2011 - %3, October

The Science Behind Yellowstone's Supervolcano

| Wed Oct. 5, 2011 8:28 PM EDT

This post courtesy BBC Earth. For more wildlife news, find BBC Earth on Facebook and Posterous.

The Grand Prismatic Spring in Yellowstone National Park, the largest hot spring in the United States and the third largest in the world, is one of our planet's great natural wonders. Rarely has a site of such beauty been so volatile and so dangerous.

With a diameter of 300 feet, the hot spring has been feared and revered in equal measure since it was discovered and named in 1871—named for its striking coloration. But looks can be deceiving since beneath the surface lies a potentially deadly supervolcano.

 From above: the stunning scene of the Grand Prismatic Spring, Yellowstone National Park.From above: the stunning scene of the Grand Prismatic Spring, Yellowstone National Park.

Supervolcanoes are unique because of their sheer size: In one eruption they can spew out more than 240 cubic miles of magma—enough to reach every person on the planet. The volcano underneath Yellowstone National Park last erupted over 640,000 years ago but unlike most super-volcanoes on the planet it is not extinct. Yellowstone sits atop a magma chamber that is 50 miles long, 25 miles wide and 5 miles deep—large enough to fit New York City inside it three times over—and it is still alive and kicking.

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Boehner Against Job-Saving China Currency Bill—WTF?

| Wed Oct. 5, 2011 7:05 PM EDT

For years, China has artificially deflated the value of its currency by some 40 percent, a huge export subsidy that cripples American manufacturers. "Chinese currency manipulation is the single biggest reason why so many Americans are still jobless," says Peter Morici, a University of Maryland business professor and former chief economist with the US International Trade Commission. Eliminating the practice, economists estimate, would boost American exports by $125 billion a year and create 900,000 US jobs. "The Chinese have figured out that this advantages them even though it's unfair," Morici says. "And they are not going to change it until we take action."

Congress seems to agree. A bipartisan majority in the Senate has agreed to vote as early as today on the Currency Exchange Rate Oversight Act of 2011, a bill that would require the Treasury Department to do more to address foreign currency manipulation. Similar legislation in the House, the Currency Reform for Fair Trade Act, has an unprecedented 225 cosponsors, including 61 Republicans. But despite bipartisan will to tackle the problem, House Speaker John Boehner has shown no sign that he'll let the bill come up for a vote. "I think it's pretty dangerous for us to move legislation in the United States Congress forcing someone to deal with the value of their currency," Boehner said on Tuesday. "This is well beyond what I think Congress ought to be doing."

Barbie Ends Troubled Relationship With Deforestation

| Wed Oct. 5, 2011 6:40 PM EDT

Barbie is moving her dream house out of the Indonesian rainforest. On Wednesday, Mattel announced that it will stop using paper products from companies "that are known to be involved in deforestation." This comes after a major Greenpeace campaign to convince the toy giant to ditch problematic packaging, specifically paper from the company Asia Pulp & Paper.

Mattel has issued new "sustainable sourcing principles" which include maximizing their use of post-consumer recycled content, avoiding fibers from "controversial sources," and increasing the use of third-party certified sustainable products.

Earlier this year, Greenpeace conducted testing on packaging for Barbie, one of Mattel's best-known products, and found that the fibers came from the environmentally fragile Indonesian rainforest. The group also dinged Mattel for using products from Asia Pulp & Paper, "a pulp and paper company notorious for destroying Indonesian rainforests, including the habitat of the endangered Sumatran tiger." Other major US companies, like Staples, Office Depot, and Target, had already stopped using paper products from the company. (Our own Kiera Butler has also blogged about APP's ties to tea party groups.)

As the Los Angeles Times reported on Wednesday, Mattel has now joined the ranks of companies shunning APP:

Mattel spokesperson Jules Andres said the company this summer directed its suppliers "to not source paper and pulp from Asia Pulp & Paper. She said Mattel's new policy "directs our printers not to contract with controversial sources," and that Mattel considers Asia Pulp & Paper "a controversial source."

It's a big win for Greenpeace, which ran a major campaign that featured Ken breaking up with Barbie because, he said, "I don't date girls that are into deforestation":

UPDATE: An APP spokesman sent along this response to Mattel's decision to drop the company, on behalf of sustainability and public outreach manager Ian Lifshitz. The response doesn't really rebut concerns about the company's practices:

Asia Pulp & Paper applauds Mattel's commitments to recycling, wood legality, protection of High Conservation Value Forest, respect for the rights of indigenous peoples and robust auditing and certification procedures. These principles very much mirror AP'’s philosophy and environmental commitments and we are delighted to see a major global toy manufacturer adopt the same.
APP supports all credible industry certification, however, we strongly urge companies to not limit their procurement policies to one standard, in this case FSC, which discriminates against products from Indonesia and other developing markets. APP supports policies that protect both the environment and the vital income which developing countries receive from the pulp & paper industries.

Sarah Palin Decides Against Demotion to President

| Wed Oct. 5, 2011 6:26 PM EDT

Sarah Palin made it official today: she's not going to run for president. I'm posting about this just in case anyone out there was still unsure about Palin's prospects.

But riddle me this: why did she make this announcement through the lamestream media? What's up with that?

UPDATE: Ah, I see. Jay Newton-Small misled me. Palin actually made her announcement on the Mark Levin show.

Stat of the Day: Don't-Lend-College-Students-Money Edition

| Wed Oct. 5, 2011 6:21 PM EDT

Here's a fun tidbit fact-checker extraordinaire Aaron Ross dug up when we were shipping my Assignment: Ohio feature for the November/December issue. With the help of student-aid guru Mark Kantrowitz, Aaron was verifying that the majority of the student loans taken out in the United States haven't yet been paid back. Just how much in outstanding loans are we talking?

Of the nearly $1.5 trillion in loans that US students have ever taken out on record, about $900 billion of it hasn't been repaid. Yes, there are, according to the best estimate available, around some 60 million Americans walking around with student-loan balances. No, the numbers aren't really so staggering because grads are slackers who never pay their debts; a third of all student loan debt was incurred in the last four years. So the national outstanding-loan debt is growing fast. Too bad for all us suckers who took out all that aid that the same cannot be said of the job market.

A Wee Question About Financial Transaction Taxes

| Wed Oct. 5, 2011 3:12 PM EDT

Financial transaction taxes are getting some attention again, and Megan McArdle is against them:

Myself, I don't really see the charms. Tiny taxes on high-volume transactions raise a lot of money, but they also cost money to record, collect, and audit, which is why few jurisdictions have 0.25% sales taxes. And I'm not clear on what problem taxing financial transactions is supposed to solve. It's not as if our woes were caused by legions of high-frequency traders wrecking the markets with their tiny, tiny spreads.

I'm going to take this opportunity to write something potentially really ignorant. But hey — how else do you learn new things aside from putting yourself in a position to get viciously called an idiot in the blogosphere?

So then: when we talk about FTTs, the usual topic is, as Megan implies, high-frequency traders who make money by executing millions of computerized trades that each produce only a tiny profit. Introduce an FTT and they'd become unprofitable and high-frequency trading might go away. I'm perfectly fine with this, since I'm on record as having a dim view of high-frequency trading, but by itself I agree that it isn't enough of a reason to mount an FTT. Besides, if we really think high-frequency trading is dangerous, we should just ban it and move on.

So here comes the possibly ignorant part. One of the most dangerous aspects of the financial system of the aughts — not the only one, but one of them — came from the virtually frictionless nature of modern money flows. That prompted traders to follow a strategy similar to the one that blew up Long Term Capital Management in the 90s: seek out trades that are only barely profitable, and then lever them up enormously. Even a spread of a tenth of a percent is a money spinner if you can lever it up 30:1 or 100:1 with mountains of cheap money.

My question, then, is whether an FTT would slow this down. Basically, any trade with a spread of less than 0.25% would automatically be unprofitable. There would still be plenty of marginally profitable trades, of course, but they'd tend to be a little less exotic. Lots of people can spot an arbitrage opportunity of 0.4%, so they wouldn't last long. The real problem lies in the clever, minuscule trades that stay hidden long enough to be profitable at high levels of leverage but that blow up spectacularly when they go bad. If we had fewer of them, the entire system would be a little more stable.

I can think of several reasons why I might be wrong about this. I don't know, for example, how this would affect big banks, or how it would affect the construction of rocket-science securities like the subprime CDOs that brought down Wall Street in 2008. Maybe the small-spread trades I'm thinking of aren't really as widespread as I think. Or maybe the danger would simply get transferred wholesale from trades with 0.1% spreads to trades with 0.35% spreads.

Hopefully someone who actually knows how high finance works will see this and provide some kind of definitive answer. I've long thought that aside from limiting leverage, which is clearly Job 1 for a more stable financial system, we also need to throw just a little bit of sand in the gears and slow things down slightly. Capital controls, for example, might be a good idea for a lot of countries if they're kept small: just enough to prevent massive hot money flows but not big enough to seriously affect capital formation. An FTT seems like something along these lines.

But I'm open to being swatted down. I'm looking at you, Economics of Contempt.

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Is #OWS What We've All Been Waiting For?

| Wed Oct. 5, 2011 1:45 PM EDT

Over at The Corner, Andrew Stiles recounts a conversation he overheard this morning about the Occupy Wall Street protest. The speaker wasn't especially lucid and ended up explaining that he was just generally opposed to greedhead capitalists:

Sure. Because we all know splendidly greed- and corruption-free socialist government is, and how "the 99 percent" of Americans are just clamoring for it. Certainly, this one fellow doesn't speak for all the protesters, but being familiar with how a (frighteningly) large portion of my generation thinks—and in many cases, has been taught to think—this seems like a fairly accurate distillation of their collective mindset: vague, incoherent, idiotic.

Funny, isn't it? Conservatives sure get plenty offended when people use language like this to talk about tea partiers. But find some guy in a coffee shop who dislikes bankers but can't really articulate a fully fleshed out worldview to explain it, and suddenly an entire generation is a bunch of morons.

I'm going to continue to allow other people to follow OWS more closely than me—Andy Kroll has a good piece about union involvement here, and Michelle Goldberg has another here—but I do find it sort of fascinating. The lack of a clear message has never bothered me, any more than the lack of a clear message in the early days of the tea party bothered conservatives. If OWS continues to grow, messages will start to germinate organically. Some of them will spring from the anarchist roots of the founders, but they'll become fringe issues pretty quickly and shouldn't scare off the rest of us—sort of like tea party demands to repeal the 17th amendment. Others will be more mainstream: repeal of the Bush tax cuts on the rich, stricter financial regulations, more stimulus spending, etc. These will become the equivalent of tea party demands for lower taxes and reduced spending.

And just like the tea party, mainstream logistical support will be key. The tea party movement thrived partly because of genuine grass roots anger, but also because it got lots of publicity from Fox News and plenty of money and organizational support from national conservative groups. Likewise, on our side, union support is key because, even in their current emaciated state, unions are still the only big, institutional pressure groups in America focused almost entirely on economic issues. Jon Cohn puts it pretty well:

During my lifetime, the activist left has gone through several incarnations, focusing on a series of different causes. For much of the 80s and 90s, very generally speaking, the focus was largely on identity politics. Then attention moved to globalization and then, during the Bush presidency, to wars abroad.

As far as I can tell, this is the first time the activist left has focused seriously on issues of economic opportunity at home. In fact, I think it's the first time such issues have been front and center since the 1930s, although I'll defer to the historians on that one. Either way, this movement has a chance to help shape the debate over economic policy in this country—not merely about the financial industry, which is the object of protests right now, but also about inequality generally.

This is a point I was trying to get across in my article earlier this year about unions and plutocracy. My main takeaway was: With unions in a state of decline, what will take their place as a big, organized, persistent source of left-wing pressure on economic issues? I didn't know the answer then, and I still don't. But Occupy Wall Street has a chance—a fighting chance, anyway—of becoming that.

Eric Cantor Aide Forms Super-PAC—Is He Angling for VP?

| Wed Oct. 5, 2011 1:25 PM EDT
Rep. Eric Cantor (R-Va.) is getting his own super-PAC.

If you're a running for national office in 2012, there are a few things you need to do: 1.) Do not hire Mark Penn; 2.) Don't tell your base that they "don't have a heart" (they won't like it); 3.) Set up a nominally independent super-PAC—preferably with a longtime ally at the helm—dedicated to raising corporate cash and spending it on your behalf. Since 2009's Citizens United decision, independent super-PACs, which can raise unlimited sums and spend it as they please—provided they don't communicate with any candidate—are all but required for serious candidates. Rick Perry has two of them, for instance.

And now, National Journal's Chris Frates reports that House Majority Leader Eric Cantor has gotten in the game, too—paving the way for a spot on 2012 ticket:

The PAC will be run by Cantor's deputy chief of staff John Murray and would give Cantor a vehicle he could use to run for vice president, should the opportunity arise, said a source close to the majority leader's office, who asked not to be named because the source was not authorized to speak publicly. Murray's departure from Cantor's office is imminent, the source said.

Cantor was floated as a potential vice presidential pick in 2008, but one year later a McCain aide called those reports a "complete and total joke." He was briefly mentioned as 2012 presidential candidate (mainly because he was raising a lot of money), but shot down those rumors. He has not endorsed a candidate yet, although he had publicly urged Rep. Paul Ryan (R-Wis.) to run.

Chart of the Day: Clarence Thomas' Non-Disclosure Form

| Wed Oct. 5, 2011 1:20 PM EDT

Supreme Court Justice Clarence Thomas is under fire from Democrats and liberal advocacy groups who contend that he may have violated the Ethics in Government Act by failing to disclose the sources of income for his wife Virginia Thomas. Places like the Heritage Foundation, which has been a vocal opponent of the Obama health care reform law, were paying Virginia Thomas large amounts of money during the years that her husband reported she had no income. (The health care law, of course, is likely to come before the Supreme Court in the next year.)

Initially, the liberal watchdog group Common Cause estimated that Virginia Thomas had made about $700,000 in the years her husband was claiming she made nothing. But the group has recently come up with new figures showing Virginia Thomas actually earned around $1.6 million—more than twice as much as the original estimate. That's a decent chunk of change the Thomas family was earning from a party with an interest in what could be one of the court's biggest cases in years.

Thomas has amended his disclosure forms to correct the omissions and has claimed that he misunderstood how to fill out the forms. But Common Cause noticed that Thomas had actually filled the forms out properly for many years before he suddenly stopped recording his wife's employers. "There is now more than enough evidence to merit a formal inquiry as to whether Justice Thomas willfully failed to make legally required disclosures, perhaps for as long as 13 years," Common Cause president Bob Edgar said in a statement. "Given that we now know he correctly completed the reports in prior years, it's hardly plausible—indeed it's close to unbelievable—that Justice Thomas did not understand the instructions."

Common Cause provides a breakdown of the missing income here: Courtesy Common CauseCourtesy Common Cause

Obama: Still Letting Child Soldiers Be Soldiers

| Wed Oct. 5, 2011 1:00 PM EDT
Former child soldiers in the Congo.

Late last year, the Obama administration quietly waived restrictions on military aid to Chad, Yemen, Sudan, and the Democratic Republic of Congo (DRC)—four countries with records of actively recruiting child soldiers. Those restrictions were a key part of 2008's Child Soldiers Prevention Act (CSPA)—a law that was co-sponsored by then-Senator Obama—which requires that such assistance be yanked for countries that recruit soldiers under the age of 15.

The waivers angered human rights advocates, who were blindsided by the announcement. So the White House promptly deployed Samantha Power, the National Security Council's human rights czar, to smooth things over via conference call. The Obama administration's argument: The four offending countries hadn't had time to comply with the law. Power also explained that the waivers would only be in effect for one year. "Our judgment was to brand them, name them, shame them, and then try to leverage assistance in a fashion to make this work," Power said.