Friday , October 30 2020
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Yves Smith



Articles by Yves Smith

Limited Liability: Profit Without Responsibility

6 days ago

Yves here. Sundaram provides an informative, high level discussion of the hazards posed by limited liability companies. One might add that they are less dangerous in a system with strong regulation, liability protection, and a legal regime that does not undermine class action litigation. The egregious case of the Sacklers and Purdue Pharma points to the need to be able to penetrate the corporate veil for fraudulent activity in combination with efforts to move assets out of the company to prevent recovery by those harmed. In general, the notion of “fraudulent conveyance” isn’t taken very seriously by courts, which points to the need for much stronger legislation to turn that around.
By Jomo Kwame Sundaram, a former economics professor, who was United Nations Assistant Secretary-General for

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Housing Market Goes Nuts, Everyone Sees it, But it Can’t Last

6 days ago

Yves here. On the one hand, Covid will be with us for some time, and so will its effects on the housing market. But a recent Wall Street Journal interview of CEOs showed way over 90% hated remote work. They think a lot of informal collaboration has gone down the tubes, and some also claimed productivity was down (not implausible given that many employees are now having to contend with a lot more child management). So expect work-at-home to be curtailed when Covid is eventually contained. And bear in mind that Silicon Valley firms are also cutting pay for staffers who have moved to places with lower costs of living.
And that’s before you get to the elephant in the room, which is Wolf’s focus: that the willingness of DC to continue to throw enough stimulus at the economy is already waning,

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Trust and Compliance with Public Health Policies in the Time of COVID-19

6 days ago

Yves here. Even though this article frames trust around trust in politicians, one could argue that broader societal trust may be at least as relevant. As readers know well, the US has become a highly unequal society in a comparatively short period of time. Unequal societies are low trust societies. Neolibearlism separately reduces trust by encouraging individuals to view themselves as atomized, both as consumers and as workers, and the resulting low attachment to companies and communities also diminishes trust. We’ve also had a increase in paranoid parenting, with children having to be picked up from school and escorted to play dates, when crime rates are way lower than in the era of “free range” children.
By Olivier Bargain, Professor of Economics, University of Bordeaux and Ulugbek

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Goldman Gets Off Easy in 1MDB Scandal Despite Further $2.9 Billion in Payments, Criminal Charge Against Malaysian Sub

7 days ago

Experts will tell you that a good negotiation leaves both sides feeling a bit bruised. I doubt that Goldman is feeling bruised over yesterdays’s multi-regulator settlement in the 1MDB scandal. Mr. Market certainly thought so; Goldman’s stock held its price on the announcement of the multi-regulator settlements yesterday that included $2.9 billion in fines and disgorgements.
Among other things, the estimated $4.5 billion looting of sovereign wealth fund 1MDB between 2009 and 2014 led to the imprisonment of Malaysia’s former Prime Minister Najib Razak, who also happens to have established 1MDB in 2009.
Goldman has admitted to criminal wrongdoing under the Foreign Corrupt Practices Act by its Malaysian subsidiary and agreed to pay $2.3 billion in fines and $600 million in disgorgement to the

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The East Mediterranean Crisis Could Ignite a Greek-Turkish Proxy War

7 days ago

Yves here. I hope that readers who are knowledgeable about the long-running Greek-Turkish dispute can opine on this thesis. Any short article about regional politics is bound to be a bit reductivist. And even the 2015 Greece bailout negotiations bumped into relations with Turkey. For instance, one short-lived idea was to pledge rights to underwater gas exploration as collateral for new loans. The wee problem, aside from considerable uncertainty as to how much offshore gas there really was, was that Turkey also had claim on the resource.
While “proxy war” notion is plausible, I wish it has been more completely developed, particularly with respect to Turkey’s conduct in the Western campaigns against Syria and Iran.
By Alexander Kazamias, Senior Lecturer in Politics at Coventry University

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CalPERS: Poster Child of Private Equity Cargo Cultism

8 days ago

CalPERS, once highly regarded for its acumen, is increasingly the willing victim of investment fads past their sell-by date. For hedge funds, CalPERS admitted they weren’t delivering adequate returns in 2006, but didn’t announce its intent to end the strategy until 2014. But even with that delay in taking action, CalPERS was willing to look at what its data said and acknowledged publicly that hedge funds were underperforming.
But in board meetings and in presentations to the press, the latest being to the New York Times, CalPERS continues to insist that private equity is its big hope for reducing its underfunding, in the face of overwhelming evidence that private equity is failing to beat public stocks.
And remember that private equity ought to deliver a markedly higher return, with

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Profits Over Human Life? ER Doctor’s Story Is Fearful Lesson for U.S. Workers During Pandemic

8 days ago

Yves here. While whistleblower Dr. Ming Lin has secured employment while pursuing damage claims against the hospital system and his immediate private equity employer, TeamHealth, for terminating him for speaking out against poor Covid procedures, it’s the medical version of exile to Siberia. Lin is now working in Rosebud, South Dakota for the Lakota, at least an 18 hours drive from his home. Even though Native American nations deserve first class care, the reality is that reservations by design are isolated and usually poor, and therefore have difficulty attracting and keeping qualified professionals. Dr. Lin has likely left his family behind.
By Lynn Parramore, a Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic

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With Bankruptcies Mounting, Faltering Oil and Gas Firms Are Leaving a Multi-billion Dollar Cleanup Bill to the Public

11 days ago

Yves here. This is extremely frustrating. I scheduled this post how the oil industry is dumping huge costs on citizens and it didn’t fire as set in the backstage. Apologies.
By Justin Mikulka, a freelance writer, audio and video producer living in New York who a degree in Civil and Environmental Engineering from Cornell University. Originally published at DeSmogBlog

Amid a record wave of bankruptcies, the U.S. oil and gas industry is on the verge of defaulting on billions of dollars in environmental cleanup obligations.
Even the largest companies in the industry appear to have few plans to properly clean up and plug oil and gas wells after the wells stop producing — despite being legally required to do so. While the bankruptcy process could be an opportunity to hold accountable either

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How To Break the Covid Doom Loop

13 days ago

Yves here. While this proposal sounds more realistic than other schemes on offer, I still wonder if it would work all that much better than the shambolic approaches in countries and communities where Covid has settled in. And on top of that, we have the sobering spectacle of countries in Europe that had gotten infection rates down now seeing troubling upsurges.
In other words, I keep coming back to the notion that the disease is in control and it takes pretty stringent measures to lower contagion rates. This proposal does have the appeal of reducing uncertainty, since the populace would know in advance when restrictions would be in place.
However, I regard the authors as way too optimistic about the effect of short stringent lockdowns (two weeks??). And even if the weight of the law were

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An Indictment of the “Standard Model” for Pension and Endowment Investing

14 days ago

We are featuring an important new article by Richard Ennis, the co-founder of the first professional investment consultancy, EnnisKrupp, and editor of the Financial Analysts Journal. As we’ll explain shortly, Ennis continues with his criticism of fundamental flaws in the orthodox, and pretty much pervasive, approach large investors use for structuring and managing their portfolios. Ennis, who is unusually well-qualified to make an assessment, deems this strategy to be inherently flawed and describes what he views as superior approach.
We’ve embedded his paper at the end of this post and encourage you to read it in full.
While we are very much taken with Ennis’ critique, we have to confess to be less keen about his remedy. It is likely to reduce expenditures on chasing returns, but we are

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Brexit: Standoff

14 days ago

If UK reporting is any guide, it appears the EU has finally managed to get through the UK’s fog of delusion and convey that “no means no” on EU red lines, such as the “level playing field,” as in common rules and standards as a condition for a tariff-free pact. The Government has reacted badly to the notion, which the EU has conveyed repeatedly, that the EU wasn’t prepared to budge on the big open issues, save maybe a bit on fishing. Prime Minister Johnson is set to say later today if he plans to continue the talks or pursue a no-deal.
Recall that even if the two sides were to come to an agreement, it would only blunt the pain of Brexit. The timetable is so short that all the EU and UK could settle on would be a thin “no tariffs, no quotas” deal. It would not eliminate most types of trade

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Links 10/15/2020

15 days ago

Florida Cat Goes Viral After Bravely Staring Down Alligator Who Shows Up At Front Door Animal Rescue (David L)
Wild Predators Are Relying More on Our Food—and Pets Wired
Room-Temperature Superconductivity Achieved for the First Time Quanta Magazine (David L)
Proprietary Grapes Come With Draconian End User License Agreement Vice (resilc)
Digital Planet, Predicting US elections results every hour BBC World Service. Resilc:
First two are interesting sections1. on the election betting market2. on solar energy in rural Africa. Components are failing. Right to repair essential. Tthe cheapness of quality of all the components is a real weakness. I have Chicom solar lights on outdoor sculptures here in Vermont. Some work for years, some work for 3 months. Cannot be fixed after they break. More

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College Enrollments Drop Due to Covid, Adding to Budget Damage

15 days ago

It shouldn’t come as much of a surprise to learn that the number of students attending college has fallen due to Covid-19, 16% for incoming students and 4% overall, with the total decline greatest among foreign students. Those foreign students, who pay top dollar, have been staying away first due to China bashing (the Chinese were very well represented) and then due to Covid risks and travel restrictions.
Remember that the drop in enrollment comes on top of other hits to revenues. We gave the broad outlines of how Covid-19 translated into a grim future for higher education in May:
“Decimate” might be too charitable a forecast for American higher educational institutions, since the word originated with the Roman army practice of killing one man in ten. Coronavirus is hitting pretty much

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Milton Friedman Versus Stakeholder Capitalism

15 days ago

Yves here. Jomo Kwame Sundaram continues his takedown of Milton Friedman’s legacy. Note that I’m not keen about the expression “stakeholder capitalism”. However, the prevailing view among economists and even corporate executives themselves prior to the concerted effort to move US values to the right was that companies were responsible to the broader communities in which they lived. This attitude may have resulted in large measure due to the fact that American companies, even public ones, were smaller than they are now. Their top executives were leaders in the towns in which they were headquartered and thus wanted to be respected by other local notables.
The flaw with “corporate social responsibility” as  a way to get companies to behave better, as opposed to the fear of not being admitted

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Bill Would Clamp Down on Cops Collecting DNA From Kids

15 days ago

Yves here. The thought has crossed my mind that urban police would use “stop and frisk” type approaches to get DNA from anyone too cowed to say no (and one also suspects the police threaten that non-cooperation will lead to a night in filthy and possibly dangerous cell). In fact, I’ve wondered how to refuse that and other types of illegal searches while staying cool. But going after children? Do readers have any idea where else kiddie DNA is being snagged?
By Eileen Grench, who covers juvenile justice for THE CITY and is a Report for America corps member. She was previously an investigative reporter for the Global Migration Project, where her work was featured in The Intercept, The Nation, and Documented. You can reach her at [email protected] Originally published at THE CITY on October

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Why Saudi Arabia May Be Forced To Start Another Oil Price War

15 days ago

Yves here. The notion that weak oil prices through early 2021 would spark another price war suggests that the major actors, unlike stock market investors, also anticipate that a recovery will be sluggish.
By Dr. Cyril Widdershoven, a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle East and energy sectors in the Netherlands, the United Kingdom, and the United States. Originally published at OilPrice
The ongoing weakness of global oil markets seems to be stoking tensions within OPEC+, and a split within its leadership is now imminent. From the start of this year’s Moscow-Riyadh brokered OPEC+ production cut deal, internal differences have been kept at bay by a global pandemic and high crude oil

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EU Wins WTO Ruling on Boeing Subsidies, Following WTO Ruling for the US on Airbus Subsidies. Tariff War On?

16 days ago

The WTO issued a ruling in its biggest trade dispute ever: the tit for tat between Boeing and Airbus over government subsidies. Boeing started its action against Airbus in 2004; Airbus lodged its case against Boeing in 2005. Boeing won a ruling in its favor in 2019, permitting the US to impose tariffs on $7.5 billion of European goods; as we’ll see, the US has already started levying charges. The EU win allows Europe to impose tariffs on $3.99 billion of specified US goods, including Boeing airplanes, although the EU needs to take an additional formal step to get rolling.
The extraordinarily attenuated process shows why WTO adjudications aren’t a great way to stop trade abuses. And this timeline doesn’t include appeals, which currently are a non-starter due to the Trump Administration

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Why Has Mayoral Candidate Scott Stringer Invested New York City Pensions in Private Equity Firms Like Blackstone?

16 days ago

Yves here. CalPERS gets such a disproportionate amount of press attention than most other US public pension funds, which results in too many of them getting a free pass on similarly shoddy practices. This article by Matthew Cunningham-Cook focuses on the role of Scott Stringer, currently New York City Comptroller, who also oversees the New York City pension system called New York City Employees’ Retirement System, or NYCERS. And it’s worth noting that a connection to Blackstone increasingly is a badge of dishonor.
Cunningham-Cook describes how Stringer has been too friendly to private real estate fund managers like Blackstone and Carlyle, to the detriment of the pension funds’ performance. That should come as no surprise. Stringer was previously Manhattan Borough President and launched a

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Why the George Floyd Protests Succeeded Where Others Failed

16 days ago

Yves here. This post describes some of the factors that pushed the Black Lives Matter protests past a tipping point. Recall that Black Lives Matter looked about to achieve a break-out into national consciousness after the killing of Eric Garner. “Die-ins” in high-profile places like Grand Central, which regularly had substantial non-black participation, were getting traction. Lambert was tracking Black Lives Matter intensely at the time and saw how Democratic party operatives moved quickly to try to assume leadership or at least influential positions and succeeded often enough to co-opt the movement. The tactically brilliant die-ins inexplicably stopped.
The reason for featuring this post is to look at an example of activism/movement building that made headway. But having said that, I am

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What Did Billionaire Leon Black of Apollo Get for >$50 Million in Fees to Jeffrey Epstein?

17 days ago

It turns out that the smoke around private equity kingpin Leon Black’s business dealings with convicted sex offender Jeffrey Epstein was a sign of a real fire. Four sources told the New York Times that Black wired Epstein at least $50 million in fees after Epstein’s 2008 conviction; two said Black could have paid as much as $75 million.
Alert readers may recall that this is roughly the same level of money that Apollo spent in bribes, um, placement agent fees, to CalPERS. It’s never been made clear what exactly Apollo thought it would be getting for the $48 million it gave to former board member Al Villalobos, some of which wound as cash in paper bags to CalPERS CEO Fred Buenrostro, who is now in Federal prison.
The relationship between Black and Epstein is murkier and more troubling since

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What Should Europe Expect from American Trade Policy After the Election?

17 days ago

Yves here. This Bruegel article describes possible changes in US trade policy under a Biden Administration. Despite campaign messaging that Team Biden will attempt to turn the clock back to 2016 (or earlier), this article makes clear why that can’t really happen. There are new facts on the ground and not just ones created by Trump.
Another issue that this article politely underplays is how our internal fractures are hurting our credibility abroad. Again, it’s convenient to blame this on Trump, but it’s probably more accurate to see him as an accelerant. For instance, Matt Taibbi has described how the media embraced narrowcasting and stoking rage and fear among target audiences as effective strategies to win loyalty. Trump is a perfect product.
It’s also rich to see the authors finger-shake

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Citi’s Recidivist Rule-Breaking and Incompetence Shows Persistence of Too Big/Complex to Fail Problem

18 days ago

Remember how lots of people, from Elizabeth Warren to Trump, and many before them, have called for breaking up the big banks? And that that hasn’t happened? We’ll use the latest round of regulatory wet-noodle lashing of Citigroup, the poster child of “too big to fail,” to help illuminate the supposed impediments to breaking up Big Tech.
We’re now seeing a rehash of the “too complex to break up” assertions with the antitrust debates over Big Tech in the EU and even now in Congress. For instance, from tonight’s Wall Street Journal:
Days before, Facebook Inc. produced its own document contending that breaking it up would be a “nonstarter” for a number of reasons, including that the company’s constituent parts are already too complicated and interconnected for any of them—Instagram, WhatsApp,

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Michael Klare: How the US Plays Nuclear Chicken with Russia and China

18 days ago

Yves here. Nuclear eye-poking isn’t the action of a responsible, calculating player. The only rationale I can think of is when Henry Kissinger played up Richard Nixon as unpredictable and dangerous, since Kissinger thought that presenting Nixon as dangerously quick-trigger might help win concessions. But it’s one thing to engage in provocations as proof that a leader is hot-headed, and quite another to make it national strategy.
Needless to say, nuclear posturing with Russia doesn’t go well with the Dem insistence that Hair Furore is a great buddy of Putin.
By Michael T. Klare, the five-college professor emeritus of peace and world security studies at Hampshire College and a senior visiting fellow at the Arms Control Association. He is the author of 15 books, the latest of which is All

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Links 10/10/2020

20 days ago

Eco-friendly shark barrier invented in South Africa Getaway (David L)
Memristor Breakthrough: First Single Device To Act Like a Neuron IEEE Spectrum (Chuck L)
The Plastic Pandemic Reuters (Bob H)
Silent Rooftop Wind Turbines Could Generate Half of a Household’s Energy Needs TreeHugger (David L)
Vermont to legalize recreational marijuana The Hill
‘Rapid evolution’ means humans now being born without wisdom teeth Independent (Kevin W)
U.S. Crop Report Signals Worsening Global Food-Insecurity Crisis Bloomberg
Thinning forests no defence against fires PhysOrg (Robert M)
#COVID-19
Witches Are Trying to Figure Out Whose Spell Gave Trump COVID-19 Vice (resilc)
Science/Medicine
Trump Feasts On Deep-Fried Fetus After Learning Antibody Treatment Derived From Stem Cells The Onion
Covax: Covid vaccine

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Pandemic Erects Barriers for Prized Bloc of Voters in Nursing Homes, Senior Facilities

20 days ago

Yves here. I would assume these retirement facility residents aren’t normally polled, so I wonder how they are included in voter models. But regardless, it’s inexcusable that they are being disenfranchised. Why isn’t the League of Women Voters insisting on 15 minutes of free air time at a Death Valley hour that seniors could watch, on a cheap cable channel like MeTV? And if they can’t get it donated, why isn’t some squillionaire like Mike Bloomberg willing to fund it? These problems are solvable, at least in big and medium sized cities, but no one cares to address it.
By Rachel Bluth, Correspondent for California Healthline, who has written for NPR.org and PBS.org. She was previously the lead political correspondent for the Annapolis Bureau of Capital News Service. Originally published at

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Rana Foroohar and Mark Blyth: How Deep Will the Depression Get?

20 days ago

Yves here. There’s a lot to like about this interview with Rana Foroohar and Mark Blyth, yet there are some odd sour notes. For instance, Blyth repeats what is essentially a Democratic party stereotype about Trump voters, that they are Rust Belt victims of manufacturing loss. As we have repeatedly stressed, the average household income of Trump voters was substantially higher than that of Clinton voters: $72,000 versus $61,000. We’ve linked repeatedly to the Washington Post article, It’s time to bust the myth: Most Trump voters were not working class.
By Paul Jay. Originally published at TheAnalysis.net

[embedded content]
Paul Jay
Hi, I’m Paul Jay, and welcome to theAnalysis.news podcast. Don’t forget; we need you to click the donate button if you haven’t already because, without your

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‘A Definite and Sustained Increase’: Europe Leads Record Single-Day Worldwide Covid-19 Infection Surge

20 days ago

Yves here. While it is difficult to keep on top of the state and nation-level Covid trends, the uptick in Covid-19 cases in Europe looks to be more than just a blip. It may also be a “Winter is coming” level warning.
While infection levels didn’t fall off in the US in the summer, due mainly to ending many lockdowns too early and mask refusnik-dom in the South, in Europe, summer weather likely did play a part in the fall in infection levels.
If you expect to be spending a fair bit of time in your house this winter and you have a bit of free cash, consider getting humidifiers. Dry winter air increases vulnerability to respiratory infections. And in a bit of synchronicity, my very own NYC MD confirms that point in the first article I found on Google.
By Brett Wilkins, a staff writer for

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CalPERS CEO Marcie Frost Says She’s Not in Charge and Lies to the Board About Receiving a Warning from the Fair Political Practices Commission

21 days ago

One of our favorite headlines was about the HUD Secretary during the foreclosure crisis: Memo to Shaun Donovan: Your Nose is Getting So Long You Need to Get a Hacksaw. We’ve resisted the temptation to reprise it with CalPERS CEO Marcie Frost as the Pinocchio wannabe. But yet another incident of Frost’s casual lying shows it to fit.
Readers may recall that former CalPERS board member JJ Jelincic filed complaints with the Fair Political Practices Commission with respect to board member Theresa Taylor’s failure to report over $30,000 of income, as required under California law. From a July post:
As we’ll show, Taylor has made a cut-and-dried violation of California requirements for California officials to report all income and assets received from non-government sources in their jurisdiction.

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Covid-19 and the Global Addiction to Cheap Migrant Labor

23 days ago

This is Naked Capitalism fundraising week. 1729 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, or PayPal. Read about why we’re doing this fundraiser, what we’ve accomplished in the last year, and our current goal, more original reporting.
Yves here. Mike Elk of the PayDay Report has done an extraordinary job of chronicling strikes, particularly Covid-19 related ones. By contrast, for the most part, the US press acknowledges the importance of “essential workers” and the disconnect between their lynchpin roles, their typically modest pay, and the inadequate adjustments of their environment and/or pay in

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Links 10/6/2020

24 days ago

This is Naked Capitalism fundraising week. 1722 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, or PayPal. Read about why we’re doing this fundraiser, what we’ve accomplished in the last year, and our current goal, more original reporting.
Tasmanian Devils reintroduced into Australian wild BBC (resilc)
America’s Rapid Feral Hog Problem Is Creating a ‘Super-Pig’ Uprising Popular Mechanics
How Reykjavik’s Sheet-Metal Homes Beat the Icelandic Winter Bloomberg (UserFriendly)
Study Shows Renewables Are Kicking Natural Gas To the Curb cleantechnica
Boris Johnson to unveil plan to power all UK homes with wind

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