Quantitative Easing - What's That?

What‘s Quantitative Easing? Why it’s the new way of saying “printing money” of course!  Let this entertaining seven minute video explain it to you.



But isn’t printing money bad?
Yes. It led to hyperinflation and the fall of the Weimar Republic in Germany and probably contributed to the rise of Hitler. It has also lead to the downfall of some regimes in certain South American countries but fortunately, unlike the U.S., they were not important on the world stage.

So why has the US Federal Reserve been printing money?
When confidence finally evaporated in the cleverly constructed financial products, which created worthless financial assets out of other people’s bad debts, the lack of real value behind these assets created enormous holes in the balance sheets of the banks. This was the start of the 2008 credit crunch.
To prevent banks from going bust, and in the process wiping out even more assets, an attempt was made to pump money into the economy by allowing the U.S. Federal Reserve to enormously increase the money supply in two phases called QE1 and QE2. The theory was that this money would filter out into the real world and prevent huge job losses by stimulating growth in the economy. In two episodes of quantitative easing, $2,300 billion dollars of money was printed since 2009.

So did it work?
Well no actually. Unemployment has still increased in the U.S. and growth has slowed.

So why didn’t it work?
As the graph below shows the banks have held on to the money and their monetary base has increased dramatically.



At first this was justified by the banks who claimed that, after the shock of writing off their worthless investments, the banks needed to rebuild their reserves.

But surely they have done that now?

Yes probably.

Then why are banks still reluctant to lend?

They don’t want to release this money by lending to other banks because the bankers themselves are aware that they have not yet fully disclosed all of their bad assets. They think that if we haven’t disclosed all our problem assets, then others will not have done so either! Basically they don’t trust each other.

So where has the money been going?

Into gold, commodities and stocks which are regarded as safer investments.

So what’s the answer?

Some people are still calling for more Quantitative Easing, but faced with strong opposition in Congress, Ben Bernanke (the Chairman of the U.S. Federal Reserve) has, so far, said no and in the process he’s sparked off yet more market turbulence. After such a large injection of cash has already taken place, to release yet more could be seen as a desperate measure, to which the market and the credit rating agencies could well react badly.

Is the UK better off?
No, the UK’s monetary base has also tripled whilst producing little growth, for the same reasons as prevail in the U.S. concerning lack of disclosure.

So what’s the answer - full disclosure?
Maybe! Some commentators are calling for mandatory full disclosure so that banks holding bad assets would be forced to acknowledge them and declare them properly on their balance sheets. This would be like disinfecting the hospital ward after a bad infection had contaminated the patients. Each patient (asset) would have to be examined for infection before it was re-admitted to the ward. It would be a process which some think could be safely managed, whilst others disagree. The risk is that several banks would collapse, creating a lack of confidence in the economy, and a massive political fallout in a U.S. election year.

So it’s all back to confidence?
Yes indeed! If the public don’t have confidence in the financial institutions and the currency they will be reluctant to invest and may withdraw money from the real economy. This would be catastrophic for growth and employment.

What’s the risk of runaway inflation?
There’s a real risk that high inflation will result when the money finally works its way out into the real economy. In fact this is almost a matter of deliberate policy since the U.S. wants to weaken its currency and thereby reduce its debt burden.

The Fed is a private company?
Something else you should know is that U.S. Federal Reserve was set up in 1913 as a private company with the banks as shareholders. Although it’s subject to congressional oversight it was intended to serve both the public interest and the interests of the banks.

OK clever dick, what would you do?
Go liquid, spread it around a number of UK banks and watch out for QE3!

Who is Developing Thorium Power?

If thorium power means little or nothing to you, and you are not aware of its huge potential benefits, then take a look at my blog piece Thorium – A New Direction in Power Generation.  If you can only spare a few minutes just watch the opening video by Kirk Sorensen! If, however, you are already a LFTR (Liquid Fluoride Thorium Reactor) enthusiast or you are researching this field, and want to know more about who is developing power from thorium then read on.

A schematic design for a Liquid Fluoride Thorium Reactor

The internet is buzzing with presentations, videos and articles extolling the advantages of using thorium in Liquid Fluoride Thorium Reactors, but who are the major players and who is going to get there first? This blog is a review of the current state of progress in the use of thorium as a nuclear fuel and concerns the main countries and companies involved in the field. It has been based on internet research and, in true blogging tradition, it’s a mixture of fact and personal opinion! [So that it's clear which is which, comments are enclosed in square brackets like this.]

USA
In President Obama’s January 2011 State of the Union address, he refers to clean energy from a variety of sources, including nuclear, as one of the many innovations required to restore employment, but although U.S. Energy Secretary Stephen Chu  is aware of thorium, so far there has been little U.S. government interest shown in it apart from the promotion of a Bill in Congress by two senators.


US Senators Orrin Hatch and Harry Reid Promote Thorium
Senator, Orrin Hatch, Utah and Senator Harry Reid, Nevada are promoting thorium and they proposed a Bill in the 2nd session of the 111th Congress, called AMENDED S.3060: Thorium Energy Security Act of 2010. (Nevada has its own website promoting Thorium) The Bill was read in Congress on 3rd March 2010 and was passed to the US Senate Committee on Energy and Natural Resources where it has been allowed to expire. This committee is concerned with all forms of energy including oil and gas.

(The bill was proposed in a previous session of Congress. Sessions of Congress last two years, and at the end of each session all proposed bills and resolutions that haven't passed are cleared from the books. Members often reintroduce bills that did not come up for debate under a new number in the next session).

There are three U.S. private companies backing thorium.  The first two, Lightbridge (formerly Thorium Power) and Flibe Energy, have rather distinct objectives.  The third company Transatomic Power has only recently been announced.

Lightbridge - Seth Grae - President

Light Bridge is a company formed in 1992 (originally named Thorium Power Inc.) which was established to exploit nuclear fuel designs developed by Dr Alvin Radkowsky,  who is one of the founding fathers of the U.S. nuclear industry. (This nicely written piece by Leslie Allen gives the background to how the company was formed). 

Lightbridge has a long-standing and ongoing working relationship with the Kurchatov Institute in Moscow.  They generate revenue from providing consulting engineering services to foreign governments.  As well as offering and developing nuclear fuel designs for existing reactor systems, they are also developing thorium based fuel systems. They do not appear to be proposing to develop Liquid Fluoride Thorium Reactors LFTR’s.

This article describes Lightbridge’s Russian interests and mentions that the Kurchatov Institute is already running thorium solid fuel rods in their IR-8 research reactor. Lightbridge is particularly aware of the potential for plutonium disposal using LFTR technology in the Russian context.

Whilst Lightbridge is not yet consistently profitable, they are capitalized to approx 20m$ of which 10m$ is in cash or easily convertible securities, and operating losses are steadily being reduced.

[Experience and a realistic business approach go hand in hand in this company. They have set themselves the task of running a profitable nuclear company and not changing the world or developing a major new technology. In that limited objective I am sure they will succeed and yet it’s a pity that they don’t have bigger ambitions, beyond servicing and retrofitting the existing nuclear industry, because they are, at present, probably the best equipped private company to develop LFTR technology.]

Flibe Energy – Kirk Sorensen - President 

Kirk Sorensen has been at the forefront of promoting the use of thorium powered liquid fluoride reactors for several years and he's a great ambassador for the subject. It was when he worked for NASA, and was asked to consider power sources suitable for use on the moon, that he came across the possibility of using thorium as a fuel and quickly realised the potential applications for terrestrial power production.

In 2010 he set up a company called Flibe Energy which has the objective of building an LFTR to achieve criticality by June 2015.

[Whilst their objective could have been achieved at Oak Ridge National Laboratory under Alvin Weinberg in the late sixties/early seventies (and very nearly was in the Molten Salt Reactor Experiment see below), it’s a very ambitious timescale in the current climate. Flibe Energy will need to recruit many expert staff, and they have only just started to search for funding. Building a demonstration plant will need not just careful engineering, but they’ll also have to take the safety regulators with them. In their inspiring presentations they don’t mention the difficulties of obtaining approval for buying, handling and generating fissile materials, let alone passing the detailed technical reviews that will be imposed on their designs by the U.S. Nuclear Regulatory Commission. I admire their enthusiasm, and I sincerely hope that they are able to achieve their objective, but it'll be an uphill struggle. I think that they’ll need heavyweight political support and, as well as demonstrating their technical competence, they’ll need great political skill and judgement, to succeed.  Maybe once they have obtained a few patents they should be talking to the Chinese.]

Transatomic Power
Another U.S. company Transatomic Power has just been formed and they are promoting LFTR's.  The company has a high degree of intellectual capital on the board.  Four of the five board members are people from the MIT Department of Nuclear Science and Engineering, including the Head of Department.  The fifth is a Senior Nuclear R and D Manager at Oak Ridge National Laboratory. Information on their website is still sketchy.

Back to the Future - the Oak Ridge Molten Salt Reactor Experiment
The U.S. was the first to operate a graphite moderated molten salt reactor at Oak Ridge National Laboratory and it ran successfully from 1965 to 1969 reaching temperatures up to 650 deg C. It was fuelled by a mixture of fluorides LiF-BeF2-ZrF4-UF4 (in the proportions 65-30-5-0.1).  As a result of the Oak Ridge work on Molten Salt Reactors a US patent no 3743577 for a single fluid molten salt nuclear breeder reactor was granted to ES Bettis in 1973. It's also graphite moderated design.

Charles Barton uses documents produced at the time to comment on the costs of this experimental work and scales them up to present day in this interesting piece

CHINA
It’s not a priority for the Chinese to communicate their policies concerning energy to the outside world, and the information available in English on this subject is very limited. Recent official announcements, relayed via the specialist press, show that they are committed to the use of Thorium in Liquid Fuelled Thorium Reactors.

This, difficult to read, Google translation  of the Chinese Academy of Science announcement indicates that, unlike their distant western colleagues in government and the nuclear industry, the Chinese government has been listening to the western supporters of this technology. All of the familiar advantages and potential benefits are repeated and put into the context of an extremely rapidly growing need for energy in China.

As a fast growing economy, which is currently highly reliant on very polluting coal fired power stations, they need to secure a cleaner, safer option to provide for their enormous energy needs through to the end of the 21st century. Xu Hongie of the Shanghai Institute of Applied Physics estimates that China’s energy output from nuclear sources will increase by a factor of 20 over the next forty years during which time he considers that Liquid Fluoride Thorium Reactors will become mainstream technology.

More details, including a comment on the high level of political support behind this project, are given in an article by IThEO.org the International Thorium Energy Organisation.

 [China has huge reserves of thorium and is not constrained by an entrenched nuclear industry, based on the uranium/plutonium fuel cycle, or an anti-nuclear environmental movement. They have a real need to rapidly develop new energy sources. If there truly is full political support behind this project, then the Chinese government will sweep away any financial or regulatory objections.]

EUROPE
Europe backed fusion power in a big way in 2001 and is currently funding work to the extent of billions of dollars. So far they have given a grant of 1m euros to the Grenoble Reactor Research Group for work on LFTR’s.

Europe is Losing Out
In this comprehensive policy brief  for the Centre for European Policy Reform Stephen Tindale, who was until 2005 the UK’s Executive Director of Greenpeace, makes a persuasive case for Europe to pursue the thorium option as a bridge technology between carbon based power and 100% renewables. On the way he dismisses fusion power!

Quote

Tokamak Magnetic Confinement Device

“In order to use nuclear as a bridge technology, the EU need not spend more money on unproven technological approaches such as nuclear fusion, which remains at least 30 years away. Advocates of fusion argue that this technology in theory provides limitless and sustainable energy. So it does – theoretically. The downside is best summarised in the quip that “nuclear fusion is 30 years in the future – and always will be”. The budget for the international nuclear fusion project, (ITER) in France, has almost tripled since 2001. It is now $16 billion, although major construction has yet to start. The EU will have to pay $6.6 billion of this. The Commission awarded ITER $1.4 billion, from unspent parts of the EU budget and the research programme, in 2010.2 Even if fusion works eventually (which is far from certain), it will not provide electricity soon enough to help Europe with its transition to a low-carbon economy. ITER itself accepts that the plant will not feed electricity into the grid before 2040.”
Unquote

[For environmentalists energy generation from 100% renewable sources, in spite of their disadvantages, is the Holy Grail. I don’t think it’s advisable to commit to this objective since, ignoring issues of cost, there seems to be no way of securing the 24 hour base load requirements using renewable sources. Solar energy only works during the day, wind energy only works when it’s windy, hydroelectric power is mostly already fully developed in Western countries, wave power needs a coastline with waves and bio-energy projects require enormous land areas, which means taking agricultural land out of use.  Whilst there is a place for all of these technologies in the energy supply mix, I don't believe that they have sufficiently high energy densities to supply all of the power required by industrialised countries. Having said that, it’s nice to see Stephen Tindale, a former executive director of Greenpeace, supporting LFTR’s, which he does after the quotation above.]

Sweden
A Swedish company called 232Thorwards SAS is promoting Thorium LFTR’s  but there's little information concerning their achievements or objectives.

Norway
Aker Solutions bought Professor Rubbia’s patent rights for an accelerator driven sub critical thorium reactor.  They have subsequently signed an agreement with the Chinese for its development.

Germany
After the tsunami on 11th March 2011 caused the Fukushima nuclear plant to release radioactivity Germany announced, on 30th May, that it was going to shut down all its nuclear power plants by 2022.  As far as I know Germany has no plans to develop LFTR’s or any other nuclear technology.

United Kingdom
The UK National Nuclear Laboratory’s (NNL) 2010 position paper only considered using thorium as a replacement fuel in existing reactors and concluded that there were insufficient advantages to make it worth pursuing this path.

Earlier this year Baroness Angela Smith asked a question concerning thorium power in the House of Lords and the government response was that a new report has been recently commissioned from the NNL. I am still trying to find out what the terms of reference are.

[The UK was one of the first countries to pursue civilian nuclear power and many of its ageing power stations are due for renewal; but I would be very surprised if money can be found to replace what is currently perceived as an environmentally dangerous technology with a different and safer type of nuclear reactor. Decision makers are also under the influence of the existing UK nuclear industry which, like France, is committed to the Pressurised Water Reactor. As a UK citizen, I am very doubtful that the UK is still capable of piloting such a significant new innovation, but I appreciate the efforts that are being made by Baroness Smith, Worthington and others to raise awareness of this issue.]

FRANCE
France generates about 80% of its electricity from nuclear power and the French company AREVA is one of the world’s leading companies for the building of nuclear power plants. This is, however, not necessarily an advantage since commercial organisations will always tend to promote their own proven products rather than unproven technology and they are very aware of the difficulties presented by the regulatory context.

[This exchange on the AREVA North American blog demonstrates the state of mind and appears to indicate that AREVA is not keen to pursue the development of new technology until it has been proven elsewhere.]

Quote

by Gilles Clement, Vice-President of Recycling Technologies, and Dr. Alan Hanson, Executive Vice President of Technology and Used-Fuel Management

Randal Leavitt asked recently:
Recycling fission fuel is better than not recycling, but there are other approaches that are better still. My preferred technology is the liquid fluoride thorium reactor. How do we shift the nuclear industry over to this technology?

Randal,
We definitely agree that recycling used fuel is much better than “throwing it away” (i.e: direct disposal). The ability to shift the nuclear industry to a new technology is really something that is determined by the success of three conditions:

1. It must be proven and demonstrated at large industrial scale
2. It must be economically justified as compared to other alternatives
3. It must be licensed by the appropriate nuclear regulatory authorities

Large scale deployment of new technology requires – as soon as the principles are reasonably well stabilized and enough data from R and D is available – the preparation of a thorough and credible business case to justify the large investments needed to develop it.

To demonstrate that a new technology is fully proven and obtain the final license, one has to go through a lengthy piloting process. This involves designing, building and operating a series of “pilot models” of progressively increasing scale. A first model is developed to evaluate and understand the basic performance of the new technology, and it takes several years to test it rigorously. This first step is followed by incremental increases in the scale and the capacity of the models, (generally two further steps) to reach full commercial production size. The final model is considered as pre-industrial and is used to demonstrate the full range of safety, security and reliability requirements. Today nuclear reactors fuelled with thorium have not yet been shown to meet the three conditions.
Unquote

Nevertheless, the Grenoble Reactor Research Group recently received a 1 million euro EU grant to carry out design studies, build small scale simulation plants and select materials. The presentation by Michel Allibert at the 2010 Thorium Energy Conference in London sets out their current progress and proposes a timescale to build a demonstration reactor in 15 years, a prototype 15 years later and a commercial reactor in 2040-50. In the presentation they emphasize the need for approval by safety authorities and the training of independent safety experts.

[This cautious attitude, which shows a keen awareness of the political and regulatory background, is almost certainly justified in the French/European context!]

RUSSIA
Russia is interested in plutonium disposal by burning it in LFTR’s and the Kurchatov Institute is working on conceptual designs for molten salt reactors but it’s difficult to assess their progress.

In 2007 Red Star ("Krasnaya Zvezda" in Russian), a Russian government-owned entity and one of the premier nuclear design bureaus in the world, announced an agreement on the terms of a contract whereby Thorium Power's seed and blanket fuel designs will undergo irradiation testing with the goal of moving toward deployment within full-sized commercial reactors.

In 2007 the Kurchatov Institute signed an agreement with Lightbridge to carry out tests on thorium fuel elements and share the data. 

 [In spite of having lots of experience of nuclear energy, as well as very capable technologists and prestigious research establishments, it’s difficult to see where political support would come from for developing LFTR’s in Russia. It’s political outlook is short term, nationalistic, largely autocratic and corruption is rife. Whilst they may replace the fuel rods in some of their legacy uranium/plutonium reactors with thorium, I think it’s unlikely that their politicians will see the need to pioneer new power generation technologies for several decades.

Russia has enormous oil and gas reserves and it is committed to exporting it to Western Europe. Why would you want to develop a better goose when you already have plenty of golden eggs? ]

INDIA

The Kakrapar Nuclear Power Station Complex

India already has a 220MW reactor running on thorium. The Kakrapar 1 reactor uses solid fuel rods in a retrofitted reactor chamber. The neutrons to initiate fission are supplied by a plutonium core.

When India was developing a nuclear weapon capability it was forbidden by the international community from importing uranium for their existing reactors in an attempt to reduce proliferation. This experience concentrated the minds of policy makers and using the thorium fuel cycle became a very important priority for India. (India has large reserves of thorium).  Ever since then, they have been developing civilian applications for power generation from thorium but, at present, only in their existing solid fuelled  reactors.

India has not so far announced any interest in LFTR or MSR technologies. This comment on the Nuclear Green blog run by Charles Barton could help to explain why.

Quote
David asked...
So, why are the Indians not pursuing LFTR technology? If our numbers are right and the development is somewhat "open-source" already why is this technology not being pursued yet metal fuelled Thorium reactors or Fast breeders are being pursued?

This seeming avoidance of a technology makes me wonder if there are aspects to LFTR we have overlooked? If a handful of engineers in the 1960's could assembly one, what would stop India? They have some really good engineers and scientists there.

Charles Barton replied ...
David, 'the Indians are following a plan that was created almost 2 generations ago, before the LFTR became a possibility. There is a significant question as to why that complex and expensive plan is still being followed by the Indians, in light of the thorium breeding potential of the LFTR. The Indian failure to embrace the LFTR cannot be attributed to some great difficulty that was unique to the LFTR and exceeded the challenges of the three stage program. Perhaps the most likely explanation is that since the Indians had until very recently access to a very limited amount of uranium, they needed the significantly greater breeding capacity of fast reactors, in order to obtain enough fissionable uranium to start a large number of thorium based reactors.
Unquote


JAPAN
Before the Fukushima accident Japan had 47, 348 MW of installed nuclear power capacity and generated 28.9% of its electricity needs from nuclear sources.  Japan has 127 million people on densely populated islands, which are subjected to frequent earthquakes and tsunamis.  As Fukushima has shown power plants using solid fuel and pressurised water are not inherently safe in the event of power failures.

The reaction of the Japanese public to the contamination of a large zone around the plant has been understandably negative.  Problems in stabilizing the Fukushima nuclear plant have hardened attitudes to nuclear power.  As of June 2011, "more than 80 percent of Japanese now say they are anti-nuclear and distrust government information on radiation".  Post-Fukushima polls suggest that somewhere "between 41 and 54 percent of Japanese support scrapping, or reducing the numbers of, nuclear power plants.

Before Fukushima, on 5th Oct 2010 the Keidranen industry group announced that IThEMS (International Thorium Energy Molten-Salt Technology Inc.) , which needs a start up funding of 300m$, is targeting 2016 to build a 10MW miniFuji LFTR. This would then be followed up by a 200MW design called Fuji which has a Japanese Patent (No 3326759) and a Russian Federation Patent (No 2137222).

Conceptual design and research appears to be well under way and several technical papers were published at the 2010 Thorium Energy Conference.

Charles Barton, on his blog Nuclear Green, reports on 8th November 2010 that he has been in contact with Dr Kazuo Furakawa of IThEMS and he comments on their business plan here.  

[Japan has a very capable nuclear industry and all the necessary research and industrial infrastructure to succeed in developing new nuclear technology.  In normal circumstances it would be a strong candidate and an early adopter.  The Fukushima accident has, however, changed public opinion and the lack of trust in government is, for some time to come, likely to be fatal to new developments in nuclear power systems. I am trying to get an update on IThEMS progress but realistically, I fear that nothing will have been acheived in their attempt to obtain funding.]


IN CONCLUSION
[Apart from lack of money, those wishing to develop new nuclear technology in Western nations are trapped in a four pronged attack: from conservative regulators, from a lack of political will, from opposition by vested interests like the existing nuclear companies, and from a powerful anti-nuclear protest movement.

My money is on China being the first nation to successfully deploy LFTR reactors. They have a great need for the development of new energy resources and a political system, which we may not like, but which will enable rapid technological change. I wish them every success, because the world needs someone to take this technology from the theoretical to the mainstream. I think that within 20 years the West can look forward to buying mass produced Chinese LFTR power stations at low prices.

Or if I was being even more cynical about Europe than usual, we will probably buy one, pick apart the design, re-engineer it completely, incorporating lots of unnecessary concrete, safety features and exotic materials and then build a few LFTR's at ten times the cost of the Chinese product. That way the European nuclear industry can justify their earlier lack of interest in Liquid Fuelled Thorium Breeder Reactors by saying that they always knew that there were no true economic advantages over uranium/plutonium solid fuelled, water cooled reactors!]

Other posts about nuclear power in this blog

So You’re Against Nuclear Power?
Thorium- Safe, Clean, Cheap Nuclear Power
Thorium- A New Direction in Power Generation

The UK Riots

Disaffected Youth or Common Criminals?

Whilst the buildings are still smouldering, politicians have been condemning the rioters and looters as common criminals! Of course they are! Arson is a criminal act which endangers lives and looting is just criminal. Many of those involved will be brought to justice, whilst others will enjoy their looted goods unmolested. But such condemnation by politicians is unhelpful because it gets us nowhere.

We have seen riots without the excuse of a political objective in London before, but never primarily by the young so why now? Is it that they see no future for themselves? Do they just burn cars, buildings and smash windows because they feel like it or are there significant underlying social problems? Can they imagine themselves having a steady job in a prosperous country in ten years time? Or do they look at industries relocating to cheaper countries, and workers from Eastern Europe flooding in and think, “What the hell am I going to do when I want a job?”

In my view, whether they articulate their fears or not, there is, behind their actions, a strong element of discontent about their future prospects. They feel that they have nothing to lose, or look forward to, so why not get out on the streets?

Apart from policing deployments what can we do?

Teach children their responsibilities
The decades old emphasis on children’s rights should be rebalanced with a few practical lessons about children’s responsibilities. We have transferred too much power to the young and I challenge educationalists to begin to redress the balance.

Support parental discipline
Parents also have a critical role and we should promote initiatives to reverse the trend towards reduction of parental authority. For many years now, following expert advice, it has been the fashion for parents to negotiate with their children rather than impose control over them. There are some things that are moral absolutes, which should not be met with explanation or mild disapproval and this starts with the very young. Parents need to be told that they can and should apply discipline and that their children will most likely be better off because of it.

But these measures do not address underlying economic issues so what else can we do about it?

Forgive me for starting with a history lesson!

Globalisation
Beginning in the seventies but gathering pace in the 1990’s western governments were persuaded that great benefits would flow to western economies from freeing up world trade by reducing tariffs and trade barriers generally. At the beginning this seemed to be true, but quite quickly it was obvious that manufacturing industries in the developed world were re-locating to countries with lower costs and cheaper labour. We were exporting our jobs! In return we were able to buy goods of the same quality, or better than before, but at much lower prices.

If you are an economic liberal then, theoretically, fair competition from the East should have stimulated productivity in the West, and enabled us to continue to sell our goods at similar prices, but it’s not a fair and perfect market. How can you compete with 12 hour working days and very low pay in countries like China? In addition, there is a fundamentally unfair imbalance due to a deliberately undervalued Yuan, which reduces China’s selling prices and increases the cost of western goods and services in China.

De-regulation
At around the same time the de-regulation of financial markets and the reduction of control over banks were also supposed to give enormous advantages to western economies. Again for nearly two decades this seemed to be true, as debt fuelled economies forged ahead, until the credit crunch of 2008 showed everyone just how false this was. Meanwhile personal debt had gone through the roof, because whenever you wanted to borrow money to buy goods manufactured in the East you could! Then government debts went the same way as money was pumped into western economies to avoid a recession caused by bank collapses and credit shortages.


Payback Time
Eventually debt has to be repaid and that’s where we are now. The credit-worthiness of many Western nations is doubtful and borrowing will cost more in future. Governments must reduce their spending and increase taxes to repay debt and this will lead to a recession. Some countries, like the USA, have been very reluctant to do so. Others have done too little too late and are trapped in a continuing round of new budget cutback announcements and financial rescues. France is the latest to come under pressure and risks going the same way. It will need to cut spending or raise taxes in a very public way and I think that we can look forward to more protests on the streets this Autumn!

The UK acted decisively and, soon after the new coalition government came to power in May 2010, it announced huge cutbacks. Again for a while it seemed that they had done the right thing and that the pain would be accepted. Then the riots started and no amount of political rhetoric will undo the damage. Worse still, there may be further consequences if the riots continue sporadically and the rating agencies consider that the UK is no longer an AAA risk due to the economic effects of civil unrest.

Here are a few diverse ideas about what the US and the EU could do.

Reassess Globalisation
They should put some pressure on Far Eastern economies, particularly China, to float their currencies or risk selective tariff increases.

They should make it a legal requirement for European companies to impose contractually binding Health and Safety rules on Far Eastern subcontractors and suppliers.

Re-regulate banks
They should tighten up still further the financial regulation of banks and investment companies.

They should impose a tax on financial transactions to discourage program trading.

The Mafiosi Banksters will scream but they always do. This time we aren’t listening! They have more than demonstrated that they are incapable of self-regulation and are toxically dangerous when left un-regulated!

More power to politicians with a longer term view
Typically politicians can see no further than the next election, and governments (certainly in France and the US) often avoid taking difficult decisions if they think it will harm their election prospects.

In the UK, the second chamber of Parliament needs to be strengthened constitutionally, so that it can exert real powers when a government is refusing to act, or is taking questionable short term decisions. The members of the second chamber need to be active but less Party-political. That won’t stop most of the bad decisions being taken but it might be able to intervene and make a difference occasionally.

Start looking for the next job creating technology
In order to create new jobs and wealth in western economies innovation is critical. It’s still an area, in which western countries have an advantage as a result of their educational and research infrastructure, although that advantage is being eroded rapidly. So we need to keep ourselves at the forefront.

How about a strategy for concentrating on green energy industries and power from thorium during this decade? Then in the next decade we could move on to nano-technology and bio-technology.

This will need considerable investment in research projects, and a more open minded attitude than we currently have, but it’s a screamingly urgent priority and money must be found, not just for solid reliable and conventional projects but for some “blue sky” things as well!

US Credit Rating is downgraded from AAA to AA+

Michele Constantini PhotoAlto Getty Images

Downgrade is due to concerns about US political instutions

China Calls for a new Reserve Currency

Standard and Poor's statement
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011".

"The outlook on the new U.S. credit rating is negative," the S and P said in its statement, "a sign that another downgrade is possible in the next 12 to 18 months".

On Aug. 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S and P had called for as a good "down payment" on fixing America's finances.

The financial commentator Daniel Gross summarizes the political situation in his blog of 6 August
"The fiscal clown show continues. A few days after Congress and the White House agreed to raise the debt ceiling and cut spending, Standard & Poor's has downgraded the United States of America's credit rating from AAA to AA+.

S and P, which covered itself in a substance other than glory during the mortgage crisis, may have a poor record and strange methodology when it comes to sovereign ratings. France, which has a far higher debt per capita ratio than the U.S., still enjoys a AAA rating. And a downgrade, alone, doesn't mean U.S. interest rates will spike - on Monday or at any time in the future. Japan's credit rating was downgraded several years ago, when the interest rates its government paid on bonds was already extremely low, and they've generally trended lower in the years since.

But Congressional Republicans deserve much more of the blame. For this calamity was entirely man-made - even intentional. The contemporary Republican Party is fixated on taxes. It possesses an iron-clad belief that the existing tax rates should never go up, that loopholes shouldn't be closed unless they're offset by other tax reductions, that the fact that hedge fund managers pay lower tax rates than school teachers makes complete sense, that a reversion to the tax rates of the prosperous 1990's or 1980's would be unacceptable.

In the past two years, this attitude has combined with a general hostility to playing ball with Democrats on large legislative issues, a near-blanket refusal to conduct business with President Obama, and, since the arrival of the raucous Tea Party freshman, a cavalier attitude toward the nation's obligations. It was common to hear duly elected legislators argue that it wouldn't be a big deal if the government were to pierce the debt ceiling and default on its debts".

Other rating agencies hold their fire for now and China proposes a new reserve currency

The other two major credit rating agencies, Moody's and Fitch, said on Friday night they had no immediate plans to follow S and P in taking the US off their lists of risk-free borrowers.

China, the world's largest holder of US debt, had "every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," said a commentary in the official Xinhua news agency.

"International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," the commentary said.

In my view China should put their money where there mouth is!

So far they have been content to stand back, sell their goods and bank the profits without taking any of the responsibility. Why don't they take the initiative and try to lead the world?  At the moment the Yuan is a pegged currency, only recently tradeable outside China!  How about starting by exposing the Yuan to the markets so that it can find its true value instead of giving themselves the unfair advantage of an undervalued currency? 

Is China prepared to guarantee a new reserve currency?  I think it's their turn to step up to the plate!

Meanwhile the markets tumble everywhere!

Eugene Onegin

Opéra Eclaté - St Céré Festival

In the impressive outdoor setting of the courtyard of Castelnau castle (12th C) at Prudhomat in the Lot, Opéra Eclaté gave a performance of Eugene Onegin in a co-production with Opera Fribourg, directed by Eric Perez and designed by Ruth Gross.

Like most of the St Céré Festival’s productions the design is simple, but very effective, making the most of limited resources. Here six translucent panels enclosed the stage, changing colour with backlighting, to follow the mood of the drama, and moving to create suitable spaces.

In the opening scene Karine Motyka (Olga) worked hard to create the illusion of a vivacious young girl as she jumped and skipped about the stage, her full, well balanced, richly coloured and mature mezzo voice giving the lie to her theatrical portrayal of youthfulness.

Tatiana (Ekaterina Godovanets) was, in deliberate contrast, very static as she read her book and sang rather quietly with little colour. At first she looked and sounded like a very gawky, rather sulky, teenager. A little later in the same scene she briefly transformed into a beautiful young woman, as she caught the audience with an ecstatic gaze and dreamed of romantic love, “une reveuse”. This hint of a suppressed passionate nature almost made what follows credible.

The panels were used to even greater effect when the backlighting was switched off and they became white, to form the pages on which Tatiana writes to Onegin in the famous “Letter Scene”. (I foolishly wondered why I couldn’t read the words until I realised they were in Russian)! Ms Godvanets shaped the long solo aria very well. Building the passion in her declaration of love, step by step, her performance opening up vocally and dramatically. The pianissimo passages were floated with a rare and very beautiful colour and her transformation into an attractive young girl was subtle but very real. She was entirely capable of fully exploiting the emotional impact of this scene, which is so central to the work. In doing so she was ably aided by the dialogue with the orchestra and its woodwind soloists. This was definitely the high point of the evening!

Svetislav Stojanovic (Lensky) has a sharp edged tenor voice, which had no difficulty penetrating the dead outdoor acoustic. With his lean masculine figure he persuasively portrayed his youthful love for Olga and later, in the ball scene, he convincingly acted his outrage at the behaviour of Onegin. His solo aria before the duel (Act II Scene 2) was sung very well.

Not outraged, but certainly outrageous, was Eric Vignau whose highly camp and mannered presentation of the minor buffo role of M. Triquet was matched only by his costume. His was a rather special sort of “trouser role” and as always he excels in this type of part.

Sergei Stilmachenko (Onegin) was very un-engaging in the early scenes. His portrayal was heavy with boredom and cynicism but lacking any sort of charm which might possibly attract and enchant a young girl. His voice did not impress either. Whilst he projected adequately, there were no touches of quality which made you sit up and take notice, and here and there his sense of rhythm was not shared by the orchestra. To carry off this role one needs to have a certain charisma and attractiveness behind the bored facade. Otherwise, in the final scene, you have not built any sympathy for the character of Onegin who, having killed his best friend, is then rejected in his turn by the woman he still loves, but whom he spurned as a young girl. M. Stilmachenko did not manage to create and inhabit this part.

In the third act, four years later, Ms Godovanets transformed herself once again as the wife of Prince Gremin. Now she was a beautiful young woman with true nobility of bearing.

Jean-Claude Sarragosse (Prince Gremin) sang nicely, but his tall, handsome fortyish looks were too young for the part, and one could well understand that Tatiana would choose him instead of Onegin!

Hermine Huguenel (Mme Larine) and Beatrice Burley (Filipievna, Tatiana’s nurse), both have warm mature voices and sympathetic demeanours, but in this context they were too similar.  Surely a nurse should have a different, less refined vocal colour from a member of the minor nobility? Something more was needed here to emphasize their individuality.

The chorus was properly schooled by Inna Petcheniouk, and their voices blended well, creating a very pleasing ensemble.

The Festival Orchestra was very expertly directed by Dominique Trottein. He extracted the essence of the drama and beauty from the orchestral writing and, with well chosen tempos, drove it along when necessary, or held it back for the more poetic moments. One couldn’t expect the rich colours of a full orchestra playing Tchaikovsky from such a small ensemble but, once one had adjusted one’s aural expectations, it certainly did not disappoint.

Pictures are from the Fribourg production. © Opéra de Fribourg and are taken from resmusica’s review.