Archive for the ‘Natural science’ Category

Cyber Attacks Force EU to Close Emission Trading System

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Natural science, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 22.01.11 at 03:15

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset

After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement


A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

Related by The Swapper:


Mass Animal Death Mystery Just Got More Mysterious

In Health and Environment, International Econnomic Politics, Natural science, Philosophy, Technology, Views, commentaries and opinions on 20.01.11 at 02:49

This is now beyond weird – its plain spooky. Reports of mass animal deaths keeps coming in. Any plausible explanations, however, is totally absent. On Tuesday, 200 cows was found death on a farm in Portage County, Wisconsin, USA. Cause of death is yet to be determined. Yesterday a large number of dead, half rotten, fish was found floating in the area around Stjernøya in northern Norway. And here neither fishermen or authorities are able to figure out what kind of fish it is.

“It was a sad sight, and the whole fjord smelled absolutely terrible. It became worse further up the fjord where large amounts of fish was floating, partially disintegrated. All down in the fjord, it looked as if there were large quantities of dead fish at the bottom.”

Tor Mikkola

The Norwegian broadcasting Cooperation (NRK) reports of large amounts of dead fish found in Kjerringfjorden at Stjernøya in northern parts of Norway. At the moment, no ne can say where the fish originally comes from. And even more odd – no one can say for sure what kind of fish it is.

Local resident, Tor Mikkola, who first discovered the dead fish, tells NRK that it looked like herring at first, “but after looking a bit closer on some of them it looked more like saith,” he says.

These parts of Norway is traditionally populated by fishermen who usually knows what there is to know about fish.

Elisabeth Arild at the local FSA in Alta says that she is uncertain about what type of fish it is, based on the pictures she has seen.

“It is difficult to conclude anything just by looking at the pictures. It is perhaps small saith, that are not gutted. It may be from a fishing device that has been left there in where the fish has died,” she says, but points out that this is pure speculation.

The dead fish in the Norwegian fjord would not have been a big deal if it wasn’t for all the other cases of mass animal death being reported at the moment.

It happens from time to time that large amounts of fish gets killed by diseases, or other natural causes.

And there’s a lot of fish farming in the area. Last year one producer of salmon had to clean up 50 tons of fish who allegedly had died of hypoxia – lack of oxygen.

But the ting is; mass fish kills have also been reported in the US, Brazil and New Zealand, along with 40,000 dead crabs that washed ashore on the British beaches.

In addition it’s been reported that thousands of dead birds fell from the sky in Arkansas on New Year’s Eve, following a massive fish kill just 100 miles away days earlier.

In the week following, other mass bird deaths were reported in nearby Louisiana and Kentucky.

Birds were also reported to fall dead from the sky in Italy and Sweden, and more recently similar incidents have been reported in California and Alabama.

And now – cows.

200 Dead Cows

200 cows were found dead Friday on a farm in Portage County, Wisconsin, AP reports.

The dead cows had to be removed with semi-trucks. The rest of the farm has not been quarantined, as officials say no threat is posed toward humans or other animals.

The owner of the dead cows was working with a local veterinarian, who initially believed a virus such as infectious bovine rhinotracheitis (IBR) or bovine virus diarrhea (BVD) could be the culprit, according to The Wausau Daily Herald.

WSAW News reports that more recent updates have suggested pneumonia as the cause of the mass cow deaths, though such widespread cases of pneumonia are rare.

Tests are still underway to determine what is responsible.

(WSAW’s full video report here.)

In a recent news report, a veterinarian says he believes the cows died of acute interstitial pneumonia

Investigators are, however, still working to determine what caused the death of 200 steers in Portage County.

Many explanations have been offered for the various mass animal deaths, with everything from fireworks, semi-truck collisions, overeating and cold weather blamed for the birds’ deaths.

Cold weather has also been pinned to likely be the cause of many of the fish and crab deaths, as well.

According to some experts, mass animal deaths are not all that uncommon.

But the fact remains: There has been no exact and plausible explanation in any of these incidents.

As I said, this is now beyond weird.

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Related by The Swapper:

Who Killed The Blackbirds? The Aliens or Al Qaeda?

Low-Oxygen Zones In Oceans Worry Scientists

More Mysterious “Monster Fish” Comes To Surface

Norway: Police To Investigate “Monster Fish”

Coldest Winter In 1000 Years; Start Of New Ice Age?


So, You Think You Can Blog? (Econotwist’s Greatest Hits 2010)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Natural science, Philosophy, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 09.01.11 at 20:40

Every serious blog is presenting their top lists for 2010 these days, so I better get my lists out there too. Frankly, I’m quite surprised by the response I’ve got. After all this was my first year as a full-time blogger. By summer last year, the econotwist’s blogs – mainly The Swapper and The Econotwist’s – reached 20.000 unique visitors per month. Some articles was also republished by other blogs, or featured on the publishing sites like Scribd. I estimate the top articles of Econotwist’s in 2010 was read by at least 200.000 people. And as usual I managed, completely unintended, to make some people a little bit angry.

“That article is about as credible as me writing about nuclear technology. Off-balance sheet transactions? SPEs? Interest Rate and Currency Swaps? Has that idiot even looked at an Annual report for BP?”

Reader’s response

The quote above was in response to the July 2 post – “So, You Thought BP Was An OIL Company?” I haven’t got that much pepper since I described DnB NOR‘s subsidiary in the Baltic region as at “financial lab rat”. Anyway, I see all feedback, good or bad, as extremely valuable. I have not been able to reply to all comments or requests. For that I apologize, and promise I’ll spend more time on your responses in 2011. As for themes I will be focusing on the technological side of the financial markets in addition to my other specialties – the relations between economy and ecology.

And I will have a couple of new prominent contributors joining in, as well as some other surprises…

But right now I want to give my sincere thanks to all of you who’s been cheering me on this year, making my first year as a blogger a definitive success.

To quote one of my favorite artists, (Keith Richards): GOLD RINGS TO YOU ALL !

And here is a summary of the most popular posts and publications by The Econotwist’s Blogs in 2010.



  1. So, You Thought BP Was An OIL Company?
  2. Mother Earth On Crack
  3. Volcano Ash Can Send The Earth Into “Deep Freeze”
  4. The Worlds Most Contagious Countries – Here’s The List
  5. Cyber Criminals Attack Critical Water, Oil and Gas Systems
  6. More Mysterious “Monster Fish” Comes To Surface
  7. The Ultimate Trading Weapon
  8. Norwegian Day Traders Convicted Of Market Manipulation
  9. Goldman Sachs: “Damn American Bastards!”
  10. Flight to Mystery
  11. The Sun Is Speaking!
  12. Here’s The REAL Norwegian PIIGS Exposure



  1. Goldman Sachs: Global Economics Weekly. June 2010.
  2. Non Performing Loans, Europe June 2010. PriceWaterhouseCoopers
  3. Letter From Geithner
  4. SULTANS OF SWAP: BP Potentially More Devastating than Lehman!
  5. Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal Reserve System, at Princeton. 09242010.
  6. Goldman Sachs: “On The Eve of The Bank StressTests”
  7. Tudor Investments Letter October 2010
  8. Saxo Bank. Quarterly Outlook. Q3 2010.
  9. BP Annual Report and Accounts 2009
  10. Bank of International Settlement. Quarterly Report. June 2010
  11. Oslo District Court. Final Verdict In The Case of Market Manipulation by Day Traders. 10122010.
  12. Fitch. Special Report. “CDS Spreads and Default Risk – Interpreting the Signals”- October 2010.


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The Greatest Conspiracy


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#1. “Nobody Lnpws The Bubbles I’ve Seen” (By


#2. “It’s Beginning To Look A Lot More RiskLess” (By



No matter what happens in 2011 – don’t forget to have some fun!

All The Best

Mystery of Mass Animal Death Deepens

In Health and Environment, International Econnomic Politics, Learning, Natural science, Trading software, Views, commentaries and opinions on 08.01.11 at 01:35

The mystery of mass animal death epidemic deepens after 8.000 turtle doves fall dead in Italy with strange blue stain on their beaks. The blue stains are believed to be sign of poisoning or hypoxia – lack of oxygen. Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness. Experts said results from tests on the doves will not be available for at least a week.

“We have no idea why this happened all of a sudden.The doves just started falling one-by-one then in groups of 10’s and 20’s.”


Residents in Faenza described the birds falling to the ground like “little Christmas balls” with strange blue stains on their beaks. Thousands of dead turtle doves rained down on roofs and cars in an Italian town in the latest in a growing spate of mass animal deaths across the globe.

Initial tests on up to 8,000 of the doves indicated that the blue stain could have been caused by poisoning or hypoxia, the UK Daily Mail reports.

A witness told “We have no idea why this happened all of a sudden. The doves just started falling one-by-one then in groups of 10’s and 20’s.”

Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness.

Experts says results from tests on the doves will not be available for at least a week.

They say that cold weather could have caused the birds’ deaths as the flock was swept into a high-altitude wind storm before falling to the earth.

It comes after two million dead fish were found to have washed up on shores in Chesapeake Bay, Maryland.

The alarming find is being blamed by authorities in Maryland on the stress caused by unusually cold water and over breeding among spot fish.

That investigation comes just days after the deaths of an estimated 100.000 fish in northwest Arkansas, which is being blamed on disease.

A statement by the Maryland Department of the Environment says: “Natural causes appear to be the reason. Cold water stress exacerbated by a large population of the affected species (juvenile spot fish) appears to be the cause of the kill.”

Preliminary tests of the water in Chesapeake Bay have showed the quality was “acceptable,” officials says.

The statement adds: ‘The affected fish are almost exclusively juvenile spot fish, three to six inches in length. A recent survey showed a very strong population of spot in the bay this year. An increased juvenile population and limited deep water habitat would likely compound the effects of cold water stress.”

Mass winter deaths among spot fish have occurred twice before in the Maryland area – in 1976 and 1980.

CNN reports:

Vodpod videos no longer available.


Here’s some of the latest news stories:

  • Blue stain believed to be sign of poisoning or hypoxia – lack of oxygen that is precursor to altitude sickness
  • Cold weather and over breeding blamed for deaths of two 2million fish in Chesapeake Bay
  • Disease behind deaths of 100,000 fish in Arkansas River
  • At least nine incidents of mass animal deaths across the globe
  • Hundreds of confused birds plummeted to their deaths in multiple locations in the U.S.
  • Rapid movement of Magnetic North Pole towards Russia may have caused bird deaths.
  • .

    And here’s some of stories that have made headlines over the last two weeks:

    • 450 red-winged blackbirds, brown-headed cowbirds, grackles and starlings found littering a highway in Baton Rouge, Louisiana
    • 3,000 blackbirds on roofs and roads in the small town of Beebe, Arkansas
    • Thousands of ‘devil crabs’ washed up along the Kent coast near Thanet
    • Thousands of drum fish washed along a 20-mile stretch of the Arkansas River
    • Two million small fish in Chesapeake Bay, Maryland
    • Thousands of dead fish found floating in warm Florida creek
    • Hundreds of snapper fish found dead in New Zealand
    • Scores of American Coots found dead on Texas highway bridge


    Not The End of Nature

    Experts have speculated that New Year fireworks, thunderstorms, cold weather, parasites and even poisoning may be behind the deaths.

    But conspiracy theorists have also speculated on the internet that secret government experiments could be behind them, with some even claiming it was a sign of a looming Armageddon at the end of the Mayan calendar next year.

    Another theory is that the rapid movement of the Magnetic North Pole towards Russia may have affected the birds’ innate navigation systems.

    However – wildlife health experts  says that these mortality events happen every year but we are just beginning to notice them now, ThaiIndian News writes on their website.

    “This is really not the unusual thing that people are trying to make it into,” Robert Meese, ecologist at the University of California, Davis, says in an interview with Discovery News. “A lot of this stuff happens without anyone documenting it.”

    Meese adds that there are many reasons for such massive die-offs – bad weather, migratory birds accidentally ingesting pesticides or even poisons or birds losing their way due to disorientation by fog or storms.

    Records kept by the United States Geological Survey list at least 16 die-offs of more than 1.000 blackbirds or starlings over the past 30 years, according to Marisa Lubeck, spokesperson for the USGS in Denver.

    But group deaths among animals have been going on for a lot longer than that. In one case, an estimated 1.5 million Lapland Longspurs died during a March 1904 storm in Minnesota and Iowa.

    And such phenomena occur amongst fish, whales, seals and even turtles

    “I think people are very often surprised that this kind of phenomenon happens, that wildlife are susceptible to disease and that there are large outbreaks in the wild, because they often go unseen,” says Paul Slota, spokesperson for the USGS National Wildlife Health Center in Madisonn.

    “I think people should be aware that mortality events in wildlife are normal. They are a fact of life.”

    Related by The Swapper:

    Who Killed The Blackbirds? The Aliens or Al Qaeda?

    Low-Oxygen Zones In Oceans Worry Scientists

    More Mysterious “Monster Fish” Comes To Surface

    Norway: Police To Investigate “Monster Fish”

    Coldest Winter In 1000 Years; Start Of New Ice Age?

    Scientists Gather Around Katla, Volcano Giant Close To Eruption

    In Financial Markets, Health and Environment, Natural science, Technology on 08.01.11 at 00:23

    A sudden grouping of earthquakes at and around the volcano Katla in Iceland during the past 24 hours is cause for concern. Approximately 50 earthquakes have suddenly popped around the region, according to the Modern Survival Blog. The most alarming is that the last 6 have rumbled right beneath and within the Katla volcano caldera  itself – the most caldera quakes in one day since this author began monitoring the Icelandic volcano 7  months ago. International geologist is now setting up new equipment in the area.

    “If that wasn’t enough cause for concern, earthquakes are also rumbling around the volcano that erupted last April (Eyjafjallajokull), the one that shut down European air traffic for several weeks.”


    A few weeks ago, Eyjafjallajokull began showing signs of activity once again, the activity being new earthquakes. Having been mostly quiet since the eruption ended early last year, Eyjafjallajokull may now be indicating that it has more in store for us, the blog reports.

    However, of greater overall concern is the Katla volcano.

    The Katla Eruption of 1918

    Reason being, it has the potential to explode with up to ten times the force of that of its neighbor, Eyjafjallajokull.

    “The last Katla eruption was during 1918, 92 years ago, and is way overdue for its next wake-up call.”

    The average time between explosive Katla eruptions has been 52 years since it erupted in 30 AD. Katla has erupted 38 times since.

    Since May, 2010, approximately 132 earthquakes have rumbled within the Katla caldera.

    The concentration of these earthquakes appear to be located in three general areas, as shown in the following image.

    The largest concentration looks to be near the eruption of 1755, with nearly an equal number located near the eruption of 1918. There is also a build up of quakes along the northeast rim.

    “We know that it is only a matter of time before this volcano blows its top. The explosion could be the biggest we’ve seen in a long time around this planet. Katla has exploded with a VEI 5 in the past (that’s pretty big).”

    According to,  new detection equipment has been installed around the Katla; Eyja region.

    “If accurate, this could explain some of what we may be seeing. My own experience tells me that newly installed systems (any industry) take a while to tweak out issues. We’ll see how this plays out. Apparently just days ago, new, more sensitive seismometers (and more of them) have been brought online having been installed around Katla and Eyja, and financed by the British Geological Survey. The reason for the British funding for the new seismometers and software is to give better clues and more advanced warning before Katla does eventually go ka-boom. Even they know its history.”

    Related by The Swapper:

    Who Killed The Blackbirds? The Aliens or Al Qaeda?

    In Health and Environment, International Econnomic Politics, Learning, Natural science, Philosophy, Technology, Views, commentaries and opinions on 06.01.11 at 19:17

    Over the last weeks, there have been reports from. at least, three different parts of the world about hundreds and thousands of dead black birds falling from the sky. In the US authorities blame it on the fireworks, in Australia its said to be some kind of poison and in Sweden a truck drivers has admitted to rolling over a flock of birds sitting in the middle of the road in the middle of the night. The preliminary findings shows that the birds have internal damage. However, the truth is still out there, and other explanations are far more entertaining.

    “I asked these guys who are out here picking them up and they don’t seem to know anything, nobody seems to know anything. It just kind of freaked everybody out.”

    US Citizen of Arkansas

    The reports on birds dropping dead from the sky is not the only strange phenomena observed in Arkansas recently:  Last Thursday, a day before New Years Eve and the dead-bird-rain, a tug boat operator on a 20-mile stretch of the Arkansas River discovered  over 100.000 dead drum fish, washed up on the river banks.

    The drum fish were discovered near Ozark by a tug boat operator on Thursday – a day before thousands of blackbirds fell from the sky only 125 miles away – in Little Rock, the UK Daily Mail reports.

    David Price, who spotted the fish from his parents’ Roseville house, located on the banks of the river, pointed and says: “Over from down here at the bottom of the rocks, out maybe 40 or 50 feet, there were just thousands of fish along the shore-banks all the way around the river here.”

    ‘This is kind of amazing because the fish were about a pound and a half a piece,’ Price says.

    Travis Harmon of the Department of Environmental Quality says: ‘Barges reported passing up river and churning up dead fish from the bottom of the river. A single species is killed, and we don’t know the cause. If it was toxic, other species would be affected.”

    Toxic, What Toxic?

    Fisheries officials collected some of the dying animals near Roseville to conduct tests.

    People have been warned about eating the fish.

    Keith Stephens of the Arkansas Game and Fish Commission says that a mass fish kill happens from time to time, but this case is particularly unusual.

    “The fish kill only affected one species of fish,” he points out.

    ‘If it was from a pollutant, it would have affected all of the fish, not just drum fish.”

    Ozark, where the fish was found  is about 125 miles west of the town of Beebe, where authorities still are trying to find out why about 5.000 red-winged blackbirds and starlings fell from the sky just before midnight New Year‘s Eve.

    Biologists believe the bird deaths were stress-related from either fireworks or weather and are unrelated to the fish kill near Ozark, according to Mr Stephens.

    Although the two incident occurred one after the other, Mr Stephens says he believe that they are unrelated.

    At the moment biologists are investigating the possibility of a new type of bird flu.
    A Global Mystery

    I can see why the scientists think its hard to say if the cases of dead birds and fish are related or not.
    At the moment, the following stories are being reported by the news media:
    • Thousands of fish found floating in Florida after cold snap
    • 200 birds found dead on highway bridge in Texas
    • 50 dead jackdaws found on city street in Sweden
    • 100 tons of sardines, croaker and catfish wash up dead on Brazilian coast
    • Hundreds of fish dead in New Zealand
    • In Britain, 40,000 devil crabs join list of casualties


    click to enlarge

    Internal Bleeding

    More and more animals are being found dead as the mysterious spate of mass bird and fish deaths has turned into a global phenomenon.

    The latest two separate incidents saw thousands of fish found floating in a creek in Florida and 200 birds found dead on a highway bridge in Texas.

    Experts were yesterday carrying out tests on around 50 jackdaws found dead in a street in Falkoping, Sweden, that appear to have suffered the same fate as thousands of their cousins who fell from the sky in separate incidents in the US.

    The Swedish newspaper “Expressen” reports today that the preliminary findings shows that the birds have internal damage. According to Swedish zoologist Marianne Elvander there is no sign of decreases or infections. 

    A Swedish truck driver have admitted to the police that he probably drove through a huge flock of birds sitting in the middle of the road on Monday night.

    “He ran over some of them, and did not think there was anything strange until he saw the enormous media attention the dead birds has received,” says Christer Olofsson with the Swedish rescue service to the newspaper Aftonbladet.
    Anyway – the case is still a mystery.
    And of course the speculations are flying high on the internet right now.
    Among the more exotic explanations is that the animal killing is caused by aliens from another planet, or that is another plot organized by Al Qaeda.
    However, regular readers of The Swapper/Econotwist’s will know that this is not the first case of strange phenomenons involving animals we’ve experienced over the last two years, at the same time the earthquake frequency have increased by 133% as more and more extreme weather are swiping over the planet’s surface.
    According to the scientists and the official expert nothing is related…..
    Well, I want to know WFT is going on!
    Related by The Swapper:

    WikiLeaks: The Diversion of A Decade?

    In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, National Economic Politics, Natural science, Philosophy, Technology, Views, commentaries and opinions on 06.12.10 at 20:54

    There’s a lot serious stuff going on in the world at the moment. But somehow the center of attention is a young man who has managed to piss of some politicians and generals by publishing documents that proves what most people already know – or at least suspected. The WikiLeaks founder Julian Assange is now subject to the most intense manhunt by international authorities since Osama bin-Laden for having sex without a condom. The fact that a stack of reports have been issued, warning about further deterioration of the global economy, currency wars, political instability and exploding social unrest, seems to be mostly overlooked. Am I the only one to  think it’s a little peculiar?

    “The WikiLeaks saga is trying its best to offer distraction, but the crisis in the euro zone remains impossible to ignore.”

    Robin Bew

    It’s been a strange, almost surreal, weekend. Personally I’ve been fighting off a couple of attempts to hack into my computer system, and never in the 15 years I’ve been online have I ran into so many error messages when trying to load pages on the internet. What makes it even more strange is that the WikiLeaks frenzy is happening at the same time as EU and NATO is conducting its first ever cyber war exercise, the US launch a massive operation to seize close to hundred file-sharing web sites and thousands of hackers all over the world gathered at an event organized by Google, Microsoft, NASA and the World Bank.

    And all this have been planned long time ahead. The latest release of documents from WikiLeaks was also notified months in advance.

    So was the scheduled release of several economic forecasts for 2011 last week. However, these have more or less been drowned in the avalanche of more or less (un)important Wiki-stories filling up both mainstream and alternative medias.

    So, I think it’s time to get the focus back where it belongs; on the developments of our global economy, as the Eurogroup meet for another crisis meeting this Monday and Bloomberg reports that the euro’s worst is yet to come.

    “The WikiLeaks saga is trying its best to offer distraction, but the crisis in the euro zone remains impossible to ignore. With fears of contagion increasing, our ViewsWire service examines scenarios under which countries might exit the single currency,” chief economist Robin Bew at The Economist Intelligence Unit writes in an email to subscribers. Adding: “We think the euro will ultimately survive, but significant political and economic hurdles will have to be overcome, with Portugal now likely to follow Ireland and Greece in requesting emergency EU/IMF funding.”

    Last week EIU released a bunch of reports, based on separate analysis on each topic.

    You have to look very hard to find something positive to hold on to. In fact, I can’t remember having read anything like this from The Economist in a very long time.

    This is the headlines:

    The EIU label the three first predictions with “High Probability,”  the next three as “Moderate Probability” and the two last are seen as “Low Probability”.

    As I’ve been pointing out since the financial crisis became visible to most people, we are in fact dealing with a three-part crisis; the financial, the environmental and the social.

    There three problems are connected, they interact with each other, feeds on each other, making each other stronger – and it’s impossible to solve one without solving the others.

    Robin Bew writes:

    “The UN climate summit under way in Cancún, Mexico is highly unlikely to produce a global accord on emissions cuts, though modest gains, such as on forest protection, remain possible.”

    Well, the possibility of rescuing a few trees is not gonna make much difference.

    As for the social (poverty) crisis, Economist Intelligence Unit concludes:

    “The risk is that instability becomes systemic, with political crises in certain countries affecting others through contagion or through the actions of populist new regimes seeking to assert themselves. Potential widespread disruption poses a considerable downside risk to the Economist Intelligence Unit’s global economic forecasts.”

    That’s right. Sovereign debt problems isn’t the only thing that is contagious.

    The Economist Intelligence Unit‘s baseline global forecast assumes some increase in social and political unrest, but with serious fallout largely avoided. If economic circumstances were to worsen again, however, there is a danger though that incidents of unrest turn into far more intense and long-lasting events: armed rebellions, military coups, civil conflicts and perhaps even wars between states. In such circumstances, a repetition of the pressures that transformed global politics in the 1930s, though a far-removed worst-case scenario, could not be dismissed.”

    In other words: If the economy gets worse, we may face a World War II scenario.

    Now, take a look at the top three scenarios again…

    First: Sovereign debt

    “There are considerable concerns about the sustainability of public debt positions in a number of countries. Heavily indebted sovereigns – including developed economies, notably in the euro zone – could struggle to raise private financing even at higher interest rates, and some could default.”

    “The US and the UK also face drastically increased fiscal deficits. They could moderate their debt burdens through inflation and devaluation but this risks undermining their bond markets, and the resultant spike in bond yields could force an acceleration of fiscal tightening, with highly negative implications for economic recovery.”

    “Emerging-market defaults would create some ructions more widely, but as developed-country sovereign bonds have traditionally been considered risk-free, developed-country defaults in particular would wreak havoc on investor psychology. Banks would face write-downs on their government debt portfolios, and financial-sector guarantees by governments that default would be exposed as worthless.”

    (Forecast: High probability, high impact, risk level 16)

    Second: New Asset Bubble

    “A flood of cheap money from stimulus measures, in particular carry trades drawing on record-low interest rates in the US, prompted a strong rally in a range of assets in the second half of 2009 and in 2010, particularly emerging-market stocks and bonds, but also in risky asset classes such as equities, high-yield bonds and commodities more broadly.”

    “New bubbles could continue to grow for a considerable period of time, potentially several years, during which they will help to boost growth in the economies concerned. But they would burst suddenly, and still-fragile risk appetite could be a factor in this – a decline in risk tolerance could see investors pull their money out of emerging-market assets. Indeed, the rally in asset markets has been subject to periodic reversals in 2010 as concerns about the outlook for the global economy have re-emerged.”

    “New asset bubbles may be vulnerable to painful corrections as central banks in emerging markets tighten monetary policy, fiscal stimulus is withdrawn, and the weak foundations of recovery become apparent. The resultant dislocations, including a shock to banks and a renewed rise in risk aversion, would reinforce and deepen a new economic slowdown.”

    (Forecast: High probability, high impact, risk level 16)

    Third: Currency Manipulation

    “Tensions are rising over attempts by some countries to weaken their currencies, and the US and China remain at odds over the value of the renminbi. A global “currency war” would raise the danger of protectionist responses.”

    “Tensions over exchange-rates have risen in recent months. The US Congress has been holding hearings on China’s exchange-rate policy, with a view to potential legislation to punish China for what the US regards as a mercantilist strategy of keeping the renminbi artificially low. A growing cohort of other countries are also worried about the strength of their currencies, including Brazil, Switzerland, Japan and South Korea. Market interventions by policymakers in some countries to weaken their currencies prompted Brazil’s finance minister, Guido Mantega, to warn of an “international currency war”.”

    “Given the closely integrated nature of the global economy, governments will find it difficult to close off many aspects of trade, even if they want to. But trade disputes are likely to increase as populist policies clash with countries’ international obligations.”

    (Forecast: High probability, high impact, risk level 16)

    All eight summaries are uploaded on Scribd.

    By the way – here’s the latest WikiLeaks stories:

    WikiLeaks founder Julian Assange arrested in UK (BBC)

    Feds block workers from WikiLeaks (

    MasterCard pulls plug on WikiLeaks payments (

    Swiss Bank Closes WikiLeaks Founder’s Bank Accounts (RadioFreeEurope)

    WikiLeaks‘ Swedish servers come under attack again (The Herald Tribue)

    Barack Omama Is More Dangerous Than WikiLeaks (American Enterprise Institute for Public Policy Research)

    WikiLeaks Releases List of “Vital” US Facilities (

    Google refuses to disclose whether they’d allow users to repost Wikileaks‘ State Department cables (The Atlantic)

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    The Worlds Most Contagious Countries – Here’s The List

    In Financial Markets, Health and Environment, International Econnomic Politics, Learning, National Economic Politics, Natural science, Quantitative Finance on 27.11.10 at 17:28

    I guess its about time to rewrite the old saying; “When Wall Street Sneezes – The World Catches A Cold.” Scientist have been able to map the developed countries economic interconnection, and the result is a bit surprising. It shows that some of the smallest countries, with the lowest gross national product, has in fact the greatest potential to create a worldwide financial havoc.

    “These smaller countries do not support only their local economy but are also a haven for foreign investments, as they attract funds from large countries for taxation purposes, safekeeping, etc, and a problem in such investments can easily lead to a chain reaction in other countries.”

    Antonios Garas/Panos Argyrakis/Céline Rozenblat/Marco Tomassini/Shlomo Havlin

    C12 - The Most Contagious Countries In The World

    According to the new research paper, the phrase “When Belgium Sneezes, The World Catches A Cold,” would be more accurate. Belgium, who has been without a government for six months and has one of the lowest GDP outputs in the world, is in fact among of the nations that easily can cause a major global financial crisis. The report by IOP Science list the 12 most economic contagious countries in the world – hereby named the C12.

    The new analysis of countries’ economic interconnectedness finds that some of the countries with the greatest potential to cause a global crash have surprisingly small gross domestic production.

    Using data from Bureau Van Dijk — the company information and business intelligence provider — to assess the reach and size of different countries’ economies, and applying the Susceptible-Infected-Recovered (SIR) model, physicists from universities in Greece, Switzerland and Israel have identified the twelve countries with greatest power to spread a crisis globally.

    The research published on Nov. 25,  2010, in the New Journal of Physics, groups Belgium and Luxembourg alongside more obviously impactful economies such as the USA in the top twelve.

    Here’s the “C12” nations:

    1. USA
    2. France
    3. United Kingdom
    4. Sweden
    5. Japan
    6. Spain
    7. Switzerland
    8. The Netherlands
    9. Italy
    10. Germany
    11. Belgium
    12. Luxembourg

    Except for USA and France, they’re all  – almost – equally dangerous if a crisis occurs on a national level.

    Note:  Six of the eight wealthiest nations in the world – G8 – is on the list.

    “This is explained by the fact that these smaller countries do not support only their local economy but are also a haven for foreign investments, as they attract funds from large countries for taxation purposes, safekeeping, etc, and a problem in such investments can easily lead to a chain reaction in other countries. Countries such as Luxembourg and CH, which are the headquarters for some of the world’s largest companies and subsidiaries, interact very strongly with a large number of countries. For example, about 95% of all pharmaceutical products of the Swiss industry is not intended for local consumption but for exporting,” the scientists write.

    Using a statistical physics approach, the researchers from the Universities of Thessaloniki, Lausanne and Bar-Ilan used two different databases to model the effect of hypothetical economic crashes in different countries.

    The data used allowed the physicists to identify links between the different countries, by mapping the global economy to a complex network, and gauge the likelihood of one failed economy having an effect on another.

    One network was created using data on the 4000 world corporations with highest turnover and a second using data on import and export relations between 82 countries.

    In addition, the SIR model, successfully used previously to model the spreading of disease epidemics, is applied to these two networks taking into consideration the strength of links between countries, the size of the crash, and the economic strength of the country in potential danger.

    When put to the test with the corporate data, the USA, the UK, France, Germany, Netherlands, Japan, Sweden, Italy, Switzerland, Spain, Belgium and Luxembourg were part of an inner core of countries that would individually cause the most economic damage globally if their economies were to fail.

    Using the import/export data, China, Russia, Japan, Spain, UK, Netherlands, Italy, Germany, Belgium, Luxembourg, USA, and France formed the inner core, with the researchers explaining that the difference – particularly the addition of China to this second list – is due to a large fraction of Chinese trade volume coming from subsidiaries of western corporations based in China, according to the report.

    The researchers write:

    “Surprisingly, not all 12 countries have the largest total weights or the largest GDP. Nevertheless, our results suggest that they do play an important role in the global economic network. This is explained by the fact that these smaller countries do not support only their local economy, but they are a haven for foreign investments.”

    The Big Bang of Belgium

    Belgium – who now have been without a government for six months – is held up as an example.

    “We find that countries in the nucleus can spread a crisis to larger parts of the world compared to countries in the outer shells, even if the crisis originates in a small country, such as Belgium.”

    “Zoom of the area showing the spreading for smaller crisis magnitudes (m). The dashed line shows the spreading of a crisis originating in Belgium, which is one of the smaller countries that belong to the nucleus of the network. Note that a crisis originating in Belgium, as m gets larger, becomes more severe in comparison with the average case for all countries in shell 11, (e). Fraction of nodes infected by a crisis originating from different shells of the network versus its magnitude m for ITN, (f) Zoom of the area showing the spreading for smaller crisis magnitudes (m). The dashed line again shows the spreading of a crisis originating in Belgium.”

    It’s hard to imagine, but the scientist writes that a crisis originated in Belgium has the potential to infect 95 percent of the global economy:

    “Considering the example of Belgium – ranked 29th according to its total GDP – we find that a crisis originating in this country (with magnitude m = 4.5), is able to affect for CON almost 60% of the world’s countries (average result of 50 realizations), while the worst-case scenario that is given by the maximum value of the fraction of infected countries (out of the same 50 realizations) is 95% of global infection,” they write.

    The Potential Impact of Belgium

    This story was first published by on November 26, based on materials provided by Institute of Physics, via EurekAlert!, a service of AAAS.

    Here’s a copy of the full report, downloaded from IOP

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