I Lose a Bet, Start an Argument

Bruce Krasting's picture

 

 

Back on November 17, 2011 I penned a piece in response to Fed Governor Bullard's assertions regarding the collapse of MF Global. Bullard thought there was no lasting consequences to that blow-out: .

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At the time, I thought that Bullard was full of crap, and that there would be significant consequences to the collapse of MFG. My words:

Okay, Mr. Bullard I'll make you a wager. A six pack of your favorite beer. Give the MFG story another month and it will be a problem. It will undermine markets. It will impact confidence in our financial system. It will impact liquidity. As those things will occur it will force both the Treasury and the Fed to take actions.

I was wrong, Mr. B was right. There were no consequences to the MFG disaster. No heads rolled. No one went to jail. There were no lasting economic consequences. There were were no regulatory changes. The MFG affair was buried. Bullard never accepted my bet, but I still feel I owe him.  If he reads this and sends me a note I will forward his beer. He deserves it. He won. Unfortunately, we all "lost" as a result. Today we have yet another MFG in our laps. Perigrine Financial has followed the exact same path as MFG. The PFG bankers looted customer accounts.

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I lost a bet for $12 worth of beer. Customers at Peregrine have lost $220m (so far). I can’t help wondering what would have happened had won the bet. If there had been hell to pay regarding the MFG affair, things might have turned out differently for Peregrine’s customer. But there was no market reaction, the CFTC ignored the signs, the SEC never lifted a finger. Nothing changed, so history has  repeated itself.

Perigrine customers, looking at a loss today, might be warming up lawsuits against Bart Chilton and the CFTC. He clearly fell down on the job. I think he should be fired on the spot. Fed Governor Bullard is not responsible for the failure of Peregrine (or MFG), but his dismissing attitude is:

This is no big deal, it will blow over”

To that extent, he shares in the blame.

 

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The markets are boring, so let's talk about global warming
 

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I have absolutely no credentials or expertise to discuss matters related to climate change. I’ll do it anyway. I follow this topic and read what I can. In my opinion:

I) -  Climate change is happening on a global scale. The evidence that this occurring is conclusive.

II) -  I don’t know if humans are contributing to the rapid change, but I suspect they are.

III) -  Even if there were conclusive evidence that human activity was contributing to global warming, I’m not at all sure that there is anything that can be done about it.

Consider these before and after pictures from NASA. These are images of the Beaufort Sea, north of Alaska.

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May 13, 2012

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One month later

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Okay, so some ice melted. Is that a big deal? The folks at NASA and the National Snow and Ice Data Center (NSIDC) think it is:

Sea ice retreat in June is typical, but the first half of June 2012 brought unusually rapid ice loss.

How unusual?

On June 19, 2012, NSIDC reported: “Recent ice loss rates have been 100,000 to 150,000 square kilometers per day, which is more than double the climatological rate.”

Double the rate? How much ice is melting every day in the Beauford Sea? About the size of the state of Illinois – big!

As of June 18, temperatures were above freezing over much of the sea ice in the Arctic, and snow had melted earlier than normal, leading to warming on land.

June 18? It has been hot as hell over the globe since then. This year’s arctic ice melt will set a record.

The rapid melt north of Alaska was part of a larger phenomenon. Sea ice across the entire Arctic reached record-low levels for this time of year. It was also lower than the extent in June 2007; Arctic sea ice reached its lowest extent ever recorded by satellite in September 2007.

This is not a record that we want to set. Now consider this number:

 
20,900,000,000,000
 

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20.9 Trillion is the number of pounds of CO2 that humans sent into the atmosphere in the last 12 months. It’s hard to relate to a number as big as that. Think seven billion Hondas. But even that is a number that is hard to fathom, as there are only a billion cars in the world today. How could we be producing 7Xs the weight of all the cars, every year?

Is there a connection to the incredible output of CO2 and the rapid ice melt that is happening all over the world? I wish I knew the answer to this question. I do know that CO2 emissions are directly tied to population growth/economic activity. The question is how rapidly CO2 output will rise:

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Any thoughts?

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