Capital Commerce

A bit of cheer from Jim Glassman over at JPMorgan Chase:

The forecast of an economic revival beginning in 2009 is based on six themes. First, the Federal Reserve is flooring the monetary gas pedal and using its balance sheet to counterbalance otherwise life-threatening credit restrictions resulting from shrinking leverage in the financial system; its actions are beginning to get traction. Second, a substantial fiscal stimulus initiative (equivalent to 5-7% of GDP) will be implemented early in 2009. Third, inflated US real estate markets, the cause of the building recession and credit crunch, are history. Fourth, the speculative convulsion in oil and commodity markets evaporated this fall, reversing a massive transfer of resources that was distorting global spending and saving. Fifth, policy responses around the world are matching the forceful US approach and so are lessening the risk that the weakness everywhere will continue to reverberate. And finally, fear has driven asset values to irrationally pessimistic levels, implying that it won’t take much to alter perceptions about the balance of risks and revive animal spirits. The US is likely to be out of the recovery gate first, but the global economy will quickly follow.

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Earthquakes. Supervolcanoes. Calderas. The End of Civilization.  Not the usual subject matter of this blog, but I go where the news takes me. I just checked the last data from the University of Utah's seismograph station in Yellowstone. The earthquake swarm seems to have reintenstifieda bit  over the past 24 hours. During Dec. 27 and 28, there was a swarm of earthquakes under Yellowstone in the 3.0-3.9 range. Activity then dropped off to quakes less than 2.0 on the Richter magnitude scale. But now we are again seeing quakes above 2.0 and even a 3.5 shaker earlier this morning. Again, the University of Utah puts this all in perspective:

The University of Utah Seismograph Stations reports that a notable swarm of earthquakes has been underway since December 26 beneath Yellowstone Lake in Yellowstone National Park, three to six miles south-southeast of Fishing Bridge, Wyoming. This energetic sequence of events was most intense on December 27, when the largest number of events of magnitude 3 and larger occurred. The largest of the earthquakes was a magnitude 3.9 (revised from magnitude 3.8) at 10:15 pm MST on Dec. 27. The sequence has included nine events of magnitude 3 to 3.9 and approximately 24 of magnitude 2 to 3 at the time of this release.

A total of more than 250 events large enough to be located have occurred in this swarm. Reliable depths of the larger events are up to a few miles. Visitors and National Park Service (NPS) employees in the Yellowstone Lake area reported feeling the largest of these earthquakes.

Earthquakes are a common occurrence in the Yellowstone National Park area, an active volcanic-tectonic area averaging 1,000 to 2,000 earthquakes a year. Yellowstone's 10,000 geysers and hot springs are the result of this geologic activity. A summary of the Yellowstone's volcanic history is available on the Yellowstone Volcano Observatory web site (listed below). This December 2008 earthquake sequence is the most intense in this area for some years and is centered on the east side of the Yellowstone caldera. Scientists cannot identify any causative fault or other feature without further analysis. Seismologists continue to monitor and analyze the data and will issue new information if the situation warrants it.

And here is what the Discovery channel has to say about Yellowstone and other supervolcanoes:

One way of looking at the power of volcanoes is what scientists call the Volcano Explosivity Index (VEI) — sort of a Richter scale for eruptions. And like the Richter scale used to measure earthquakes, the power of an eruption increases exponentially from number to number in the VEI index.

The VEI scale runs from zero to eight. The higher the VEI number, the bigger — and less frequent — the eruptions. On one end there are the burbling, rather gentle eruptions that happen on the big island of Hawaii. These happen daily on Earth, and even with their occasional impressive fountains of lava, they rate a zero on the VEI.

At the other extreme is the Yellowstone eruption of 2.1 million years ago, which is described on the VEI as an eight: mega-colossal, with a towering ash cloud 10 miles high that pours out at least a thousand cubic miles of ash. That Yellowstone eruption had 10 times the ejected material as a VEI 7 volcano, which modern humans have never seen either.

In fact, the last VEI 7 eruption was in Toba, Indonesia, 74,000 years ago, and it caused such global cooling that some scientists think it nearly drove humans to extinction.

The largest known eruption in the last several thousand years is believed to be that of Tambora, Indonesia, in 1815. It was tens of times more massive an eruption than Mount St. Helens in 1980. Despite pouring out 7 cubic miles of ash and causing short-term global cooling, Tambora was small fry compared with any of Yellowstone's big eruptions, or even the eruption of Toba 74,000 years ago.

No eruptions of this magnitude have happened since the dawn of civilization, about 10,000 years ago — which is lucky for us, and perhaps one reason civilization has been able to develop.

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The headline "Scientists track unusual earthquake swarm beneath Yellowstone" only means one thing to fans of the Discovery channel like myself: supervolcano. Here is what the earthquake center at the University of Utah had to say yesterday afternoon:

 The University of Utah Seismograph Stations reports that a notable swarm of earthquakes has been underway since December 26 beneath Yellowstone Lake in Yellowstone National Park, three to six miles south-southeast of Fishing Bridge, Wyoming.  This energetic sequence of events was most intense on December 27, when the largest number of events of magnitude 3 and larger occurred.

The largest of the earthquakes was a magnitude 3.9 (revised from magnitude 3.8) at 10:15 pm MST on Dec. 27.  The sequence has included nine events of magnitude 3 to 3.9 and approximately 24 of magnitude 2 to 3 at the time of this release. A total of more than 250 events large enough to be located have occurred in this swarm.  Reliable depths of the larger events are up to a few miles. Visitors and National Park Service (NPS) employees in the Yellowstone Lake area reported feeling the largest of these earthquakes.

Earthquakes are a common occurrence in the Yellowstone National Park area, an active volcanic-tectonic area averaging 1,000 to 2,000 earthquakes a year.  Yellowstone's 10,000 geysers and hot springs are the result of this geologic activity.  A summary of the Yellowstone's volcanic history is available on the Yellowstone Volcano Observatory web site (listed below).

This December 2008 earthquake sequence is the most intense in this area for some years and is centered on the east side of the Yellowstone caldera.  Scientists can not identify any causative fault or other feature without further analysis.  Seismologists continue to monitor and analyze the data and will issue new information if the situation warrants it.

The University of Utah operates a seismic network in Yellowstone National Park in conjunction with the National Park Service and the U.S. Geological Survey (USGS). These three institutions are partners in the Yellowstone Volcano Observatory.

And what if the supervolcano blew? Kind of like if a giant rock hit the Earth. A planet killer. An extinction-level event. Let me quote the words of President Tom Beck (Morgan Freeman) in the comet-hitting-earth film Deep Impact:

Within a week, the skies will be dark with dust from the impact and they will stay dark for years. All plant life will be dead within weeks. Animal life within a few months. So that's it. Good luck to us all.

Such a scenario would be very bad for equity values and the outlook for the labor market.

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The economic wishes and dreams of Jeff Madrick in The Nation:

1) Raise the minimum wage still higher and on a regular basis. It has fallen far behind increases in inflation since the 1970s, and that affects higher level wages as well.

2) Encourage living-wage programs by local governments. Governments can demand that their contractors and suppliers pay well above the minimum wage. There is substantial evidence that this does not result in an undue loss of jobs.

3) Enforce the labor laws vigilantly. Minimum-wage and maximum-hour laws are violated to a stunning degree. American workers shouldn't be forced by their employers to understate the number of hours worked or be locked in the warehouse so they can't leave on time. Workers often make only $2 and $3 an hour.

4) Unions are not seeking a free pass to organize secretly when they advocate for open check-offs on cards to approve of a union vote. They are seeking to organize without persistent and often illegal management interference. Penalties for illegally deterring such organizing are so light, it makes little sense for management not to pursue strategies to stop organizing even at the cost of prosecution.

5) Request that trading partners develop serious environmental standards and worker-protection laws. This is good for them, bringing a progressive revolution and a robust domestic market to their countries. It is good for America, which will be able to compete on a more level playing field.

6) Demand that the president, governors and mayors speak up about unconscionable executive salaries and low wages. The influence from the top cannot be underestimated. A president who looks the other way sends a strong signal to business. A president who demands responsible treatment of workers will get a response. Business does not like such attention.

7) These measures should be accompanied by serious investment in modernized infrastructure and energy alternatives, which can create millions of domestic jobs that pay good salaries. It should also be accompanied by a policy that supports a lower dollar--contrary to Rubinomics--in order to stimulate manufacturing exports again. Accomplishing this may require a new system of semi-fixed currencies across the globe. The unabashed high-dollar policy of the past twenty years has led to imbalances around the world that have contributed fundamentally to US overindebtedness.

8) And finally, the nation needs more balance on the part of the Federal Reserve between subduing inflation and creating jobs. Americans can live with inflation above 2 percent a year. There is no academic evidence to support a 2 percent annual target, although the Fed has made this its informal target.

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