Time: Almanac 2009

961 Pages·2008·26.26 MB·English

by  Editors of Time Magazine

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A L M A N A C
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TABLEOFCONTENTS 3
YearinReview
LifeonEarth..........................188
Features
Animals.............................188
TheSupremeCourt’sGroupHug..........5 Plants..............................189
byJeffreyRosen,TIME Geology.............................191
Libertarians:A(NotSo)LunaticFringe......6 PreservingNature......................199
byNathanThornburgh,TIME
Health................................200
Biofuels—TheNextGreatSource ..........7
DietandExercise.....................207
ofEnergy?
byClarenceLehman
SubprimeMortgages:ACatalystfor........8 World
GlobalChaos
byJanetH.Clark TheGhostsoftheBalkans...............217
TheGulfStates’ConstructionBoom .......9 bySamanthaPower,TIMEcolumnist,
byJohnDukeAnthony andtheTIMEstaff
Chronology,July2007–June2008 CountriesoftheWorld..................218
MonthbyMonth.......................11
Disasters,July2007–June2008 FLAGS.............................PLATES1–6
MonthbyMonth.......................30 MAPS.............................PLATES7–16
RulersandRegimes....................548
People
Populations...........................562
TheTIME100,2008.....................35
LanguagesoftheWorld.................564
CelebritiesandNewsmakers..............37
Scholarship...........................565
Obituaries..............................76
Religion ..............................567
The2008AnnualMegacensusof
Awards Religions............................568
Law&Crime ..........................574
TIME’sTop100Films....................89
MilitaryAffairs.........................577
TIME’sPersonoftheYear,1927–2007.....90
NobelPrizes............................91
SpecialAchievementAwards.............104 UnitedStates
ScienceHonors........................110 USPresidentialElectionof2008..........579
byJamesCarney(McCain)and
MichaelWeiskopf(Obama)
Nature,Science,Medicine,&Technology
History...............................581
OurSuper-SizedKids ...................117 UnitedStatesChronology..............581
byJeffreyKlugerandBryanWalsh,TIME ImportantDocumentsinUSHistory.....584
Time.................................119 Government...........................596
TheUniverse..........................127 ThePresidency ......................596
Cosmogony..........................127 TheSupremeCourt...................624
Constellations.......................129 TheCongress........................627
AstronomicalPhenomenafor2009 .....135 TheSenate .......................627
TheHouseofRepresentatives........630
MeasurementsandNumbers ............154
MilitaryAffairs.........................638
AppliedScience........................165
Population............................645
Communications.......................166
TheStatesandOtherAreas..............653
AerospaceTechnology ..................167
StateGovernment......................682
SpaceExploration....................167
SpaceExplorationFirsts...............171 Cities.................................687
AirTravel..............................172 LawandCrime.........................689
Meteorology...........................174 Society...............................696
GeologicDisasters .....................178 Family..............................696
Education...........................699
CivilEngineering.......................180
4 TABLEOFCONTENTS
Business Sport
TheNewPresident’sEconomyProblem....701 SportingCodesforCountries.............783
byJustinFox,TIME
TheOlympicGames ....................785
USEconomy...........................703
SpecialOlympics.......................849
Energy..............................705
AutomobileRacing .....................849
TravelandTourism .....................706
Baseball..............................851
Employment...........................709
Basketball............................856
ConsumerPrices.......................719
BilliardGames.........................860
USBudget............................721
Bowling...............................861
USTaxes..............................724
Chess................................863
Cricket ...............................864
Arts,Entertainment,&Leisure Curling...............................865
Hollywood’s800-lb.GoldenGorilla........727 Cycling...............................865
byRichardCorliss,TIME Football ..............................868
MotionPictures........................729 US.................................869
AcademyAwards.....................729 Canadian...........................875
Australian...........................875
Television.............................746 Rugby..............................875
AssociationFootball(Soccer)...........876
EmmyAwards .......................746
Golf..................................880
Theater...............................749
HorseRacing..........................886
TonyAwards.........................749
EncyclopædiaBritannica’s IceHockey............................895
25NotableUSTheaterCompanies....752
Marathon.............................898
Music................................752
Rodeo................................901
GrammyAwards......................752
EncyclopædiaBritannica’s Skiing................................902
25World-ClassOrchestras...........758 SledDogRacing.......................906
EncyclopædiaBritannica’s
Top25OperaCompanies............759 Swimming ............................907
Pageants.............................759 Tennis................................912
ArtsandLettersAwards.................761 Track&Field..........................927
PulitzerPrizes .......................761 Volleyball.............................936
ArchitectureAwards ....................781 WeightLifting..........................936
SpecialHonors ........................782 INDEX....................................938
The Supreme Court’s Group Hug
byJeffreyRosen,TIME
The biggest surprise from the Supreme Court about “the personalization of judicial politics,”
termthatjustended:BarackObamaheartsthe wherebypeopleidentifytheruleoflawwiththeway
Robertscourt.AttheendofJune,theDemocra- individualjusticesvoteincloselydividedcases.
ticcandidatepraisedJusticeAntoninScalia’s5–4de- Embracing as a model his greatest predecessor,
cisionstrikingdowntheWashingtonbanonhandgun JohnMarshall,Robertssaidhewouldusehispower
possession,arulingthatrecognizestherighttobear toassignmajorityopinionstopromotenarrowdeci-
armsasanindividualright.Twoweeksearlier,from sionsagreedtobywide,bipartisanmajoritiesrather
the other side of the ideological spectrum, Obama thanbypolarizing5–4splits.Onanevenlydivided
praisedJusticeAnthonyKennedy’s5–4decisional- court,Robertsfelthecouldconvincetheliberaland
lowingenemycombatantstochallengetheirdeten- conservativecampsthatconvergingonnarrowopin-
tionsinfederalcourts,arebuketotheBushadminis- ionswasineveryone’sinterest.
tration’s policies toward Guantánamo detainees. Duringhisfirstterm,whichendedin2006,Roberts
Obama’sonlymajorquarrelwiththecourtwasthe managedtoavoid5–4splits—forthemostpart,he
5–4decisionbanningtheexecutionofpeoplewho said,becausehiscolleagueswereeagertobeniceto
rapechildren:hesaidhehaslongbelievedthat“the thenewcomer,likeprospectivein-lawsmeetingafi-
mostegregiousofcrimes”deservethedeathpenalty. ancéforthefirsttimeatThanksgiving.Thenthehon-
WhenaleadingDemocratiscriticizingtheSupreme eymoonended.Whenvariousjusticeswereaskedin
Courtfornotbeingconservativeenough,it’stimefor 2007whethertheythoughtRobertscouldrebuildan
liberalstobreatheasighofrelief. atmosphereofbipartisanharmony,theywerehardly
It’struethattheremaybesomeelection-yearpan- encouraging. Scalia scoffed, “Good luck!” Justice
deringinObama’sembraceofacourtthatmanypre- StephenBreyersuggestedRobertscouldbestfoster
dicted would veer to the right under Chief Justice comitybyjoiningBreyer’sopinions.Kennedyhada
JohnRoberts.Butbyanymeasure,thetermthatjust similarresponse:“Justletmewritealltheopinions!”
endedwashardlyadisasterforliberals.Onthecon- Andyet,inhisthirdterm,Robertshasachievedwhat
trary, liberals won several important victories—not hiscolleagueshadthoughtwasnearlyimpossible.His
onlytheGuantánamoandchild-rapecasesbutalsoa successisareminderoftheimportanceofpersonal-
seriesofemployment-discriminationcasesinwhich itywhenitcomestoleadershipontheSupremeCourt,
thecourtsidedwithworkersratherthanemployers, inwhichthequirksandtemperamentsofindividual
bybroad,bipartisanmajorities. justices are as important as judicial philosophy in
Indeed,thecourt’stermwassomethingofagroup shaping the law. Roberts told me that he thought
hug between the liberal and conservative justices. muchofMarshall’ssuccesswasduetothefactthat
The Supremes were far less divided than they his colleagues liked and trusted him. Marshall per-
seemedin2007,whentheysnipedatoneanotherin suadedthejustices,atthebeginningofthe19thcen-
unusuallypersonalterms.Despitesomehigh-profile tury,toliveinthesameboardinghouseanddiscuss
splitsattheend,only17%ofthecasesweredecided casesoverglassesofhisexcellentMadeira.
by5–4votes—downsharplyfromthepreviousterm, Roberts’ssuccessisalsoareminderofthechief
inwhich33%ofthecaseswere5–4splits.Casesup- justice’slimitedbutrealpower:asthejusticewho
holdingvoter-IDrequirements,executionbylethalin- speaksfirstatthecourt’sprivateconference,hecan
jection,federaleffortstocurbchildpornography,and frametheissuesandinfluencethekindsofcases
thedetentionofAmericancitizensinIraqwerede- thatthecourtagreestohearinthefirstplace.Under
cidedunanimouslyorbylopsidedmajorities. Roberts’sleadership,thecourthasagreedtohear
So,whatexplainsthenewmoodofbipartisanhar- fewerpolarizingconstitutionalcasesandmorecases
monyontheRobertscourt?Atleastsomeofthecredit ofinteresttobusiness,whichthejusticesaremorein-
goestoRoberts’spersonalityandleadershipstyle. clined to resolve without dividing along ideological
Hewentoutofhiswaytopersuadehiscolleaguesto lines.Ofthe15casesinwhichtheUSChamberof
turndownthevolumeandlightenupwhentheydis- Commercefiledbriefsthisyear,80%weredecidedby
agreed,evenspicinguphisdissentinatechnicaltele- 7–2orhigher,andathirdwereunanimous.
comdisputebyborrowingplayfullyfromBobDylan’s Roberts told me that he thinks that bipartisan
“LikeaRollingStone”:“Whenyougotnothing,yougot agreement in the less-visible business cases can
nothingtolose.” helpdevelopa“cultureandanethosthatsays,‘It’s
AccordingtoScalia,Robertshasusedhispowerto goodwhenwe’realltogether.’”AsignofRoberts’s
assignopinionswhenhe’sinthemajoritytoencour- successinputtinghisstamponthecourt:hewasin
agehiscolleaguestowritenarrowdecisionsthatJus- themajorityin90%ofthecasesthisterm,morefre-
ticesonbothsidescanaccept.“Thechiefmaysay, quentlythananyotherjustice.
‘Whydon’tyoucomealongwithaverynarrowopin- Howlongwillthechangedmoodlast?Theroleofper-
ion?Wecangetsevenvotesforthat,anditwilllook sonality on the Supreme Court shouldn’t be over-
alotbetter,’”ScaliasaidonTheCharlieRoseShow. stated.Incasesinwhichtheyhavestrong,preexisting
“You want to go along with the chief justice be- constitutionalviewsonissuesfromabortiontoguns
cause…youwanttomaketheinstitutionwork.” toGuantánamo,thejusticesareunlikelytopersuade
This, as it happens, is precisely what Roberts oneanother.That’swhy,regardlessofRoberts’scur-
promisedtodoatthebeginningofhistenure.InJuly rentconsensusbuilding,thefutureofthecourtwillbe
2006,Robertstoldjournaliststhathewasworried determinedbythe2008presidentialelection.
6 YEARINREVIEW
Libertarians: A (Not So) Lunatic Fringe
byNathanThornburgh,TIME
Withhisbellyhidinghisbelt,withhisredsus- ithasatemple,itisNevada.It’snotjustthelowtaxes
pendersandwhitebeard,GlenParshallisa orthelibertineveneerofLasVegas;Nevadaisfree,I
deadringerforSantaClaus,exceptforthe wastold,inpartbecausesomuchofitispopulated
snub-nosed pistol he keeps tucked in his back byanunbrokenandunbowedcasteofranchers,min-
pocket.Parshallspendshisdaysbehindtheguncage ers,andhomesteaderswhobelieveintheprimacyof
of Bargain Pawn, in a roughneck North Las Vegas privateproperty.
neighborhoodlitteredwithhomelessencampments, As you might guess, things that come between a
Catholiccharities,andpawnshops.It’snoBellagio. Nevadanandhislanddon’tsitwell,andoverthepast
Butheisagentlemanwhotreatshiscustomerswith decade,there’sbeennothingmoredisruptivethan
respect,whetherhoodlumorhomeowner.Heknows theenvironmentalmovement’sgoodintentions.Nye
everythingthereistoknowaboutweaponsandisa countyrancherJimBerg,68,doesn’tcallhimselfa
sticklerforthebyzantinerulesofgunownership—the libertarian,buthethinkstheGOPhaslostitswillto
waitingperiods,thebackgroundchecks,theATFcall- keepthegovernmentfromaffectinghislivelihood.He
backsandinformationrequests. has plenty of war stories about his county’s show-
Butjustbecauseheobeystherulesdoesn’tmean downswiththefederalgovernment,includinga1991
helikesthem.Parshallisdissatisfiedwithalotof standoffwhenarmedfederalescametoconfiscate
whatgovernmentdoes.Hehatesourgunlaws.Hates cattlebelongingtoaneighboringrancherwhohadlet
thewarinIraq.Hedoesn’tusedrugs,butheseesthe hisherdgrazeonoff-limitsfederalland.TheForest
fight against them as another government power ServicegotsomeofBerg’scattleinthedragnet,auc-
grab.GrowingupasaMormoninSaltLakeCity,Par- tionedthemoff,andkepttheproceeds.“Theywanted
shallwasaBarryGoldwaterRepublican.Nowhe’sthe trouble that day,” he says. “Why else would you
kindofvoterwhoshouldscaretheGOPmost—and gather another man’s cattle with 25 to 30 armed
he’snotalone. men?”
Maybeyouhaven’theard,but2008istheyearof Thereisalotinthecomplaintsinthelibertarian
freedom.FirsttherewastheRonPaulrevolution,in heartlandthatsoundslikenostalgiaforanidealized
whichanavuncular10-termrepresentativefromBra- Americanpast.JimBergwilltellyouaboutgrazing-
zoriacounty,Texas,raisedmorethanUS$34million rightsgrievances,buthe’sjustasquicktolamentthe
as a pseudo-Republican candidate, garnered more deathoftheranchinglifestyle.“Mygrandkidshave
thanamillionprimaryvotes,andoutperformedRudy scatteredlikequail,”hesays.“They’veallgonecity.”
GiulianiandFredThompson,allonthebackofaget- Thissensethatprogresshasgonetoofarandtoo
government-off-my-backplatform. fastunitesalargeswathoflibertariansfromcoastto
Nowthere’stheLibertarianParty,whichsoldalittle coast. To many, modernity just means having our
bitofitshard-lineliberty-lovingsoulinexchangefor dailylivesruledbymechanismsthathavegrownso
themostrespectablecandidateithaseverhad:re- complexthattheyarebeyondcomprehensionorcon-
cently converted former Republican congressman trol.It’sanotionthatbondsanti-WTOprogressives
BobBarr. andanti-UNconservativesalike—andifthepartyhas
Since2000,Libertariancandidateshavepeeledoff anyrealhopeofbecomingpowerful,thoseseemingly
enoughvotesfromRepublicancongressionalcandi- disparatepointsonthepoliticalcontinuumwillhave
datestocostthepartyracesinWashington,Nevada, togetcloser.
Montana,and,mostrecently,Louisiana.Butifany- It’stemptingtothinkoflibertarianismasnothing
thing,theGOPplatformhasgrownmorecommitted morethanold-schoolRepublicanism,butit’salways
toforeignmilitaryinterventionanddomesticmoraliz- beenpartiallyleft-wing,drawingfromalonghistoryof
ing.TheselectionofJohnMcCainwasafinalinsult— American anarchism. The modern challenge is to
mostlibertariansviewhim,fairlyornot,aspro-war, unitethosetwowings—or,asmagician(andstalwart
anti-gun, pro-environmentalism, and anti–free libertarian)PennJillettetoldme,“Convincethedope
speech(thankstohisadvocacyforcampaign-finance guysthatthegunguysareOK,andviceversa.”And
reform).InNevada,McCaincameinthirdintheGOP many libertarians believe the time is now. It helps
primary,behindMittRomneyandRonPaul.Whenthe thattheUShasbeenthrottledforacenturybytwo
stateGOPtriedtocrownMcCainatitsRenoconven- partieswhosecoredifferencesarenarrowing.Foran
tioninApril,somanyPaulsupportersshowedupthat electoratehavingahardertimedistinguishingCoke
party leaders literally fled the hall, turned off the fromPepsi,there’sathirstforsomething—anything—
lights,andpostponedtheconvention. new.
LandofLiberty.Thecentralgoaloflibertarianismis The things libertarians care about—being able to
hardtodisagreewith:freedom.Definingitisanother gamblelegallyviatheirhomecomputers,continuing
matter.PartymembersI’vemetoftenspeakoffree- tohomeschooltheirkidswithoutmuchinterference,
domasifitwereaphantomlimb:you’rebornwithit, keepingtaxeslow—speaktoalotofAmericans.Ifthe
butitgetstakenfromyoubythebureaucraticvio- oldpartywascobbledtogetherfromhard-linestrains
lenceoftheEPA,theATF,theDOE,theDEA,theUN, of voluntarianism, propertarianism, and paleoliber-
NCLB, NAFTA, and—above all—the IRS. Freedom’s tarianism, the new Libertarian Party is essentially
restoration is the magic moment when the nanny suburbanarianism.
statemeltsawayandyoucanseethelifeyouwere Votersalienatedbyourcalcifiedpartysystemmay
supposedtolivebeforethetaxauditorsandenviron- findintheLibertariansapartythat’salotlikeGlen
mentalregulatorsanddrugwarriorsallcametorope, Parshall—armedtotheteethbutwithagentlelogic
brand,andpenyouinforlifewiththeirendlessrule andacontagiousenthusiasmforfreedominallits
makingandintrusions. forms. Libertarians are getting ready for the main-
IfthefreedomthatlivesintheLibertarianimagina- stream, and mainstream America may finally be
tionhasanearthlyhome,itistheAmericanWest.If readyforthem.
YEARINREVIEW 7
Biofuels—The Next Great Source of Energy?
byClarenceLehman
Aboom in the production of biofuel was under frombiomassthathasahighcontentofcellulose.
way in 2007, especially in the United States, Thiscellulosicethanolcouldbeproducedfromabun-
where in January about 75 refineries for pro- dant low-value material, including wood chips,
ducing the biofuel ethanol from corn (maize) were grasses,cropresidues,andmunicipalwaste.Themix
being built or expanded. This construction, not in- ofcommerciallyusedbiofuelswillundoubtedlyshift
cludingadditionalfacilitiesonthedrawingboard,was asthesefuelsaredeveloped,buttherangeofpossi-
expected to double existing capacity, and the de- bilitiespresentlyknowncouldfurnishpowerfortrans-
mandforcornpusheditspricesohighthatAmerican portation,heating,cooling,andelectricity.
farmersplantedmorelandwiththecropthanthey Inevaluatingtheeconomicbenefitsofbiofuels,the
hadinageneration.Biofuelwasperceivedasaben- energyrequiredforproducingthemhastobetaken
eficialalternativetopetroleumandotherfossilfuels intoaccount.Forexample,ingrowingcorntoproduce
as the price of petroleum rose during the year to ethanol,fossilfuelsareconsumedinfarming-equip-
recordlevelsandworldwideconcernincreasedabout mentuse,infertilizermanufacturing,incorntrans-
how greenhouse-gas emissions from petroleum-de- portation,andinethanoldistillation.Inthisrespect
rivedfuelswerecontributingtoclimatechangeinthe ethanolmadefromcornrepresentsarelativelysmall
form of global warming. Despite its perceived eco- energy gain; the energy gain from sugarcane is
nomic and environmental benefits, however, many greaterandthatfromcellulosicethanolcouldbeeven
criticswereexpressingconcernsaboutthescopeof greater.Biofuelssupplyenvironmentalbenefitsbut,
theexpansionofcertainbiofuelsbecauseoftheirpo- dependingontheirimplementation,canalsohavese-
tentialtocreatenewproblems. rious drawbacks. As a renewable energy source,
Biofuelsarefuelsthatarederivedfrombiomass— plant-basedbiofuelsinprinciplemakelittlenetcon-
thatis,plantmaterialoranimalwaste.Sincesuch tributiontothegreenhouseeffectbecausethecar-
materialscanbereplenishedreadily,biofuelsarea bondioxide(amajorgreenhousegas)thatentersthe
renewable source of en- airduringcombustionwill
ergy, unlike fossil fuels, “ have been removed from
such as petroleum, coal, In March the US De- the air earlier when the
and natural gas. Some combustiblematerialgrew.
long-exploited biofuels, partment of Energy an- Suchamaterialissaidto
such as wood, can be becarbon-neutral.Inprac-
useddirectlyasarawma- nounced that it would be tice, however, the indus-
terial that is burned to trialproductionofagricul-
produceheat.Theheat,in investing as much as turalbiofuelscanresultin
turn,canbeusedtorun additional emissions of
generators in a power US$385 million in six greenhousegasesthatcan
planttoproduceelectric- offsetthebenefitsofusing
ity. A number of existing refineries for cellulosic a renewable fuel. These
power facilities burn ” emissions include carbon
grass, wood, or other ethanol. dioxidefromtheburningof
kindsofbiomass. fossilfuelstoproducethe
Liquid biofuels are of biofuel and nitrous oxide
particular interest be- from soil that has been
cause of the vast infra- treatedwithnitrogenfertil-
structurealreadyinplacetousethem,especiallyfor izer.Inthisregard,cellulosicbiomassisconsideredto
transportation.Theliquidbiofuelingreatestproduc- bemorebeneficial.
tion is ethanol (an alcohol), which is made by fer- Landuseisalsoamajorfactorinevaluatingthe
menting starch or sugar. In the United States—the benefitsofbiofuels.Cornandsoybeansareimpor-
leadingproducer—ethanolbiofuelismadeprimarily tantfoods,andtheiruseinproducingfuelcanthere-
from corn grain, and it typically is blended with foreaffecttheeconomicsoffoodpriceandavailabil-
gasoline to produce a fuel that is 10% ethanol. In ity.In2007aboutone-fifthofUScornoutputwas
Brazil, which had been the leading producer until usedforbiofuel,andonestudyshowedthatevenif
2006,ethanolbiofuelismadeprimarilyfromsugar- allUScornlandwasusedtoproduceethanol,itcould
cane, and it is commonly used as 100% ethanol replace just 12% of gasoline consumption. Crops
fuelor in gasolineblendscontaining85% ethanol. grownforbiofuelcanalsocompetefortheworld’s
Thesecondmostcommonliquidbiofuelisbiodiesel, naturalhabitats.Forexample,emphasisonethanol
which is made primarily from oily plants (such as derivedfromcornisshiftinggrasslandsandbrush-
thesoybeanoroilpalm)andtoalesserextentfrom lands to corn monocultures, and emphasis on
othersources(suchascookingwastefromrestau- biodieselisbringingdownancienttropicalforeststo
rants). Biodiesel, which has found greatest accep- makewayforpalmplantations.Lossofnaturalhabi-
tanceinEurope,isusedindieselengines,usually tatcanchangehydrology,increaseerosion,andgen-
blended with petroleum diesel in various percent- erally reduce biodiversity and wildlife areas. The
ages. clearingoflandcanalsoresultinthesuddenrelease
Otherbiofuelsincludemethanegas,whichcanbe ofalargeamountofcarbondioxideastheplantmat-
derivedfromthedecompositionofbiomassintheab- teritcontaineddecays.
sence of oxygen, and methanol, butanol, and di- Someofthedisadvantagesapplymainlytolow-di-
methylether,whichareindevelopment.Muchfocus versity biofuel sources—corn, soybeans, sugarcane,
isonthedevelopmentofmethodstoproduceethanol oilpalms—whicharetraditionalagriculturalcrops.An
8 YEARINREVIEW
alternativerecentlyproposedwouldusehigh-diversity liters(21billiongallons)oftheamountbebiofuels
mixtures of species, with the North American tall- otherthancorn-derivedethanol.Inadditionthelaw
grass prairie as a specific example. Converting de- continuedgovernmentsubsidiesandtaxincentives
gradedagriculturallandpresentlyoutofproduction for biofuel production. Some observers hoped that
tosuchhigh-diversitybiofuelscouldincreasewildlife the law would encourage the commercialization of
area,reduceerosion,cleansewaterbornepollutants, technologyforproducingcellulosicethanol,forwhich
store carbon dioxide from the air as carbon com- there were a number of pilot plants in the United
poundsinthesoil,andultimatelyrestorefertilityto States.
degradedlands.Suchbiofuelscouldbeburneddi- The distinctive promise of biofuels not shared by
rectly to generate electricity or converted to liquid other forms of renewable energy, such as solar
fuelsastechnologiesdevelop. power,isthatincombinationwithanemergingtech-
Theproperwaytogrowbiofuelstoserveallneeds nology called carbon capture and storage, biofuels
simultaneouslywillcontinuetobeamatterofmuch arecapableofperpetuallyremovingcarbondioxide
experimentationanddebate,butthefastgrowthin from the atmosphere. Under this vision biofuels
biofuel production will likely continue. In the Euro- would remove carbon dioxide from the air as they
pean Union, for example, 5.75% of transport fuels grew,energyfacilitieswouldcapturethatcarbondiox-
aretobebiofuelsby2010,with10%ofitsvehicles idewhenthebiofuelswerelaterburnedforpower,
torunexclusivelyonbiofuelsby2020.InDecember andthenthecapturedcarbondioxidewouldbese-
2007USPres.GeorgeW.Bushsignedintolawthe questered(stored)inlong-termrepositoriessuchas
EnergyIndependenceandSecurityAct,whichman- geologicformationsbeneaththeland,insediments
datedtheuseof136billionliters(36billiongallons) ofthedeepocean,orconceivablyassolidssuchas
ofbiofuelsannuallyby2020,morethanasixfoldin- carbonates.Withproperplanning,therefore,biofuels
creaseover2006productionlevels.Thelegislation havethepotentialtohelpcreatetheconditionsnec-
required, with certain stipulations, that 79 billion essaryforasustainableworld.
ClarenceLehmanisanAdjunctProfessorintheDepartmentofEcology,Evolution,andBehaviorattheUni-
versityofMinnesota.
Subprime Mortgages: A Catalyst for Global Chaos
byJanetH.Clark
Oneversionofchaostheoryopinesthatabut- fundingcostsandthewidespreadbeliefthatifbor-
terfly flapping its wings in Beijing could pro- rowerscouldnotmaintainloanrepayments,theprop-
duceachangeinatmosphericpressurethatin erties could be repossessed and resold at much
turncouldcauseatornadoinKansas.This“butterfly higher prices. Credit standards were lowered, and
effect”graphicallydemonstratesthetheorywhereby manyloansweremadetohigh-riskborrowers,includ-
a small change in one area can cause a chain of ing those in low-income minority areas, who might
eventsthatleadstoamajoreffectsomewhereelse. otherwise have been excluded from the market. It
Soitwasin2007whenlossesinthesubprime-mort- wasestimatedthatUS$450billion,or30%,ofout-
gage sector in the US standing subprime loans
led to downturns in wereadjustable-ratemort-
“
many housing markets In the financial sector, gages in which the repay-
around the world, fol- mentratehadbeensetfor
lowedbyawidespread Countrywide Financial, two years before being
tighteningofcreditand reset at higher interest
turmoil in international the largest mortgage rates (plus a margin) in
financialmarkets. 2007and2008.Therapid
Earlyintheyear,there lender in the US, reported increase in interest rates
was growing concern by the Federal Reserve
abouttheriseinmort- a third-quarter loss of (Fed)from1%inmid-2004
gagedefaultsintheUS to 5.25% in mid-2006
housing market and US$1.2 billion, its first meant that by midyear
fearsofaUSrecession, 2007 a rising number of
”
which resulted in a loss in 25 years. the estimated six million
global sell-off in equi- subprime borrowers were
ties in February. Over defaulting on their mort-
thepastdecade,strong gage payments, and their
economicgrowth,mod- homes were being repos-
erateinflation,andlow sessed.Combinedwithan
interestrateshadencouragedhomeownershipinthe absenceofnewbuyers(deterredbythehigherinter-
USandotherdevelopedcountries,whilethestrong estrates),thisledtoaslumpinthehousingmarket.
riseinhousevaluesmadepropertyanattractivein- InAugustsalesofnewhomesweredown21%over
vestmenttomorepeople,includingthosewithpoor theyear,andthedeclinewasdeepening.Astheyear
creditrecordsandlowincomes,whocouldnotqual- progressed,itbecameincreasinglyclearthattheUS
ify for prime-rate loans from mainstream lenders. problem had global implications and could not be
Thisledtoanincreaseinthecompetitivenessand contained.Thiswasbecausemuchofthemortgage
proliferationofsubprime-mortgagelendersandbro- debt had been rolled into bonds, called mortgage-
kers.Confidenceamonglenderswasboostedbylow backedsecurities,andthenrebundled(togetherwith
YEARINREVIEW 9
lower-riskassets)byinvestmentbankersinorderto money,withanadditional£18billion(aboutUS$37
gainahighercredit-riskrating.Theapparentlyless- billion)indepositsbeingunderwrittenbythegovern-
riskybondswerethensoldtootherinvestorsonthe ment.
wholesalemoneymarketascollateralizeddebtobli- InJunetheUSinvestmentbankBearStearnsan-
gations(CDOs).ThemarketforCDOswasextremely nouncedthattwoofitshedgefunds,whichinvested
buoyant, and banks, pension funds, hedge funds, insubprime-relateddebt,hadregisteredlargelosses.
andotherinvestorsallovertheworldboughtthem. InMarch2008thecompanywasacquiredbyJPMor-
Crucially,thecomplexstructureofthemarketmadeit ganChaseforafractionofitsvalueinrecentyears.
difficulttoknowwhowasholdingthedebtandwhere TheFedbackedthedealwithaUS$30billiondollar
itwasintheworldfinancialsystem. loanandbyloweringitskeydiscountrateofinterest.
Bymidyear2007,housingmarketsinmanycoun- Otherfunds,locatedasfarawayasAustralia,alsoan-
trieswerebeginningtofalterandhousepricestofall. nounced losses and froze redemptions. Securities
HousepricesinmanyotherWesternindustrialcoun- backedbysubprimemortgageswerealsobeingused
trieshadrisenfasterthanintheUS(up103%)over ascollateralformoreborrowingandwereputtingad-
thepreviousdecade,ledbyIreland(up253%),theUK ditionalpressureonfinancialmarkets.InJulythere
(194%), Spain (173%), France (137%), Australia wereincreasingworriesabouttheexposureofsev-
(135%),Sweden(124%),Denmark(115%),andNew eral state-owned German banks to subprime debt,
Zealand(105%).Thesupplyofhousesin2005–06 andinearlyAugusttheFrenchbankBNPParibasan-
hadacceleratedsharplycomparedwith10yearsear- nouncedthatitwassuspendingfundsinvestedinUS
lier;againitincreasedfastestinIreland(up210%), subprime-relatedmortgagesbecauseofthedifficulty
Spain(115%),Sweden(113%),andDenmark(76%). of valuing the underlying assets. Markets were
In the UK the number of mortgages approved for stunned on 9 August when the European Central
homebuyersfellforthethirdstraightmonth,andat Bankintervenedwithanunprecedentedofferofun-
justover44,000inOctober2007,itreachedarecord limitedshort-termloanstothebankingsystem.Itin-
low.Theincreasedcostofmortgages—combinedwith jected>130billion(aboutUS$179billion)inorderto
therejectionofoneinthreemortgageapplicants— avertapotentialliquiditycrisiswhenovernightinter-
contributedtoadeclineinthenumberofbuyersfor estratesroseto4.7%,exceedingthe4%cap.The
11straightmonths.Therateofrepossessionsinthe FedmadeamoremodestinterventionofUS$24bil-
UKwasaccelerating,withnearly30,000reposses- lion. Further injections of funds continued, and in
sionordersinthethirdquarterof2007. mid-DecembercentralbanksgavearecordUS$530
IntheUK,NorthernRockhadtobebailedoutbythe billiontoboostliquidityincreditmarkets.
BankofEnglandinSeptemberandwasthefocusof Towardtheendoftheyear,sharpdeclinesinthe
continuing attention. Northern Rock was the UK’s valueofthedollaragainstallmajorcurrenciesraised
eighth largest bank and fifth biggest mortgage concernsofinflationintheUS,wheretherateofcon-
lender,accountingforoneinfiveUKmortgages.The sumerpriceincreaseswasalreadyaccelerating.This
bankhadpioneeredthesecuritizationofmortgages limitedtheFed’sscopetoraiseinterestratesforfear
intheUK,andthoughotherlendersweremorere- oftheinflationaryconsequences.InDecemberthe
strained,bythebeginningof2007abouthalfofall Feddetailedplansthat,ifimplemented,wouldgiveit
outstandingmortgageshadbeensoldoffinthisway. morecontrolovertheUSmortgagemarketandpre-
BylateNovemberitwasunclearwhatwouldhappen vent another subprime crisis. In the UK politicians
to Northern Rock, which was being propped up by andfinancialregulatorswereplanningbanking-sys-
around£25billion(nearlyUS$52billion)intaxpayer temreformstoreduceliquidityriskinthefuture.
JanetH.Clarkisaneditor,independentanalyst,andwriteroneconomicandfinancialtopics.
The Gulf States’ Construction Boom
byJohnDukeAnthony
Intheearly21stcentury,virtuallyallsixGulfCoop- Oneresultofthisvastwealthandpoliticalstability
erationCouncil(GCC)countries—Bahrain,Kuwait, wasthelargenumberofforeignfirmswithofficesin
Oman,Qatar,SaudiArabia,andtheUnitedArab theregion;forexample,accordingtotheUSDepart-
Emirates (UAE)—showcased levels of economic de- mentofCommerce,over750Americancompanies
velopment and infrastructure expansion not seen had established offices, acquired new business li-
since the 1970s oil boom. Indeed, metaphorically censes, and/or entered into joint commercial ven-
speaking, the Gulf states, especially the UAE’s tureswithlocalpartnersby2007.TheTexas-based
largest emirates, Abu Dhabi and Dubai, had wel- oil-servicesfirmHalliburtontriggeredwidespreadcrit-
comed the return of an earlier era’s most om- icismwhenitannouncedinMarch2007thatitwas
nipresent bird: the building crane. In 2007 the movingitsinternationalheadquarterstoDubai.Ac-
mixed-use Burj (“Tower”) Dubai, the final height of companyingthesetrendswasanincreaseinthepro-
whichwasexpectedtoexceed800m(2,640ft),was fusion of world-class banking institutions, together
officiallydesignatedtheworld’stalleststructure,de- withagreatconcentrationofArabinvestmentcapital
spitethefactthatitwasstillunderconstruction.Nu- andliquidity.On26Sep2005,tradingbeganonthe
merousfactorsandforcesdrovetheboom:thevast DubaiInternationalFinancialExchange,thefirstin-
public-andprivate-sectorcapitalaccumulationmade ternationalstockexchangeintheMiddleEast.
possiblebyrecord-highoilandnatural-gasrevenues, Infrastructure projects were being financed on a
theextensionofwhatwasalreadyasustainedbusi- scale not hitherto experienced. Many of these en-
ness-friendlyenvironment,andtheGCCregion’ssta- deavors were associated with islands formed by
bilityandpeace. land reclaimed from the sea. Nakheel (“The