Happy Imbolc
Tonight and tomorrow is when most modern Pagans celebrate the fire festival of Imbolc sacred to the goddess Brigid, patroness of poets, healers, and smiths. Today is also the feast day of Saint Brigid of Ireland patron saint of poets, dairymaids, blacksmiths, healers, cattle, fugitives, Irish nuns, midwives, and new-born babies.
Some things attributed to Bridget:
* Deposed the blue-faced goddess of winter every spring
* Known for her generosity, a character transferred to St Bridget
* She is invoked during childbirth
* Her feast day is February 1st, Imbolc
* Bridget means “exalted one”
* Has a connection to the beginning of lactation in ewes
* In Irish myth, she became the midwife to the Virgin Mary,
Imbolc, like many other Celtic festivals, was originally several days long. As a result, some people celebrate it on Feb. 2 or even 3rd
Imbolc Lore
(February 2nd)
Imbolc, (pronounced "IM-bulk" or "EM-bowlk"), also called Oimealg, ("IM-mol'g), by the Druids, is the festival of the lactating sheep. It is derived from the Gaelic word "oimelc" which means "ewes milk". Herd animals have either given birth to the first offspring of the year or their wombs are swollen and the milk of life is flowing into their teats and udders. It is the time of Blessing of the seeds and consecration of agricultural tools. It marks the center point of the dark half of the year. It is the festival of the Maiden, for from this day to March 21st, it is her season to prepare for growth and renewal. Brighid's snake emerges from the womb of the Earth Mother to test the weather, (the origin of Ground Hog Day), and in many places the first Crocus flowers began to spring forth from the frozen earth.
And there is a scientific basis for groundhog day and its link to prestidigitationCanada's cherished groundhog weather forecasters have emerged from their heated, custom-built homes and predicted an early spring, capping a week of snowstorms and bitter cold that kept Canadians burrowed inside their own warm dens.
Neither Ontario's Wiarton Willie nor Nova Scotia's Shubenacadie Sam saw their shadows when roused by their handlers this morning, paving the way for an early spring.
Sam was the first to weigh in, waddling into the rain at the Shubenacadie Wildlife Park, an hour north of Halifax, on Saturday morning at sunrise. Willie emerged with his handlers shortly after 8 a.m. ET, and after being held up to face fans' flashbulbs, declared that he agreed with Sam on the winter issue.
However, it seems the country's revered rodents did not confer with their counterpart across the border before making their predictions, as Pennsylvania's Punxsutawney Phil indicated to thousands gathered at Gobbler's Knob to hunker down for six more weeks of chilly temperatures.
"Here ye, hear ye, hear ye," exclaimed William Cooper, President of Punxsutawney's Inner Circle, one of many members of the local groundhog club waiting to greet their muse in black trench coats and top hats. "After casting a withered eye on his followers ... (Phil has declared) 'a bright sky I see and a shadow beside me, six more weeks of winter I see.'"
The groundhogs hibernating in Professor Greg Florant's lab at Colorado State University won't see their shadows today.
Unlike Punxsutawney Phil, they won't help predict when spring will arrive because the seven groundhogs will be snoozing
Instead, the groundhogs hibernating in a 5-degree cold room on CSU's campus might help provide information about climate change.
Florant, a biology professor, is working with Professor Stam Zervanos at Pennsylvania State University to determine whether animal hibernation patterns are genetic or can be manipulated by environmental temperatures.
Last year Florant and Zervanos studied groundhogs in their native habitats in Maine, Pennsylvania and South Carolina. Now they want to see what the animals will do in a lab environment.
Typically groundhogs in South Carolina hibernate for about two months. In Pennsylvania, it's about five months; and in Maine, it can be as much as seven months.
Florant's trying to discover whether the animals from the warmer climates will sleep longer in the colder temperatures. "Will they adjust and hibernate longer and deeper? Or will their genetics keep them from doing that?"
Global warming could potentially change the hibernation patterns of animals. If temperatures become warm enough, the animals might change their patterns, and that could affect their ability to survive.
| FRI 01 |  | -26 | -30 | - | - | 69 | 101.30 | 14 | unlimited |
| FRI 01 |  | -12 | -13 | -24 | S 44 | 92 | 100.77 | 16 | 4500 |
Allowing veterans to use whatever provider they want, wherever they want by giving them an electronic health care card or through another method.
Snowfall to hike BC avalanche risk
AVALANCHE: THE WHITE DEATHAccording to the Canadian Avalanche Centre, this past year Canada has experienced the deadliest beginning to the avalanche season on record. As of January 2008, there have been ten fatalities since the start of the avalanche season.
TagsSkiers are being warned to take extreme care as deaths from avalanches threaten to reach record levels. Even before the peak holiday months of February and March, the number of avalanche deaths in Italy and Austria has exceeded the total for the whole of last winter.
Heavy snowfalls in December and January have been greeted with delight by skiers, but excellent conditions come at a cost. Research by Escape reveals that as of last Thursday, 39 people had been killed in France, Switzerland, Austria and Italy. Austria alone has had 18 fatalities, one more than last year's total.
'We're expecting more deaths every weekend,' said Ingo Kroath, manager of the Innsbruck-based Austrian Board of Alpine Safety. 'The situation is very dangerous at the moment and isn't going to improve until March or April.'
France has recorded eight deaths, double the number at the same time last season, and the situation across the Atlantic is just as bad. The death toll in both Canada and the US has already exceeded the total for last winter.
An often deadly quest for perfect powder
Los Angeles Times Two months into the winter sports season, avalanches have claimed 26 lives nationwide, including three near Mountain High Resort this weekend, in what officials warn may be a record year for mountain fatalities.
But even a seemingly innocuous snowpack can hide tragedy: Layers of snowfall, often interspersed with ice, can slough off at the slightest disturbance.
Avalanche experts say average annual death tolls have edged up from 20 to 25 over the last decade and are likely to increase as more people with better technology and a new "extreme sports" mentality venture into remote areas in search of untrammeled powder.
"There have been avalanche fatalities since people have been in the West and in the Alps, but what has changed is the equipment has gotten better and there's a lot of hype associated with the outdoor retail industry," said Sue Burak, an avalanche forecaster for the Eastern Sierra Avalanche Center. "They're encouraging people to go out, and the level of backcountry skills haven't caught up with the technology."
Every avalanche fatality this year, except for one in Utah, involved a person who was skiing, snowmobiling or snowboarding outside of designated areas or in wilderness, with the majority of the deaths in backcountry. Only 1% of all avalanche deaths in the United States occurred within the bounds of skiing or snowboarding resorts. About 11% were out-of-bounds deaths, and the rest were in backcountry.
| Monday Morning | Monday Afternoon | Monday Evening | Monday Overnight | |
|---|---|---|---|---|
 |  | |  | |
| Temperature | -31°C | -29°C | -31°C | -39°C |
| Condition | Flurries | Cloudy with sunny breaks | Cloudy periods | Clear |
| P.O.P. | 40% | 20% | 10% | 0% |
| Feels Like | -46 | -42 | - | - |
| Wind | N 25km/h | NW 20km/h | NW 10km/h | NE 5km/h |
| Humidity | 65% | 64% | 68% | 79% |
| Snow | trace | - | - | - |
From Monday Morning to Monday Overnight we expect trace of snow.
| Tuesday Jan 29 | Wednesday Jan 30 | Thursday Jan 31 | Friday Feb 1 | Saturday Feb 2 | Sunday Feb 3 | |
|---|---|---|---|---|---|---|
 | |  |  | | | |
| High | -29°C | -28°C | -26°C | -20°C | -12°C | -16°C |
| Condition | Sunny | Sunny | Cloudy periods | Variable cloudiness | Cloudy | Mainly sunny |
| P.O.P. | 0% | 0% | 10% | 20% | 30% | 10% |
| Wind | SE 10 km/h | S 10 km/h | E 10 km/h | NW 5 km/h | S 5 km/h | S 10 km/h |
| Low | -39°C | -34°C | -34°C | -27°C | -21°C | -23°C |
An Alberta Clipper zipping through the Midwest today will bring snow to the East over the next few days, with a new shot of arctic air following close behind. Meanwhile, rain and snow continue today along the West Coast. 
The Winter Weather Center reports that the heaviest snow will fall on the northern tip of Lower Michigan and the Upper Peninsula.Even Justice Bertha Wilson, whose solitary contribution to the majority finding became the cornerstone of a feminist legacy, was unambiguous about this. She described the protection of the fetus as "a perfectly valid legislative objective," offered that "The value to be placed on the fetus as potential life is directly related to the stage of its development during gestation" and said that "The precise point in the development of the foetus at which the state's interest in its protection becomes 'compelling' should be left to the informed judgment of the legislature, which is in a position to receive submissions on the subject from all the relevant disciplines." Do those sound like the words of an estrogen-crazed baby-devourer?
All the court really did was get rid of a senseless morass of dilatory regulation whereby a woman's choice was limited not by a real, rational guideline, but by the local availability of willing physician-monopolists and the whims of hospital committees. The position taken by moderate pro-lifers today is, ironically, more or less exactly that of Bertha Wilson: i.e., that there should probably be some legislative decision, binding upon the whole country, concerning the exact moment when a fetus becomes an individual person for medical purposes. Only a radical, total opponent of abortion could conceivably advocate returning to the broken pre-1988 system, and only as a sly, unfair means of saving some fetal lives.
And this fact really confirms the fundamental wisdom of the Morgentaler decision. The overturning of the old legal regime was decided on a 4-2 vote, with Justices W.R. McIntyre and Gerard La Forest in dissent. The pair wrote that "there is no evidence or indication of general acceptance of the concept of abortion at will in our society." This must now stand as one of the great inadvertent jests in the history of the court. For the 20 years since their statement, abortion at the will of the mother is just what we have had. The number of people who have proven themselves actually willing to do something about the situation, as opposed to merely inveighing against it as an occasion for outraged verbiage, is minuscule. Domestic politicians of all parties recoil in fear, almost uniformly, at the suggestion that any abortion might ever be prevented by the force of law. And even criticism from other Western countries, which all regulate abortion themselves, has been rare verging on nonexistent.
This is where we are. This is what we wanted, whether we admit it to ourselves or not. And this is as it should be, with the final decision in the hands of the one who must chance the hazards and agony of birth. Long live Morgentaler! Long live anarchy!
As usual the fetus fetishists who proclaim their love of life decided to threaten Dr. Morgentaler's life, again, at the public meeting where the 20th Anniversary decision was being celebrated last night.
Ah yes and here is the contradiction the very Progressive and Left Wing forces that have supported Morgentaler then and over the years are the same folks who oppose the privatization of Health Care, which is what has made Morgentaler's business prosper over the years.Jan 26, 2008Two standing ovations and one death threat.
That's the reception Dr. Henry Morgentaler received at a University of Toronto symposium yesterday marking the 20th anniversary of the landmark Supreme Court ruling overturning Canada's abortion law.
"Over the past 37 years I have dedicated myself to the struggle to achieve rights to reproductive freedom and to provide facilities for women," Morgentaler told the symposium, held by the law faculty. "This struggle gave meaning to my life."
He said the Jan. 28, 1988, decision was the impetus for him and other physicians to establish abortion clinics across Canada.
"I am proud to have played such a pivotal role in the decision."
"The Morgentaler decision was huge in that it has undoubtedly saved the lives and protected the health of countless women," said Vicki Saporta, president of the National Abortion Federation (NAF). "No longer did women have to jeopardize their lives or health in order to end an unwanted pregnancy."
The NAF represents abortion providers in Canada and the United States and works to ensure abortion is safe, legal and accessible to promote health and justice for women, she said.
The decision also allowed for abortions to be a publicly funded medical procedure. However, Saporta said many women still face barriers in accessing therapeutic abortion services, particularly because it is not on the interprovincial billing agreement.
Women living in rural areas, such as Chatham-Kent, have difficulty accessing abortion clinics because the majority of abortion care is located in urban centres.
"Some women are traveling 60 miles or more. It can often be a significant barrier for some women that cannot be overcome," said Saporta, adding the closest abortion clinics are in London,Toronto and Detroit.
There are no therapeutic abortion clinics currently operating in Chatham-Kent, however the Chatham-Kent Health Alliance does perform medical abortions if it is necessary for the health of the mother.
"The obstetricians and gynecologists within Chatham-Kent do not include abortions within their scope of practice," said Kim Bossy, director of communications and community relations at CKHA.
The Chatham-Kent Public Health Unit provides women with information on options available to them regarding unwanted pregnancies and remains neutral in the decision, said Kelly Farrugia, school age health program manager.
"Our policy is to review all the options for unplanned pregnancies," she said. "I think every woman has their own reasons why they choose the option they do."
The Morgentaler decision: Choice? What choice?
Two decades after the landmark ruling on abortion rights, poor access and a lack of treatment alternatives still hamper a woman's ability to choose
ANDRÉ PICARD
From Thursday's Globe and Mail
January 24, 2008While there are, theoretically, no restrictions on abortion, the number of abortions has not increased.
In fact, the number of abortions has held steady over all, and the teen abortion rate has actually fallen.
Each year in Canada, there are about 330,000 lives births and 110,000 abortions.
Despite what you see in Hollywood movies, the vast majority of those having abortions are not teens, but women in their 20s and 30s. They have, almost universally, exercised their freedom of choice judiciously, law or no law.
While the highest court ruled that the state has no place in the uteruses of the nation, the state does have a role in the provision of medically necessary health services, of which abortion is one.
Yet our health system - from the politicians who oversee it to the policy makers and administrators through to the physicians and nurses who should provide non-judgmental care in public institutions - has largely failed women who seek abortions.
The failings are many and varied, but revolve principally around lack of access to timely care.
In short, the arbitrary rules that have crept into the system in the past two decades make a mockery of the Supreme Court ruling.
In Canada, fewer than one in five hospitals perform abortions. One province, Prince Edward Island, offers no abortion services at all. Another, New Brunswick, has created unjustified (and likely unconstitutional) barriers to access, requiring referrals from two doctors.
In the nation's capital, Ottawa, the wait time for an abortion stretches to six weeks, a perversity. (If there is one area of care for which there should be a wait-time guarantee, it is abortion, obviously a time-sensitive procedure.)
But the greatest injustice is that faced by Canadian women living outside major metropolitan centres, particularly those in the North.
Virtually every hospital and clinic offering abortion services in Canada is located within 150 kilometres of the U.S. border, and there is not a single abortion provider north of the Trans-Canada Highway in Ontario.
A woman in northern Manitoba, for example, needs to travel about 20 hours to access the nearest in-province abortion provider. For women in the three territories, travel can be an insurmountable obstacle.
Abortion should be covered by medicare but, in reality, it is expensive. If a woman opts for an abortion in a private clinic - something that is often necessary given the lack of service offered in hospitals - she must pay out of pocket and be reimbursed. (This policy was recently struck down by the courts in Quebec, which deemed that medicare should foot the bill, regardless of where the procedure is done.)
Worse yet, if a woman travels out of province or to the United States - which, again, many women are forced to do because of lack of timely access domestically - she will not be reimbursed at all.
Further, Canadian women wanting to terminate a pregnancy have no option other than surgical abortion.
Drug-induced abortion - the method of choice of about one-third of women in Europe and the United States - is not even available in Canada. Mifepristone (brand name Mifeprex, also known as RU-486) is a safe, proven alternative, and its lack of availability in Canada is a scandal.
Between the legalization of abortion in 1969 and its complete decriminalization in 1988, women fought many tough battles.
In 1983, political activist Judy Rebick became the unintended victim of assault when a man brandishing garden shears lunged at Dr Henry Morgentaler at the opening of his Toronto abortion clinic. She blocked the attack and Dr Morgentaler emerged unscathed, but the incident is just one of several threats Rebick has endured because of her involvement in the pro-choice movement.
NO ACCESS, NO CHOICE
Abortion
CHLOÉ FEDIO / Vue Weekly
Despite it all, Rebick refused to be intimidated in the debate that continues to elicit contention to this day.“I learned a lot from Dr Morgentaler, because he’d gone to jail—he almost died in jail. He was constantly a target of attack, constantly a target of threats and so on, and his attitude was, if you do this work this is part of the price you pay,” Rebick said.Rebick was part of the Ontario Coalition for Abortion Clinics, the group that encouraged and helped Dr Morgentaler open his Toronto clinic.“It’s probably one of the proudest things I’ve done in my life. There is a certain amount of courage involved, but it was also such a splendid victory,” said Rebick. “When we started, everyone was against us—the courts were against us, the cops, the government. It was really a magnificent battle.”In 1969, Dr Morgentaler broke the law to open Canada’s first abortion clinic in Montréal, becoming one of the country’s most controversial figures. But it was only after police raided his newly-opened Toronto clinic in 1983 that he became the central figure in an historic case that paved the way for reproductive rights in Canada.Before the decision, abortion was only legal in a hospital, and only if approved by a three-doctor therapeutic abortion committee. But on Jan 28, 1988, the Supreme Court struck down that law as unconstitutional, ruling that it infringed upon a woman's right to “life, liberty and security of person.”But 20 years after the lifting of federal legal restrictions on abortion, women across the country still face significant challenges in accessing the procedure.Patricia Larue, executive director of Canadians for Choice, a non-profit charitable organization based out of Ottawa, explained that abortion services in Canada are concentrated in urban areas, forcing many women to travel great distances to gain access to the procedure.“Most of the places that offer abortion services—clinics or hospitals—are located in the south of the country, about 100 kilometres north of the American border. So for women living in the north, or even central Canada, it’s really difficult to have access to a place where they can go for an abortion,” Larue said.Edmonton is the sixth largest metropolitan region in Canada, with a population of over one million, but there’s only one abortion clinic in the area. In May 2005, the Royal Alexandra Hospital stopped performing the procedure, leaving the Edmonton Morgentaler Clinic with the brunt of the responsibility in northern Alberta. Dr Christa Delacruz, who operates out of Grande Prairie, also provides abortions, but access outside of the major urban centres of Edmonton and Calgary is extremely limited.Larry Brockman, the executive director of Planned Parenthood Edmonton, explained that having a single abortion provider in Edmonton can cause a backlog, increasing wait times for women seeking the service. He said the single point of access can also allow anti-abortion groups to concentrate their efforts.“There is from time to time, lobbying or civil action that takes place that attempts to block access of women to abortion,” Brockman said. “It’s a concern that now it’s reduced to one site—it’s a little easier for protest groups to focus on one site.”Corrie Mekar works on the front lines at Planned Parenthood Edmonton, dealing directly with women who are considering an abortion. She said the recent surge in population, coupled with the single point of access, is causing a strain on abortion services in Edmonton.“You can kind of talk about abortion in terms of every other type of service that’s out here in Edmonton right now, with the influx of people coming in,” Mekar said. “Our population has exploded because of the economic boom, and because of that I think they’re having trouble with health everywhere, and this is no different.”Since Jul 1, 1996, all abortion fees in Alberta are covered for any woman with Alberta Health Care or Saskatchewan Health Care coverage. But Brockman explained that women from other Canadian provinces sometimes face challenges with coverage in Alberta, while recent immigrants are left to foot the bill on their own.Howard May, spokesperson for Alberta Health and Wellness, explained that Alberta Health Care covers the doctor’s fees and hospital costs of medically required abortion outside the province, but won’t cover the facility fee if the abortion is done in a private clinic. He said that under federal legislation, abortions are not included in the multi-province reciprocal billing agreement.“The rationale behind the exclusion from the reciprocal agreements is that provinces and territories have different rules and regulations regarding the coverage of abortions,” said May. “Some will only cover the costs if the abortion is provided in a hospital. Others require the recommendation of two physicians.”The cost of an abortion at the Edmonton Morgentaler Clinic ranges from $400 to $800, depending on how far along a woman is in her pregnancy.
SocGen trader's $7.1B loss dwarfs Barings debacle
PARIS - A junior computer whiz at the French bank Societe Generale has been accused of racking up a $7-billion loss in bad bets on stocks in the biggest trading scandal in banking history.
France's central bank and government scrambled to shore up confidence in the banking system after the 144-year-old SocGen told investors already battered by the credit crisis that it had discovered the "exceptional" fraud late last week.
The trader had circumvented the bank's risk controls through in-depth knowledge of its computer systems, but was caught when he tried to cover up his losses.
The country's central bank chief dubbed the trader "a genius of fraud" while French police announced a criminal probe.
Richard Fuld, the chief of Wall Street firm Lehman Brothers, called the debacle "everyone's worst nightmare" at the meeting of policy and business leaders in Davos.
The losses spiralled to ¤4.9-billion ($7.1-billion) -- nearly its net profit in 2006 -- as the bank tried to close out the rogue trader's stock index futures positions in Monday's sliding market.
_ 1996: Sumitomo Corp., a 300-year old Japanese metals trader, discovers that its star copper trader, Yasuo Hamanaka, amassed $2.6 billion in losses in unauthorized trades over a decade. The revelation caused copper prices to plummet worldwide. Sumitomo has paid millions of dollars in class action lawsuits and Hamanaka served more than seven years in prison.
_ 1995: Collapse of Britain's Barings Bank after a trader in Singapore, Nick Leeson, lost 860 million pounds (then worth US$1.38 billion) on futures trades. The fraud prompted banks worldwide to tighten internal checks. Leeson spent four years in prison.
_ 1995: Toshihide Iguchi, a New York bond trader for Japan's Daiwa Bank, charged with hiding $1.1 billion in trading losses he accumulated over 12 years. The bank later pleaded guilty to failing to notify U.S. authorities sooner. It was hit with $340 million in fines and ordered to shut its U.S. operations. Iguchi was sentenced to four years in prison and fined.
1994: Joseph Jett, a government bond trader at Wall Street brokerage Kidder Peabody & Co., was fired after the firm accused him of faking $348 million in profits to fatten his bonus. Jett denied wrongdoing and wasn't charged criminally. Last year a federal judge upheld a March 2004 order by the Securities and Exchange Commission saying Jett had booked fake profits of approximately $264 million and had to return $8.2 million of bonuses and pay a $200,000 civil penalty. The scandal contributed to the demise of the venerable Kidder.
_ 1991: Bank of Credit and Commerce International (BCCI), operating in nearly 70 countries, is seized by bank regulators, acting on auditors' reports of huge losses from illegal loans to corporate insiders and from trading transactions. Some 250,000 depositors left without funds. Claims exceeded US$10 billion.
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Bank of America Corp. became the first bank to settle a class-action lawsuit alleging that some of the top U.S. financial institutions participated in a scheme with Enron Corp. executives to deceive shareholders.
The Charlotte, N.C., bank, the third-largest in the U.S. in assets, agreed to pay $69 million to investors who had billions of dollars in losses as a result of Enron's collapse amid scandal in 2001. In making the settlement, Bank of America denied that it "violated any law," adding that it decided to make the payment "solely to eliminate the uncertainties, expense andNot since 1966 -- when the term "credit crunch" was coined after the Fed pushed market interest rates above the legal limits banks and thrifts then could pay on deposits and thus stopped lending in its tracks -- has the nation's mortgage apparatus been so close to breaking down.
The current crisis arguably has the potential for more economic disruption than the celebrated 1998 Long Term Capital Management meltdown. Then, as Northern Trust economist Asha Bangalore points out, the economy cruising along -- in contrast to the past four quarters, which have seen below-potential growth on average.
Moreover, mortgage borrowers perversely benefited from the LTCM fiasco. Not only did the Greenspan Fed lower rates, sparking a huge bond rally, but, also, the government-sponsored enterprises Fannie Mae (FNM) and Freddie Mac (FRE) went on virtual buying sprees. As a result, the biggest part of the credit market -- mortgages -- remained flush. Now, Fannie is looking to expand its portfolio beyond the $727 billion limit imposed on it after its accounting and governance scandals -- a move viewed skeptically by the White House but supported by some congressional Democrats.
Indeed, the full impact of the mortgage crisis still lies ahead. From the beginning of 2007 through mid 2008, interest rates on over $1 trillion of adjustable-rate mortgages are slated to be reset, many from low "teaser" rates.
![[gorge chart]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uexY6cluX0D6vc-fAKLal4cGiOquP-eRRDMOzIAAiHMN0b1LtmCkcHjLhVykfiDhnApcV_us8NLkhuVGWO9iOKwBBZl4-bp4hnheR_hh18uMMnfPXJhXlcDKJMcxccVOZqeR7FN1HB8zJ44qgfsg=s0-d)
THE SUBPRIME MESS ALSO RECALLS another crisis -- the virtual collapse of the commercial-paper market in the wake of the Penn Central bankruptcy of 1970. Back then, the paper market consisted of relatively simple short-term corporate IOUs. Now, so-called asset-backed commercial paper is backed by all manner of things, from credit cards and auto loans to collateralized debt obligations, and comprises over half the CP outstanding. Moreover, notes MacroMavens' Stephanie Pomboy, money-market funds own 27% of CP outstanding.
While the Fed managed to soothe the financial markets' nerves by week's end, the potential for future upheavals remains. As a result, the futures market is looking for the central bank to ride to the rescue with rate cuts. Fed-funds contracts are fully discounting a quarter-point cut, to 5%, at the Sept. 18 Federal Open Market Committee meeting, and a further reduction to 4¾% in December.
As the chart here shows, financial crises have tended to coincide with peaks in the fed-funds rate and subsequent Fed easing. The subsequent rate relief would be hailed by the markets as the start of a new bull run.
There is a new wrinkle -- the precarious state of the dollar. No longer is the greenback viewed as a safe haven in the world, contends Barclay Capital's currency team.
Indeed, as MacroMavens' Pomboy has posited, a Fed rate cut that sends the dollar tumbling could have a perverse effect. The influx of foreign capital has kept U.S. interest rates low and provided a flood of credit for everything from leveraged buyouts to, of course, subprime mortgages. If there's an exodus of foreign capital fleeing a declining dollar, credit could tighten even as the Fed eases. Be careful of what you wish for.
The original speculative grade bonds were bonds that once had been investment grade at time of issue, but where the credit rating of the issuer had slipped and the possibility of default increased significantly. These bonds are called "Fallen Angels".
The investment banker, Michael Milken, realised that fallen angels had regularly been valued less than what they were worth. His time with speculative grade bonds started with his investment in these. Only later did he and other investment bankers at Drexel Burnham Lambert, followed by those of competing firms, begin organising the issue of bonds that were speculative grade from the start. Speculative grade bonds thus became ubiquitous in the 1980s as a financing mechanism in mergers and acquisitions. In a leveraged buyout (LBO) an acquirer would issue speculative grade bonds to help pay for an acquisition and then use the target's cash flow to help pay the debt over time.
In 2005, over 80% of the principal amount of high yield debt issued by U.S. companies went toward corporate purposes rather than acquisitions or buyouts.
High-yield bonds can also be repackaged into collateralized debt obligations (CDO), thereby raising the credit rating of the senior tranches above the rating of the original debt. The senior tranches of high-yield CDOs can thus meet the minimum credit rating requirements of pension funds and other institutional investors despite the significant risk in the original high-yield debt.
| From: | "Kevin McKern" |
| Received: | 10/19/2006 11:45 AM |
| Subject: | Will they blow up? |
Balancing the Books
A Legacy Worth Disinheriting: The Federal Reserve remains spooked by the specter of the Great Depression
Edited by Jay Palmer
03/03/2003
Barron's
32
A History of the Federal Reserve Volume 1: 1913-1951
By Allan H. Meltzer
University of Chicago Press; 800pp; $75
Reviewed by Randall W. Forsyth
Central bankers, like generals, often are accused of fighting the last war. The Federal Reserve remains haunted by its most humiliating defeat -- an utter failure not only to prevent the Great Depression, but its ineptitude in countering the most severe downward spiral in American economic history. That failure arguably has a profound impact on Fed policy to this day.
Serious students of monetary policy will be familiar with the broad outline of what's told in Allan H. Meltzer's monumental "A History of the Federal Reserve: Volume 1: 1913-1951." The Great Depression is the most crucial period covered in the book, which encompasses the span from the Fed's founding to the Treasury Accord of 1951, when it gained its independence as a modern central bank.
Unlike others who lay the blame for the Depression on a single cause -- the stock-market Crash of '29, the Smoot-Hawley tariff, the collapse of the international gold standard or the Fed's permitting a one-third contraction in the money supply -- Meltzer reasonably attributes the catastrophe to the confluence of these shocks. But the Fed, which was established after a succession of financial panics in the 19th and early 20th centuries -- precisely to prevent their recurrence -- failed in that narrower mission.
That failure, as Meltzer keenly describes, was a result of misguided policies and political infighting. Policy was ruled by the (wrongheaded) conventional wisdom of the day, that said that the collapse of the 'Thirties was necessary to purge the excesses of the 'Twenties. The Fed was to restrict itself to providing credit solely to meet the private sector's needs -- by buying only "real bills" and not purchasing government securities, which supposedly only pumped up speculative credit, according to the prevailing notion of the time. The reestablishment of the gold standard in the 1920s was considered a success then, but Meltzer describes how it sowed the downturn's seeds. Britain needed to deflate while France and the U.S. had to inflate, so all resisted. New York Fed President Benjamin Strong, who de facto ran policy in the 'Twenties, eased to help the pound. But his jealous counterparts would posthumously blame him for inflating the bubble that burst in 1929.
More important, Meltzer details the dithering that prevented the Fed from taking the most basic monetary action -- large-scale purchases of government securities to add liquidity to the banking system. Fed officials thought policy already was easy because interest rates were near zero and banks didn't borrow from the Fed, ignoring the rise in real interest rates caused by deflation and the contraction in the money stock.
The Bank of Japan repeated those blunders through most of the 'Nineties. The Fed, having learned from history, has not been doomed to repeat it. The U.S. central bank already has slashed its key interest rate target 12 times since January 2001 to a nearly irreducible 1 1/4%. And in a speech last November that still reverberates, Fed Governor Ben Bernanke pointed out that the central bank hasn't run out of monetary bullets even if it runs out of basis points. Even at 0%, the Fed still has a magical device -- the printing press. With a steward of the dollar trumpeting the power to debase it, is it any wonder that gold has rallied and the spread between TIPS (Treasury inflation-protected securities) and fixed-return Treasuries has widened?
Yet the circumstances of the bursting of the bubbles of the 'Twenties and the 'Nineties were markedly different. Ahead of the '29 Crash, the Fed was actively trying to curb speculation. Greenspan & Co. claim no part in the recent bubble, with the Maestro contending that actions to curb the inflation in asset prices posed risks to the economy.
His protest, however, ignores the role played by the Fed in encouraging soaring asset inflation. As previously noted in Barron's, the central bank provided the monetary fuel for the Nasdaq bubble and then throttled it back ("Fed Inflated, Then Burst IPO Bubble," Dec. 11, 2000). Investors and traders also comforted themselves with the notion that the central bank would (and could) rescue the financial markets if they collapsed. That belief, which gained currency especially after the Long Term Capital Management debacle of 1998, came to be known as "The Greenspan Put" -- a get-out-of-jail-free card for speculators.
Now, even though the world enjoys expanding international trade and growth in output and income-exactly the opposite of the 'Thirties -- the Fed still worries about deflation and depression. Moreover, every indicator -- money supply, negative real rates, a steeply sloped yield curve, a weakening dollar and rising commodity prices -- is full-tilt expansionary. Indeed, William Silber of New York University's Stern School recently wrote in the Financial Times that the Fed may not act to curb inflation soon enough -- its blunder of the 1970s. How the Fed failed to foster stable prices after 1951 should be the basis of Meltzer's second volume, which I eagerly await.
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RANDALL W. FORSYTH is an assistant managing editor at Barron's
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