The Volcker Ambiguity - The triumph of political discretion over financial clarity

The Volcker Ambiguity. WSJ Editorial 
The triumph of political discretion over financial clarity.
Wall Street Journal, Updated Dec. 11, 2013 3:52 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304744304579250393935144268

Just in time for Christmas, financial regulators have come down the chimney with a sackful of billable hours for securities lawyers. Truly a gift that keeps on giving, the Volcker Rule adopted on Tuesday by five federal agencies will create a limitless supply of ambiguity and the need for experienced counsel.

We supported former Federal Reserve Chairman Paul Volcker's simple idea: Don't let federally insured banks gamble in the securities markets. Taxpayers shouldn't be forced to stand behind Wall Street trading desks. What we can't support is the "Volcker Rule" that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.

The general idea is to prevent "proprietary trading," in which a bank makes trades not at a customer's request but simply for its own account. Or at least some trades. The rule's new trading restrictions do not apply when Wall Street giants are trading debt issued by the U.S. government, state and local governments, government-created mortgage giants Fannie Mae and Freddie Mac, and in some circumstances foreign governments and even local or regional foreign governments.


You'll notice a pattern here. Like so many recent financial regulations, the Volcker Rule offers banks and investors big incentives to lend money to governments rather than private businesses. One Wall Street objection to the Volcker Rule has been that it will reduce liquidity in America's capital markets. And fear of a lack of liquidity in the market for government debt—especially Treasurys and European sovereign debt—is precisely the reason politicians and regulators have gone to such lengths to exempt government bonds from Volcker. Maybe Wall Street has a point.

What we don't know about the new rule are important details that will only become clear over time. At least that's according to Commissioner Daniel Gallagher of the Securities and Exchange Commission, who dissented on Tuesday along with fellow Republican appointees Michael Piwowar of the SEC and Scott O'Malia of the Commodity Futures Trading Commission.

Mr. Gallagher said the vote occurred in "contradiction of our procedural rules for voting on major rule releases, including the longstanding guideline that Commissioners should be given thirty days to review a draft before a vote." He added, "Not until five days ago did we have anything even resembling a voting draft, giving us less than a week to review the nearly one thousand pages of the adopting rule. In short, under intense pressure to meet an utterly artificial, wholly political end-of-year deadline, this Commission is effectively being told that we have to vote for the final rule so we can find out what's in it."

Lawyers will certainly find plenty of opportunities for judgment calls that will generate all those billable hours. Banks are still allowed to make markets in securities and to underwrite the issuance of new stocks and bonds, all of which often requires them to hold securities in anticipation of customer demand.

Banks also retain some ability to hedge—to make trades for the purpose of offsetting other risks that they've taken on for clients. The work required to define the difference between legal market-making, underwriting and hedging on the one hand and illegal proprietary trading on the other will now be ample enough to spark a new building boom at downtown D.C. law offices.

Rest assured banks will find loopholes. And rest assured some of the Volcker rule-writers will find private job opportunities to help with that loophole search once they decide to lay down the burdens of government service.

The long, convoluted Volcker process and result illustrate the central problem of Dodd-Frank: the belief that regulators given ever more discretion to craft ever more complicated regulations will yield a safer financial system. The Bank of England's Andrew Haldane and Vasileios Madouros have shown the opposite is true. The complexity of banking rules before the crisis failed to prevent catastrophic risks and made the job of addressing the crisis harder by obscuring the true condition of giant banks.

Especially with banking regulation, simple rules that are difficult for lobbyists and bankers to game are likely to work far better. Bankers would know what to expect and couldn't cry ambiguity if they crossed a line. And regulators would be far more likely to spy violations. The danger with this Volcker Complexity is that we'll get litigation, investing loopholes, and greater financial costs, but not a safer system.

New meat regulations could spark a trade war with Canada and Mexico and will raise costs

This Label Will Raise the Cost of Your Steak. By Scott George and Randy Spronk
New meat regulations could spark a trade war with Canada and Mexico.
Wall Street Journal, Dec. 5, 2013 6:42 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303670804579234642364948248

Right before Thanksgiving, while Congress was on break, federal meat labeling regulations took effect that could result in Americans paying higher prices on everything from beef and pork to apples and maple syrup. While legislators, as part of the continuing farm bill negotiations, are considering a fix to the Country of Origin Labeling (Cool) statute, the regulations implementing it went into effect Nov. 23.

The new Cool rules require more detailed labels on meat derived from animals born outside the United States. Labels must now list the country in which livestock were born, raised and slaughtered. For example, a package of rib-eye steak might be labeled: "Born in Canada, Raised and Slaughtered in the United States."

The previous Cool rules required less detailed labeling, such as "Product of Canada and the United States." Ironically, the U.S. Department of Agriculture issued the new rules in May in an effort to improve the previous Cool rules, which the World Trade Organization last year ruled discriminated against Canada, Mexico and other U.S. trading partners.

Not surprisingly, Canada and Mexico are also fighting the new, more stringent rules at the WTO. Should the trade organization rule in their favor, our North American neighbors will likely retaliate against U.S. products through tariffs that will limit U.S. exports and kill American jobs. Canada, the second-largest export market for U.S. agricultural products, valued in 2012 at $20.6 billion, already has a preliminary retaliation list that includes fresh pork and beef, bakery goods, rice, apples, wine, maple syrup and furniture.

U.S. cattle ranchers and hog farmers who purchase livestock from Canada or Mexico will be affected by those retaliatory tariffs in a number of ways. Most crucially to those of us in the industry, the duties will prompt U.S. beef and pork exports to fall while American farmers and ranchers who import animals will see significant cost increases.

Alpha 3 Cattle Company in Amarillo, Texas, for example, imports roughly 38,000 feeder cattle a year from Mexico. When the original Cool law took effect in 2009, meat packers, fearing consumers would be less inclined to buy meat labeled "Product of Mexico and the United States" and incurring added costs to label mixed-origin meat, discounted Alpha 3's Mexican-origin animals by $35 a head. That alone cost Alpha 3 more than $1 million.

Under the new Cool regulations, the company expects the discount to be even higher, or for packing plants to stop processing Mexican-born cattle altogether. Why? Because under the new regulations those animals—and the meat from them—now need to be tracked, verified and segregated from U.S.-born cattle. (The 2009 law allowed co-mingling of animals.)

A Michigan hog farmer who gets most of his feeder pigs from Canada, and who took a financial hit when the labeling law took effect in 2009, has been told by the packing plant to which he sends his animals that he'll have a 10-hour window each week to get his Canadian-born hogs to market. That will be nearly impossible to accomplish—it's 32 truckloads—and it will be extremely costly.

That's because the new regulations will force the packing plant to shut down the lines processing U.S.-born hogs and switch to processing Canadian-born ones—which spend five of their six months in the U.S.—so that pork cuts can be tracked, labeled and kept separate. That's a logistical headache and a huge expense for the plant, which will likely pay the hog farmer less for his Canadian-born hogs and charge consumers more for the meat from those animals.

So why is the U.S. risking trade retaliation and prohibitive cost increases on American producers and consumers of meat? Groups that support Cool, such as the U.S. Cattlemen's Association and the Consumer Federation of America, think U.S. consumers will buy American if they see a "Product of the United States" label. But since the 2009 law went into effect, the USDA says there's been little effect on demand for U.S. meat, and that consumers buy primarily based on taste and price. Most Americans know, even if their legislators don't, that all meat products, regardless of their country of origin, must pass the same USDA safety regulations.

When the Cool proposal was first debated in Congress, the U.S. meat industry said it would be a costly program with little if any benefit to consumers. The USDA estimated it would cost $2.5 billion to implement and nearly $212 million annually over 10 years to maintain.

With our North American neighbors set to impose tariffs on dozens of U.S. products, livestock producers and meat packers facing greater costs and American consumers ultimately bearing higher prices, it appears that assessment was an understatement.

Mr. George is a cattleman from Cody, Wyo., and president of the National Cattlemen's Beef Association. Mr. Spronk is a hog farmer from Edgerton, Minn., and president of the National Pork Producers Council.

Views from Japan on the air-defense zone recently claimed by Beijing

Views from Japan on the air-defense zone recently claimed by Beijing

1  Excerpts from Japan Questions China's Policing of Defense Zone. By Yuka Hayashi
Officials Also Address Apparent Differences With U.S. Over Response
Wall Street Journal, Dec. 1, 2013 11:50 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702303562904579230894060384128

"I was taken aback when I heard this," Yukio Okamoto, a former senior foreign ministry official, said in an interview Sunday with NHK. "I can't think of any case like this in the past where the U.S. took a step that hurt Japan's interests over an issue related directly to Japan's national security in a way visible to the whole world."
 

"We have confirmed through diplomatic channels that the U.S. government didn't request commercial carriers to submit flight plans," Prime Minister Shinzo Abe said Sunday during a visit to a regional city.

Speaking privately, Japanese officials say Washington has yet to coordinate views among different branches of the government and come up with a unified stance that can be conveyed to Tokyo properly.

[...]

Satoshi Morimoto, a former defense minister who teaches security at Takushoku University, said defense minister Onodera's remarks suggest China wasn't able to "conduct a scramble against American planes even as they flew through its new zone." Japan must determine whether China has the capability to monitor the whole expanse of its new ADIZ using radar located on the mainland and whether its pilots have the experience and expertise to go after foreign planes, Mr. Morimoto said on the NHK program.

2  a Japanese citizen:

実際この問題は簡単ではないと思われるが、日本としては、アメリカには中国の理不尽な行為及び要求を一切認めないよう望んでいる（日本政府は各航空会社に対して、中国の要求に答えないよう通達した）。日本とアメリカが一枚岩でこの件に対処すべきだとの考えが支配的である。ただ、アメリカと日本では航空会社に関する事情が異なるのは理解できる。

今後のバイデン副大統領との会談で日米の協力を確認することを期待する。まさかアメリカが中国に宥和的に方針変換することはないと信じたいが...。

この問題には韓国も絡んできており、複雑化している。今後どうなっていくのか注視せざるを得ない。

[transliteration: Jissai kono mondai wa kantande wa nai to omowa reruga, Nihon to shite wa, Amerika ni wa Chūgoku no rifujin'na kōi oyobi yōkyū o issai mitomenai yō nozonde iru (nipponseifu wa kaku kōkūkaisha ni taishite, Chūgoku no yōkyū ni kotae Nai yō tsūtatsu shita). Nihon to Amerika ga ichimaiiwa de kono-ken ni taisho subekida to no kangae ga shihai-tekidearu. Tada, Amerika to Nihonde wa kōkūkaisha ni kansuru jijō ga kotonaru no wa rikai dekiru. Kongo no baiden fuku daitōryō to no kaidan de Nichibei no kyōryoku o kakunin suru koto o kitai suru. Masaka Amerika ga Chūgoku ni yūwa-teki ni hōshin henkan suru koto wa nai to shinjitaiga.... Kono mondai ni wa Kankoku mo karande kite ori, fukuzatsu-ka shite iru. Kongo dō natte iku no ka chūshi sezaruwoenai.]

honestly, we Japanese has been sick and tired of China's movements lately... some journalists analyze Xi _jinping can't control the force any longer. and underground disorder's coming overground.

a citizen

China Unveils IPO Guidelines - Regulator Says It Will Leave Judging Value, Risks to the Market

China Unveils IPO Guidelines Ahead of Expected New-Offering Flood. By Amy Li
Regulator Says It Will Leave Judging Value, Risks to the Market
Wall Street Journal, Dec. 1, 2013 1:21 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304017204579229691357340398

China moved closer to ending a 13-month moratorium on initial public offerings, releasing guidelines on fundamental changes to the way companies will raise funds in the country's stock market.

At the same time, China unveiled rules that will allow listed companies to issue preferred shares, offering firms—especially banks—a fresh channel for funding to shore up their capital bases.

The long-awaited launch of the IPO reform plan indicates an imminent restart of the country's IPO market, where more than 760 firms are queuing for listings. The China Securities Regulatory Commission, which issued the guidelines, said companies might begin listing as soon as January.

China shut the door to IPOs in the country in November 2012, just before a once-in-a-decade leadership transition, in an effort to support the long-suffering stock market, analysts said.

Two weeks ago, China's top leaders had promised, in a blueprint for economic and social policies over the next decade, that they would push for reforms of the stock-issuance system while promoting fundraising activities in the equity market through a variety of channels.

The reform plan marks a significant easing of government control over China's IPO market, which channeled 488 billion yuan ($80 billion) to issuers in 2010.

The plan shifts toward a so-called registration-based IPO system, widely used in developed markets, in which the regulator focuses on whether a firm seeking a listing meets the requirements for information disclosure.

Currently, China has an approval-based IPO system where the regulator focuses on whether an issuer can sustain its operations and whether it will be able to stay profitable. One criticism of the current system is that it can take years for some companies to get listed while the regulator has often given preferential treatment to the country's large but poorly managed state-owned enterprises, allowing them to jump the queue and float shares within just a few months.

In most Western markets, regulators determine if companies have met specific legal and financial requirements, and then allow them to list, leaving it up to investors whether to buy the stocks.

"We believe the reform laid out the groundwork for an introduction of a registration-based IPO system," the CSRC said in a transcript of answers to questions from reporters on the overhaul plan.

China's current approval-based IPO system has long been criticized for distorting supply and demand and artificially inflating valuations of new listings in one of the world's largest stock markets. Listing aspirants have had to endure an application process that can include roughly 10 rounds of reviews lasting as long as several years to receive approval from the country's securities regulator, which determines whether the company has met thresholds in terms of revenues, profits and the like.

Even after a company has secured listing approval, the fate of its IPO still lies in the hands of the regulator. When market conditions are strong, the regulator tends to release the supply of IPOs, often resulting in frenzied buying and high prices. But when investors' mood is poor, authorities can halt new listings to avoid further depressing the market.

The CSRC said it would focus on reviewing compliance by companies planning IPOs, while it will let investors and the market judge the value and risks of IPOs. Once a company gets the go-ahead to seek an IPO, the commission said it would allow the market to decide the timing of it and how the issue will work.

Following the release of the guidelines, firms seeking IPOs will need around one month to prepare, the commission estimated. Around 50 firms are expected to have IPO preparation done in time for them to list by January 2014, the commission added.

The review of stock offerings will focus on the information disclosure of the issuer, according to the guidelines. Also included in guidelines were rules about the pricing of stocks, share placements, responsibilities of market participants, and measures to crack down on fraudulent listing.

"The market-oriented reform will make the issuer and intermediaries shoulder more responsibility while strengthening the protection for smaller investors," said Wang Jianyong, a partner with Haiwen & Partners, a law office that advises companies seeking a listing in China.

Issuers, underwriters and other intermediaries should commit to compensate investors that suffer losses because of falsehoods, misleading statements or major omissions in IPO documents, according to the guidelines.

The new rules say controlling stakeholders, as well as board members and senior executives who own shares, should commit that they won't sell shares below the IPO price for two years after a six-month lockup period during which they can't sell shares. If the shares of a firm close below the IPO price six months after listing, these shareholders must promise to extend the lockup period by at least another six months.

An increase in the supply of shares from new listings is likely to cause short-term pain to the prices of small stocks trading on the country's startup board, ChiNext, said Sinolink Securities 600109.SH +0.18% analyst Huang Cendong.

Mr. Wang of Haiwen said, "The sentiment in the stock market will likely be hurt with the coming IPO restart."

However, Beijing's effort to push forward market-oriented reforms could enhance investors' expectations for the longer term, Mr. Wang added.

The guidelines also clarify the time span of the review procedure. The commission will make a decision on whether to approve a listing in three months after accepting an IPO application.

With the new rules, a listing could happen as early as two or three months after the commission accepts an application, based on current administrative procedure, an investment banker said.

The commission said it may take around one year to review the IPO applications of more than 760 firms that are queuing for listing.

It gave underwriters more freedom in stock offerings, allowing them to reserve a certain amount of new shares to select investors, potentially benefiting brokerage firms with a strong institutional client base. Previously all new shares were sold through auctions.

But the commission also will require an underwriter to take on more responsibility, saying it will stop reviewing any applications submitted by an underwriter if a company it underwrites posts a net loss or a drop in profit of more than 50% in the same year as its IPO.

Along with the lifting of the IPO moratorium, Beijing moved to allow listed firms to issue preferred stock publicly, in a bid to give issuers a flexible direct financing tool, optimize the financing structure of firms and further mergers and acquisitions of firms. Currently, Chinese companies aren't allowed to issue preferred shares.

Under the guidelines on the trial issuance of preferred stocks, the State Council, the country's cabinet, said the private issuance of preferred stocks would also be available to listed firms, including those incorporated in mainland China but listed overseas, as well as unlisted public firms.

Preferred stock has priority over common stock in the distribution of corporate profits and upon liquidation, but shareholders of such stock have limited rights on corporate decision making, according to the definition provided by the guidelines.

Tesla Meets the Auto Regulators - Remember Toyota's invisible defect and drivers that are inordinately prone to "pedal misapplication"

Tesla Meets the Auto Regulators. By Holman W Jenkins 
The feds have opened a safety investigation into the Model S fires. Elon Musk should be worried.
WSJ, Nov 27, 2013
http://online.wsj.com/news/articles/SB10001424052702304465604579222051067101342

Look out, Elon Musk. Expecting rational results from regulatory agencies is often a recipe for disappointment.

Two of Mr. Musk's Tesla Model S cars burned up when road debris punctured the battery, a vulnerability not seen in other electric cars. Mr. Musk says his cars are no more fire-prone than gasoline cars. He claims to welcome a National Highway Safety Administration investigation into whether the cars are defective and warrant a recall.

Good luck with that. Mr. Musk is embroiled in a process that, he may soon discover, can quickly become more about politics than engineering. GM pickups with side-mounted gas tanks in the 1980s were necessarily more fire-prone in side collisions. Yet the truck's overall safety record was exemplary and the vehicle fully complied with federal fuel-system safety standards. That didn't stop the feds from eventually ruling the trucks defective, in response to over-the-top media and interest-group allegations against the company.


Those nearing ecstasy over the driverless car ought to sober up too. Tesla is not the only example of how unwelcoming our system of auto regulation is to new ideas. At a congressional hearing on the robotic car last week, a GM executive pleaded for "protection for auto makers and dealers from frivolous litigation for systems that meet and surpass whatever performance standards are established by the government." NHTSA's David Strickland was also present and seemed a lot more interested in extending his agency's remit to "things like, you know, navigation on an iPhone. . . . That is a piece of motor vehicle equipment and I think we have a very strong precedent."

And recall NHTSA's performance during the furor almost four years ago over alleged runaway Toyotas. Its then-overseer, Transportation Secretary Ray LaHood, happily participated in congressional hearings designed to flog for the benefit of trial lawyers the idea of a hidden bug in Toyota's electronic throttle control.

When the agency much more quietly came out with a report a year later debunking the idea of an electronic defect, notice how little good it did Toyota. The car maker still found it necessary to cough up $1.2 billion to satisfy owners who claimed their cars lost value in the media frenzy over a non-defect. Toyota has also seen the tide turning against it lately as it resists a deluge of accident claims.

At first, opposing lawyers were hesitant to emphasize an invisible defect that government research suggested didn't exist. That was a tactical error on their part. In an Oklahoma trial last month involving an 82-year-old woman driver, jurors awarded $3 million in compensatory damages and were ready to assign punitive damages in a complaint focused on a hypothetical bug when Toyota abruptly settled on undisclosed terms.

In another closely-watched trial set to begin in California in March, an 83-year-old female driver (who has since died from unrelated causes) testified in a deposition that she stepped on the brake instead of the gas. The judge has already ruled that if the jury decides to believe her testimony, it is entitled to infer the existence of a defect that nobody can find.

These cases, out of some 300 pending, were chosen for a reason. Study after study, including one last year by the University of North Carolina Highway Safety Research Center, finds that elderly female drivers are inordinately prone to "pedal misapplication." If Toyota can't prevail in these cases, the company might be wise to run up the white flag and seek a global settlement that some estimate at upwards of $5 billion—quite a sum for a non-defect.

Why do we mention this? These episodes describe the regulatory-cum-political thicket that Tesla wandered into when it started making cars. This thicket has served as a near-perfect barrier to entry to startup car makers for the better part of a century.

Even more so because Tesla's troubles come at a time when much bigger companies, with vast lobbying and political resources, are entering the market for high-end electric cars—including Cadillac, Porsche, BMW and Audi. Maybe this explains a note of hyperbole that has begun to creep into Mr. Musk's frequent blog postings. "If a false perception about the safety of electric cars is allowed to linger," he wrote last week, "it will delay the advent of sustainable transport and increase the risk of global climate change, with potentially disastrous consequences worldwide."

Federal regulators have been warned. They can always be denounced as climate criminals if they find the Tesla Model S defective. Maybe Mr. Musk is ready to play the political game after all.

IMF: Modifications to the Current List of Financial Soundness Indicators

Modifications to the Current List of Financial Soundness Indicators
IMF, November 14, 2013
http://www.imf.org/external/pp/longres.aspx?id=4832

Summary: The purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF’s Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF’s relevant departments and all FSI-reporting countries and concerned international organizations.


EXECUTIVE SUMMARY (edited)

The Executive Board has requested that the list of financial soundness indicators (FSIs) be kept under review to ensure that they reflect the evolving priorities of Fund surveillance, the rapidly changing financial environment and the relative capacity of countries to compile FSIs. Accordingly, the purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF's Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF's relevant departments and all FSI-reporting countries and concerned international organizations.

As a result of these consultations, the list of FSIs has been revised. The revised FSI list includes new indicators to expand the coverage of the financial sector, including money market funds, insurance corporations, pension funds, other nonbank financial institutions, as well as non-financial corporations and households. Also, certain FSIs will be dropped due mainly to very limited reporting and comparability. Overall, 19 new FSIs will be added to the list and five will be dropped.

To improve usefulness and forward-looking features, FSIs for the sector as a whole would be enhanced with concentration and distribution measures. In this connection, STA is planning to conduct a pilot exercise with a set of FSI-reporting countries on a voluntary basis.

STA will continue to keep the Executive Board informed periodically on developments in the IMF's FSIs initiative, including its work on revising the FSI Compilation Guide.


---
Also, check the background paper: http://www.imf.org/external/pp/longres.aspx?id=4833

Alzheimer's Disease - The Puzzles, The Partners, The Path Forward

Alzheimer's Disease - The Puzzles, The Partners, The Path Forward
PhRMA, November 26, 2013
http://www.innovation.org/index.cfm/NewsCenter/Newsletters?NID=218

Alzheimer's is a debilitating neurodegenerative disease that currently afflicts more than 5 million people in the U.S. If no new medicines are found to prevent, delay or stop the progression of Alzheimer's disease, the number of affected people in America will jump to 15 million by 2050 and related healthcare costs could increase five-fold to $1.2 trillion, according to the Alzheimer's Association. In contrast, a medicine that delays onset of Alzheimer's disease by five years would lower the number of Americans suffering from the disease by nearly half and save $447 billion in related costs, in 2050.

America's biopharmaceutical companies are currently developing 73 potential new treatments and diagnostics for Alzheimer's, according to a recent report released by PhRMA. At a recent all day-forum, "Alzheimer's: The Puzzle, The Partners, The Path Forward," the Alzheimer's Association, Alzheimer's Drug Discovery Foundation, and PhRMA convened key stakeholders from the Alzheimer's community to discuss these therapies presently in development to treat the disease, as well as the current state of innovation and R&D for Alzheimer's disease treatments and diagnostics.

Among the key areas of discussion were pre-competitive partnerships, including potential areas for collaboration and public-private partnerships, as well as pre-symptomatic clinical trials, which may help researchers understand the clinical heterogeneity of the disease and subsequent challenges in the use and adoption of clinical and functional endpoints in new clinical trial design.

Panelists included top industry and academic scientists, policymakers, patients, payers, and many others. Executives from the Alzheimer's Association and Alzheimer's Drug Discovery Foundation also discussed the path forward for Alzheimer's disease in relation to science and policy.

Continue the conversation online using the event hashtag #ALZpov

Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res

Les sancions contra l'Iran no es manipularan. . Per Douglas J. Feith

Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res.

Translation to Catalan of Sanctions on Iran Won't Be Cranked Back Up. By Un Liberal Recalcitrant
Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

El president Obama vol que l'Iran suspengui parts del seu programa nuclear a canvi d'alleujar les sancions econòmiques internacionals. Els crítics sostenen que si Occident arriba a un acord en aquest sentit, l'Iran podria enganyar molt més fàcilment, molt abans que la resta del món pogués establir noves i dures sancions. Però el senyor Obama insisteix que relaxar les sancions és reversible : Si els iranians estan pel "no seguir endavant", va dir recentment a NBC News, "Podem anar endavant ".

Els acords de pau i el control d'armes tenen una llarga història que hauria de ser un advertiment contra aquestes garanties. Els països democràtics, durant molt de temps, no van poder aconseguir el que esperaven dels seus antagonistes no democràtics - i després es van veure incapaços o no van estar disposats a complir el tracte-.

Després de la Primera Guerra Mundial, els tractats de Versalles i Locarno van sotmetre Alemanya  a mesures de control d'armes, incloent la desmilitarització de Renània. Quan el règim nazi d'Alemanya, va remilitaritzar audaçment la Renània el 1936, ni la Gran Bretanya, ni França, ni cap altre signant del tractat va prendre cap tipus d’acció legal.

Aquest i d’altres incidents del segle XX van portar l’estratega dels EUA Fred Iklé a escriure un clarivident article el 1961 a la revista "Afers exteriors", titulat "Després de Detectar-ho - Què ?" Va sostenir : "Si signem un acord de control d'armes, hem de saber no només que som tècnicament capaços de detectar una violació, sinó que també nosaltres, o la resta del món, estarà en condicions de reaccionar eficaçment si es descobreix una violació, ja sigui legalment, política o militar. " Iklé va preveure que els soviètics violarien els seus acords i que als presidents dels Estats Units els resultaria difícil o impossible de posar remei a les violacions.

No obstant això, els EUA va fer una sèrie de tractats de control d'armes amb els soviètics i quan es van produir les violacions previstes, no va haver-hi cap tipus d'imposició, ni tan sols es va intentar.

Durant el govern de Reagan, les autoritats nord-americanes van detectar un enorme radar a la ciutat soviètica de Krasnoyarsk que violava el Tractat de Míssils Antibalístics del 1972. Malgrat la seva reputació de ser un escèptic en relació al control d'armes i de la línia dura anti - soviètica, Reagan va concloure que no tenia bones opcions, fora de la de queixar-se. Els EUA seguí per adherir-se al tractat per als següents 16 anys, fins que el president George W. Bush ho va retirar per raons no relacionades amb les violacions del tractat.

Una altra democràcia que no ha aconseguit complir els acords és Israel. Quan Israel va signar els Acords d'Oslo amb l'OAP el 1993, al després Ministre de Relacions Exteriors israelià Shimon Peres se li va preguntar què faria Israel si es es violés l'acord. Ell va declarar que era un tractat "reversible", assegurant que era escèptic i que si l'OAP trenqués les seves promeses de pau, Israel no només aturaria els recessos territorials, sinó que reprendria territoris ja negociats.

L'OAP va violar ràpidament el Tractat d’Oslo de diverses maneres, el més flagrant amb la Segona Intifada l’any 2000. Però cap govern israelià d'esquerra o de dreta mai va liquidar els acords, i encara menys revertir qualsevol retirada.

El que sol passar amb aquest tipus d'acords és el següent : Al costat democràtic, els líders polítics donen publicitat a l'acord per als seus votants significantlo com una gran fita diplomàtica de la que cal sentir-se’n orgullós. Per l’altra banda  -generalment el costat no democràtic, es porta a terme l’engany, la deshonestedat i l’agressió.

Els líders democràtics no tenen cap desig de detectar la violació perquè no volen admetre que l'acord o plusvàlua, per raons diverses, és una eina de relacions amb l’altra part i, òbviament, no volen pertorbar aquesta relació. En els casos que no es pot passar per alt la violació, afirmaran que l'evidència no és concloent. Però si és concloent, en menyspreen la importància de la infracció. Els funcionaris del costat democràtic de vegades actuen de facto com a advocats de la defensa per als tramposos.

Recordem el cas de Krasnoyarsk. Alguns funcionaris nord-americans en les reunions internes de l'administració en què he participat, van dir que no hem d’acusar els soviètics de violar el Tractat ABM, simplement perquè es va construir el radar en un camp de futbol  gran. Per desgràcia, però sostingut de forma descarada, vam haver d’esperar a que els soviètics el posesin en marxa..

Quan els funcionaris de l'OAP en la dècada de 1990 van violar el tractat d’Oslo per incitar a l'odi contra Israel i donar suport al terrorisme, els israelians que havien signat el tractat, van oferir excuses similars i vergonyoses tals com: "No ens importa el que diguin, només el que fan" i "Cal fer les paus amb els enemics, nopas  amb els amics. "

Un acord que realment desmantellés el programa nuclear iranià seria un èxit formidable. Però si Obama pot justificar el seu acord amb l'Iran només amb la promesa de “relaxar les sancions” als tramposos iranians, ningú donarà credibilitat al programa.. La història ensenya que hem d'esperar sempre l'engany, però no una aplicació efectiva del tractat.

Feith, investigador principal a l'Institut Hudson,  va exercir com subsecretari de Defensadels EUA per a la política ( 2001-05 ) i és l'autor de  "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008)

--- Sanctions on Iran Won't Be Cranked Back Up. By Douglas J. Feith
Arms control in action: The bad guys cheat, and democracies do nothing.Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

President Obama wants Iran to suspend parts of its nuclear program in return for easing international economic sanctions. Critics contend that if the West strikes a deal along these lines, Iran could cheat far more easily than the rest of the world could reinstate tough sanctions. But Mr. Obama insists that relaxing sanctions is reversible: If the Iranians are "not following through," he recently told NBC News, "We can crank that dial back up."

Peace and arms-control agreements have a long history that warns against such assurances. Democratic countries have time and again failed to get what they bargained for with their undemocratic antagonists—and then found themselves unable or unwilling to enforce the bargain.

After World War I, the Versailles and Locarno Treaties subjected Germany to arms-control measures, including demilitarization of the Rhineland. When Germany's Nazi regime boldly remilitarized the Rhineland in 1936, neither Britain, France nor any other treaty party took enforcement action.

This and other 20th-century incidents led U.S. strategist Fred Iklé to write a prescient 1961 "Foreign Affairs" article titled "After Detection—What?" He argued: "In entering into an arms-control agreement, we must know not only that we are technically capable of detecting a violation but also that we or the rest of the world will be politically, legally and militarily in a position to react effectively if a violation is discovered." Iklé foresaw that the Soviets would violate their agreements, and that U.S. presidents would find it difficult or impossible to remedy the violations.

Nevertheless, the U.S. made a series of arms-control treaties with the Soviets. When the predicted violations occurred, no enforcement actions were even attempted.

During the Reagan administration, U.S. officials detected a huge radar in the Soviet city of Krasnoyarsk that violated the 1972 Anti-Ballistic Missile Treaty. Despite his reputation as an arms-control skeptic and anti-Soviet hard-liner, Reagan concluded he had no good options other than to complain. The U.S. continued to adhere to the treaty for another 16 years, until President George W. Bush withdrew for reasons unrelated to violations.

Another democracy that has failed to enforce agreements is Israel. When Israel signed the Oslo Accords with the Palestine Liberation Organization in 1993, then-Israeli Foreign Minister Shimon Peres was asked what Israel would do if the agreement were violated. He declared it was "reversible," assuring skeptics that if the PLO broke its peace pledges, Israel would not only stop territorial withdrawals, but retake the land already traded.

The PLO promptly violated Oslo in various ways, most egregiously by launching the Second Intifada in 2000. But no Israeli government—on the left or right—ever terminated the Accords, let alone reversed any withdrawals.

What typically happens with such agreements is the following: On the democratic side, political leaders hype the agreement to their voters as a proud diplomatic achievement. The nondemocratic side—typically an aggressive, dishonest party—cheats.

The democratic leaders have no desire to detect the violation because they don't want to admit that they oversold the agreement or, for other reasons, they don't want to disrupt relations with the other side. If they can't ignore the violation, they will claim the evidence is inconclusive. But if it is conclusive, they will belittle the significance of the offense. Officials on the democratic side sometimes even act as de facto defense attorneys for the cheaters.

Recall the Krasnoyarsk case. Some U.S. officials in internal administration meetings in which I participated said we should not accuse the Soviets of violating the ABM Treaty simply because they built the football-field-size radar. Rather, they disgracefully but brazenly argued, we should wait until the Soviets turned it on.

When PLO officials in the 1990s breached Oslo by inciting anti-Israel hatred and supporting terrorism, the Israelis who had made the deal offered similarly disgraceful excuses along the lines of: "We don't care what they say, only what they do," and "You have to make peace with your enemies, not with your friends."

An agreement that actually dismantled the Iranian nuclear program would be a formidable accomplishment. But if Mr. Obama can justify his deal with Iran only by promising to "crank up" the relaxed sanctions if and when the Iranian regime cheats, no one should buy it. History teaches that we should expect the cheating, but not effective enforcement.

Mr. Feith, a senior fellow at the Hudson Institute, served as U.S. undersecretary of defense for policy (2001-05) and is the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008).

L'Energia Verda és la realment subvencionada. Per Bjorn Lomborg

L'Energia Verda és la realment subvencionada. Per Bjorn Lomborg
Espanya malgasta l’1% del PIB en energies verdes
Les renovables reben tres vegades més diners per unitat d'energia que els combustibles Fòssils.

Wall Street Journal , 11 novembre 2013

Translation of Green Energy Is the Real Subsidy Hog to Catalan by Un Liberal Recalcitrant
http://online.wsj.com/news/articles/SB10001424127887324432404579051123500813210

Extractes :

Durant 20 anys el món ha provat de subvencionar l'energia verda en lloc de centrar-se en fer-la més eficient . Avui Espanya gasta al voltant de l'1% del PIB en energies verdes com la solar i l'eòlica . Aquests 11.000 milions d’euros anuals sobrepassen la despesa espanyola en educació superior .

A finals d’aquest segle, amb els actuals compromisos, aquests esforços dels espanyols hauran retardat l'impacte de l’escalfament global en unes seixanta- una hores, segons les estimacions del prestigiós model dinàmic integral econòmic-climàtic de la Universitat de Yale. ¿Milers de milions d’euros per a seixanta-una hores adicionals? És un mal negoci .

Però quan es critiquen aquests ineficients subsidis verds, poden estar sergurs de que els defensors assenyalaran que el planeta subsidia encara més els combustibles fòssils. No hauríem de fer-ho amb cap. Però la desinformació que envolta els subsidis energètics és considerable i ajuda a impedir que el món prengui mesures raonables .

Tres són els mites dels subsidis de combustibles fòssils que val la pena desmuntar. El primer és l'al·legació [ ... ] de que els EUA subsidien més els combustibles fòssils que les energies verdes. No és així.

[S'estima] que el 2010 [aquests] subsidis van arribar als $4.000 milions anuals. Això inclou $ 240 milions en inversions per a instal·lacions de carbó net [que a aquest traductor no li sembla una cosa molt allunyada del “rotllet verd”], [ i ] una deducció de despeses sobre l'amortització dels equips de control de la pol·lució [alguna cosa que els verds haurien aplaudir, en la meva humil opinió]. Les fonts renovables van rebre més del triple d’squesta xifra, uns 14.000 $ milions . En tot això no considerem $ 2.500 milions per a l’energia nuclear [que estalvia emissions de CO2].

Encara més del que sembla, és més gran la desviació real de real de la despesa a favor de l'energia verda perquè les turbines eòliques i altres fonts renovables produeixen molta menys Energia que els combustibles fòssils, i els EUA estan pagant més per menys. L'electricitat que s'obté a partir del carbó és subsidiat per les Nacions Unides un 5% d’un centau per cada kWh produït, mentre que l'eòlica rep prop d’un centau per kWh. Per a la solar, el cost per al contribuent és de 77 centaus per kWh .

Els crítics de subsidiar els combustibles fòssils, com el científic climàtic Jim Hansen, també indiquen que la immensa grandària dels subsidis slobals és l’evidència del poder que tenen les companyies de combustibles fòssils i els escèptics del canvi climàtic sobre els governs.

[Aquests] subsidis globals superen els de les renovables en dòlars nominals - $523 milers de milions sobre $88 millers de milions [per a les les renovables], segons l'Agència Internacional d'Energia. Però aquesta disparitat es reverteix si es té en compte la proporció. Els combustibles fòssils suposen més del 80% de l'energia global, mentre que la moderna energia verda suposa prop del 5%. Això vol dir que les renovables reben encara tres vegades més de diners per unitat d'energia.

Però encara més important: els crítics ignoren que aquests subsidis de combustibles fòssils pertanyen gairebé de forma exclusiva a països no occidentals. Dotze d’aquestes nacions són responsables del 75% dels subsidis globals d’aquests combustibles. Iran és el primer amb $82.000 milions anuals, seguit per l’Aràbia Saudita amb $61.000 milions. Rússia, Índia i Xina, apliquen un pressupost d’entre $30.000 i $40.000 milions i Veneçuela, Egipte, Iraq, Emirats Àrabs Units, Indonèsia, Mèxic i Algèria, la resta.

Aquests subsidis no tenen res a veure amb intentar de congraciar-se amb companyies petrolieres o amb fer-los un bon regal als escèptics de l'escalfament global. Aquesta despesa és una manera de que aquests governs comprin estabilitat política: a Veneçuela, la gasolina es ven a uns 5,9 centaus el galó [un galó són 3,8 litres] , el que li costa al govern uns $22.000 milions anuals, més del doble del que es gasta en sanitat.

Un Tercer mite el difon el recent informe de l'FMI, "Reforma dels Subsidis Energètics - lliçons i implications". L'Organització va anunciar el març passat que hi havia descobert uns $ 1.4 bilions de subsidis als combustibles fòssils que ningú havia vist . D’aquesta xifra , al·lega l'Informe, $ 700.000 milions vénen del món desenvolupat.

La gasolina i el dièsel dels EUA són receptors, en sí mateix, de prop de la meitat d’aquests 700.000 dòlars que l’FMI en diu subsidis. La gasolina i el dièsel haurien de tenir impostos més alts, atès l'informe, i així l’FMI considera aquests impostos no aplicats com a “subvencions” [Aquest traductor creu que aquestes idees tan brillants podria ser que sorgissin de la pròpia Administració Federal perquè casen amb les línies, o més ben dit, les corbes sinuoses del raonament de gent amb la preparació del Community Organizer in Chief]. Així, la pol·lució de l'aire acredita un impost de 34 centaus/galó, segons els models de l'FMI, mentre que els accidents de trànsit i la congestió haurien d’afegir prop d’un dòlar per galó .

A més hauria d’haver un IVA del 17% com en altres països, segons l'FMI, o prop de $0.80 per galó. Tots aquests impostos recaptarien $ 350.000, tractats ara per l’FMI com a subsidis.

[Això té diversos problemes.] L'Organització assumeix un cost social del CO2 de cinc vegades el que actualment té la Unió Europea. Els danys atribuïts a la pol·lució de l'aire són deu vegades més grans que les estimacions de la Unió Europea. ¿I què tenen a veure els accidents de trànsit amb els subsidis a la benzina?

Finalment, l’FMI Ignora a la pràctica els 49,5 centaus d'impostos sobre el galó de gasolina que el consumidor americà paga realment. Els models cancel·len, inexplicablement, aquest impost amb un "cost internacional d’enviament" [per mar, oleoductes, etc.] Però fins i tot si  vostè accepta les estimacions de l'FMI dels costos de la pol·lució i l'IVA a l'estil Europeu, el total del que parla l’FMI que no es recapta, es redueix només a 44 centaus / galó - menys que els impostos reals en les  EUA per centaus/galó [ ... ]

Les informacions inexactes com aquesta desinformen de manera innecessària la presa de decisions sobre polítiques públiques. Estic a favor d’acabar amb els subsidis globals als combustibles fòssils -i amb els subsidis a les energies verdes. Subsidiar energies verdes de primera generació, ineficients, fa als acomodats sentir bé en ells mateixos, però no transformarà els mercats energètics .

[ ... ]

El Dr Lomborg, director del Copenhagen Consensus Center , és l'autor de "How Much HaveGlobal Problems Cost the World? A Scoreboard from 1900 to 2050" ( Cambridge,  2013 ).

 --- 

Original, etc.: http://www.bipartisanalliance.com/2013/11/la-energia-verde-es-la-realmente.html

La energía verde es la realmente subvencionada. By Bjorn Lomborg

La energía verde es la realmente subvencionada. Por Bjorn Lomborg

Las renovables reciben tres veces más dinero por unidad de energía que los combustibles fósiles.
Wall Street Journal, Nov 11, 2013
http://online.wsj.com/news/articles/SB10001424127887324432404579051123500813210

Excerpts:

Durante 20 años el mundo ha intentado subvencionar la energía verde en vez de centrarse en hacerla más eficiente. Hoy España tira alrededor del 1% del PIB en energías verdes como la solar y la eólica. Esos €11 000 millones anuales son más de lo que España gasta en educación superior.

A finales de este siglo, con los actuales compromisos, esos esfuerzos de los españoles habrán retrasado el impacto del calentamiento global por unas sesenta y una horas, según las estimaciones del reputado modelo dinámico integral económico-climático de la Universidad de Yale. ¿Cientos de miles de millones de dólares para sesenta y una horas adicionales? Es un mal negocio.

Pero cuando se critican esos ineficientes subsidios verdes, pueden estar seguros de que los defensores señalarán que el planeta subsidia los combustibles fósiles aun más. No deberíamos hacerlo con ninguno. Pero la desinformación que rodea los subsidios energéticos es considerable y ayuda a impedir que el mundo tome medidas razonables.

Tres son los mitos de los subsidios de combustibles fósiles que vale la pena desmontar. El primero es la alegación [...] de que los EE UU subsidian más los combustibles fósiles que la energía verde. No es así.

[Se estima] que en 2010 [esos] subsidios alcanzaron los $4000 millones anuales. Esto incluye $240 millones en inversiones para instalaciones de carbón limpio [que a este traductor no le parece algo muy alejado del rollito verde]; [y] una deducción de gastos sobre la amortización de equpos de control de la polución [algo que los verdes deberían aplaudir, no?]. Las fuentes renovables recibieron más del triple de esa cifra, unos $14 000 millones. En todo esto no consideramos $2500 millones para energía nuclear [que ahorra emisiones de CO2].

Aun más de lo que parece, es mayor el sesgo real del gasto a favor de la energía verde. Ya que las turbinas eólicas y otras fuentes renovables producen mucha menos energía que los combustibles fósiles, los EE UU están pagando más por menos. La electricidad que se obtiene a partir del carbón se subsidia a un 5% de un centavo por cada kWh producido, mientras que la eólica recibe cerca de un centavo por kWh. Para solar, el coste para el contribuyente es de 77 centavos por kWh.

Los críticos de los subsidios de combustibles fósiles, como el científico climático Jim Hansen, también indican que el inmenso tamaño de los subsidios globales es evidencia del poder que sobre los gobiernos tienen las compañías de combustibles fósiles y los escépticos del cambio climático. [En opinión de este traductor, Jim está mayor.]

[Estos] subsidios globales exceden los de las renovables en dólares nominales — $523 miles de millones sobre $88 miles de millones [para las renovables], según la International Energy Agency. Pero la disparidad se revierte cuando la proporción se toma en consideración. Los combustibles fósiles suponen más del 80% de la energía global, mientras que la moderna energía verde supone cerca del 5%. Esto significa que las renovables reciben aun tres veces más dinero por unidad de energía.

Pero mucho más importante, los críticos ignoran que estos subsidios de combustibles fósiles pertenecen casi exclusivamente a países no occidentales. Doce de tales naciones son responsables del 75% de los subsidios globales de tales combustibles. Irán es el primero con $82 000 millones anuales, seguido por Arabia Saudí con $61 000 millones. Rusia, India y China presupuestan entre $30 000 y $40 000 millones y Venezuela, Egipto, Iraq, Emiratos Árabes Unidos, Indonesia, México y Argelia son el resto.

Estos subsidios no tienen nada que ver con intentar congraciarse con compañías petroleras o con regalar a los escépticos del calentamiento global. Este gasto es una forma de que estos gobiernos compren estabilidad política: en Venezuela, la gasolina se vende a 5.9 centavos el galón [el galón son 3.8 litros], lo que cuesta al gobierno unos $22 000 millones anuales, más del doble de lo que se gasta en sanidad.

Un tercer mito lo difunde un reciente informe del IMF, "Reforma de los subsidios energéticos — Lecciones e implicaciones" ("Energy Subsidy Reform—Lessons and Implications"). La organización anunció en marzo que había descubierto unos $1.4 billones de subsidios a los combustibles fósiles que nadie había visto. De esa cifra, alega el informe, $700 000 millones vienen del mundo desarrollado. [Este traductor está parcialmente de acuerdo con el informe del IMF y cree que Lomborg yerra al no mencionar lo positivas que son muchas de las valoraciones y recomendaciones del informe. Los subsidios en países no desarrollados son una salvajada para esas economías, además de que benefician en igual proporción a todos los consumidores, es decir, benefician también a quienes no los necesitan, como los jerarcas del partido dominante o los crazy mullahs. Otra cosa es lo que comenta Lomborg, que es muy razonable IMHO: el rollo este de estimar costes que deberían ser impuestos y encima los suben más que los locos de Bruselas y que al no ser recaudados los meten en la línea de subsidios.]

La gasolina y el diesel en los EE UU por sí solos son cerca de la mitad de esos $700 000 millones que el IMF dice son subsidios. La gasolina y el diesel deberían tener impuestos más altos, dice el informe, así que el IMF cuenta tales impuestos no impuestos como "subsidios" [este traductor barrunta que estas ideas tan brillantes pudiera ser que surjan de la propia Administración Federal porque casan con las líneas, o más bien sinuosas curvas, del razonamiento de gente con la preparación del Community Organizer in Chief]. Así, la polución del aire amerita un impuesto de 34 centavos/galón, según los modelos del IMF, mientras que los accidentes de tráfico y la congestión deberían añardir cerca de $1 por galón.

Además debería haber un IVA del 17% como en otros países, según el IMF, o cerca de $0.80/galón [es fácil de engordar esta estimación, el gobierno español puede sugerir el vigente 21%]. La suma que tales impuestos recaudarían, $350 000 millones, se tratan como un subsidio.

[Esto tiene varios problemas.] La organización asume un coste social del CO2 de cinco veces el que actualmente emplea la Unión Europea. Los daños atribuidos a la polución del aire son 10 veces mayores que las estimaciones de la Unión Europea. ¿Y qué tienen que ver los accidentes de tráfico con los subsidios a la gasolina?

Por último, el IMF ignora en la práctica los 49.5 centavos de impuestos sobre el galón de gasolina que el consumidor americano paga realmente. Los modelos cancelan, inexplicablemente, este impuesto con un "coste internacional de envío" [por mar, oleoductos, etc.]. Pero incluso si Vd acepta las estimaciones del IMF de los costes de la polución y el IVA al estilo europeo, el total que dice el IMF que no se recauda se reduce a solo 44 centavos/galón — menos que los impuestos reales en los EE UU por cents/galón. [...]

Información inexacta como esta perjudica innecesariamente la toma de politicas públicas. Estoy a favor de terminar con los subsidios globales de combustibles fósiles — y con los subsidios a las energías verdes. Subsidiar energías verdes de primera generación, ineficientes, hace a los acomodados sentirse bien consigo mismos, pero no transformará los mercados energéticos.

[...]

El Dr. Lomborg, director del Copenhagen Consensus Center, es el autor de "How Much Have Global Problems Cost the World? A Scoreboard from 1900 to 2050" (Cambridge, 2013).
---
Translation to Catalan: http://www.bipartisanalliance.com/2013/11/lenergia-verda-es-la-realment.html. By Un Liberal Recalcitrant

---
Green Energy Is the Real Subsidy Hog. By Bjorn Lomborg
Renewables receive three times as much money per energy unit as fossil fuels.
Wall Street Journal, Nov 11, 2013
http://online.wsj.com/news/articles/SB10001424127887324432404579051123500813210

For 20 years the world has tried subsidizing green technology instead of focusing on making it more efficient. Today Spain spends about 1% of GDP throwing money at green energy such as solar and wind power. The $11 billion a year is more than Spain spends on higher education.

At the end of the century, with current commitments, these Spanish efforts will have delayed the impact of global warming by roughly 61 hours, according to the estimates of Yale University's well-regarded Dynamic Integrated Climate-Economy model. Hundreds of billions of dollars for 61 additional hours? That's a bad deal.

Yet when such inefficient green subsidies are criticized, their defenders can be relied on to point out that the world subsidizes fossil fuels even more heavily. We shouldn't subsidize either. But the misinformation surrounding energy subsidies is considerable, and it helps keep the world from enacting sensible policy.

Three myths about fossil-fuel subsidies are worth debunking. The first is the claim, put forth by organizations such as the Environmental Law Institute, that the U.S. subsidizes fossil fuels more heavily than green energy. Not so.

The U.S. Energy Information Administration estimated in 2010 that fossil-fuel subsidies amounted to $4 billion a year. These include $240 million in credit for investment in Clean Coal Facilities; a tax deferral worth $980 million called excess of percentage over cost depletion; and an expense deduction on amortization of pollution-control equipment. Renewable sources received more than triple that figure, roughly $14 billion. That doesn't include $2.5 billion for nuclear energy.

Actual spending skews even more toward green energy than it seems. Since wind turbines and other renewable sources produce much less energy than fossil fuels, the U.S. is paying more for less. Coal-powered electricity is subsidized at about 5% of one cent for every kilowatt-hour produced, while wind power gets about a nickel per kwh. For solar power, it costs the taxpayer 77 cents per kwh.
Critics of fossil-fuel subsidies, such as climate scientist Jim Hansen, also suggest that the immense size of global subsidies is evidence of the power over governments wielded by fossil-fuel companies and climate-change skeptics. Global fossil-fuel subsidies do exceed those for renewables in raw dollars—$523 billion to $88 billion, according to the International Energy Agency. But the disparity is reversed when proportion is taken into account. Fossil fuels make up more than 80% of global energy, while modern green energy accounts for about 5%. This means that renewables still receive three times as much money per energy unit.

But much more important, the critics ignore that these fossil-fuel subsidies are almost exclusive to non-Western countries. Twelve such nations account for 75% of the world's fossil-fuel subsidies. Iran tops the list with $82 billion a year, followed by Saudi Arabia at $61 billion. Russia, India and China spend between $30 billion and $40 billion, and Venezuela, Egypt, Iran, U.A.E., Indonesia, Mexico and Algeria make up the rest.

These subsidies have nothing to do with cozying up to oil companies or indulging global-warming skeptics. The spending is a way for governments to buy political stability: In Venezuela, gas sells at 5.8 cents a gallon, costing the government $22 billion a year, more than twice what is spent on health care.

A third myth is propagated by a recent International Monetary Fund report, "Energy Subsidy Reform—Lessons and Implications." The organization announced in March that it had discovered an extra $1.4 trillion in fossil-fuel subsidies that everyone else overlooked. Of that figure, the report claims, $700 billion comes from the developed world.

U.S. gasoline and diesel alone make up about half of the IMF's $700 billion in alleged subsidies. Gasoline and diesel deserve more taxation, the report says, so the IMF counts taxes that were not levied as "subsidies." Thus air pollution merits a 34-cents-per-gallon tax, according to the IMF models, while traffic accidents and congestion should add about $1 per gallon.

According to the IMF, the U.S. also should have a 17% value-added tax like other countries, at about 80 cents per gallon. The combined $350 billion such taxes allegedly would raise gets spun as a subsidy.

The assumptions behind the IMF's math have some problems. The organization assumes a social price of carbon dioxide at five times what Europe currently charges. The air-pollution damages are upward of 10 times higher than the European Union estimates. And what do traffic accidents have to do with gasoline subsidies?

Finally, the IMF effectively ignores the 49.5 cents per gallon in gasoline taxes the U.S. consumer actually pays. The models cancel out this tax, inexplicably, with an "international shipping cost." But even if you accept the IMF's estimated pollution costs and the European-style VAT, the total tax the IMF says goes uncollected comes to only about 44 cents per gallon—or less than the actual U.S. tax of 49.5 cents per gallon. The real under-taxation is zero. The $350 billion is a figment of the IMF's balance sheet.

Inaccurate information of this sort is needlessly misinforming public policy. I'm in favor of ending global fossil-fuel subsidies—and green-energy subsidies. Subsidizing first-generation, inefficient green energy might make well-off people feel good about themselves, but it won't transform the energy market.

Green-energy initiatives must focus on innovations, making new generations of technology work better and cost less. This will eventually power the world in a cleaner and cheaper way than fossil fuels. That effort isn't aided by the perpetuation of myths.

Dr. Lomborg, director of the Copenhagen Consensus Center, is the author of "How Much Have Global Problems Cost the World? A Scoreboard from 1900 to 2050" (Cambridge, 2013).

Bailouts and Systemic Insurance. By Giovanni Dell'Ariccia and Lev Ratnovski

Bailouts and Systemic Insurance. By Giovanni Dell'Ariccia and Lev Ratnovski
IMF Working Paper No. 13/233
November 12, 2013
http://www.imf.org/external/pubs/cat/longres.aspx?sk=41048.0

Summary: We revisit the link between bailouts and bank risk taking. The expectation of government support to failing banks creates moral hazard—increases bank risk taking. However, when a bank’s success depends on both its effort and the overall stability of the banking system, a government’s commitment to shield banks from contagion may increase their incentives to invest prudently and so reduce bank risk taking. This systemic insurance effect will be relatively more important when bailout rents are low and the risk of contagion (upon a bank failure) is high. The optimal policy may then be not to try to avoid bailouts, but to make them “effective”: associated with lower rents.

Excerpts

When banks expect to be supported in a crisis, they take more risk, because shareholders, managers, and other stakeholders believe they can shift negative risk realizations to the taxpayer. So the expectations of support increase the probability of bank failures that governments want to avoid in the first place.

This paper highlights that when there are risks beyond the control of individual banks, such as the risk of contagion, the expectation of government support, while creating moral hazard, also entails a virtuous “systemic insurance” effect on bank risk taking. The reason is that bailouts protect banks against contagion, removing an exogenous source of risk, and this may increase bank incentives to monitor loans. The interaction between the moral hazard and systemic insurance effects of expected bailouts is the focus of this paper.

The risk of contagion is one of the reasons that makes banks special. While a car company going bankrupt is an opportunity for its competitors, a bank going bankrupt is a potential threat to the industry, especially when the failing bank is large. Banks are exposed to each other directly through the interbank market, and indirectly through the real economy and …nancial markets. While banks have some control over direct exposures, the indirect links are largely beyond an individual bank’s control. The threat of contagion affects bank incentives. The key mechanism that we consider in this paper is that when a bank can fail due to exogenous circumstances, it does not invest as much to protect itself from idiosyncratic risk. Indeed, would you watch your cholesterol intake while eating on a plane that is likely to crash? Or save money for retirement when living in a war zone? Moreover, making the threat of contagion endogenous to the risk choices of all banks generates a strategic complementarity that ampli…es initial results: banks take more risk when other banks take more risk, because risk taking of other banks increases the threat of contagion. [While we focus on the risk that a bank failure imposes on other banks, other papers have focused on the potential bene…ts for competing banks that can buy assets of a distressed institution at …resale prices, possibly with government support to the buyer.]


Under these circumstances, when the government commits to stem the systemic effects of bank failure, it has two effects on bank incentives. The …rst is the classical moral hazard effect described in much of the literature. The second is a systemic insurance effect that increases banks’incentives to monitor loans (this is similar to the effect identi…ed for macro shocks by Cordella and Levy-Yeyati, 2003, and to that of IMF lending to sovereigns in Corsetti et al., 2006). The promise of bailout removes a risk outside the control of a bank and increases its return to monitoring. Going back to our risky ‡ight parable, how would your choice of meal change if you had a parachute?

Formally, we develop a model of financial intermediation where banks use deposits (or debt) and their own capital to fund a portfolio of risky loans. The bank portfolio is subject to two sources of risk. The fi…rst is idiosyncratic and under the control of the bank. Think about this risk as dependent on the quality of a bank’s borrowers, which the bank can control through costly monitoring or screening. The second source of risk is contagion. Think about this, for example, as a form of macro risk. When a bank of systemic importance fails, it has negative effects on the real economy, possibly triggering a recession. A deep enough recession can lead even the best borrowers into trouble and, as a consequence, can cause the failure of other banks independently of the quality of their own portfolio. The risk of contagion is exogenous to individual banks (it cannot be managed or diversi…ed), but it is endogenous to the …nancial system as a whole, since it depends on risk taking by all banks.

These two sources of risk are associated to two inefficiencies. First, banks are protected by limited liability and informational asymmetries prevent investors from pricing risk at the margin. As a result, in equilibrium banks will take excessive idiosyncratic risk. As in other models, this problem can be ameliorated through capital requirements. The second ine¢ ciency stems from externalities. When individual banks do not take into account the effect of their risk taking on other banks, they take too much risk relative to the coordinated solution. And since banks are also affected by the externality, this exogenous source of risk reduces the private return to portfolio monitoring/screening. Bank increase idiosyncratic risk, increasing also the contagion externality. Capital requirements cannot fully correct this problem: even a bank fully funded by capital will take excessive risk when exposed to risk externalities.

Against this background, government intervention in support of failing banks has two opposite effects on incentives. It exacerbates the moral hazard problem stemming from limited liability, but reduces the externality problem associated with contagion. The extent of moral hazard depends on the rents that the government leaves to bailed out banks, while the importance of the "systemic insurance" effect depends on the probability of contagion. Thus, there are parameter values .low bailout rents and a high risk of contagion -- for which the promise of government intervention leads to lower bank risk and better ex ante outcomes.

The "systemic insurance" effects continue to be present when we allow banks to correlate their investments. The threat of contagion may induce banks to excessively correlate their portfolios, because contagion discourages strategies that pay off when other banks fail. Such correlation may be undesirable for a number of reasons .ine¢ cient distribution of credit in the economy, lower bank profits, or an increased probability of simultaneous bank failures (which are socially costly; Acharya, 2009). We show that the expectations of government support may reduce banks'incentives to correlate their investments by decreasing the risk of contagion. It is important to interpret our results with caution. First, they should not be seen as downplaying the moral hazard implications of bailouts. Rather, we argue that such implications have to be balanced with systemic insurance effects. Systemic insurance may be important for some, but not all parameter values. The best illustration for the case where systemic insurance effects might dominate would be a financial system on the brink of the crisis (with weak banks and high probability of contagion) with well-designed bank resolution rules (which minimize bailout rents). Second, we focus on ex ante effects of policies. Ex post considerations may be different and depend e.g. on the difference between the economic costs of bank bankruptcy and that of the use of public funds. Third, and most critically, we assume that the government is able to commit to a given bailout strategy. In a richer model with potential time inconsistencies in the government reaction function, outcomes may be more complex. In particular, banks may find it optimal to take correlated risks if they believe that bailouts will be more likely when many of them fail simultaneously.

Several recent papers have explored the effects of expected government support on bank risk taking. In these papers, bailouts increase risk taking and generate a strategic complementarity among banks when the probability of bailouts increases with the share of the banking system that is in distress. We add to that literature by introducing a risk externality in the form of an undiversi…able contagion risk. This risk externality creates an additional strategic complementarity in risk taking, one that does not result from government policy. In contrast to the existing literature, by preventing contagion, bailouts can reduce the strategic externalities and bank risk taking. The paper relates to the literature on government intervention as a means of preventing contagion. The observation that by removing exogenous risk the government can improve banks’ monitoring incentives was …first made by Cordella and Levy-Yeyati (2003), in the context of macroeconomic shocks. Our model builds on their work by making these shocks endogenous to the banking system, thus offering a link between individual bank risk taking and systemic risk. [Orszag and Stiglitz (2002) use the creation of fire departments as a parable to describe how risk taking incentives are affected by externalities and public policy. In their model (like here), individuals do not take into account the effects of reproof houses on reducing the risk of fire damage to their neighbors’homes, and invest too little in fire safety. The introduction of a fire department reduces the risk of a fire, but further worsens individual incentives, as it reduces the probability that a fire spreads from one house to another. To extend their parable, our paper is more about condo buildings rather than single-family houses. If the rest of the building burns down and collapses, a condo owner gets little benefit from having …reproofed her own apartment. Then, the introduction of a fire department makes individual safety measures more valuable as it reduces the probability of total meltdown.]