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Market disconnections
Aug. 12th, 2010 02:16 pmI suppose that I should be a fan of mass hysteria; after all, it's nearly always correlated with some kind of market opportunity. This is because, although the intellectual side of a trader will be saying "well, yes, this is clearly an overreaction", it will also be saying "ahh, but, other people might not see it as an overreaction, and I don't want to be caught out as the only person who isn't out of step. SELL!"
Gradually the BP situation appears, at last, to be coming into some kind of context. Although the Americans are quick to mass hysteria (politicians in particular being worse than traders when it comes to not want to be seen to fall behind public opinion) they are also, it appears, quick to forget. Three months of BP out of the headlines and the court cases (which will rumble on for a couple of decades) will be consigned to page 6 of the Wall Street Journal.
I remember being in the US at the time of the Iraq invasion in 2003. Unless you wanted to be branded a communist, you wore an American flag badge. It was de rigeur to insult the French at least every other couple of minutes, and as an Englishman your sole asset was that "Tony Blair backed us".
Move forward four years and it was hard to find someone in Las Vegas who admitted to their enthusiasm at the time. One guy just said to me with bafflement; "They lied to us".
The truth, as per usual, lay between the two extremes. But Americans do not go for shades of gray (or grey). For them, it's a binary world.
Which is partly why complex, extremely grey areas such as environmental damage, without key headline events (such as an oil well fracturing) are difficult for Americans to get excited about.
One such revealed itself this week. The Gulf of Mexico now has a low-oxygen “dead zone” about the size of Massachusetts, a zone that has reappeared every summer for over 30 years. At 20,000 square kilomtres, It covers an area twice as large as last year, according to a just-released National Oceanic and Atmospheric Administration study.
This year’s dead zone is bigger because of more nitrogen- and phosphate-rich sewage, fertilizer and other agricultural runoffs flowing from the Mississippi River. Larger farms are requiring proportionally more fertilizer, thus causing higher concentrations of nitrates in the river.
Hypoxia, water with the oxygen sucked out, was documented off the Louisiana coast for the first time in 1972. It's now causing an estimated 10% to 15% loss for shrimp fisheries in the region.
None of this is anything to do with the Macondo field oil spill, but it's causing more damage than the Macondo field oil spill. Indeed, three quarters of the oil from that spill has already been degraded by bacteria. This is mainly because the oil itself was in a crude rather than refined form (oil spills carrying refined oil from crashed tankers are a far greater ecological threat) and thus degraded naturally at a far greater pace than if it was refined. In addition, it was a type of crude that tended towards faster degradation. Bacteria like it.
But the dead zone caused by fertilizer flowing down the Mississippi? No-one's doing anything about it, and the newspapers don't want to cover it. It's long-term; it isn't sexy, and the "criminals" are the farmers in the outh and in the farm belt, rather than a London-listed multi-national. There is nothing the Americans like less than not having anyone to blame apart from themselves. And, even within America, that blame is usually shifted to "big business" in New York, or "politicians in Washington". Tell them they it's actually the farmer in Missouri, Tennessee or Arkansas who is causing the damage to the Gulf of Mexico, and enthusiasm for punitive measures will disappear rapidly. The farms keep getting bigger; the fertilizer keeps getting used; the big rivers in the US are getting systematically destroyed. These days there is hardly any Colorado left by the time it reaches the west coast. Water wars, one feels, might not just be the remit of Israel and Palestine in the years to come.
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Gradually the BP situation appears, at last, to be coming into some kind of context. Although the Americans are quick to mass hysteria (politicians in particular being worse than traders when it comes to not want to be seen to fall behind public opinion) they are also, it appears, quick to forget. Three months of BP out of the headlines and the court cases (which will rumble on for a couple of decades) will be consigned to page 6 of the Wall Street Journal.
I remember being in the US at the time of the Iraq invasion in 2003. Unless you wanted to be branded a communist, you wore an American flag badge. It was de rigeur to insult the French at least every other couple of minutes, and as an Englishman your sole asset was that "Tony Blair backed us".
Move forward four years and it was hard to find someone in Las Vegas who admitted to their enthusiasm at the time. One guy just said to me with bafflement; "They lied to us".
The truth, as per usual, lay between the two extremes. But Americans do not go for shades of gray (or grey). For them, it's a binary world.
Which is partly why complex, extremely grey areas such as environmental damage, without key headline events (such as an oil well fracturing) are difficult for Americans to get excited about.
One such revealed itself this week. The Gulf of Mexico now has a low-oxygen “dead zone” about the size of Massachusetts, a zone that has reappeared every summer for over 30 years. At 20,000 square kilomtres, It covers an area twice as large as last year, according to a just-released National Oceanic and Atmospheric Administration study.
This year’s dead zone is bigger because of more nitrogen- and phosphate-rich sewage, fertilizer and other agricultural runoffs flowing from the Mississippi River. Larger farms are requiring proportionally more fertilizer, thus causing higher concentrations of nitrates in the river.
Hypoxia, water with the oxygen sucked out, was documented off the Louisiana coast for the first time in 1972. It's now causing an estimated 10% to 15% loss for shrimp fisheries in the region.
None of this is anything to do with the Macondo field oil spill, but it's causing more damage than the Macondo field oil spill. Indeed, three quarters of the oil from that spill has already been degraded by bacteria. This is mainly because the oil itself was in a crude rather than refined form (oil spills carrying refined oil from crashed tankers are a far greater ecological threat) and thus degraded naturally at a far greater pace than if it was refined. In addition, it was a type of crude that tended towards faster degradation. Bacteria like it.
But the dead zone caused by fertilizer flowing down the Mississippi? No-one's doing anything about it, and the newspapers don't want to cover it. It's long-term; it isn't sexy, and the "criminals" are the farmers in the outh and in the farm belt, rather than a London-listed multi-national. There is nothing the Americans like less than not having anyone to blame apart from themselves. And, even within America, that blame is usually shifted to "big business" in New York, or "politicians in Washington". Tell them they it's actually the farmer in Missouri, Tennessee or Arkansas who is causing the damage to the Gulf of Mexico, and enthusiasm for punitive measures will disappear rapidly. The farms keep getting bigger; the fertilizer keeps getting used; the big rivers in the US are getting systematically destroyed. These days there is hardly any Colorado left by the time it reaches the west coast. Water wars, one feels, might not just be the remit of Israel and Palestine in the years to come.
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