The Tropics Attacking the Arctic

There is a subtropical storm in the Atlantic Ocean. While the formation of a northern-hemisphere subtropical storm in January is odd enough, the forecast track is odd in its own right. Tropical systems can’t meaningfully be predicted a week in advance, but the National Hurricane Center forecast track (below) suggests that the storm is likely to pass east of Greenland. If that comes to pass, there is a fair chance of the storm reaching the Arctic Circle with wind, waves, and relatively warm air — “the tropics attacking the sea ice,” as one observer put it. It is rare enough that such an event happens in summer. For it to appear in the forecast in January, the coldest month in the Northern Hemisphere, suggests that the balance of power has shifted.

The Arctic could never win a fight with the tropics anyway, for the simple fact that the tropics are ten times as large. The Arctic can hold on well only by avoiding any direct confrontation with the tropics. But if a tropical-influenced event — Subtropical Storm Alex formed just outside the tropics with the aid of tropical air — can reach out and poke the Arctic in January, then where is the place for the Arctic to hide?

It used to be that the jet stream would protect the Arctic from tropical incursions, but this week, the jet stream is too busy pouring cold air into mid-continent regions to help out over the open ocean.

The Arctic has already seen a major ice-melting event this month, and the remnants of Alex could be a second. It is early enough in winter for the ice to recover effectively, but only if there aren’t two more similar storms over the next two months. In other words, the health of the Arctic sea ice is tenuous enough that it depends on random chance. Random chance being what it is, it is just a matter of time before the tropics and the Arctic have a fight that the Arctic can’t run away from.

Update, January 14: Alex reached hurricane status and has the unmistakable signature of a hurricane on the satellite picture. The forecast suggests it could remain a hurricane for a day, giving it a stronger chance of holding together into the Arctic. The forecast track has not changed much.

The Detour Through Another Country

Canada was cut in half yesterday when a bridge on the Trans-Canada Highway broke. It was the newest and, for those crossing Canada, the most essential bridge on the highway. Cables on the Nipigon River Bridge at Nipigon, Ontario, shortened more than intended in cold weather, lifting one end of the bridge deck above the road surface. The 400-meter, 2-lane bridge was immediately closed to vehicular traffic, though pedestrians could still cross. The bridge reopened at 9 a.m. after weights and, I assume, a construction plate made the bridge passable again, but only one lane is open, only standard-weight vehicles can cross, and backups are expected.

The Nipigon River Bridge is not so easy, from an American perspective, to put in its correct geographical context. The first step is to remember that Michigan consists of two peninsulas. The Lower Peninsula, the one that most people automatically think of, separates two of the Great Lakes, Lakes Michigan and Huron. Logically, there must be an Upper Peninsula, but where is it? It sounds like a trick question to most Americans at this point. The Upper Peninsula is easily found, though, extending westward from the northern tip of the Lower Peninsula. It also falls between two of the Great Lakes — Lake Michigan to the southeast and Lake Superior, the largest lake in North America, to the north. Upper Peninsula residents are occasionally so tired of being forgotten that some of them petition for statehood, but with a population so much smaller than any U.S. state, this idea has a hard time being heard, let alone being taken seriously.

Before I proceed, a quick apology to Canadians for taking such a long way around in explaining how eastern and western Canada are connected. I promise I am most of the way there.

The Upper Peninsula is possibly the most-forgotten region of the United States, and to its north is the largest lake in North America. The definition of a lake implies that there must be land on every side, so of course there is land north of the lake. Most of the land area of Ontario is found between Lake Superior and Hudson Bay. However, this is an area more forgotten in Ontario than the Upper Peninsula is in Michigan. Most of the northern shore of Lake Superior is organized into a district (think of it as a county) that is the size of Ohio in land area, but with a population matching that of Dayton, Ohio. In all of northern and northwestern Ontario there are only six highways worth noting, so road maps of Ontario may relegate this vast area to a tiny inset in one of the corners of the map if they include it at all. The inset effect can lead people not to realize how large this area is. If you drive around the north end of Lake Superior from Sault Ste. Marie, which is where road maps of Ontario traditionally end (and is a name that Americans may recognize as the northern terminus of Interstate 75) to the next city, Thunder Bay, it is an 8-hour, 700-kilometer drive during which I believe you will pass through only three towns with a population over 1,000.

All this geographical context is necessary to understand the magnitude of the problem caused by the broken bridge. Ordinarily when a bridge is out, you ask where the detour is. Here, there is no detour. The short stretch of highway extending west from Nipigon is one of the few places in North America where there is no alternate route. To be more precise, the only sensible detour to suggest is U.S. Highway 2, through Michigan, Wisconsin, and Minnesota, south of Lake Superior. If you had already arrived at the Nipigon River Bridge, that would be a very long way around. The local municipality declared a state of emergency when the bridge closed and set up shelters for stranded travelers. The bridge reopened this morning, but with only one lane open, the highway cannot carry its usual volume of daytime traffic. Possibly for the rest of the winter, most travelers driving between eastern and western Canada will have to drive through the United States.

The Trans-Canada Highway is symbolically important in showing that a country as far-flung as Canada is can function as a single country. The symbolic value is reason enough to give a high priority to the engineering work needed to restore the highway to normal functioning.

Campbell’s Breaks Silence on GMOs

Genetic modifications of food ingredients have always been a secret in U.S. food, but Campbell’s Soup Co. is breaking the silence, preparing to label genetically modified ingredients (GMOs) on its products and calling for a mandatory uniform approach to GMO labeling. Most likely the GMO labeling would be part of the text of the ingredient list, already a mandatory part of a processed food product. For example, corn starch made from GMO corn might appear in the ingredient list as CORN STARCH (GMO). With mandatory GMO labeling, consumers would have a way to avoid the risks of GMOs without insisting on organic ingredients.

This Week in Bank Failures

New EU standards for banks, followed loosely and informally for the last three years, formally went into effect at the start of this year. The new rules focus on two life-and-death issues for banks: capitalization and resolution. The need for the new rules became obvious in the December rescue of four of the larger banks in Italy, in a plan that favored the banks’ largest creditors. The government pushed to complete the deal in 2015, and faced widespread criticism for doing so, because the favorable treatment of large bondholders would not have been allowed under the new EU rules. In theory, the new rules prevent, within the EU, any repeat of the large-scale bank bailouts of the past decade that put sovereign financial integrity at risk.

The NCUA liquidated two credit unions in December, for a total of 11 in 2015: Bethex Federal Credit Union of Bronx, New York, with 6,000 members, member accounts and assets transferred to USAlliance Federal Credit Union; First Hawaiian Homes Federal Credit Union, with 4,000 members, member accounts and assets transferred to Molokai Community Federal Credit Union.

In the bankruptcy case of Sentinel Management Group, an appeals court has ruled that BNY Mellon is an unsecured creditor. The court ruled that the bank knew there were problems at Sentinel when it issued loans to the fund management company prior to its 2007 bankruptcy. The bank should have seen that funds from the loans it was making were likely to be diverted, but looked the other way, so it cannot gain the benefits of being a secured creditor in the bankruptcy proceeding. The bank provided nearly half of the funding for a criminal enterprise that ultimately sent Sentinel’s CEO to jail.

Wilmington Trust Corporation faces indictments after a TARP investigation. The bank repaid its 2008 TARP loan with money from a 2009 stock offering. In the stock offering and in filings with the SEC the bank exaggerated the quality of many of its loans. The bank and four executives are being charged with making false statements in a securities filing.

Weather Effect in December Jobs

I wrote yesterday about some of the more direct effects of mild winter weather on economic trends, and this morning we see the indirect effects in the jobs numbers for December. The net job creation was 292,000, much better than the expected 200,000 or 212,000, depending on who you asked. Layoffs were particularly low in December. Most of the discrepancy, it appears, consists of construction jobs that went forward in December because the weather permitted it. I have seen this firsthand in my local area, where road work that ordinarily would have shut down for the winter around December 5 carried on through December and continues even now. The weather effect was broad enough to make today’s headline macroeconomic number 40 percent higher than expected.