How Depressing

Another shoe falls in Europe. Note the references to similar events in early 1930’s Europe which just happen to lead to the rise of a certain German promising to lead them back to prosperity. It’s a bit of a dry and cumbersome read, but important.

The French Depression

Ambrose Evans-PritchardBy  of the UK Telegraph

His tragically-misguided budget offers no strategic plan to reverse — or even to stop — thirty years of slow national decline. He offers no worthwhile measures to slim the Leviathan state, now a Nordic-sized 55% of GDP (Gross Domestic Product), without Nordic labour flexibility or Nordic free markets.

He does not tell us how he will stem the slide in France’s share of eurozone exports over the last decade, down from 17% to 13%, or what he will do about the disastrous swing in France’s trade balance from a surplus of 2.5% of GDP to a deficit of 2.4% since 1999.

He proposes nothing credible to restore France’s viability within EMU (Economic and Monetary Union), or to stop public debt spiralling beyond 90% of GDP. Instead he has served up the most drastic retrenchment in forty years, at the worst possible time, and in the worst possible way. And markets are supposed to applaud?

The budget will tighten discretionary fiscal policy by 2% of GDP next year into the teeth of deepening depression, without offsetting monetary stimulus or exchange rate relief.

Mr Hollande likes to quote Leon Blum, the Popular Front leader of the interwar years. The reality could hardly be more cruel. He is replicating the disastrous deflation policies of Labour Chancellor Philip Snowden in 1931, before the Labour Party woke up to the delicious possibility that you could lift two fingers to the forces of reaction and leave the Gold Standard.

Worse yet, he is perilously close to re-enacting the desperate deflation decrees of Pierre Laval — an ex-Socialist dreamer, pacifist, and utopian who lost his way, and ultimately cleaved too closely to foreign ideologies — and like Laval he is doing so to uphold a fixed exchange system that is slowly asphyxiating his country and no longer makes any sense.

His budget is pro-cylical error of the first order, carried out to meet an EU (European Union) deficit target of 3% of GDP that has no economic logic and is plucked out of thin air to meet bureaucratic tidiness and enshrined like so much other idiocy into EU treaty law. The certain result will be hundreds of thousands of lost jobs.

“To save the dogma of single currency, they are imposing absurd hyper-austerity on France,” said Marine Le Pen from the National Front, France’s unlikely apostle of Keynesian doctrine.

France now joins Italy, Spain, Portugal, Greece, Ireland, and parts of Eastern Europe in synchronized tightening, with the Netherlands and Belgium cutting too, all dragging each other down in a 1930s style slide into the political swamp.

Mr Hollande has not been entirely passive. He threw his weight behind the Latin revolt earlier this summer, forcing German Chancellor Angela Merkel to sanction mass bond purchases by the European Central Bank. This would not have been possible in the Merkozy era, when Nicholas Sarkozy sacrificed all else on the altar of the Franco-German unity.

But he has not followed through and there were in any case two quid pro quos to this deal with Germany. One was that Spain and Italy must submit to Troika Hell before the ECB (European Central Bank) buys a single bond. The second was that France must submit to fiscal Hell.

Mr Hollande has his own motives for bowing to austerity demands. He learned the lesson as an aide to François Mitterrand that you cannot deviate too far from Germany if you share a currency peg. There will be no repetition of 1983, the epic U-turn or `tournant de la rigueur’.

He may judge it tactically clever to get his recession out-of-the-way early in the electoral cycle. If so, it is a very risky strategy.

Professor Jacques Sapir, director of the École des hautes études en sciences sociales in Paris, says the more likely outcome is a downward economic spiral, pushing the declared numbers of jobless from 3m towards 4m — and the real number to 6m — by the end of next year. The economy will not spring back of its own accord this time because the contractionary structure of EMU has jammed the mechanism.

Prof Sapir fears global markets will turn on France with “full fury” before long, at which point, events will slip entirely beyond political control. “François Hollande is making a dangerous bet that he can only lose,” he said.

The French economy has already been in quasi-slump for five quarters. Dominique Barbet from BNP Paribas says the latest crash in the manufacturing PMI (Purchasing Managers Index) to 42.6 — the lowest since April 2009, and lower that at any time in the dotcom bust — is “potentially alarming”.

Indeed it is. Data collected by Simon Ward at Henderson Global Investors shows that a key leading indicator of the money supply –`six-month real M1 money’ — is now contracting even faster in France than in Spain. The shock will hit over the winter. “The budget looks increasingly misguided and self-defeating,” he said.

Mr Hollande thinks his budget will safeguard jobs. The fiscal burden will fall on the rich with a top tax rate of 75%, and on industry. Barclays Capital says three-quarters of the total will come by raising revenue, with the taxes “front-loaded” while spending cuts are “back-loaded”. The ratio of taxes to gross wages will rise to an all-time high of 46.3%. (Finance ministry estimates). [ Notice that like in the U.S., tax hikes always come first with hollow promises of mythical spending cuts later, that, of course, never materialize.]

Harvard Professor Alberto Alesina says this flies in the face of all we have learned about austerity. “The accumulated evidence from over 40 years across the OECD ( Organization for Economic Co-operation and Development) peaks loud and clear: spending cuts are less recessionary than tax increases,” he said.

France, above all, screams out for a blast of tax-cutting Thatcherism and pension reform. The IMF (International Monetary Fund) says the country’s “tax wedge” – or tax as a share of labour costs – is one of highest in the world at almost 50%.

Just 39.7% of those aged 55 to 64 are in work, compared with 56.7% in the UK and 57.7% in Germany. Early retirement incentives are to blame. “French workers spend the longest time in retirement among advanced countries,” says the Fund.

France coasted through the last decade, losing 20% unit labour cost competitiveness against Germany as it screwed down wages and pushed through the Hartz IV reforms. French industry has been losing 60,000 jobs a year for a decade. Manufacturing has shrunk to 12% of GDP, as bad as Britain.

Renault chief Carlos Ghosn warned last week that France’s biggest car company would “cease to exist” in its current form unless there was a radical change in the country’s work climate. “Not over three or six months perhaps, but over three years, or five years, yes, the danger is real,” he said.

The whole economic structure of France is an anachronism in a Chinese world and a German currency union. “We are consuming the leftovers of a past prosperity,” says Jean Peyrelevade, ex-head of Credit Lyonnais.

Sovereign debt strategist Nicholas Spiro says growing doubts about the “credibility of French fiscal and economic policy” may soon bring Mr Hollande’s strange honeymoon to a close. It is a widely-shared view. Danske Bank’s bond team sees a “significant risk that the market will turn on France in 2013”.

Huw Pill from Goldman Sachs said the detonator may be activation of the European Stability Mechanism to bail out Spain and then Italy.

The potential ESM demands are too large for the “vulnerable core” of France, Belgium, and Austria. Their own fiscal health would come under the microscope. The shock would push them “from one equilibrium to another.”

Mr Hollande has swallowed the argument that drastic cuts are the only way to cap debt at 90% of GDP and keep the debt trajectory under control.

Yet we already know from Greece, Ireland, Portugal, and Spain that fiscal shock therapy makes little dent on the deficit without monetary shock absorber. It causes nominal GDP and the tax base to shrink, making debt ratios even worse.

France does not have to put up with destructive 1930s policies imposed by Germany. It is not a vassal state. It remains a great nation, the beating heart of Europe and the EU’s balancing force.

It can break out of this awful trap by leading a yet more determined Latin revolt, this time marshalling its voting majority in the Council to force an end to contractionary policies.

A French-led growth bloc can strike back by inflicting an intolerable level of inflation on Germany. It can, if necessary, cause the North Europeans to walk out of EMU altogether — the optimal solution for the North and South respectively.

For that, Mr Hollande must be willing to abandon the Franco-German condominium, the central tenet of French foreign policy for almost sixty years. The cautious, plodding Enarque from the Limousin is not the type for fireworks, but give him time.

Melts in Your Mouth or in Your Hand

MEDFORD/SOMERVILLE, Mass.–Tiny, fully biocompatible electronic devices that are able to dissolve harmlessly into their surroundings after functioning for a precise amount of time have been created by a research team led by biomedical engineers at Tufts University in collaboration with researchers at the University of Illinois at Urbana-Champaign.

Dubbed “transient electronics,” the new class of silk-silicon devices promises a generation of medical implants that never need surgical removal, as well as environmental monitors and consumer electronics that can become compost rather than trash.

“These devices are the polar opposite of conventional electronics whose integrated circuits are designed for long-term physical and electronic stability,” says Fiorenzo Omenetto, professor of biomedical engineering at Tufts School of Engineering and a senior and corresponding author on the paper “A Physically Transient Form of Silicon Electronics” published in the September 28, 2012, issue of Science.

“Transient electronics offer robust performance comparable to current devices but they will fully resorb into their environment at a prescribed time—ranging from minutes to years, depending on the application,” Omenetto explains. “Imagine the environmental benefits if cell phones, for example, could just dissolve instead of languishing in landfills for years.”

The futuristic devices incorporate the stuff of conventional integrated circuits — silicon and magnesium — but in an ultrathin form that is then encapsulated in silk protein.

“While silicon may appear to be impermeable, eventually it dissolves in water,” says Omenetto. The challenge, he notes, is to make the electrical components dissolve in minutes rather than eons.

Researchers led by UIUC’s John Rogers — the other senior and corresponding author — are pioneers in the engineering of ultrathin flexible electronic components.   Only a few tens of nanometers thick, these tiny circuits, from transistors to interconnects, readily dissolve in a small amount of water, or body fluid, and are harmlessly resorbed, or assimilated. Controlling materials at these scales makes it possible to fine-tune how long it takes the devices to dissolve.

Device dissolution is further controlled by sheets of silk protein in which the electronics are supported and encapsulated.   Extracted from silkworm cocoons, silk protein is one of the strongest, most robust materials known. It’s also fully biodegradable and biofriendly and is already used for some medical applications.   Omenetto and his Tufts colleagues have discovered how to adjust the properties of silk so that it degrades at a wide range of intervals.

The researchers successfully demonstrated the new platform by testing a thermal device designed to monitor and prevent post-surgical infection (demonstrated in a rat model) and also created a 64 pixel digital camera.

Collaborating with Omenetto from Tufts Department of Biomedical Engineering were Hu Tao, research assistant professor and co-first author on the paper; Mark A. Brenckle, doctoral student; Bruce Panilaitis, program administrator; Miaomiao Yang, doctoral student; and David L. Kaplan, Stern Family Professor of Engineering and department chair. In addition to Tufts and UIUC, co-authors on the paper also came from Seoul National University, Northwestern University, Dalian University of Technology (China), Nano Terra (Boston), and the University of Arizona.

In the future, the researchers envision more complex devices that could be adjustable in real time or responsive to changes in their environment, such as chemistry, light or pressure.

The work was supported by the Defense Advanced Research Projects Agency, the National Science Foundation, the Air Force Office of Scientific Research Multi University Research Initiative program, the National Institute of Biomedical Imaging and Bioengineering of the National Institutes of Health under award EB002520 and the U.S. Department of Energy.

Attribution: Real Clear Science

Rice should Resign

King: ‘Susan Rice Should Resign’

By Katrina Trinko at NATIONAL REVIEW ONLINE

comments, as always, by yours truly [ ]

House Homeland Security Committee chairman Pete King is calling on U.N. ambassador Susan Rice to resign over her comments on the Sunday talk shows September 16 regarding the Libyan attacks.

“I think Susan Rice should resign. She is America’s foreign policy spokesman to the world as ambassador to the U.N.,” King, a Republican congressman from New York, tells National Review Online. [ Who do you suppose Obama might choose to replace her, Louis Farrakhan? I heard the Blind Sheikh will be available soon. Maybe he could represent this administration? He’d fit right in at the U.N. ]

Rice appeared on five Sunday morning shows five days after the attacks.  On ABC’s This Week, she said, “Our current best assessment, based on the information that we have at present, is that, in fact, what this began as, it was a spontaneous – not a premeditated – response to what had transpired in Cairo,” despite the fact that U.S. officials knew terrorism was involved within 24 hours after the attack. [ Actually, the State Department knew well in advance. Blaming Rice is ridiculous. She was towing the administration line. ]

“Very nice person, very smart,” King says of Rice, “but the fact is she gave out information which was either intentionally or unintentionally misleading and wrong and there should be consequences for that. And I don’t see how she didn’t know how that information was wrong. What she could have and should have said was the final word isn’t in yet, certainly strong evidence that there was strong terrorist involvement, [but identifying] the exact nature it’ll  take us a few more days. That would have been legitimate.”

[ Okay, can we just put this, “nice person” crap away. It has nothing to do with anything, and how many “nice people” will sit there and lie to whole world five separate times. I’ve heard that about Obama also. He’s a nice person, just misguided. I personally can’t name a single marxist, communist or anticolonialist I would consider to be “nice”. ]

King also called for an investigation into what was known before the attack. “This warrants a full investigation,” he says. “I believe there should be a congressional investigation. I think there should be an internal investigation.” [ Yes, like the recent investigation into the “Fast and Furious” scandal that basically exonerated Eric Holder. I’m sure he’s a “nice person” too. ]

Benghazi, he adds, “was a hotbed of al-Qaeda activity, of militia activity, of terrorist activity. We knew that the facilities that we were using there were not adequately fortified. These were temporary, basically private residences which had almost none of the protections that a consulate should have.” [ Has anyone, save for a few of us, even asked what the ambassador was doing there? You may wish to re-read “Benghazi was no Coincidence”  ]

“To allow the American ambassador to go there,” he continues, “ to allow us to keep records or documentation there or anything  in such an unsecure and such a dangerous area and such unsecure facilities with such little security appears to be gross negligence, and may be criminal negligence.” [ Unless it was not a consulate, but a CIA safe house ]

He also criticized the administration’s reluctance to call the attacks terrorism. “Either they intentionally mislead the American people or they were extremely uninformed,” King remarks. “Neither excuse is very good. From the start, I can see them saying we’re not certain what caused it, but the presumption from the start should have been that it was a terrorist attack or the terrorist were heavily involved.” [ I wish someone would just come out and state the obvious; This administration, from the top down, is filled with bad people who don’t appear at all concerned with our security, or that of our allies ]

Obama, he speculates, had political reasons to avoid calling it terrorism. “What I believe now is that the president is so fixated on convincing the American people that we have defeated al-Qaeda and that al-Qaeda is no longer a real threat by saying this was a terrorist attack, or by acknowledge a terrorist attack,  it would be looked upon as a defeat for his policies against al-Qaeda,” King says. [ No need for speculation Mr. King. It’s a fact ]

New Supercar

Peugeot has unveiled a sinister looking supercar concept that will be debuting this month at the 2012 Paris Auto Show.

The vehicle has been built using materials that have been processed as little as possible. They include aluminum, carbon fiber, PMMA (PolyMethyl MethAcrylate), copper and even felt.

The chassis is a carbon fiber monocoque and weighs just 220 pounds. It’s one of the main reasons the total weight of the Onyx is only 2,425 pounds.

Power comes from a mid-mounted 3.7-liter V-8 turbodiesel, developed with the help of Peugeot’s motorsport arm, Peugeot Sport. Cooled by ducts which begin at the roof via NACA take-offs, the V-8 transmits its 600 horsepower to the rear wheels via a six-speed sequential gearbox.

For added performance, Peugeot designers have also added their company’s HYbrid4 system. The latest version of the system uses a kinetic energy recovery system to charge up an array of lithium-ion batteries. These batteries are used to power an electric motor that sends an additional 80 horsepower to the front wheels, coming online automatically when the Onyx is accelerating.

One of the Onyx’s most distinguishing features is its interior. Made of felt, compressed and stretched, the cabin is formed as a one-piece pod, with no stitching or joints.

It creates a real cocoon around the occupants and is fitted into the carbon structure, visible in places, it replaces a number of elements found in regular cars: soundproofing, floors, dashboards, roofs, and even seats.

To make the seats, for example, designers simply inserted foam padding under the felt. The best part is that felt is not only quite flexible to use, it’s completely renewable as it’s made from wool. The dash, meanwhile, is made from old newspapers that have been compressed to form a hard material that, believe it or not, resembles wood. If you take a close look at the dash, Peugeot says you’ll even notice some of the original newspaper print.

Sadly, Peugeot stresses that the Onyx is simply to showcase the talents of its design team and preview new materials and construction techniques that could be making their way into future cars. In other words, you can’t purchase one.

Joke of the Day

Eleven people were clinging precariously to a wildly swinging rope suspended from a crumbling outcropping on Mount Everest.

Ten were blonde, one was a brunette.

As a group they decided that one of the party should let go. If that didn’t happen the rope would break and everyone would perish.

For an agonizing few moments no one volunteered.

Finally the brunette gave a truly touching speech saying she would sacrifice herself to save the lives of the others.

The blondes applauded.