Brazil Removes President, But Crisis Continues

Brazil’s senate has voted to remove President Rousseff. Her defiant testimony in the impeachment proceedings, shrugging off corruption charges at a time when the country is nearly paralyzed by political corruption, gave no political cover to senators who might have wanted to vote to retain her.

A few politicians and many journalists have portrayed today’s vote as a chance for a fresh start, but there is little chance of that. The larger corruption problem is substantially in place despite a year of indictments, resignations, and other actions. The new president is also deeply unpopular and faces the risk of a corruption impeachment himself, and as the investigation proceeds half of his initial cabinet is already gone. The state-owned oil company at the heart of the corruption scandal is paralyzed by both court orders and low world oil prices. A former president faces indictment and half of the legislature is under investigation. The underlying struggle in all of Brazilian politics this year is between those who want to bow to the inevitable and those who want to delay the inevitable as long as possible. It is a struggle with no end in sight, and in the meantime, the country’s economic crisis and other problems are not getting the attention they deserve.

A Day on the Ice Brigade

My boss, the inimitable Mr. Snow, called me into his office. I took a seat in the big padded white chair he kept for visitors. “Rick, we have a situation,” Snow said. “Ice is going to be coming in faster than usual — faster than we’ve ever seen. I need you to melt it.”

“Well, I know how to melt ice,” I replied. “You just keep adding heat till it turns to liquid. How much ice are we talking about?”

“It’s going to be coming in at one, maybe two kilometers an hour — almost a walking pace,” Snow said, “and this is for the next few days and maybe for two or three weeks. The best thing is if you can keep up with it, melt it all as it comes in.”

“Two kilometers an hour!” I exclaimed. “Can I borrow the Gulf Stream?” If I was going to melt ice that fast, I was going to need the biggest influx of tropical water that the cryosphere had ever seen.

“Anything you need, as long as you can keep it melting,” Snow said. “People aren’t going to be happy at this time of year seeing a parade of ice stretching south toward, well, Iceland. In November, fine, but August? That wouldn’t be a pretty picture.”

“I know what you mean,” I said. I could easily picture the faces of the cruise ship passengers hoping to stop off at a beach in the north of Greenland only to be turned back by Arctic sea ice. “I hope this ice isn’t very strong or thick,” I said.

“No one has seen it up close, but no one is vouching for its quality, either,” Snow said. “This is the warmest year ever globally, you know,” he added. “The ice couldn’t be anything like what we used to see.”

“Well, okay, I think I can do it,” I said. I pictured myself walking toward the ice, the ice marching toward me in a sheet hundreds of kilometers wide, only to melt at my feet as it arrived. And this might continue for a week, and another week, and maybe another week after that. “Well, I’d better get started,” I said, leaping out of the chair and heading for the door.

“That’s the spirit!” Snow said. “Call me if you need anything.”

 

I soon found that Snow wasn’t exaggerating about the speed of the ice coming out of the High Arctic. It just keeps coming! But he was also right about the ice being some of the thinnest and weakest North Pole ice we had ever seen. I’ve personally seen ice that could sink a battleship, but this stuff — this ice gets one whiff of Atlantic water, really just one broken-off corner of the Gulf Stream, and it goes to pieces. I’m pleased to say that so far, the ice hasn’t even reached Svalbard, never mind Iceland.

This is a strange situation, everyone agrees about that. In the Arctic, the wind never blows in the same direction for as long as a week, and I keep looking at the long-range forecast and thinking it must be a mistake. But I also can’t help musing about what would happen if the wind kept blowing and the ice just kept coming. How long could the Atlantic water hold off the whole Arctic ice pack? Maybe a month, possibly two, surely not three. But after three months, there would be no ice pack left anywhere in the Northern Hemisphere. In 90 or 100 days of this the North Pole would have thrown everything it had at us. In that doomsday scenario, if it took a few extra weeks of mopping up, I’m sure people would understand.

This Week in Bank Failures

Banks are closing branches again, particularly in the U.S., U.K., New Zealand, and Australia. Branch closings carry more weight in the U.K. and New Zealand, where all-new branches have been the rare exception over the last half century. When a town or central business district loses its last bank, there are worries about other businesses leaving. In the United States, new branch locations open almost every week so that despite many branches closing, the total count of branches has fallen only 6 percent from its 2009 peak.

Portugal has worked out a plan to recapitalize its largest bank, the state-owned CGD, with a bond issue and €2.7 billion in state funds.

In large U.S. cities moving accounts from giant banks to black-owned community banks has become a trend this summer. It’s one part of the Move Your Money campaign, which for years has been trying to persuade consumers that they will get a better deal and their money will be safer at a community-based bank or credit union. The movement got a boost from rapper Killer Mike in February, who mentioned specific black-owned banks and asked fans to “Bank black, bank small, and bank local.” But officials at black-owned banks have said the influx of new customers was only a trickle at first and did not become an obvious change until early in July. Possibly an online list of black-owned banks helped, and mentions on talk radio might have made a difference, but no one seems to know for sure why the Bank Black movement suddenly took off just then. This week the Move Your Money campaign got a boost from presidential candidate Hillary Clinton, who stressed the value of community banks and proposed changes in rules that she says currently make the banking system unstable by favoring the largest banks. Among Clinton’s proposals are new safe-harbor provisions for smaller banks that follow sound lending practices.

Looking Back at an Olympics Avoided

I’ve been alerted that the Olympics are over and that I can come out from my self-imposed media storm shelter. In looking at the late echoes of the coverage from Rio, it seems I did well to avoid the full onslaught of the media event.

I wasn’t alone in trying to stay away from the Olympics. The U.S. television audience was 20 to 30 percent lower than four years ago. Viewership faded as the games wore on, with the lowest ratings tallied on the final Saturday. Even loyal TV sports fans couldn’t wait for the show to be over. Among those who watched the broadcasts, there was criticism of NBC, with TV critics and pundits questioning both the selection of events and the live commentary the network provided.

But it seems there was plenty of criticism to go around this month. The IOC and other institutions of international athletics came out looking ashen and dubious, and at least six top U.S. athletes came away with reasons to regret having made the trip. Regret seems to be the word for the host country and city too. It was too late to cancel, but Brazil and Rio de Janeiro pulled off a respectable event, even if the unintentionally green swimming pools have stuck in people’s minds as one of the most enduring images of the 2016 games. Neither Brazil nor Rio could make the case this year that they could afford the Olympics in a financial sense, but costs aside, I think this is the first time that an Olympics host has seen its reputation actually damaged as a result of hosting the Olympics. Brazil did not really want to be in such a big spotlight right now, facing an economic nightmare the country can’t seem to shake off, not to mention a related presidential impeachment that had to be postponed until today in order not to make appearances worse than they had to be. As for the host city, I feel certain I recall that a month ago, Rio was widely seen as an almost mythic place that you might get to visit someday if you were lucky. Now that has changed. Without anyone being able to say how or when it happened, the city’s image has been turned on its head. Maybe it’s just a case of too many TV cameras in one place. It isn’t about people saying, “I’m glad I don’t have to be in Rio myself,” which would be an understandable sentiment this year given the region’s current horrifying mosquito-carried disease outbreak. It is worse than that. No one is even thinking about Rio in those terms, as if the unspoken understanding is, “Well, obviously, who would voluntarily set foot in Rio de Janeiro?” I almost wonder if the 20th-century short form of the city’s name, “Rio,” is no longer valid, and the full name might now be required, in case someone might respond with, “Rio who?”

As the games dispersed, one of the big headlines was about the president of Turkmenistan blasting his country’s team, heading home without a single medal. The Olympics weren’t entirely a bummer, though. The headlines also speak of a few hundred medalists who have become heroes in the world and especially in their home countries. I knew the Olympics were on when I saw a flurry of bicyclists out on country roads in the early evenings last week. The broadcasts reminded these athletes to tune up their bicycles, get on them, and ride. The burst of bicycle activity might have lasted only a week, but even this level of inspiration has some value.

There is no question about the 2020 summer games, for which plans are set and contracts signed, but there has to be some doubt about 2024. The Olympics in recent decades have been mostly paid for by the host city and U.S. TV, and that no longer looks like a workable formula. Did I mention that the U.S. TV audience was down 20 to 30 percent in spite of an ideal time zone for the American audience? NBC can absorb its losses from this month, but if the U.S. TV audience declined 20 to 30 percent in four years, could it decline another 50 percent in another eight years? More to the point, what giant U.S. broadcaster will be in a position to take that chance? Meanwhile, now that potential host cities see that it’s possible to shell out $20 billion and also take a black eye that could linger for decades, what city will take that leap of faith? It is an ethical problem already that most of the work that goes into the Olympics is provided by uncompensated amateur participants. There has to be a new formula for the Olympics that doesn’t require transferring so much cost and risk onto third parties that may not be prepared to bear them.

This Week in Bank Failures

I had planned to take the month off, but I’m taking a few minutes to provide an update on the occasion of a bank failure tonight.

The failed bank is The Woodbury Banking Company in Woodbury, Georgia, with only one banking location and $20 million in deposits. All deposits have been transferred to United Bank along with most of the assets. The failed bank got in trouble with state regulators last year when a director who was also a loan officer made loans that exceeded legal limits. The officer was banned from banking in Georgia and barred from voting the shares he held in the bank.

It has been a quiet month, and that is nothing unusual in August, but there has been some movement in banking in the last three weeks.

Credit Suisse and Deutsche Bank were dropped from the STOXX 50 index. Both banks’ stocks are down 60 percent from a year ago.

Australia’s three largest banks want to launch an iPhone payment app together and are seeking court approval to act as a bloc for that purpose.

Arrested: The longtime CEO of Veneto Banca, the 10th largest bank in Italy; charged with market manipulation and making false statements.

Under investigation: Monte dei Paschi, the 3rd largest bank in Italy, along with one current and one former executive; accused of misleading the banks’ investors in connection with derivatives trades made by the bank between 2011 and 2014.

Choosing Peace Over Olympics and TV

Four years ago I found that when I was to avoid coverage of the Summer Olympics, it was good for my peace of mind. The Olympics story has taken on more than its share of negative vibes over the years, with endemic corruption, drugs, and the exploitation of thousands of unpaid athletes. At the center of it all there is a “village” that anywhere else would be described as condirions of poverty. It all heppens for the sake of an event that, seen through a financial lens, is the biggest American reality TV special of all time. This year one can add repression, a crisis of democracy, and a dangerous epidemic to the TV lens’s sordid backdrop. And so this time I plan to go farther to isolate myself from the Olympics. Since Olympics coverage forms a sort of media flood in the United States, I plan to largely avoid both news and social media during the hours when the competition and TV broadcasts may be occurring — and yes, I do realize that is about 19 hours per day. I will catch up on events, and this blog, in September.

While I am on the subject I would like to take a moment to offer a suggestion to anyone in the United States who has been waiting for an opportune time to cancel their TV subscriptions. There couldn’t be a better time to unplug the TV than right now. Not only will you be spared the worst of the Olympics coverage, but as a bonus you will miss much of the even more sordid political season that follows. Meanwhile, the roughly $1.50 per month that you have been contributing to the Republican political machine by way of your TV subscription and the Fox News channel can be put to better use just at the moment when America’s political future may depend on it. You might think you will miss TV, but you won’t; I had the same trepidation 10 years and 1 month ago when I shut off my cable subscription, but I would never go back.