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Live from under the sea, it's Fabien Cousteau

Tue, 2014-06-17 02:00

For Fabien Cousteau, grandson of famed explorer Jacques Cousteau, under the sea is a pretty comfortable place to be.

No, not like this. Not this, either. 

Marking the 50th Anniversary of his grandfather's 30 day underwater stay at Continental Shelf Station Two, aka Conshelf Two, Cousteau plans to spend 31 days in the Aquarius lab, "the only underwater marine habitat and lab in the world." Called "Mission 31," Cousteau and a team of scientists will explore the effects of climate change, pollution, and the consumption of natural resources.

Also unique to the venture: the team is broadcasting the entire event live. Check out the livestream of Mission 31 below:

Coal's share of global energy is growing

Tue, 2014-06-17 02:00

BP’s annual world energy report is out, and it turns out coal has its largest share of the global energy market since 1970.

Just because coal use is going down in the U.S. doesn’t mean it’s not popular in other parts of the world.

“Coal is still a fairly fast growing fuel globally," says James Stevenson, director of North American coal at IHS Energy, a global research and consulting firm. “We have fairly strong growth in countries like China.”

The use of coal is also expanding in Latin America, parts of the Mediterranean, and Africa, though more slowly. Even Germany is burning more coal, partly because it’s shutting down its nuclear power plants.

Kristoffer Inton, an equity analyst with Morningstar, says coal is easy to come by.

“That’s the main advantage of coal," he says, "that it’s cheap and it’s available.”

And even with the EPA’s newly proposed regulations for carbon, it still expects coal to generate 30 percent of the power in this country. Inton notes, globally, coal is probably one of the easiest ways to get power.

“So what we’re seeing right now is that even though there’s high coal usage in China and growing usage in some other countries, there’s a significant amount of supply out there,” he says.

 

Report says too many teachers-to-be are poor students

Tue, 2014-06-17 02:00

Higher education institutions are training some of the weakest students to lead the nation's classrooms.

That’s one of the conclusions of a new report from the National Council on Teacher Quality. On top of that, the advocacy group says fewer than 10 percent of the teacher training programs it's assessed are doing a stellar job.

One of the criteria the group uses to assess schools is their admissions selectivity.

“The education school is often the easiest program on a campus to get into,” says Kate Walsh, president of The National Council on Teacher Quality. Walsh says three out of four of the teacher prep programs her group examined lack rigorous admissions standards and accept students with lackluster grade point averages or scores on college entrance tests.

Walsh says mediocre students use education as a fall-back major. She wants schools to raise the bar and make teaching a more elite profession.

But Peter Cookson with the American Institutes for Research says another important way to do that would be to raise teachers' pay.

“It's a good salary, but it isn't really competitive in the long-term,” he says.

Cookson says the stakes are high for attracting and retaining good teachers. He says students perform much better with strong instructors.

How the U.S. pays for its involvement in Iraq

Tue, 2014-06-17 02:00

The Obama Administration says 275 troops are deploying to Iraq to protect the U.S. Embassy and other interests. We don’t yet know the full cost of any U.S. action in Iraq, but we can lift the curtain a bit on the economics behind military intervention, and what the Pentagon gets for its half trillion dollar baseline budget.

What’s included and what’s not?

Let’s start with the USS George H.W. Bush. That’s the aircraft carrier that sped to the *Persian Gulf this weekend (other ships are joining too).

Is the Bush covered in the defense budget?

“On any given day, we have about three aircraft carriers floating about the world in order to respond to crises,” says Janine Davidson, senior fellow for defense policy with the Council on Foreign Relations. “That money is already paid for. It’s the operational account for what we would call posturing our military forces abroad.”

Todd Harrison, a senior fellow with the Center for Strategic and Budgetary Assessments, says the U.S. routinely rotates carriers.

“But if you actually take it a step further,” he says, “and you start conducting things like air strikes, then that picks up the pace of operations of the aircraft operating off the aircraft carrier, which is an additional cost. And then you’ve got the cost of munitions that are expended – you know, bombs and missiles and the like.”

But here’s the thing about bombs and Tomahawk missiles: You don’t have to pay for them when you use them. Payment comes later, to replenish them. That provides flexibility.

Mackenzie Eaglen, resident fellow at the American Enterprise Institute, says President Obama would rather fund operations like no-fly zones by moving money around than asking Congress for more.

“That’s what we saw happen in Libya, when there was a multi-month no-fly zone which the US participated in and the Pentagon paid for that out of hide,” she says.

That operation cost about a billion dollars.

Todd Harrison says the costs of intelligence sharing, air support, and limited air strikes are probably small enough for the regular defense budget to absorb. He says the big potential cost for the Department of Defense is troops on the ground.

“So when you start putting in 10,000, 20,000 troops, that’s when DOD would need to request supplemental funding to pay for those operations,” he says.

Those are the kinds of numbers last seen from the US for the wars in Iraq and Afghanistan. So far, the force committed this time around is much, much smaller.

*NOTE: An earlier version of this story used the term Arabian Gulf, which is used by the military, to describe the Persian Gulf.

A rogue Greenpeace trader wreaks havoc

Mon, 2014-06-16 13:52

As we know well, capitalism can be a perilous place.

The environmental group Greenpeace announced Monday that it had lost $5.2 million due, essentially, to a rogue trader.

They had a guy in their finance division who was working currency trades as a way to hedge against other investment fluctuations.

Two things happened:

One, he traded way more money than he was authorized to trade.

And two, he bet the Euro woud fall last year. It didn't.

$5 million is a boatful of money. The group's annual revenues, however, are somewhere near $400 million.

The U.S. Supreme Court deals a blow to Argentina

Mon, 2014-06-16 13:30

After Argentina defaulted on its sovereign debt back in 2001, it took an approach that many at the time described as hard line. It offered investors the choice of 30 percent of their money back, or none of their money back. 

“They stepped on a lot of toes,” says Win Thin, Global head of Emerging Markets strategy for Brown Brothers Harriman.

Though many bondholders were upset, 92 percent agreed to the terms. A small group, primarily hedge funds, did not. 

As Argentina began paying out diminutive returns to the creditors who agreed, the holdouts sued. They argued that as long as Argentina was paying some investors back, it was contractually obliged to pay the holdouts too – and to pay them the full amount of their debts.

Reading the relevant contracts narrowly, a lower U.S. court agreed, and in declining to hear the case the Supreme Court has allowed that ruling to stand. Argentina is now on the hook for more than a billion dollars and says it may now default. “If you look at the numbers they simply just can’t afford to pay this right now,” says Thin.  

Argentina may negotiate with the holdouts, but after launching a campaign to vilify them as vultures, that may prove difficult. The next payment date for Argentina is June 30, and this represents the deadline for determining whether the country will default or reach some sort of agreement.

The situation is negative for Argentina’s economy, but unlikely to spread into some regional or global financial crisis, says Thin. Investors have generally stayed far away from Argentina since its default. 

The global implications are still serious, according to many observers. 

“The [International Monetary] Fund remains deeply concerned about the broad systemic implications that the lower court decision could have for the debt restructuring process in general,” said Gerry Rice, spokesman for the International Monetary Fund, in a briefing June 5.

Countries in distress have often used the same framework as did Argentina to extract themselves from default. Usually not quite as aggressively, but the principle is the same: obtain the consent of a majority or plurality of investors to take a haircut. 

“The fear is when a country -- whether it’s Greece or Portugal or what have you -- is in a position where it can’t pay its debt, it’s rare that you ever get 100 percent of creditors accepting it,” says Peter Hakim, President Emeritus of the Inter-American Dialogue. 

Requiring every defaulting country to obtain approval of all creditors could drag the process out or even dash it altogether, as creditors would now have an incentive to be the last holdout.

“You’re sort of messing with a system that’s working pretty well,” says Hakim. “The U.S. Treasury, although it didn’t formally join in the suit at all, has the same view, that this may interfere with the workings of the financial system.”

Others have more dire predictions. 

“This case will impact debt restructuring all over the world, it’ll impact poor country access to credit,” says Eric LeCompte, Executive Director of Jubilee USA, a religiously backed organization that promotes global financial reform.

He says money earmarked for development is being diverted to pay creditors, to the detriment of vulnerable populations. 

In one sense, the legal quarrel in Argentina’s case could have been avoided by a different type of contract, where new payment terms become binding for all investors if a certain proportion of them agrees to them. 

However, for all the countries who have debt in the here and now, Argentina’s example is a warning that getting out of debt could is a lot harder than anyone thought. 

A mall in the middle of (what used to be) nowhere

Mon, 2014-06-16 12:21

Williston, North Dakota, has the nation’s highest rents. Thanks to the fracking boom, a basic apartment in Williston costs more than something similar in New York or San Francisco.  And it comes with a lot fewer amenities.

For instance, shopping. If Walmart doesn’t have it, the nearest outlet is at least two hours away. Now, a Swiss investment firm has announced plans to build a $500 million development that will include a major shopping center.

There are good reasons retail has taken so long to catch up with the town’s exploding population.

About three years ago, California real-estate developer Jeff Lunnen and his partners went to Williston to check out the fracking boom’s business prospects.

It wasn’t an easy trip. “It was hard to get accommodations," he says. "Hard to get something to eat, and trucks going in every direction.” At the time, many of the workers crowding into Williston camped out in RVs—some in the Walmart parking lot, others on the street.

All of which, to Lunnen, signaled unlimited opportunity. “We went back in two weeks, and started buying real estate,” he says, “and it’s been very good for us.”

The town’s population has more than doubled, and the RVs have been replaced by “man camps”—basically company barracks—after a city crackdown.

Lunnen has focused on industrial projects, but some developers have started to create more-permanent housing, at those sky-high rents.

Retail, says Lunnen, presents special challenges. “It’s a little like building your retail project on the moon,” he says. “There’s some logistical issues.”

For instance: Who would work in the shops? Are they supposed to live in the man-camps? How could retail stores pay competitive wages, when oilfield companies pay unskilled 19 year-olds $80,000 a year?

Traditional lenders haven’t been quick to get involved in retail development. “We are looking to avoid what I would refer to as over-capacity,” says John Giese, who oversees business banking for Wells Fargo in North Dakota. In other words, when things level off, will there be more malls than even a built-up Williston needs? 

No one knows for sure how many people live and work in Williston now. A study commissioned by the city planning department puts the range between 39,000 and 44,500.

Meanwhile, like Jeff Lunnen, Wells Fargo has plenty to do in a line that’s more of a sure thing: working with energy producers. “Supporting that industry—making equipment and construction loans and such—will have quicker payback,” he says.

A Swiss investment firm called Stropiq is behind the newly announced $500 million project, to include housing, hotels and 1.2 million square feet of retail.

Donn Fuller, a Jones Lang LaSalle executive who is managing the build-out and soliciting tenants, says the first phase will focus on what he calls commodities:  “Grocery, pharmacy, theaters,” he says. “In that area we consider theaters a commodity. Which is a little different, but there’s not a lot of entertainment.”

Fuller hopes to have that phase—which may include department stores and women’s fashion—up and running in about three years. The project as a whole may take seven to ten.

“We’ve got a lot of work to do,” he says. “On the site plan, the financial model. All I can say is, we think it’s going to be profitable. How profitable remains to be seen.”

Fuller admits: He’s never done a project in a location like this before.

You can't beet vegetables. Lettuce explain.

Mon, 2014-06-16 11:19

From the Marketplace Datebook, here's a look at what's coming up Tuesday, June 17:

In Washington, the Labor Department releases the Consumer Price Index. It lets us know if consumers paid more or less for stuff in May than they did in April.

The Commerce Department tells us how many new homes were built in May.

The Federal Reserve begins a two-day meeting on interest rates. It's one of eight regularly scheduled meetings for the year.

The Senate Agriculture, Nutrition and Forestry Committee holds a hearing on creating jobs through bio-based manufacturing.

And start thinking about broccoli, beets and Brussels sprouts. Tuesday is Eat Your Vegetables Day. Don't argue with me.

Did becoming a Starbucks barista just get harder?

Mon, 2014-06-16 10:03

There was a time when a cup of coffee would run you 35 cents, and a college education could be had for a couple thousand dollars a year.

Now a latte costs three bucks plus change, and college can cost you more than $100,000.

On Monday, Starbucks announced it’ll help employees foot the bill for a degree.

It’ll pick up a portion—sometimes a large one—of the tab for online classes at Arizona State University. Even for employees working part time.

Listening to the Starbucks webcast today was a little like those Publishers Clearing House ads, where they give a really big check to an unsuspecting, overwhelmed winner.

One current employee stood to tell her story: “I started out as a barista and now I’m a store manager,” she said. “And when we heard the news, on the news, my daughter started jumping up and down and said 'Finally, you can graduate.'”

Yes, it was emotional. 

But, this is not all about feel good, corporate citizenship.  It’s also good business.

“Starbucks will certainly attract better employees,” said Zeynep Ton, a professor at MIT Sloan School of Management.

Becoming a barista is likely to get a whole lot more competitive. This sort of benefit will lure exactly the sort of employee Starbucks wants--young and highly motivated.

“They are competing for the cream of the crop of low-wage workers,” said Maureen Conway, Vice President at the Aspen Institute.

And Starbucks isn’t the only company looking to sweeten the pot for its workers, even its part timers. FedEx, UPS and others offer tuition reimbursement. Gap raised its minimum wage this year.

But not all employers feel the need to compete for the best of the best.  “Some employers are willing to get what they can get for the lowest wage they can pay,” said Elizabeth Malatestinic, a professor at the Indiana University's *Kelley School of Business in Indianapolis.

At some level, she says, the decision comes down to the culture of the business. 

And it's a lot cheaper for Starbucks to help employees get degrees, than it is for Starbucks to pay employees enough to afford  the ever higher cost of college.  

*CORRECTION: An earlier version of this story misspelled the name of the Kelley School of Business. The text has been corrected.

Iraqi and Syrian refugees are flowing into Erbil

Mon, 2014-06-16 10:03

As many as half a million people have fled Mosul, one of Iraq’s largest cities, after violence instigated by ISIL (the Islamic State of Iraq and the Levant) rocked the country's north. Most of the refugees have been heading up to the Iraqi city of Erbil, because it is currently the safest place to go to. Refugees are also coming into Erbil from Syria and several other Iraqi cities.

Despite the takeover, many of the internal refugees began heading back to Mosul after just a few days. BBC Correspondent Rami Ruhayem says their biggest fear was an attack from the Iraqi army and not the Islamic military.

Although Mosul is facing some economic problems with the military invasion, like high gas prices and supply shortages, Ruhayem says it’s hard to verify how bad the situation really is.

"The people we spoke to that are going back say it’s OK," says Ruhayem. "They say they have nothing to fear as civilians from the militants. They only feared an Iraqi army assault in order to chase the militants out, and they also said services were OK."

The possibility of things getting worse in Mosul and the rest of Iraq is there. But how will the Kurdish Provincial Government handle all of the displaced people?

"They’re actually doing a really good job of handling it. And it’s probably because of the organization, security and the prosperity that this province is enjoying in very sharp contrast to the rest of Iraq," says Ruhayem.

How gentrification could hit DC's middle class golfers

Mon, 2014-06-16 09:17

It’s a fine line, the one between economic development and gentrification. A fine line and one that’s wrought with tension, even when it comes to the seemingly rarefied world of golf.

Washington, D.C. is home to three federally owned public golf courses: Langston Golf Course, East Potomac Golf Course, and Rock Creek Golf Course. They’re property of the National Park Service, but run on concessions contracts by a private company.

They’re also affordable, which is why men like Charlie Greene and John Gwinn have been coming to Langston for decades.

“I been playing here for, what, 50 or 60 years,” says Greene, one Friday morning.

Langston, with its long history of African-American golf, is on the National Register of Historic Places. The two men have a regular game here, and Gwinn has been winning lately.

“But that’s gonna change today,” Greene laughs.

The victor may change, but Greene wants everything else about this course to stay the same. Right now he can play 18 holes for 18 bucks.

Though he says he wouldn’t mind better cart paths. And maybe more sand in the sand traps. But that’s it.

“Cause if they make it Augusta,” he says, “they’re gonna price it out of my range.”

He’s talking about an idea proposed by some city councilmembers to study a redevelopment of Langston that would turn it into a PGA Championship Golf Course, with a AAA Four Diamond restaurant and adjoining wine bar. (Not to mention a nearby water park, domed stadium, multimedia soundstage, hotels, and so on.)

D.C.’s lone congresswoman, Eleanor Holmes Norton, thinks all the courses need work.

“It’s like seeing all these jewels on the ground and saying, ‘Why doesn’t someone pick ‘em up and do something with them? They’re valuable,” she says.

Her idea is to transform the East Potomac Course, with its monument views, into a world-class course, with fees to match. She’s introduced a House bill asking for a feasibility study.

“It probably could cater to the lobbyists and the other rich people who come here because the Congress is here,” she says.

They’d fly in. Lobby, lobby, lobby. And at the end of the day, they’d head out and fork out for a round of golf. Norton thinks higher fees at East Potomac could basically subsidize the other two courses, keeping them affordable for middle-class golfers. Right now, capital improvements are paid for by the contractor who runs the courses.

On the putting green at East Potomac, golfer Butch Duvall says he doesn’t think a world-class upgrade would physically work. But he definitely doesn't want to get priced out if it did. Even the new publicly accessible Jack Nicklaus course that just opened in Virginia is too rich for his blood. 

"Love Jack. Love golf," he says -- but not at $95 a round.

Right now these are all just ideas about sustainability and how to use the city’s assets. (Washington’s chief financial officer doesn’t even think the city can afford to study the councilmembers’ redevelopment proposal.)

But beyond all that, does it even make sense to build a trophy course in today’s golf economy?

Jim Koppenhaver of Pellucid Corp, which advises golf clients, says not really.

“We’ve overbuilt what we call premium, penal, and pristine courses in the country,” he says.

In other words, he says there are already too many immaculate, difficult courses that are pricey to maintain and play. Americans are playing 50 million fewer rounds of golf than they did in 2000. So Koppenhaver says supply should be built in line with what the average golfer wants: fun.

“The majority of them, they enjoy golf for the challenge of it, they enjoy it for its outdoors, they enjoy it for the social experience,” he says. “And they somehow tolerate the fact that you’re never gonna be very good at it.”

Unless you spend a lot of time on it. The question for D.C. is how much money golfers will spend along the way.

IMF chief wants U.S. to raise the minimum wage

Mon, 2014-06-16 06:16

Count the International Monetary Fund as another voice in favor of raising the minimum wage in the U.S. 

Christine Lagarde, managing director of the IMF, urged American lawmakers to increase the federal minimum wage, to expand the Earned Income Tax Credit (EITC), to invest more in U.S. infrastructure and for better communication from the Federal Reserve.

In an interview with Marketplace, Lagarde said implementation of such policies would lead to "medium-term fiscal growth" in the U.S. and globally. 

"By identifying a good medium-term fiscal consolidation path, that will improve the level of confidence that needs to take root in the U.S. for the private sector to invest," Lagarde said. "You know, commitments. Commitments that would last beyond one election or one mid-term election."

Lagarde spoke just after the IMF released its annual health assessment of the U.S. economy, lowering estimated growth to 2 percent from its previous estimate of 2.7. Six years after the financial crisis, the organization says it has lingering concerns about "financial stability," and warns that under-regulating the financial sector could threaten the larger global economy. 

"We’re saying this: there is uncertainty on the one hand... when you look at employment numbers, when you look at the participation rate in the job market, when you look at the unemployment numbers and how fast they’ve gone down, you have lots and lots of questions that are not answered," Lagarde said. "At the other end, when you look at the markets, and you talk to market people, they seem to be overly confident and certain of when tapering will happen and how fast, when tightening will take place and how interest rates are going to move up."

So if you're Madame Lagarde, how exactly do you go about suggesting these policies to the Fed Chair? Can you just call up Janet Yellen and ask her to talk over a cup of coffee?

"It was actually over salad that we shared, not a cup of coffee," Lagarde says.

KAI RYSSDAL, MARKETPLACE HOST: Christine Lagarde, good to have you with us.

CHRISTINE LAGARDE, IMF CHIEF: Lovely to be with you.

RYSSDAL: This report, while certainly interesting in what it says, doesn’t necessarily say anything surprising. You guys want better productivity growth out of the state, you want us to get our labor market fixed, you want our public debt to go down. There’s nothing especially astonishing here in what you say we need to do.

LAGARADE: I would disagree with that, actually.

RYSSDAL: Alright, go ahead

LAGARDE: Let’s start with the fiscal. We say two things. We say number one: The medium term fiscal pause has to be identified and anchored which will allow for some short term fiscal benefits to be available in order to support financing in infrastructure and education, among other things. On the monetary front, we suggest that excellent communication be continued and developed further in order to try to match the uncertainty of employment/unemployment numbers on the one hand, and the level of certainty that seems to be enjoyed by markets, and where we see a bit of a discrepancy. And on the jobs and growth front, we are also saying things that you probably haven’t heard or read us saying, which includes the increase in the EITC.

RYSSDAL: Earned Income Tax Credit.

LAGARDE: Earned Income Tax Credit…coupled with an increase in the minimum wage. So those are fairly important things.

RYSSDAL: Alright, well let’s take those apart. First of all, on fiscal policy: In essence, you say you are heartened that the Congress of the United States has gotten its act together a little bit, but you are not at all sure it can make its policy stick. Is that how I read it?

LAGARDE: Well, yes and no. I would say, ‘Great that at least there was a deal on last year’s budget. That is good. Please continue doing this job. Try to agree amongst yourselves what are the key budget items going forwards. And it may very well include this medium term fiscal consolidation path that should be had.

RYSSDAL: In other words, you want more revenues to improve growth. You want us to fix our tax structure. All those are things that, again, have been said before.

LAGARDE: They may have been said before, but we are going to continue to say it until they happen. It’s not going to make them happen, but hopefully if the voices are strong enough, we keep at it, they will hopefully be a path for, as I said, this medium term fiscal consolidation, short term focus on investment in the U.S. That’s what we’re saying essentially: Invest in the U.S. The productivity is low, and therefore it’s a question of investing in the right places: innovation, education, infrastructure.

RYSSDAL: The problem is, of course, that when you say “investment,” there are those in the U.S., mostly on the Republican side of the aisle, who hear “government spending” and that gets you nowhere in a very big hurry.

LAGARDE: It doesn’t necessarily have to mean exclusively government spending. There can be enough encouragement to private sector funding. When you look at innovation, for instance, there were some interesting tax breaks that were available for innovation. Certainly this one could be reinstated and that would encourage the private sector to invest in the right place. We’re also saying that by identifying a good medium-term fiscal consolidation path, that will improve the level of confidence that needs to take roots in the US for the private sector to invest. And not only invest in buying their own shares, but invest in capital expenditure for instance. That will actually support the growth going forward.

RYSSDAL : When you say medium-term, what do you mean?

LAGARDE: Beyond one year. And things that would actually stick. You know, commitments. That would last beyond one election or one midterm election. And by the way, on the minimum wage, which we are recommending be increased, it’s really based on the observation of numbers. When we look at numbers and we see there are 50 million Americans that are below the poverty line, many of whom are actually working poor, we’re saying two things: increase the EITC, which puts a bit more on the table, a bit more income for people who typically spend income, [who] do not save it, and that’s good for the economy. And, we’re saying, couple that with an increase in the minimum wage, which in the case of the United States, is one of the lowest of all the OECD countries. So it’s not as if we’re proposing something that is revolutionary, but we’re suggesting that more money be put in the hands of those who actually work so they can spend.

RYSSDAL: You know, last time we spoke, which was I guess a couple years ago, I asked you whether you had confidence that the Congress and the American people would figure out the right thing to do. And you said, in essence, ‘I always have confidence in the Americans. The world has confidence in the Americans.’ Do you still believe that?

LAGARDE: Yes, I do. And it’s firmly rooted in Alexis de Tocqueville and many of the writers about the U.S. - Oscar Wilde, amongst others, as well.

Kai: Not an American.

Lagarde: Not an American. No, he was a typical Brit actually. But he said among other things: “Youth is a tradition for the United States of the America.” In the same vein, I would hope that confidence and confidence building is also typical of the U.S. It might take time. But clearly the budget deal that was cut a few months ago is an indication that even when people are at each others’ throats, they can eventually cut a deal and find something they agree upon. Which is good.

Kai: About the Federal Reserve: You want Janet Yellen, the Chair of the Federal Reserve, to have press conferences once a month. You want them to publish quarterly monetary policy reports to make sure that we all know more of what the Fed is thinking. I’m gonna guess that you’ve spoken with Janet Yellen about this over a cup of coffee some place, or are you just publishing this in the report for the first time?

LAGARDE: It was actually over salad that we shared, not a cup of coffee. Clearly what we are prescribing is the best case scenario, and a direction to take. We’re not suggesting she gives press conferences every month from tomorrow onwards. But we’re saying this: There is uncertainty on the one hand. Because when you look at employment numbers, when you look at the participation rate in the job market, when you look at the unemployment numbers and how fast they’ve gone down, you have lots and lots of questions that are not answered. At the other end, when you look at the markets, and you talk to market people, they seem to be overly confident and certain of when tapering will happen and how fast, when tightening will take place and how interest rates are going to move up. We believe that there has to be a reconciliation between uncertainty on the one hand, certainty on the other one. And who best than the Fed Chair can do that? That’s what we’re saying. Continue communicate as well as is done at the moment, but increase the intensity and the level, and the frequency.

RYSSDAL: You still have, the IMF, still has, and this is a quote: “financial stability concerns.” Here we are now six years after the financial crisis, and we’re still having this conversation about stability in the banking sector. It’s kind of amazing.

LAGARDE: No it’s not. The financial sector is a very special one, if only because it is dealing with public good, which is credit, which is the value of the currency. And in the case of the U.S., it’s an international public good given the size of the dollar transactions and the dollar as a currency of reserve. We are acknowledging huge progress that has been made: strengthening of the banks, stronger capitalizations of these institutions, improvement in the supervisions. But we’re also seeing, at the same time, a lot of shadow banks, a lot of intermediaries, that are lightly supervised and lightly regulated. We’re not advocating regulation for the sake of regulations, but we’re saying that in the name of this public good that is available, there has to be a degree of scrutiny and a degree of supervision at that is applying across the system and not just to the banks as defined.

RYSSDAL: Do you worry at all about the IMF being perceived as an organization that is constantly telling others what to do. Being the scold. Saying, “We have to do this so we can get here.” It does seem that you guys spend a lot of time doing that.

LAGARDE: Well, we do. It’s part of the mission of the IMF. We were tasked to do that by the founders back in the mid ‘40s. As we are celebrating the landing in Normandy, and the end of the second world war, we are also celebrating the 70th anniversary of the IMF. We have to do three things. One is do the surveillance that we were entrusted to do -- provide policy recommendations based on empirical research; even-handed analytical work. We have to lend to member countries when they’re in trouble. And we have to provide technical assistance to those to ask. Those are the three missions that we have, and we have to continue doing it. It’s not always pleasant. We are often criticized, we are often regarded as the tellers of the hard truth, but so be it, that’s what we were asked to do.

RYSSDAL : A word very quickly about the changing nature of the global economy. You said in a speech in Montreal earlier this month that you could see conceivably if global growth patterns continue the way they’re going, the IMF being headquartered in Beijing, because of course the IMF statute says the headquarters have to be in the home of the largest shareholder, the largest contributor. And if Beijing grows the way we think it’s going to grow… Could you see the IMF offices in Beijing, perhaps?

LAGARDE: Not under my term, but it could happen. If we apply the articles and growth continues as it does, it could well happen.

RYSSDAL : What is it that keeps you up at night?

LAGARDE: First of all: jobs, jobs, jobs, and the people who are looking for jobs who would like to get a job, who would like to enter the market, and who can’t. That’s first and foremost. Second, the various nests of geopolitical crisis that could hamper the recovery that could really derail what is in train at the moment.

Ukraine, Iraq and the price of oil

Mon, 2014-06-16 05:34

After talks about Ukraine paying its gas bills broke down, Russia began lowering the supply of natural gas flowing to Ukraine on Monday. The Russian state-owned gas company Gazprom said it's open to more negotiations but that it now wants Ukraine to pay up front for this crucial energy.

Western Europe also gets gas from pipes that flow through Ukraine and Gazprom's CEO said this morning that he see's what he called "not insignificant" risk for gas heading for the European Union. Remove the double-negative and what you get is a "significant risk" for Europe's supply.

Add to those risks the concern over oil exports from Iraq, and analysts have started to worry about high gas prices impacting economic growth in the U.S. 

"I ask myself, 'What gasoline price would actually start to cause problems for the U.S. economy?' and the number that came out is quite high. About $5.15 per gallon or $5.25 per gallon," says Carl Riccadona, senior U.S. economist at Deustche Bank Securities. "That would be the level, if sustained, that would cause growth to break down."

Plus, Starbucks announced a new perk on Monday called the Starbucks College Achievement Plan. It's partnering with Arizona State University to pay for its workers to do online college classes. 

How Comp-Sci went from passing fad to must-have major

Mon, 2014-06-16 02:30

The demand for computer science majors is booming. Even students at liberal arts institutions are itching to learn how to write code and develop artificial intelligence.

It's hard to believe that the field wasn't considered a serious academic discipline back in the 1960s.

Joel Moses has been teaching computer science at the Massachusetts Institute of Technology for 47 years. But when he first arrived on campus in 1963, it was to be a founding member of Project MAC.

"Machine Aided Cognition, which is another way of saying artificial intelligence. And Multi Access Computers, which is another way of saying time sharing," Moses explained.

Project MAC marked the beginning of the formal study of computer scienceAt first, administrators were skeptical. They viewed computer science as just a passing fad.

"We had to prove ourselves,” Moses said. “And we did!”

Not only did Moses and his colleagues create time sharing, they automated calculus problems.

“People were pleasantly surprised that a computer could do that as well as humans," Moses said.

Then, in the 1970s, MIT's Lab for Computer Science was born. MIT researchers developed some of the basic programming that led to fax machines, e-mail, and the complex operating systems we all take for granted today. Computer science was finally making its mark.

“There was a turning point,” Moses said. “Sometime in the 80s I thought it was OK to major in computer science."

Today, one-third of all MIT engineering students are computer science majors. And the number of undergrads taking advanced courses in the field is growing.

We have to reach further with equipment and we can only do this with computer science," said PhD candidate Dehann Fourie.

Inside the lab, Fourie is working to program a robot that can both explore the deepest reaches of the ocean and be smart enough to know what it's found.

Ten thousand meters down, you are sort of in this dark abyss,” Fourie said. “Now you have to go do something useful and that doesn't just happen by itself."

"All these things people have talked about for decades are coming to fruition and the computers are getting better and better," said Moses. 

But he admits it's still early days: computer science is just beginning to really tackle speech and facial recognition and to advance artificial intelligence by figuring our how the human brain works.

Listen to Kirk’s extended interview with Joel Moses:

MIT is celebrating 50 years of computer science and the birth of a new field. To commemorate the ocassion, the university has compiled a list of 50 ways Project MAC transformed computer science.

 

How Comp-Sci went from passing fad to must have major

Mon, 2014-06-16 02:30

The demand for computer science majors is booming. Even students at liberal arts institutions are itching to learn how to write code and develop artificial intelligence.

It's hard to believe that the field wasn't considered a serious academic discipline back in the 1960s.

Joel Moses has been teaching computer science at the Massachusetts Institute of Technology for 47 years. But when he first arrived on campus in 1963, it was to be a founding member of Project MAC.

"Machine Aided Cognition, which is another way of saying artificial intelligence. And Multi Access Computers, which is another way of saying time sharing," Moses explained.

Project MAC marked the beginning of the formal study of computer scienceAt first, administrators were skeptical. They viewed computer science as just a passing fad.

"We had to prove ourselves,” Moses said. “And we did!”

Not only did Moses and his colleagues create time sharing, they automated calculus problems.

“People were pleasantly surprised that a computer could do that as well as humans," Moses said.

Then, in the 1970s, MIT's Lab for Computer Science was born. MIT researchers developed some of the basic programming that led to fax machines, e-mail, and the complex operating systems we all take for granted today. Computer science was finally making its mark.

“There was a turning point,” Moses said. “Sometime in the 80s I thought it was OK to major in computer science."

Today, one-third of all MIT engineering students are computer science majors. And the number of undergrads taking advanced courses in the field is growing.

We have to reach further with equipment and we can only do this with computer science," said PhD candidate Dehann Fourie.

Inside the lab, Fourie is working to program a robot that can both explore the deepest reaches of the ocean and be smart enough to know what it's found.

Ten thousand meters down, you are sort of in this dark abyss,” Fourie said. “Now you have to go do something useful and that doesn't just happen by itself."

"All these things people have talked about for decades are coming to fruition and the computers are getting better and better," said Moses. 

But he admits it's still early days: computer science is just beginning to really tackle speech and facial recognition and to advance artificial intelligence by figuring our how the human brain works.

Listen to Kirk’s extended interview with Joel Moses:

MIT is celebrating 50 years of computer science and the birth of a new field. To commemorate the ocassion, the university has compiled a list of 50 ways Project MAC transformed computer science.

 

Will the instability in Iraq flow to the pump?

Mon, 2014-06-16 02:17

Oil traders are among the many people keeping a close watch on growing violence in Iraq.

They’re gathering a kind of intelligence, says Phil Flynn, with The PRICE Futures Group in Chicago: “You kind of price in the worst-case scenarios, and then you wait and see if that really happens,” he says.

Traders are worried about what would happen if the world were to lose access to Iraq’s oil, about two million barrels a day, according to Jim Burkhard, head of global oil market research for IHS.

That has traders worried about “spare capacity,” which Burkhard says is like “our emergency supply, in case there is a disruption.”

Right now, total spare capacity worldwide is roughly equal to what Iraq exports.

Paul Sullivan, who teaches courses on energy security at the National Defense University, sounds a note of caution: “The oil is coming out of Iraq without much disruption, except for psychological disruption.”

Still, when it comes to the price of oil, that can be powerful. Even though it takes several weeks for oil to get from the Persian Gulf to U.S. refineries, gas prices are already going up.

According to the U.S. Energy Information Administration, here's what makes up the cost of every gallon of gas pumped at the service station:

$3.66

The average national gas price according to AAA is $3.66 a gallon. If you split that out according to the EIA, that price is made up of costs from crude oil, refining, distribution, marketing, retail costs and taxes. While dependency on foreign oil has decreased, 40 percent of crude oil and petroleum products consumed by Americans is still imported from foreign countries.

$2.45

"The biggest portion of the cost of gas goes to the crude-oil suppliers. This is determined by the world's oil-exporting nations, particularly the Organization of the Petroleum Exporting Countries (OPEC)," according to Kevin Bonsor and Ed Grabianowski of How Stuff Works. Two-thirds of the retail price of gas is from the actual crude oil, and at today's prices that equates to $2.45.

$0.44

Twelve percent of your $3.66 per gallon goes towards refining costs and profits. That's approximately $0.44 cents that goes towards refining the oil and other terminal operations, including crude oil processing, oxygenate additives, product shipment and storage and brand advertising -- as well as profits. This also includes the cost of any oil spills.

$0.33

Gas consumers, you and I, also help cover the cost of franchise fees, rents, wages, environmental fees, credit cards fees and insurance costs. This includes billboard, TV and newspaper ads. These, among a few other costs, are all encompassed in the distribution, marketing, and retail costs and profits, or 9 percent of the retail price for a gallon of gas.

$0.44

And another 12 percent of the retail price goes towards taxes, including, among others, state and federal. Federal taxes averaged around 18.4 cents per gallon and state taxes averaged 23.52 cents per gallon according to the U.S. EIA.

Horseshoe crab blood (and, why conservation pays)

Mon, 2014-06-16 02:00

Quite possibly, the gentle horseshoe crab has swum ashore during the full and new moons of May and June to spawn for 445 million years. 

Horseshoe crab-like creatures were here when the dinosaurs appeared, and they were here after the dinosaurs disappeared. They survived ancient global warming and ice ages alike. And then people happened. 

“Over a hundred years ago, they were ground up and put on land as a fertilizer,” says Eric Hallerman, professor of fish conservation at Virginia Tech. In places like the Delaware Bay, 90 percent of the crab population was wiped out, and not a great many people cried about it. 

Then in the '70s, people discovered that they need the crabs for something much more valuable.  

“Every human on the face of the earth, if they’ve ever been given an injectable medicine, has been touched by LAL,” says Allen Bergenson with biomedical firm Lonza. 

LAL – Limulus Amebocyte Lysate – is a test for bacterial contamination made from the crab’s blood (usually made without killing the crabs). Lonza is one of four companies that manufacture it. The test is used throughout the medical industry to ensure medical instruments and materials don’t cause fever or complications when introduced to the blood.

It’s among the reasons that, gradually, people and governments started to care about the crab. 

“We’ve created laws that make sure the animals are returned to sea, that require them to be harvested by hand,” says John Dubczak, general manager with biomed company Charles River Endosafe in South Carolina. In that state the industry lobbied to ban fishermen from harvesting hundreds of thousands of crabs to use as bait for sea snails and eels. 

The Atlantic States Marine Fisheries Commission intervened in 1998 to relieve pressure on the crab from the bait industry. 

Now, the biomedical industry is competing within itself to see who can use the fewest crabs. 

Charles River has developed a highly sensitive test that only uses one twentieth the normal amount of horseshoe crab’s blood. Lonza has a synthetic version that doesn’t use any crab’s blood. The firms argue, sometimes bitterly, over which product is better. The synthetic version doesn’t have the same regulatory standing as the crab-based version (it’s not currently listed in the United States Pharmacopoeia, an official list of sanctioned drugs and uses), and for now that has dissuaded the pharmaceutical industry from embracing it.

Whatever the result, the competition raises a different way of thinking about nature.

“Instead of nature for nature’s sake, nature for people’s sake,” explains Janet Ranganathan, Vice President for Science and Research at the World Resources Institute. She’s referring to a concept called “Ecosystem Services.” When people realize the value in nature, and then pay to maintain it, everyone wins. 

In many cases, this approach has saved entire ecosystems.

“In the '80s, water quality was degrading in NYC because of development in the Catskill and Delaware watershed,” she says. Instead of building a $6 billion water filtration plant the city spent a fraction of that ($1.5 billion) just protecting the forests that purified water by paying landowners to maintain and restore it. 

It doesn’t always work, of course. Upstream agriculture on the Mississippi causes dead zones downstream that negatively affect fishermen, Ranganathan gives as an example. “You have one industry trumping another,” and polluters don’t have to pay for the disruption in services that nature provides. 

But things appear to be working out somewhat for the horseshoe crabs. Overall, the pressure on their population appears sustainable, according to the ASMFC, though there are troubling declines numbers in certain regions.

In some cases, making money off of nature can be a good way to protect it. 

Airbus just can't take flight

Mon, 2014-06-16 01:00

The A380 was supposed to change aviation as we know it. The plane can hold more than 500 people -- Airports around the world even remodeled to accommodate the huge jet.

But apart from Emirates Airline, the double decker jet hasn’t sold well.

Robert Mann, a former airline executive, says the reality is there are only a few airlines and airports in the world where the A380 makes sense.

“The A380 is a niche airplane," he says. “Anybody who had a need for them, or could conceive a need for them has ordered them.”

That’s left an opening for Boeing.

Richard Aboulafia, an aviation analyst at the Teal Group Corporation, says most airlines are interested in long haul, twin engine jets that can seat between 250 and 400 people.

“That’s where the action’s act,” he says.

Aboulafia says that fits nicely with what Boeing offers with the Dreamliner and its redesigned 777X. He says it “puts Airbus at a competitive disadvantage.”

Airbus is trying to answer Boeing with a slightly smaller jet: the redesigned A350XWB. Though, the company is having difficulty getting the planes off the ground -- Last week, Emirates Airline canceled its order for 70 of those planes.

Don’t just get mad, decode the system

Mon, 2014-06-16 00:40

Here is the latest menu item on my "Get Smarter in 90 Minutes A Week" media diet: The other night I watched How to Survive a Plague, a film about ACT UP and its activism to fight AIDS. I am not sure why I chose to view the documentary from 2012 now; maybe it is that I just came off a seven-day bike ride in California to raise money and awareness in the fight against HIV/AIDS, during which I had a number of conversations during the ride about the progress against the disease, and the many remaining challenges.

What I did not realize until after the fact is that I was watching the film on the 25th anniversary of one of the film's key moments. This week in 1989, activists were able to shove their way into the International AIDS  Conference in Montreal. As the film shows, the insurgents were there to make much more than just a ruckus in support of speeding up the testing of new treatments for the disease. Members of ACT UP had the smarts and focus to study and decode the Food and Drug and Administration's system for drug approval. The activists forced their way into that meeting with more than banners, placards, and slogans: They had drafted a smart action plan that would radically change the fight against AIDS.

Activists had come up with the now-famed National AIDS Treatment Agenda: 15-pages long and printed with a yellow cover. This agenda proposed — demanded, really — a series of changes to the drug approval process to make clinical trials of new medicines for AIDS, and the opportunistic infections that are associated with the disease, better meet the needs of patients. It was the product of some very smart systems analysis from people without a formal background in this area of medical research and drug regulation. These activists applied intellectual rigor to figure out how the federal system worked and what it might need to get drugs to desperate people more quickly.

As the film shows, thoughtful medical statisticians got a copy of the agenda that day 25 years ago and took seriously many of the recommendations. Eventually, activists, patients, researchers at the National Institutes of Health, members of Congress, and officials at the FDA would come more closely into line in the fight against the disease.

One of the activists who figured out the AIDS drug process was broken and contributed to new thinking on ways to fix it is Mark Harrington, who won a MacArthur "Genius" fellowship in 1997 for his work in this area. Although Harrington doesn’t have an MBA, he was acting on a lesson from business: He understood the power of a deep systems analysis to diagnose something big that was broken.

Another star of the doc I watched last night is still working hard in the fight against the disease. Peter Staley wrote a column just the other day calling for a new set of changes to America's HIV prevention efforts.

On the 25th anniversary of the original agenda, he points out that 50,000 people a year still get infected every year — and that figure is just for the United States.

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