Latest News Clips 2013.12.30

                     

1. Markets on Edge as China Moves to Curb Risky Lending 

The New York Times   December 27, 2013 

 

HONG KONG — China’s financial system is in danger of becoming too big to bail out. 

Official bank lending has more than doubled since the global financial crisis, growing nearly twice as fast as the overall economy. The even bigger problem, however, appears to come from the rise of a shadow banking system that has allowed a number of companies and individuals, often with political connections, to borrow from state-controlled banks at low interest rates and relend the money at much higher rates to private businesses desperate for credit at almost any price. 

Now, in an effort to wean the banks and the economy off their addiction to such risky practices, Beijing has pledged to deliver what amounts to the country’s most sweeping financial overhaul in decades. Markets will play the “decisive” role in directing the economy, policy makers promised last month after a key plenum meeting of the Communist Party leadership. Interest rates are to be liberalized, cross-border investment will be welcomed and regional and bureaucratic protectionism will be curtailed, they declared. 

But already even relatively modest government moves are producing turbulence in money markets; just this week China’s central bank was forced to back off, at least temporarily, to avoid putting too much stress on the banking system and potentially igniting a backlash from powerful vested interests in China accustomed to paying very little for their loans. 

“It’s been pretty clear since June, and especially clear since the plenum, that the new crowd is interested in tightening monetary policy and letting interest rates rise,” said Arthur R. Kroeber, the Beijing-based managing director of GK Dragonomics, an economic research firm. “The purpose is to reduce the rate at which credit is expanding, which has been a bit of a problem over the last couple of years.” 

2. N.S.A. Phone Surveillance Is Lawful, Federal Judge Rules 

The New York Times    December 27, 2013 

 

WASHINGTON — A federal judge in New York on Friday ruled that the National Security Agency’s program that is systematically keeping phone records of all Americans is lawful, creating a conflict among lower courts and increasing the likelihood that the issue will be resolved by the Supreme Court. 

In the ruling, Judge William H. Pauley III, of the United States District Court for the Southern District of New York, granted a motion filed by the federal government to dismiss a challenge to the program brought by the American Civil Liberties Union, which had tried to halt the program. 

Judge Pauley said that protections under the Fourth Amendment do not apply to records held by third parties, like phone companies. 

“This blunt tool only works because it collects everything,” Judge Pauley said in the ruling. 

“While robust discussions are underway across the nation, in Congress and at the White House, the question for this court is whether the government’s bulk telephony metadata program is lawful. This court finds it is,” he added. 

A spokesman for the Justice Department said, “We are pleased the court found the N.S.A.'s bulk telephony metadata collection program to be lawful.” He declined to comment further. 

Jameel Jaffer, the A.C.L.U. deputy legal director, said the group intended to appeal. “We are extremely disappointed with this decision, which misinterprets the relevant statutes, understates the privacy implications of the government’s surveillance and misapplies a narrow and outdated precedent to read away core constitutional protections,” he said. 

3. The Peril of Antibiotic Use on Farms 

The New York Times  December 21, 2013 

  

 

After years of inaction, the Food and Drug Administration has finally taken an important step to reduce the use of medically important antibiotics in animal feed. The goal is to curb the rise of bacteria that become resistant to antibiotics used in both human and veterinary medicine. 

Earlier this month, the F.D.A. issued a new policy asking drug companies to revise their labels voluntarily to remove statements indicating that the antibiotics can be used to promote growth in livestock. Such a labeling change would make it illegal to use the antibiotics for that purpose. Companies that comply will also have to ensure that the use of the drugs to treat, control or prevent disease in animals is authorized and overseen by veterinarians. 

This step depends on the willing cooperation of the drug makers, which will have three months to tell the agency whether they will change the labels, and up to three years to carry out the new rules. Two major manufacturers have already said they will do so. 

The rampant use of antibiotics in agriculture has been alarming. The drugs are given not just to treat sick animals, but added in low doses to animal feed or water to speed the growth of cattle, pigs and chickens, thus reducing costs for the producers. Such widespread use of antibiotics in healthy animals has stimulated the emergence of bacterial strains that are resistant to antibiotics and capable of passing their resistance to human pathogens, many of which can no longer be treated by drugs that were once effective against them. 

Each year, at least two million Americans fall ill — and 23,000 die — from antibiotic-resistant infections. Doctors are partly to blame because many prescribe antibiotics for conditions like colds that can’t be cured with such drugs. The Centers for Disease Control and Prevention estimated in September that up to half of the antibiotics prescribed for humans are not needed or are used inappropriately. It added, however, that overuse of antibiotics on farms contributed to the problem. 

4. Turkey's Byzantine Scandal 

Corruption charges threaten the country's Islamist leader. 

The Wall Street Journal    Dec. 26, 2013 

  

Recep Tayyip Erdogan has spent the past week blaming a burgeoning corruption scandal on foreign plotters. But Wednesday's trio of resignations from his cabinet, which were intended to insulate Turkey's Islamist Prime Minister, had the effect of bringing the scandal to his doorstep. 

The Interior and Economy Ministers did their duty by denouncing the investigations and professing the prime minister's (and their own) innocence. But Erdogan Bayraktar, the Minister for the Environment and a confidant of the PM, went out with a bang. Mr. Bayraktar said Wednesday that he was pressured to resign to shield Mr. Erdogan from the scandal, which concerns alleged payoffs to facilitate real-estate development deals. He also suggested that if it was right for him to step aside for the country's sake, then Mr. Erdogan should resign as well. 

In addition to blaming the crackdown on unnamed foreign governments, Mr. Erdogan has spent the week tightening his control over police and prosecutors. Scores of police chiefs around Turkey have been fired and replaced since the investigation went public December 17 with some two dozen arrests. Prosecutors have been barred from conducting investigations without informing their political masters first. 

The Prime Minister has spent a decade consolidating power in Turkey, and his AK Party faces no serious rival on the national stage. The Turkish military, once feared by civilian governments, has been removed from the political scene. Mr. Erdogan's deceitful and brutal handling last summer of protesters in Istanbul damaged his international reputation, but the protests did not seem to shake his political grip. 

Latest News Clips 2013.12.23

1. Indian diplomat arrested, strip-searched: Does she have immunity? 

CNN    December 18, 2013  

 

Arrest sparks diplomatic feud 

(CNN) -- The arrest and strip-search of Indian diplomat Devyani Khobragade, accused of visa fraud, has sparked questions about the complex, murky system of diplomatic immunity. 

"There's a lot of subjectivity on this stuff," says CNN legal analyst Jeffrey Toobin. 

Khobragade's lawyer, Daniel Arshack, says his client is entitled to diplomatic immunity and can't be prosecuted under U.S. law, CNN's Indian sister network IBN reported. But the State Department says Khobragade's consular immunity does not cover this kind of crime. 

Now, Khobragade has been moved to India's Permanent Mission to the United Nations -- where, Indian officials say, she may get full diplomatic immunity. 

The rules involved are laid out by the State Department in a guidance document for law enforcement and judicial authorities. 

"Most of these privileges and immunities are not absolute, and law enforcement officers retain their fundamental responsibility to protect and police the orderly conduct of persons in the United States," the document states. 

Members of consular posts, such as Khobragade at the time of her arrest, do not have the same level of immunity as those who work at diplomatic missions. 

Consular officers have some immunity involving official acts, but their "personal inviolability" is "quite limited," the document says. They may be arrested and detained for alleged felonies, and may be prosecuted for misdemeanors. Their families have no immunity of any kind. 

2. A Lifelong Fight Against Trans Fats 

The New York Times    December 16, 2013 

 

In 1957, a fledgling nutrition scientist at the University of Illinois persuaded a hospital to give him samples of arteries from patients who had died of heart attacks. 

When he analyzed them, he made a startling discovery. Not surprisingly, the diseased arteries were filled with fat — but it was a specific kind of fat. The artificial fatty acids called trans fats, which come from the hydrogen-treated oils used in processed foods like margarine, had crowded out other types of fatty acids. 

The scientist, Fred Kummerow, followed up with a study that found troubling amounts of artery-clogging plaque in pigs given a diet heavy in artificial fats. He became a pioneer of trans-fat research, one of the first scientists to assert a link between heart disease and processed foods. 

It would be more than three decades before those findings were widely accepted — and five decades before the Food and Drug Administration decided that trans fats should be eliminated from the food supply, as it proposed in a rule issued last month. 

Now, Dr. Kummerow (KOO-mer-ow) is still active at age 99, living a few blocks from the university, where he runs a small laboratory. And he continues to come to contrarian conclusions about fat and heart disease. 

In the past two years, he has published four papers in peer-reviewed scientific journals, two of them devoted to another major culprit he has singled out as responsible for atherosclerosis, or the hardening of the arteries: an excess of polyunsaturated vegetable oils like soybean, corn and sunflower — exactly the types of fats Americans have been urged to consume for the past several decades. 

The problem, he says, is not LDL, the “bad cholesterol” widely considered to be the major cause of heart disease. What matters is whether the cholesterol and fat residing in those LDL particles have been oxidized. (Technically, LDL is not cholesterol, but particles containing cholesterol, along with fatty acids and protein.) 

“Cholesterol has nothing to do with heart disease, except if it’s oxidized,” Dr. Kummerow said. Oxidation is a chemical process that happens widely in the body, contributing to aging and the development of degenerative and chronic diseases. Dr. Kummerow contends that the high temperatures used in commercial frying cause inherently unstable polyunsaturated oils to oxidize, and that these oxidized fatty acids become a destructive part of LDL particles. Even when not oxidized by frying, soybean and corn oils can oxidize inside the body. 

If true, the hypothesis might explain why studies have found that half of all heart disease patients have normal or low levels of LDL. 

“You can have fine levels of LDL and still be in trouble if a lot of that LDL is oxidized,” Dr. Kummerow said. 

3. Taper seen as positive for economy, bad omen for bonds 

CNBC.com   18 Dec 2013  

            

The surprise decision by the Federal Reserve to slow down its bond buying program was greeted by markets as a sign the economy is improving, a longer term bearish omen for bonds but a positive for stocks for now. 

"I think there's a general consensus that ... what the Fed is finally signaling is that the economy is doing better," said Bob Doll, Nuveen Asset Management chief equity strategist. "In 2014, the economy will be a bit stronger and a bit better." 

The Fed's move to "taper" its bond buying by $10 billion was expected by some market participants, but many had expected the Fed to wait for more data, in January or March. 

Stocks initially sold off but recovered, with the Dow logging a triple digit gain. The 10-year yield initially rose to 2.92 percent but fell back to its earlier level of 2.84 percent. It then moved higher, to the 2.88 percent area. 

"This is a bit of a relief trade," said CRT chief Treasury strategist David Ader. "I think it's incredibly significant that it came when we had tapering. The curve is doing very little on this." 

Ader had expected a taper and said the bond market is showing the event was priced in. The Fed said it would cut its $85 billion monthly purchases of mortgage securities and Treasurys by $5 billion each starting in January. 

"It's kind of a soft taper. Markets don't like uncertainty. They didn't know what the Fed was going to do," said John Canally, economist at market strategist at LPL Financial. "The Fed is agreeing with the market that the Fed can stand some tapering." 

Canally said it's clear the Fed will taper the quantitative easing program in a measured way. The Fed also made clear it had not predetermined the course of asset purchases. 

4. JAPAN’S NEW DEFENSE STRATEGY 

War on the Rocks    December 18, 2013 

 

Under Prime Minister Abe, Japan is turning a corner on its postwar identity and getting serious about defense. 

Shinzo Abe’s new National Security Strategy, National Defense Program Guidelines, and bold five-year defense plan are the strongest signs yet that Japan wishes to finally end decades of self-imposed pacifism in order to rejoin other major powers. Prime Minister Abe is taking unmistakable but measured steps to move Japan from a reactive to a proactive foreign policy, and to transform the Self-Defense Force from a complementary force-in-being to a comprehensive, operational military. 

Critics and rivals have sought to characterize the plans as evidence of Japanese “remilitarization” and a threat to regional stability.  In reality, however, Japan is presenting clear, cogent and cost-effective responses to a number of pressing challenges. 

The two key drivers of this policy shift are first, China’s reemergence and growing maritime assertiveness, and second, Japan’s fear of losing its postwar status as a top-tier nation.  Other concerns, such as increasing tension on the Korean peninsula, as well as doubts about U.S. commitment and staying power, are also shaping the Abe administration’s strategic calculus.  Because of what Tokyo describes as an increasingly severe security environment, Japan’s armed forces are preparing to go operational to deter China’s assertive encroachment and respond to a wide range of potential contingencies in and out of East Asia.  As the just-released National Defense Program Guidelines note “While the probability of large-scale military conflicts between major countries presumably remains low, various security challenges…are becoming more tangible and acute.”