embroiled in a furious row with Nicolas Sarkozyover Britain's role in talks to solve the crisis enveloping the euro.
Sarkozy bluntly told Cameron: "You have lost a good opportunity to shut up." He added: "We are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings."
The prime minister has torn up his travel plans this week – a move urged on him by Labour leader Ed Miliband in a Guardian interview on Saturday – to attend an emergency heads of state meeting on Wednesday, and has demanded that all 27 EU countries be given the final say over measures to prevent the eurozone's sovereign debt crisis spreading and Europe sliding into deep recession.
On Monday the prime minister is facing both the largest Commons revolt of his premiership and the largest rebellion of eurosceptics suffered by a Conservative prime minister when parliament votes on whether the UK should have a referendum on Europe.
Cameron will meet parliamentary aides in Downing Street before the vote in an attempt to dissuade as many as 10 members of the government minded to rebel against the prime minister, requiring them to resign their posts. The government is sticking to its decision to impose a three-line whip on MPs to vote against the motion despite criticism it has been too heavy-handed.
Officials who witnessed the angry exchanges between Cameron and Sarkozy said the prime minister insisted that the package to be adopted on Wednesday by the 17 eurozone countries had serious implications for non-euro countries in the EU and their interests must be safeguarded. Eventually, after what Donald Tusk, the Polish prime minister, who chaired the summit, called a "stormy" discussion, the French president secured an agreement that all 27 leaders will first debate the three-pronged package of measures to recapitalise banks, build up the bailout find and write down Greek debt, but then the eurosummit would have the final say at back-to-back summits on Wednesday.
Cameron, however, got his fellow leaders to insert into the final communique recognition that laws on the single market must be upheld and a level playing field safeguarded for countries not in the euro. He later brushed aside the divisions, saying that what mattered was that markets regain confidence that the eurozone is preventing contagion from the Greek debt crisis.
The vote in parliament on Monday will be a testy encounter with his own party on Britain's membership of the EU. The vote calls for a nationwide referendum on whether Britain should leave the EU, renegotiate its treaty with Brussels, or remain a member on current terms. The government will not suffer a defeat, since Labour and the Lib Dems will vote down the motion, but a voluble and sizeable group believe the prime minister should honour pledges once made to allow a national poll on Britain's relationship with Europe. They would like the repatriation of social and employment rights.
Cameron claimed he had proved his ability last year to "exact" a good price when he agreed an EU treaty change that created a new mechanism for bailing out troubled eurozone countries but exempted Britain from having to pay for bailouts from 2013.
It is not clear if this would trigger the government's stated commitment to a referendum because it is due to stage a vote only if new powers are transferred from Westminster to Brussels, and any change by Cameron would be likely to do the reverse.
"If there is a treaty change, that gives Britain an opportunity," Cameron said. "Treaty change can only happen if it is agreed by all the 27 member states of the European Union.
"Any treaty change – as the last treaty change did – is an opportunity for Britain to advance our national interest. The last limited treaty change which brought about the European stability mechanism gave us the opportunity to get out of the euro bailout fund that the last government opted into."
Cameron said: "I've also argued that this crisis means that greater fiscal and economic integration of the eurozone is inevitable. But this must not be at the expense of Britain's national interest. So I've secured a commitment today, which will be in the council's conclusions, that we must safeguard the interests of countries that want to stay outside of the euro, particularly with respect to the integrity of the single market for all 27 countries of the EU.
Academics at Nottingham University predict the number rebelling against the government is likely to top the 41 Conservative MPs who voted against John Major in May 1993 on the third reading of the Maastricht bill – the biggest backbench rebellion for a Tory PM on Europe on whipped business.
They also said 41 was the number who rebelled in October last year over an attempt to make using insulting language a criminal act, which was then the biggest rebellion of Cameron's premiership.
The two sides in the referendum battle fortified their positions, with government ministers defending the decision to impose a three-line whip on the vote brought to the Commons by a petition.
The defence secretary, Philip Hammond, said the whip had been put in place because the motion was contrary to government policy and holding a referendum on the EU would be "just a distraction".
The former Conservative leader Lord Howard also weighed in, saying that an EU referendum would be a mistake in current conditions. The former foreign secretary Sir Malcolm Rifkind said he believed a vote for a referendum would make Britain a "laughing stock".
But Cameron faces the likely resignations of some parliamentary aides to ministers and rebellion by the chairman of the 1922 committee, Graham Brady. Lord Tebbit suggested that "not even Ted Heath faced the chairman of the 1922 voting against him".
The number rebelling could hit 90 if the 68 who signed up to the original amendment tabled by the MP for Bury North, David Nuttall combine with another 33 who have signed compromise amendments which ministers say also run counter to government policy. Nuttall would commit the government to holding a referendum by May 2013 but would give the public three options – keeping the status quo, leaving the EU or reforming the terms of the UK's membership.
An amendment from George Eustice, a new but influential MP who used to work for Cameron, calls on the coalition to publish a white paper in the next two years setting out which powers ministers would repatriate from Brussels. The government would then renegotiate the UK's relationship with the EU and hold a referendum on the outcome.
Some names on Eustice's list may have signed up in the brief window when they thought Eustice's amendment would come to be adopted by the government as a way of the party high command giving backbenchers a compromise to vote through.The Commons speaker John Bercow may however choose not to call Eustice's amendment.
The Gurdian
Europe's leaders threaten Greek default if banks won't take haircut and accept losses of £120bn
Europe's leaders are threatening to trigger a formal default on Greek debt and risk a “credit event” if banks refuse to accept losses of up to €140bn (£120bn) on their holdings.
Hardline eurozone members, backed by the International Monetary Fund (IMF), delivered the ultimatum this weekend after an official report found that in a worst-case scenario Greece could need a second bail-out of €450bn – twice the current package and more than the entire €440bn in the eurozone’s rescue fund.
Vittorio Grilli, a senior EU official, travelled to Rome yesterday to present the “take it or leave it” deal to the Institute of International Finance, which is leading the negotiations for the banks. “The only voluntary element for the banks now is to take a 50pc haircut or face a credit event, a default,” said an EU diplomat.
The threat marks a dramatic change of stance in Brussels, and follows early warnings that a Greek default would set off a chain reaction that would result in a worse financial crisis than in 2008.
Although wary about the markets, they are now thought to believe that a “big bazooka” solution could contain the crisis in Greece.
The “haircut” would be accompanied by details of plans to recapitalise the banks and reinforce the European Financial Stability Facility (EFSF), the €440bn bail-out mechanism.
If the banks called the EU-ECB-IMF troika’s bluff, they would potentially face nationalisation. A “credit event” would risk triggering credit default swaps – the scale of losses from which cannot be accurately quantified.
Finance ministers, including Chancellor George Osborne, were locked in discussions all day yesterday over the details of the bank recapitalisation. He emerged from talks saying that “real progress” had been made on plans to strengthen European banks.
Ministers were thought to have agreed that banks may need about €100bn in capital, increasing their core tier one capital ratio to 9pc. But, the details of these plans were not yet clear.
Europe’s banking lobby, dominated by French financial institutions with a high exposure to Greek debt, have protested that any haircut greater than 40pc is too much.
But Mr Grilli, who chairs the EU’s powerful economic and financial committee, which does the backroom work for European finance ministers, will tell the banks the IMF recommends a 60pc haircut.
The ultimatum will say that a 50pc private sector contribution is the minimum that can be accepted and, even then, the EU will have to put in an extra €4.5bn for Greece. To ensure the banks can withstand the losses, they will be made to raise at least €100bn over the next six to nine months.
French banks are particularly exposed, but UK officials are confident British banks will escape unscathed.
In July, European banks offered a “voluntary contribution” of 21pc writedowns – an offer the banking sector has struggled to deliver and which is widely mistrusted by governments due to the collateral lenders are asking in return.
Jean-Claude Juncker, the chairman of the euro group of finance ministers, said: “We have agreed that we have to have a significant increase in the banks’ contribution.”
The development is a victory for the IMF, which typically requires a default and a currency devaluation as well as austerity as part of a rescue programme. In Greece’s case, the ECB and European Commission (EC) have insisted the programme is limited to austerity. The ECB and EC fought with the IMF to keep haircut scenarios out of a joint troika report on Greece, delaying its completion by a month .
The Telegraph
U.S. likely to get second rating downgrade: Merrill
NEW YORK – The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.
The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.
A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.
“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report.
“Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added.
The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the U.S. deficit by at least US$1.2-trillion by Nov. 23.
If a majority of the 12-member committee fails to agree on a plan, US$1.2-trillion in automatic spending cuts will be triggered, beginning in 2013.
Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile U.S. economy, Merrill said. In the same report, the bank reduced its 2012 and 2013 growth forecasts for the United States to 1.8% and 1.4%, respectively.
If there were a downgrade, it was not clear which ratings agency would move first.
Moody’s Investors Service, which has a negative outlook on the United States’s Aaa rating, said it is looking at several other factors, including the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, to decide on the rating.
“It’s not that we’re waiting just for this committee to decide on the rating,” Steven Hess, Moody’s lead analyst for the United States, told Reuters in an interview last week.
Failure by the committee to come up with an agreement, he said, “would be negative information but it is not decisive in our view about the rating.”
To be sure, Hess did not rule out the possibility of an early move on U.S. ratings if the country’s economy slips into recession. So far, however, the economic performance “is certainly not super positive but not a disaster either,” he said.
Fitch Ratings, on the other hand, still has a stable outlook on its AAA rating on the United States, meaning it is more likely to revise that outlook to negative before actually downgrading the rating.
In its latest report on the United States, Fitch says a ”negative rating action,” which could be only an outlook revision, could result from a weaker-than-expected economic recovery or by failure by the bipartisan committee to reach agreement on at least US$1.2-billion in deficit-reduction measures.
Financial Post
Hundreds die as strong quake rocks eastern Turkey
A strong quake has shattered buildings near the Turkish city of Van, killing more than 200 people and trapping an unknown number under rubble.
Casualties are reported to be particularly high in the town of Ercis, close to the Iranian border, where dozens of buildings fell.
Reports spoke of thousands of residents running screaming in the streets.
Rescuers worked into the night to find survivors, some with shovels or their bare hands.
Turkey is particularly vulnerable to earthquakes because it sits on major geological fault lines.
Two earthquakes in 1999 with a magnitude of more than 7 killed almost 20,000 people in densely populated parts of the north-west of the country.'One thousand buildings'
The earthquake struck at 13:41 (10:41 GMT) at a depth of 20km (12.4 miles), with its epicentre 16km north-east of Van in eastern Turkey, the US Geological Survey said.
It was followed by a series of powerful aftershocks, also centred north of Van, including two of magnitude 5.6 soon after the quake and one of 6.0 late on Sunday.
Prime Minister Recep Tayyip Erdogan visited the Van region and Ercis by helicopter.
Up to 80 buildings, including a dormitory, collapsed in the town about 60km north of Van, while 10 fell in Van itself.
Town mayor Zulfikar Arapoglu appealed for help. "We need urgent aid, we need medics," he said.
Ambulances, soldiers and rescue teams rushed to the town, a Reuters photographer reported from Ercis.
Survivors complained of a lack of heavy machinery to remove chunks of cement floors that had pancaked on to each other, the Associated Press reports.
Serious damage and casualties were also reported in the district of Celebibag, near Ercis.
"There are many people under the rubble," said the local mayor, Veysel Keser.
"People are in agony, we can hear their screams for help. We need urgent help."
The head of Turkey's seismology institute said hundreds of people could have been killed.
"We estimate around 1,000 buildings are damaged and our estimate is for hundreds of lives lost - it could be 500 or 1,000," said Mustafa Erdik, general manager of the Kandilli Observatory.
New euro 'empire' plot by Brussels
The proposal, put forward by Herman Van Rompuy, the European Council president, would be the clearest sign yet of a new “United States of Europe” — with Britain left on the sidelines.
The plan comes as European governments desperately trying to save the euro from collapse last night faced a new bombshell, with sources at the International Monetary Fund saying it would not pay for a second Greek bail-out.
It was also disclosed last night that British businesses are turning their back on Brussels regulations to give temporary workers full employment rights, with supermarket chain Tesco leading the charge.
Meanwhile, David Cameron is attempting to face down a rebellion tomorrow by Tory MPs in a vote over staging a referendum on Britain’s membership of the EU.
Ministers expect 60 or 70 MPs to defy the party’s high command and back the call for a referendum, while some rebels claim the final toll could be up to 100 — about a third of the parliamentary party.
Downing Street has upped the stakes dramatically. Last night, No 10 sources insisted they would impose a three-line whip — effectively ordering all Tory MPs to fall in line.
Mr Cameron, who yesterday took personal charge of the effort to persuade MPs to back the Government, has come under intense pressure from Cabinet colleagues to try to defuse the revolt by offering concessions or a way out to rebels. Sources say a handful of parliamentary private secretaries — the lowest rung on the government ladder — might resign.
The single Treasury plan emerged in Brussels yesterday as Europe’s finance ministers tried to find a way out of the crisis engulfing the eurozone. A full-scale rescue plan could cost about £1.75 trillion.
British sources said Mr Van Rompuy, who is regarded as being close to the German government, suggested plans for a “finance ministry” to be based either in Frankfurt or Paris. The EU already has its own “foreign ministry”, headed by Baroness Ashton, the former British Labour minister, and based in Brussels.
A senior Coalition source told The Sunday Telegraph: “I am well aware of arguments in Brussels and elsewhere in favour of a single Treasury. You’d get any number of different versions of 'Europe’ all running at very different speeds.”
They were overshadowed last night as senior sources at the International Monetary Fund indicated privately that it is not willing to further bail out Greece, whose economy has an outstanding debt of about £232 billion.
The IMF, with the EU and the European Central Bank, is assessing Greece’s debt crisis, and a joint report yesterday suggested lenders might have to agree losses of up to 60 per cent in a Greek default.
Eurosceptic Tories, meanwhile, are arguing in favour of “repatriating” powers from the EU to Britain, including the Agency Workers Directive, imposed last year at an annual cost of £1.8 billion, which is putting at risk 28,000 temporary job contracts for those aged between 16 and 24. Tesco has asked one of its suppliers to take advantage of a loophole in the law which allows workers to “opt out”.
As Mr Cameron led the drive this weekend to neuter the Tory rebellion, Nigel Farage, the leader of Ukip, indicated his party might not field candidates at the next election against MPs who vote for a referendum.
On Saturday Tory rebels were among speakers at a “People’s Pledge” pro-referendum rally in Westminster. They included David Davis, the former shadow home secretary, who called the EU a “nascent superstate”.
The Telegraph
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