When the gods dance...

Sunday, March 31, 2013

China’s Shadow Bankers and the Vampire Squid

Hard Landing in China? It's Just a Matter of Time

“China is displaying the same three symptoms that Japan, the U.S. and parts of Europe all showed before suffering financial crises: a rapid build-up of leverage, elevated property prices and a decline in potential growth.”
– Zhiwei Zhang,  Nomura economist
An uptick in manufacturing activity in March has eased fears of a hard landing, but China is not out of the woods yet, not by a long-shot.   The industrial powerhouse has succumbed to the same problems as its trading partners in the West who were thrust into crisis by soaring real estate prices, reckless credit expansion, and an out-of-control shadow banking system. While government-directed infrastructure programs have helped to keep the Chinese economy chugging along at an impressive 7.5%,  a growing number of experts believe that China’s day of reckoning may not be far off. Here’s an excerpt from an article in Emerging Markets:
“Worries that China’s economy will slow down more abruptly than forecast have returned on the agenda, a fund managers survey shows.  The survey, by BofA Merrill Lynch Global Research, showed that expectations for growth in the Chinese economy dropped sharply to 14% of participants from 60% in a previous poll. This is the lowest level since October last year and represents one of the biggest monthly falls in the reading in the survey’s history….
The analysts said that the “significantly increased” fears of a hard landing in China are reflected in investors’ moves out of stocks in emerging markets and into those of developed ones, especially the US and Japan…..” (“China hard landing fears resurface in survey”, Emerging Markets)
While exports remain the source of China’s strength, 20 to 30 percent of GDP derives from domestic real estate development much of which is financed by exotic wealth-management products that are subject to neither regulation nor disclosure.  According to 60 Minutes news magazine, China’s credit explosion has “created the largest housing bubble in history” which is “the main driver of growth.” (“China’s real estate bubble”, 60 Minutes)  Due to the unreliability of the data, it’s hard for analysts to predict when the bubble will burst, but in a recent interview with Reuters,  Gillem Tulloch, founder and managing director of Forensic Asia, had this to say:
“I’ve never come across a government that’s managed to deflate a bubble gradually. What will likely happen is that confidence will suddenly go, and, yes, the bubble will pop. We think the bubble will pop in the second half of the year once they stop injecting ridiculous amounts of credit into the economy.” (“China housing bubble will pop in second half of 2013: Forensic Asia”, Reuters Staff)
Analysts are particularly worried about  China’s shadow banking system which Credit Suisse economist, Tao Dong,  calls “a time bomb.”  Here’s a brief rundown from the financial newsletter called The Asset:
“The bank estimates trust funds, wealth management products, and other components of the (shadow banking) sector to have grown to nearly…US$3.7 trillion or 44% of the nation’s GDP at the end of 2012….Non-loan credit now comprises one-third of total credit outstanding in the financial sector, up from 15% in 2006….
According to Tao, many products offered to retail investors in China increasingly look like collateralized debt obligations (CDOs) sold in the US before the financial crisis.
“These products have little transparency and a complicated structure, seem tied to higher-risk underlying investments, are lacking a regulatory framework, and are vulnerable to tail risks,” he analyses. (“Shadow banking casts gloom on China rebound”, The Asset)
Sound familiar? China’s shadow bankers have adopted the same flawed model as Wall Street. Leverage is building in dodgy debt instruments that have little or no capital supporting them and that are not subject to regulatory oversight. It’s a prescription for disaster. Even a modest slowdown in expansion, could lead to a credit crunch that could send the dominoes tumbling and push GDP below the 6 percent threshold.
China’s growing middle class has boosted its investment in wealth-management products (WMPs) which offer a higher yield than bank deposits. But investors are unaware of how risky these products are. A significant amount of the money has been loaned to builders and developers who will never be able to repay the debt. Analysts fear that any tightening of monetary policy will trigger a series of defaults and bankruptcies that will ripple through the financial system leading to a contraction.  Here’s an except from a post by China expert, Michael Pettis:
 ”It is difficult to measure the precise amount and value of WMPs….. According to a report by CN Benefit, a Chinese wealth-management consultancy, sales of WMPs soared 43 percent in the first half of 2012 to 12.14 trillion yuan ($1.9 trillion).

There are more than 20,000 WMPs in circulation, a dramatic increase from only a few hundred just five years ago. Given that the number is so big and hard to manage, China’s shadow banking sector has become a potential source of systemic financial risk over the next few years.

Particularly worrisome is the quality and transparency of WMPs. Many assets underlying the products are dependent on some empty real estate property or long-term infrastructure, and are sometimes even linked to high-risk projects, which may find it impossible to generate sufficient cash flow to meet repayment obligations.”  (“Michael Pettis on China Reforms, Ponzi Schemes in Wealth Management Programs, Rebalancing Implications“,globaleconomicanalysis.blogspot.com
Chinese policymakers appear to be eager to follow Wall Street off the cliff using the same methods for boosting leverage through securitization, hypothecation, and derivatives.  An article in the Wall Street Journal sheds a little light on recent developments:
“In November, Bank of China became the first Chinese lender to participate in the sale of U.S. commercial-mortgage-backed securities, known as CMBS….Investors are moving into riskier investments that offer higher yields, as the Federal Reserve’s near-zero interest rates hold down returns on the safest debt, including Treasurys….
The latest securitization foray by Bank of China involved teaming up with Goldman Sachs Group Inc. GS -0.56% and Deutsche BankDBK.XE -3.20% on a $900 million loan on a 1.7 million-square-foot office and retail property in Manhattan’s Times Square.”  (“China Bank Securitizing U.S. Loans”, Wall Street Journal)
So the Bank of China is in bed with “The Vampire Squid”?
Indeed, and it’s worse than it looks.  Wealthy elites rule the country like their personal fiefdom while touting the same neoliberal nostrums as their mentors in Washington and downtown Manhattan.  The “free market” is the new god, while austerity, “reforms”, and privatization are the corollaries of the new state religion. Here’s an excerpt from an article titled “China’s new premier to enforce “painful’ market restructuring”:
 ”China’s newly installed premier, Li Keqiang, emphasized in his first press conference on Sunday that the government is preparing sweeping “free market” economic restructuring measures, including privatization of state assets and deregulation of the banking and finance sector….
….. During the press conference, broadcast live on Chinese state television, the new premier mentioned “reform” two dozen times to emphasize the forceful character of his policy. “The reform is about curbing government power; it is a self-imposed revolution,” he declared. “It will require real sacrifice and this will be painful and even feel like cutting one’s wrist”.
Li added: “We need to leave to the market and society what they can do well… All wealth creators, either state-owned or private, should be duly rewarded for having honestly competed on a level playing field.” The premier admitted that the government was heading into “unchartered waters”, warning: “We may also have to confront some protracted problems. This is because we will have to shake up vested interests… Sometimes stirring vested interests can be more difficult than stirring the soul. No matter how deep the water is, we’ll wade into it because we have no alternative.” (“China’s new premier to enforce “painful” market restructuring”, World Socialist Web Site)
It’s all there in one speech, praise for the glorious free market, support for harsh austerity measures and privatization, even Margaret Thatcher’s infamous TINA (“There Is No Alternative, to slash and burn capitalism) The astonishing rise of Li Keqiang suggests that China is eager to be  “integrated” into the US-dominated global system, a system that lavishly rewards its managers at the top while working people face reduced social services, belt-tightening and ever-increasing financial crises.
While upbeat economic data has eased jitters about a hard landing in China, the underlying problems remain the same. Eventually China’s property bubble will burst,  investors in sketchy wealth management products will face heavy losses, defaults and bankruptcies will soar,  and the economy will slip into recession. China’s financial crisis is coming; it’s just a matter of when?
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

The Coming Crash: Our Addiction to Endless Growth on a Finite Planet

Richard Heinberg talks about the new book "Energy: Overdevelopment and the Delusion of Endless Growth," a haunting look at our current energy path.
This article was published in partnership with GlobalPossibilities.org.
If you want to understand how much energy costs, don't look at your electric bill; instead get a copy of the new book Energy: Overdevelopment and the Delusion of Endless Growth. This massive coffeetable book contains hundreds of arresting images showing the effects of our energy choices, including oil spills, nuclear accidents, massive solar arrays, tar sands mines, fracking operations, transmission lines, and more. The photos are complemented by essays from leading writers like Wes Jackson, Wendell Berry, Sandra Steingraber, Douglas Tompkins, Bill McKibben, Lester Brown and many others, which put into context our growing energy problems and what we can do about them.
The book is a collaboration of great minds, including editors Tom Butler and George Wuerthner and contributing author Richard Heinberg. It's also a partnership between the Post Carbon Institute and the Foundation for Deep Ecology, copublished by PCI and Watershed Media.
While the book delves greatly into different energy sources and their limitations, the heart of the book is really not so much about what kinds of energy we use but how much. To get a clearer understanding of this AlterNet spoke with contributing writer Richard Heinberg, a senior fellow at PCI and the author of numerous books including The End of Growth: Adapting to our New Economic Reality (June 2011), Blackout: Coal, Climate, and the Last Energy Crisis (2009) and Peak Everything: Waking Up to the Century of Declines(2007).
Tara Lohan: How did this book project come about? I know it started out as a book about tar sands, but then it evolved into so much more.
Richard Heinberg: The economy is all about energy. Almost all of our environmental issues relate to energy in one way or another. Certainly, climate change does. War and peace, it's all about energy. Upping the energy literacy of the American people and thought leaders is a pretty high priority.
TL: Explain a little bit more what you mean by energy literacy, because I know you talk about that in the book as well.
RH: Well, surprisingly few people have really looked at or thought about or studied what energy is. It's in all of our lives. We all depend on it for everything we do, but energy is pretty allusive. You can't hold a jar of pure energy in your hands. Useful energy comes to us in various forms. All of these different forms of energy, whether it's coal, oil, natural gas, wind, hydropower, nuclear, each has its own characteristics. Environmental characteristics. Economic characteristics. It takes a while to sort of wrap your head around all of that, and there are some basic concepts like the laws of thermodynamics. The ideas of energy density and return on energy investment that are absolutely fundamental to evaluating different forms and sources of energy.
Again, not too many people have really studied or given much thought to these. Well, over the course of the next few years, we're going to be making absolutely critical decisions about our energy future, our environmental future and our economic future. Unless we have these basic elements of energy literacy, unless more of us understand the criteria by which to evaluate these different sources of energy, we're going to get a lot of things wrong. We think energy literacy is really important.
TL: Right, it's not as easy as just replacing all the coal and oil with solar and wind, because they differ in terms of the energy returned on energy invested.
RH: There's actually a good article on that in the current issue of Scientific American that has some neat infographics. This becomes a real issue in energy sources that have very low returns like biofuels and also unconventional fossil fuels like tar sands and shale gas and tight oil. These sources of energy can be profitable in certain situations, especially if there are government subsidies or if Wall Street gets interested and attracts a lot of investment capital, but these are energy sources that are not going to be able to support an industrial society absent other sources of energy that have a higher return on investment.
If all we had to power society were tar sands, biofuels, shale gas and tight oil, society would basically come apart at the seams because we'd be having to put so much of our effort into producing energy that we wouldn't have much energy left over at the end of the day to do all the things we need energy for like education, healthcare, transportation, trade. All of those things use energy. They don't produce energy. We need a very substantial energy surplus from the energy that we do invest in getting more energy. These sources just aren't up to the job.
TL: It seems like there's an increasing industrialization in order to get there, too. I'm thinking about what the footprint looks like for a conventional natural gas well as opposed to a well that's being fracked.
RH: Right. It's a lower quality resource. The shale gas is produced from rocks with very low porosity. The gas just doesn't want to migrate to the wellbore. That's why they have to apply technologies like hydrofracturing and horizontal drilling. That increases the contact between the wellbore and the resource, but at the end of the day, we may have changed technology, but we haven't changed the rocks themselves. What we get are very high decline rates. If you drill a shale gas well on January 1st, by December 31st of the same year, the rate of production of that well may already have fallen by 70 percent or 80 percent.
That means we have to drill and drill and drill in order to keep overall production rates flat or increasing. That means thousands, tens of thousands, even ultimately perhaps hundreds of thousands of wells. This is costly, of course, but it's also extremely environmentally risky. If we were only drilling a few wells, there would only be a few water tables to put at risk of pollution and probably only a few accidents. But if, let's say, 6 percent or 7 percent of well casings end up being faulty, which is according to research, a pretty fair estimate, we're talking about thousands of wells that are going to be leaking methane and other chemicals and toxics into water and air.
Unless this is understood, people really don't have a basis for making good decisions.


March 27, 2013 |  
Selected photos from  Energy: Overdevelopment and the Delusion of Endless Growthedited by Tom Butler and George Wuerthner. 
COMMENT NOW!See all slideshows


TL: Unfortunately, most of the conversation seems to revolve around the economic benefits and the amount of job creation.
RH: Right and highly misleading information is being spread to the media and the American people. The companies that are engaged in fracking have a lot at stake. The price of their shares, the availability of investment capital and so they tend to overestimate future production fairly dramatically. We've done some independent research based on crunching numbers from about 65,000 oil and gas wells in the U.S. The result of that research is we see a peak and decline in shale gas production in the U.S. well before 2020. On one hand, you have the industry saying we have 100 years and in some cases they even say we have 200 years of cheap natural gas in front of us. The reality is production is probably going to start declining within the next very few years.
Again, when policy makers only listen to the voice of the industry, they get highly skewed information and make bad decisions.
TL: Is that looking at the production of what we're doing right now? Or does that include projections for areas we haven't hit yet, like parts of the Marcellus shale?
RH: The Marcellus, yes, has yet to be drilled out fully, but there are other shale gas plays that are already pretty much fully drilled out and already in decline, such as the Barnett in Texas.
TL: You wrote that our population is seven times larger now than it was before the Industrial Revolution, but even more troubling is that we use 30 times more energy. To me, that gets to the heart of what the problem is. It's not just the kinds of energy we're using, but how much we're using.
RH: Exactly. Using more energy gives us a lot of power as a species. We've developed the ability to extract and transform all sorts of other resources, including minerals and metals. We've increased our speed and scope of transport and trade, all because we've had cheap, concentrated, portable energy sources, primarily fossil fuels. We just have to figure out how to get more and more energy all the time and progress can go on indefinitely. The reality is we live on a finite planet.
Energy production has costs and tradeoffs. We won't be able to continue increasing the rate of extraction of fossil fuels much longer. Other sources of energy are in some ways seemingly, if not infinite, at least very, very large -- like the amount of sunlight striking the earth on an average day is virtually infinite in comparison with the amount of energy that we use. Our means of capturing sunlight and wind and other renewable sources of energy are themselves dependent upon other finite resources. You have to build wind turbines out of something. You would have to use minerals and metals to make solar panels.
At the end of the day, we have to somehow make peace with the fact that the earth is not just a giant cookie jar that is going to give us everything we want. We have to moderate our demand for energy and everything else so that it's commensurate with Earth's ability to supply our wants and needs. Now, currently our energy consumption is vast in comparison with our energy consumption at any previous time in history. Also, it's extremely uneven. Americans use twice as much energy as people in Europe per capita, and 10 or 100 times as much as people in less industrialized countries.
First of all we're going to have to find ways of bringing energy consumption up somewhat in those countries where people are poorest, but in the wealthiest countries, it's extremely unlikely that we'll be able to grow energy production and it's in fact very likely that available energy is going to decline. We need to learn how to live with less energy, and that doesn't require so much inventing a lot of new gadgets as getting back to reality, getting back to normal. Accepting a lifestyle of less mobility and finding ways to use the energy that we do use in the most efficient way as possible.
TL: We talk about using less energy, having less economic growth -- what does that look like on a long-term scale? I mean, most people would associate less economic growth with recessions and depressions, which usually aren't very popular. How do we get people to move in that direction, not just individually, but as a society?
RH: Well, less economic growth translates to recession and depression in highly financialized economies, such as we have today where the economy booms and busts on a regular basis due to fads and manias in the financial industry. It wasn't always quite this way. Prior to the last 100 years or so, we really didn't anticipate constant economic growth. It just wasn't a feature of anyone's thinking. It's really only the last few decades when we've had such cheap energy that economists have gotten the idea that somehow economic growth is normal, and if it's not happening, there's something terribly wrong. We need to essentially get back to normal, and normal is a non-growing economy. A steady-state economy in which we pursue goals of human well-being, rather than goals of pure financial speculative enrichment.
There are a number of economists who have been talking about this for some time. The idea of a steady-state economy and a getting off of GDP -- of using alternative indicators, like gross national happiness or a genuine progress indicator. If we did that, I think we could have a way of life that is not only satisfying, but also secure and stable over the long term. Unfortunately, I think we sort of boxed ourselves into a corner in the last while by growing the financial industry to such a scale that it's just cutting it down to size. It's going to be a shock to the system.
TL: It makes so much sense to think, of course, we have to conserve more and we have to use less energy, but then I'm picturing what that actually looks like. I'm seeing a growing movement against climate change and forces coming out against the Keystone pipeline. I'm wondering how you translate that kind of public support for something like conservation.
RH: Right. Well, there are people all over the place who already understand the benefits of downsizing, cutting back, becoming more self-sufficient. Those benefits are both economic and also psychological. If we're sharing more with our neighbors, that means we're consuming less. Now, that's bad for the economy because it reduces overall consumption and it shows up as a hit in GDP.
If you're sharing more with your neighbors, you're actually happier. We've gotten ourselves into this bizarre situation where if we do what's actually good for us, which is to become more self-sufficient, to consume less and to share more, we hurt the economy. We have to make a fundamental choice here as to what the economy is for. Is it for growth at all costs? Is it all about consuming more and more until the day we die? Or is it about health and happiness and a sense of community?
TL: I remember a few years ago everyone talking about, "Oh, we're running out of fossil fuels, and this is going to be catastrophic unless we make a change." But now it seems like, "Well, yeah maybe we're hitting a peak at some point, but we have more than enough to do ourselves in."
How do we get companies to start leaving these fossil fuels in the ground?
RH: Well, I think what's going on with the Keystone XL pipeline is indicative of the pushback that is coming increasingly from citizens. There's a rapidly growing awareness that climate change is not a theoretical problem that we may have to deal with in a generation or two. It's a profound challenge to the very existence of civilization. If we don't do something about climate change, then future generations, if they even exist, will look back upon us with little kindness.
With that growing awareness, there's this pervasive sense that this is the issue of our times. Either we get off of fossil fuels as rapidly as we can or we may not have a future. The fossil fuel industry is made up of human beings, and they're engaged in work that seems to benefit society in so many tangible ways. It supports the economy. It provides the fuel for our cars and trucks. These aren't evil people, but it's an industry that has outlived its real usefulness to society. As a society, we have to find a polite way to say thank you, but no more.
TL: It's hard considering the strength of the lobby that they seem to have.
RH: Right. I know. There are some I know in the environmental movement who believe that it's necessary to demonize the industry. Frankly, it's an entirely understandable stance because the industry has invested large amounts of money in astroturf organizations and front groups to deny the existence of climate change or to fight off the idea of peak oil. There's a natural adversarial situation there, but in the end we are all in this together, and the CEO of Exxon's grandchildren are going to suffer just as much under climate change as anyone else.
TL: You guys do a fantastic job of pointing at how destructive so many different kinds of fossil fuels are, including things that probably a lot of people don't know about, like oil sands and tar sands and gas hydrates. You also don't give a free pass to renewables either or a lot of the things many of us consider clean energy sources. In that category of things, which do you think look like places that we should be focusing our attention and our resources?
RH: There are certain renewables like biofuels that just haven't made the cut because of the low energy return, because it really doesn't make sense to turn food into fuel for cars. Biofuels are essentially a failure. That's not so much true with wind and solar. The energy return is relatively low compared to fossil fuels, especially in the past, but it's good enough to enable us to maintain an industrial society of some sort into the future. As technology advances, we may be able to get better energy returns. I don't know. We'll see. But these are certainly worth pursuing.
Now the question is, on what scale and in what way? If we develop renewables with the same kind of centralized industrial model that we have with coal and other fossil fuels, then we end up with unacceptable tradeoffs. We end up paving over deserts with solar arrays. We end up destroying natural scenery with wind farms. When what we could do is deploy renewables in a decentralized and distributed way that would preserve environments and maintain more citizen control of the power system.
Now if we do that, of course, we are going to have to accept a future of less energy, but we argue that that's a tradeoff that's worth making. We will have less energy in either case, but if we choose voluntarily to go down that path and opt for a distributed energy future, we have both more control and a cleaner environment.
TL: In all the research you've done for this book and the many previous books that you've written, what is it that scares you the most?
RH: First of all, just the speed with which climate change is happening, I think, has got to be the scariest thing. I mean, even just a few years ago we weren't anticipating the total loss of the polar ice cap in summer months so soon. It may be ice-free by 2015. The implications of that are so vast. I don't think anybody has really been able to process them.
The environmental impacts of producing lower-grade fossil fuels. As we deplete the higher-grade fossil fuels, the conventional oil and gas and the high concentrations of coal, energy prices go up. As the price of oil goes up, for example, then it becomes cost-effective to mine tar sands or to frack North Dakota.
The environmental consequences and risks are staggeringly high. It's turning neighbor against neighbor, community against community. As some win big by selling the drilling rights to their property and others lose by having their water and air contaminated, it's a pretty grim situation. We've seen boom towns before all through history and particularly in the early 20th century. There were lots of oil boom towns in the American South and Southwest, and those are ghost towns today. I think we're going to see the same process work its way out in very short order and some places that seem to be benefitting so much from drilling and mining right now are going to be pretty sad places in just a few years.
TL: What is it that gives you hope?
RH: What gives me hope is things like the transition town movement where people are coming together and finding ways to cooperate, to reduce their energy consumption, whether it's with local food or car share programs. Not waiting for government to tell them what to do or to pass legislation to make it easier to do what we need to do which is use less. There are small organizations all over the country that have risen up in response to fracking and pipeline issues. These are very often people who would never have thought of themselves as being environmentalists.
They're maybe responding to problems with their drinking water or air quality or hundreds of trucks rumbling past on their way to the drill pads, and they suddenly find themselves in harm's way and they decided to fight. I think that's a very positive thing.
People are waking up and rising up and doing hard things because they realize that everything is at stake. It's really the most important moment in all of human history; if we consciously and deliberately move away from our dependence on fossil fuels, we have the opportunity of reinventing civilization. If we don't, civilization probably won't survive.
Tara Lohan is a senior editor at AlterNet and editor of the new book Water Matters: Why We Need to Act Now to Save Our Most Critical Resource. You can follow her on Twitter 

When Google lost its cool

Google Reader is gone. Google is banning ad-blocking apps. Google Alert doesn't work. The Google backlash is on

When Google lost its cool
Google co-founder Sergey Brin (Credit: AP/Eric Risberg/Salon)
A strange thing happened on Twitter in the middle of March. “Why I Left Google,” a year-old post by a former Google executive named James Whittaker, went viral, for the second time.
A fairly scathing denunciation of how Google’s corporate culture had changed for the worse, Whittaker’s post got a reasonable amount of notice when it was first published. But this time around, the buzz was louder.
Exactly how the screed was born anew is anyone’s guess. The precise mechanics of viral transmission are an enduring mystery. Maybe someone was randomly trolling  the Web, stumbled across Whittaker’s lament, didn’t notice the date was March 13, 2012, instead of March 13, 2013, tweeted it, and hit a nerve. Or perhaps one of Google’s competitors saw an opening, and struck a clever blow of Twitter meme warfare.
The point is that there was an opening, a raw nerve aching to be hit. That same week, Google had announced that it was killing off Google Reader, probably the most widely used newsreader on the Web, beloved by exactly the kind of power users you might expect to boast legions of Twitter followers. These power users were annoyed and distressed at the imminent disappearance of a service that they depended on. They wanted an explanation. It’s possible that many of them, encountering Whittaker’s post for the first time, found something substantive to chew on in his argument that Google had sacrificed its innovative “don’t be evil” soul in the quest to maximize advertising revenue.
The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus.
Cue the Google backlash.
Om Malik in GigaOm:
I spent about seven years of my online life on that service. I sent feedback, used it to annotate information and they killed it like a butcher slaughters a chicken. No conversation — dead. The service that drives more traffic than Google+ was sacrificed because it didn’t meet some vague corporate goals; users — many of them life long — be damned.
Thomas Claburn in Information Week.
Trust might be earned and it might be paid for. But whatever trust Google earned in its youth, it has squandered in its adolescence.
* * *
Google is so big, so entrenched in so many aspects of our online lives, and so relentlessly active that in any given week the company makes news on multiple fronts, good and bad. It can be difficult to parse signal from noise amid all the deluge of simultaneous hype and complaints. When I told Google I was writing a story about a possible backlash, I was immediately sent a list of a half-dozen positive stories about the company that had appeared in just the last few weeks.
But in the two weeks after the announcement of Google Reader, a handful of other developments gave Google grouches even more grist to grumble. The same week that Whittaker’s post was retweeted around the world for a second time, Google banned the advertising blocking app AdBlock Plus from its Google Play app store. A few days later, SearchEngineLand’s Danny Sullivan observed that Google Alerts, a popular service that generates daily email reports on any keywords that you choose to monitor, had been effectively broken for months. And just this week, Twitter erupted with scorn at the news that Google’s legal department had objected to a Swedish effort to formalize the definitionof the Swedish word for “ungoogleable” (ogooglebar) as “that cannot be found on the Web with a search engine.” (Google, in an effort to protect its trademark, wanted the definition to specify that the word meant “cannot be found on the Web with Google and requested the inclusion of a disclaimer noting that “Google” is a registered trademark.)
There may be valid reasons for every single one of these developments. AdBlock Plus undoubtedly interferes with Google’s future lifeblood of mobile advertising revenue. Google Alerts, like Google Reader, may not generate enough revenue to merit the kind of engineering resources that keeps it functional. And if I’ve heard it once in the context of ludicrous trademark infringement cases, I’ve heard it a million times: If you don’t defend your trademarks, you endanger your legal right to keep them. (Though it still seems like a dumb, ham-handed move.)
But whatever the reasons, there’s one thing that links them all together. They’re just notcool. They betray a my-way-or-the-highway operating stance that is bound to raise hackles. It’s no wonder the trade press and power user crowd that once applauded Google for breaking Microsoft’s hegemony over the technology realm and for providing an “open” alternative to Apple’s closed system is now increasingly suspicious and critical and ready to pounce. When Google debuted a new note-taking service called Google Keep one week ago, nearly every reviewer, from the New York Times on down, was careful to warn that, given the recent example of Google Reader’s unceremonious dismissal, there was no guarantee that Google would keep Keep around.
Let’s return to Whittaker:
Under [former CEO] Eric Schmidt ads were always in the background. Google was run like an innovation factory, empowering employees to be entrepreneurial through founders’ awards, peer bonuses and 20 percent time. Our advertising revenue gave us the headroom to think, innovate and create …
It turns out that there was one place where the Google innovation machine faltered and that one place mattered a lot: competing with Facebook…. Larry Page himself assumed command to right this wrong. Social became state-owned, a corporate mandate called Google+. It was an ominous name invoking the feeling that Google alone wasn’t enough. Search had to be social. Android had to be social. YouTube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction.
Suddenly, 20 percent meant half-assed. Google Labs was shut down. App Engine fees were raised. APIs that had been free for years were deprecated or provided for a fee. As the trappings of entrepreneurship were dismantled, derisive talk of the “old Google” and its feeble attempts at competing with Facebook surfaced to justify a “new Google” that promised “more wood behind fewer arrows.”
The days of old Google hiring smart people and empowering them to invent the future was gone. The new Google knew beyond doubt what the future should look like. Employees had gotten it wrong and corporate intervention would set it right again.
Whittaker now works at Microsoft. Reading between the lines, one wonders whether the corporate transition from Schmidt to Page led to some kind of power struggle that didn’t work out for Whittaker, pushing him to leave some serious scorched earth behind as he left town. It’s also interesting to speculate on whether the ascendance of Page is the explanation for the new, harder-nosed Google.
It’s also important not to overreact to the momentary, viral-blog-post-buffeted moods of Twitter. As I was writing this piece, I saw a news release noting that the two most popular app downloads for Apple’s mobile devices in 2013 were Google Maps and YouTube. To a certain extent, the people have spoken. As long as they keep speaking in favor of Google’s tools, Google will be just fine.
But in a fickle information economy in which giants become dwarves overnight, balancing one’s reputation for cool with one’s bottom line is trickier than ever. A growing accumulation of incidents that rub users the wrong way creates a climate of dissatisfaction that amplifies our reactions to new abuses. A year ago, maybe we laughed off the “ogooglebar” kerfuffle, ignored Whittaker’s post, and dreamed of wearing Google glasses. Now we poke mean fun at overzealous lawyers, see bean-counting corporate realignment behind every new product launch, and savage Google Glass wearers as irredeemable dorks. Perhaps most troublingly, the benefit of the doubt is gone.We’re way beyond mocking “don’t be evil.” Now our default position toward Google increasingly resembles how we treated Microsoft in the ’90s. Google is indispensable, certainly, but not necessarily to be trusted.
In his prescient 2011 book “The Googlization of Everything (And Why We Should Worry),” Siva Vaidhyanathan opened his preface by observing that “it’s no surprise that we hold the company in deific awe and respect.” He then proceeded to spend the entire rest of the book explaining why it was dangerous to allow one company to play such an overwhelmingly dominant role in our informational lives. March 2013 has been the month that Siva’s chickens came home to roost. Suddenly “deific awe and respect” seems in short supply. Ungoogleable, almost.
Andrew Leonard
Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

Saturday, March 30, 2013

New Banksy ‘Stations Of The Cross’ mural appears for Easter

March 29, 2013 at 11:43 am in Lifestyle
By StaffArtlyst
A new Banksy located in the London Bridge area has ‘likely’ been unveiled for Easter. Already nicknamed, ‘The Stations of the Cross’ the mural shows Christ carrying the cross while police taser him and the paparazzi photograph him, in his suffering. This work of art definitely shares the hallmarks of a genuine Banksy.

The stations of the cross is a series of artistic representations, often sculptural, depicting Christ carrying the cross to his crucifixion in the final hours (or Passion) of Jesus before he died. The devotions using that series to commemorate the Passion, often moves physically around a set of stations. The vast majority of Roman Catholic churches now contain such a series, typically placed at intervals along the side walls of the nave; in most churches these are small plaques with reliefs or paintings. The tradition as chapel devotion began with St. Francis of Assisi and extended throughout the Roman Catholic Church in the medieval period. It may be done at any time, but is most commonly done during the Season of Lent, especially on Good Friday and on Friday evenings during Lent.

This mural both stylistically and in terms of content displays all of the characteristics of the master. It first appeared on Twitter late this afternoon. No location has been pinpointed and it hasn’t yet appeared on the Banksy website. Happy Easter!

Read more from Artlyst by clicking here.

Your iPhone kills jobs


Smartphone apps have created a new digital underclass of low-paid and highly monitored workers. We're all to blame


Your iPhone kills jobs

Joseph Gordon-Levitt as a bike messenger in "Premium Rush." (Credit: Columbia Pictures)

This is the sixth and final installment in a new series called Working Ahead, which will examine key issues facing the modern American worker, and how we can use our everyday spending habits to help save and create good jobs. The series is brought to you by the AFL-CIO. To read the other stories in this series, click here.

Today, workers trying to eat cheap at lunch order dollar pizza slices. But a few decades ago, they might have dined at an automat —  cafeterias with rows of coin-operated food displays between the dining room and kitchen. Meals were cheap, usually a nickel.

The customers saved, but the workers paid. Behind the glass, cooks and dishwashers often had to work 12-hour shifts at below average wages. Tensions simmered until 1937, when several shops representing anywhere between 500 and more than 1,000 workers lined up behind the AFL-CIO and won a unionization vote.

The automat workers faced a lot of the same challenges as other service workers at the time, but with one major spin: total invisibility. Without a front-of-house, the automat workers became unsympathetic toilers, not unlike the wretched underclass portrayed in Fritz Lang’s film “Metropolis.”

The modern equivalent of the automat worker is on your smartphone. While there have been many reports on the often miserable working conditions at the Foxconn plant in Shenzhen, China, which manufactures iPhones, it’s easy to see the convenient smartphone apps as labor savers for us. But another layer of the smart technology’s impact on labor has rarely been discussed: the way certain applications have revolutionized domestic labor — especially in the service sector — and how the workers toiling behind the slick interface of a shopping app are not unlike the hidden short-order cook of an automat.

Can’t live with ‘em                   

I know firsthand how rapid the change has been. Before I went to university I worked for a year running food deliveries for a cafe in New York. It was a grueling job, but working in a Brooklyn neighborhood that caters to many sympathetic service employees, the tips were usually pretty high. Three years later, I came back to the same job with an updated résumé that listed “B.A. in Literary Studies” among my qualifications. Much of the staff, the menu and the management was the same. The main difference was the delivery system, a majority of orders now made through Seamless Web or Grubhub.

The job, which I could once recall nostalgically as akin to the friendly neighborhood milkman (instead doling out cheeseburgers and chicken wings), had now become practically bureaucratic. A page would be faxed to the company with the order. Everything was prepaid, including the tip.

The result was much higher volume, so much that a second delivery rider and a dispatcher were hired for each night shift. Another result: Tips were far down. It was much easier for customers to give the recommended $2 tip on any order with Seamless or a flat 10 percent with Grubhub than to give the same low tip in cash when face-to-face with their delivery person.

Having one’s food delivered as opposed to dining in is already one step removed from human contact. From the other end of the phone line, one cannot see the momentary conditions of the restaurant: how busy the floor, how backed up the kitchen, or how close they are to closing. The Seamless and Grubhub apps wipe out the human contact entirely. Ten orders could (and sometimes did) come in at once, and we could not warn the customer of a long wait. If it’s raining heavily, customers will almost never adjust their tips accordingly — seven times out of 10, they stick with the app-recommended $2.

The same principle applies to retail shops. Apps like Snaptell or Redlaser allow users to take photos of bar codes or covers of books, CDs or video games and display reviews and lowest prices. While this practice might not bother major retailers like Barnes and Noble or Best Buy, who have their own massive online stores, smaller shops are finding the practice to be quite predatory.

Troy Swain, co-owner of the New York-based used bookshop Bookthug Nation, has “several people a day” checking prices of books online to see if they can get it cheaper or make a profit reselling them. Some of them scan bar codes using an app. “We kick people out who do that,” he says. “But lots check prices online.”

But with online and app-based shopping, even big box stores like Wal-Mart look like a mom-and-pop in comparison to the vast, sterile warehouses where Amazon’s products are stocked and distributed. In 2011, a report by a paper in Lehigh, Penn., about the working conditions in Amazon’s nearby distribution center found dangerous work conditions caused by high workloads, dangerously high temperatures and mandatory overtime. As most of the employees at the facility were temps, inability to deal with the workload or complaints to management would simply mean dismissal. Similar conditions have recently been reported at an Amazon distribution center in Bad Hersfeld, Germany, where some 10,000 foreign guest workers are strictly disciplined by a private security team that a public television report revealed as a neo-Nazi organization.

Amazon isn’t alone. Disputes over labor conditions have plagued online-oriented businesses such as FreshDirect, WalMart.com and Target, while better working conditions are reported at Zappos.

Compare this to the recent labor situation at the Strand, New York’s iconic used bookstore, which has been unionized since 1976. When management tried to break the union by implementing a two-tier wage system, the workers pressured management into concessions by handing out comics explaining their situation to customers and holding a public action on May Day of last year. The same sort action is much more difficult for an employee of Amazon or FreshDirect. Like the sandwich makers behind the windows of an automat, their work goes largely unseen.

Can’t live without them

Like teenagers who enjoy the social benefits of a mobile phone but rue their parent’s newfound ability to contact them at any time, workers who perform their tasks on-the-go can now be monitored step-by-step by their managers with the help of smartphone applications.

The frustrations of being on the back end of an app is becoming a universal trend in the service industry. I talked to a dog walker named Rod whose job has recently become integrated with smartphone apps.

“A few months ago the company I work for started using an app that requires walkers to scan a QR code each time they enter and leave a client’s apartment. The app basically tracks two things: the duration of the walk (down to the second), and the route. The latter is tracked via your phone’s GPS, and is visible to both the employer and the client.”

The new system has some advantages, such as assurance to the employer and client of not being hustled by employees — and occasionally more time billed per walk. The disadvantages, however, are myriad. Bad reception in buildings, cranky doormen, or faulty keys can set a walker behind on their tightly computerized schedule. Even the dogs are annoyed by this new system, Rod says, “The dog has no idea why I won’t just leave it in peace. An extra five minutes means nothing to a dog, but everything to the app.”

I heard one story of a postal employee who had to scan QR codes to prove he was working the right amount of hours in day. He beat the system by taking photos of the bar codes and scanning those on his smartphone, allowing him to complete tasks at his own rapid pace and then do what he wished with the rest of the day. He was fired, the story goes, for “theft of time.”

For commercial drivers, like moving-company driver Joseph Frey, the smartphone, which he had to purchase independently, had become a costly but necessary expense. The GPS was indispensable enough, but Joseph recounts how being “the guy with the smartphone” actually extended his hours throughout the night. “I was required to edit the schedule all day on my new work phone. I fielded a lot of calls, late night, like 11 and 12 o’clock, waking me up, from guys who didn’t have the Internet and needed their schedule for the next day.”

Another trend in the new smart-workforce are micro-tasking apps likeTaskRabbit, GigWalk or NeighborFavor. Users are able to request a variety of odd jobs and errands that can be assigned to a database of mobile workers with flexible schedules.

A short-lived employee of the household cleaning-centered micro-task app called I Am Exec, who wished to remain anonymous, describes how the smartphone became like a boss in her pocket. “Part of the application process involves watching their ‘training videos’ online where they talk about the different apps you’ll use. One is the app they use to have you check in and out of a job. Each morning they email you who you’re paired with for the day for cleaning, where you’re working, and when your breaks are scheduled.”

The length of cleaning tasks were set over the phone, and if that task ended up taking more time than requested it could be difficult to get extra compensation.  Her entire time at the company, she never met a manager. This was a privilege apparently reserved for employees who move on “to the next phase.”

Even payment was made through an app called Dwolla. Unlike other cleaning agencies, I Am Exec’s employees are trained to refuse tips.

One of the more popular new micro-tasking companies is  eBay’s new Same-Day P2P service, which actually issues a smartphone to new employees. The workers are paid an hourly flat rate as long as they accept a certain number of jobs per week. The phones monitor their location; they need to stay in delivery range and in Manhattan. When a job becomes available, it pops up like a text message. Most of the time, says eBay P2P employee Samuel Littlefield, is spent bumming around and waiting for a gig, often browsing the Internet on his company-issued smartphone.

All in all, he says it’s “like any service industry job. You paste on a plastic smile and do your work as efficiently as possible.”

This type of job is appealing to the same types as freelance writers and graphic designers — young students or recent college grads who either have unpaid jobs as interns or are unemployed, and spend their days bumming around coffee shops trying to figure out where their rent will come from. A recent study by Mohamed Musthag and Deepak Ganesan at the University of Massachusetts  found that the vast majority of micro-taskers — up to 75 percent — are in this age group. These are also the highest-performing micro-taskers, super-agentsas Mushtag and Gensan call them, clever at minimizing transportation costs and content with a temporary low-income job and no benefits.

Another important skill these youths do have is tech-savviness. They are much quicker at adapting to new technology than previous generations, and often already have a smart device in order to socialize. In this sense, many young smart-workers may enjoy the convenience and flexible hours of working via smartphone. After all, being offered a moving job at 10:45 a.m. isn’t so different than being texted by a romantic interest saying, “What are you up to?” at 10:45 p.m.. In this sense, the new buzzword FOMO (Fear of Missing Out) refers to partying and employment equally.

Welcoming our new robot overlords?

How can smart-laborers and micro-taskers fight for better working conditions in these rapidly evolving and precarious conditions? Some have suggested Web-oriented protests, like the digital sit-ins to protest tuition hikes in California, or the digital picket line against Huffington Post called by the National Writer’s Guild. While these actions had some, if limited effect, they are nothing compared to the solidarity and obtrusiveness of a physical picket line, something that is not only practically illegal in many places in the United States but now impossible as well for many types of service workers.

The best hope would be a change in the mediums of exchange themselves, something that would take expanded labor consciousness on the part of smartphone shoppers.

Chris Anderson’s popular take on the long-tail theory offers perhaps the best hope for an ethical way forward. Consumers are preferring smaller-batch products from online shops like Etsy or local merchants. North Brooklyn has experienced a boom in artisanal restaurants, craft-beer shops, bakeries and the like.

Some of these locales, such as the collectively run Norbert’s pizza in Bushwick, can appear virtually empty for much of the day, but their Web presence makes them profitable by virtue of deliveries alone. With accessibility to a wider variety of options, consumers often prefer a pizza joint like this, which offers vegan options and a more local flavor than a homogenous giant like the nearby Papa John’s.

Some shopping apps attempt to appeal to this consumer consciousness.Goodguide, for instance, performs a similar function to Snaptell but tells consumers which objects are more ethically produced. Scanning a bottle of Badger SPF 25 Sport Sunscreen, for instance, will give you an overall rating of 7.6/10. The lotion gets a 10 rating for health and a 7.2 for environmental impact, but a 5.2 in the social category. The app explains: “The company’s social policies and practices are average.” The social category considers the condition of workers, the transparency of management, and community connections in its rating process.

As new generations of smart tech, such as Google Glass or Ray Kurzweil’s AI “mind” continue to develop, we can only expect service labor to adapt in ways as unforeseen as these technologies’ social impact.

Looking at the larger picture, the future of labor in the first world in general is as uncertain as our perilous economy with its constant crises, crashes and cliffs. With institutionalized organized labor facing rapidly declining numbers since the 1970s, a recent spat of vicious anti-worker legislation, a consumer base that cannot be appealed to in real space, and sometimes not even a flesh-and-blood manager to organize against, tomorrow’s working class will quite literally be left to their own devices.

A.M. Gittlitz is a fiction writer, essayist and bike delivery boy living in Brooklyn, New York. He formerly wrote for Arthur Magazine blog, and a contributer to Death Panel Press and Modulo Magazine.

Low voter turn-out among California youth


New research finds that 78 percent of online registrants actually voted, and only 70 percent of all other registrants voted. Youth made up 26 percent of those who registered online. Still, almost half of people of all ages eligible to vote did not vote in the last election, among the lowest voting rates in the nation, says study author Mindy Romero. (Credit: iStockphoto)

UC DAVIS (US) —More than two-thirds of California’s eligible young adults failed to vote in the 2012 general election, new research shows.

That’s despite a significant increase in 18- to 24-year-olds who registered to vote, especially online. The two million young adults who sat out the election also tended to be from lower-income areas of the state.

In Imperial County, for example, only 17.6 percent of eligible voters in this age group turned out to vote—the lowest youth voting rate of any of California’s 58 counties. The highest rate was reported in Marin County, with 58 percent of eligible youth voting.

“Even with the recent successful implementation of online voter registration, which helped boost both youth registration and turnout during the 2012 election, California’s electoral system is still challenging for many youth to access,” says Mindy Romero, author of the study and project director of the California Civic Engagement Project of the University of California, Davis Center for Regional Change.

“These findings suggest that increasing youth voter registration rates does not alone automatically translate into increased representation for youth at the polls,” Romero says.

“Youth need education and outreach, particularly for those from resource-poor communities, to help them learn about and find relevancy in the act of voting itself.”

More potential voters

In the latest policy brief, researchers looked at voting patterns using the California Secretary of State registration and voting records.

Registration among 18- to 24-year-olds in California in 2012 increased 14 percent statewide compared with the 2008 general election. While the total number of 18- to 24-year-old registrants increased 14 percent over 2008, 2012 youth registered turnout actually decreased 10 percentage points from the 2008 registered turnout of youth.

Details on California voter registration numbers are available in an earlier reportby Romero.

Youth also remain underrepresented among voters when compared with their share of the state’s population. In 2010, younger voters made up 14.2 percent of the general eligible citizen population, but only 8 percent of the 2012 November vote.

Party preference

“We see variation by age in voter turnout by party affiliation that widens significantly for registrants under age 45,” Romero says. She says party turnout of those ages 18-24 was far lower than the rest of the registered electorate, with those in this age group at 56 percent Democratic turnout, 52 percent Republican, and only 43.5 percent who had registered no party preference.

“This lower turnout for NPP registrants is striking considering the high numbers of youth who registered as this affiliation—29.6 percent of all youth registrants identified as no party preference,” she adds.

“If more youth continue to register no party preference over the state’s major parties, additional strategies will need to be utilized to directly address the lower turnout of this large proportion of the youth electorate.”

However, despite their low turnout compared with the general population, younger voters in both the 18-24- and 25-34-year-old groups exhibited higher Democratic turnout compared to Republicans, unlike older voters who lean toward greater Republican turnout.

Online registration

Another policy report released by Romero this week finds that voters who registered online turned out to vote at higher levels than those who registered in traditional ways.

Romero found that 78 percent of online registrants actually voted, and only 70 percent of all other registrants voted. Youth made up 26 percent of those who registered online.

Still, almost half of people of all ages eligible to vote did not vote in the last election, among the lowest voting rates in the nation, Romero says.

Source: UC Davis

Straight from the Source

Read the original study