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More in the link.

Billion-year-old water found under Ontario

http://www.earth-hea...er-ontario.html

Researchers working in a Canadian mine – 1.5 miles (2.4 kilometers) below Earth’s surface – have tapped a source of water that they say has been isolated for at least a billion years. This research was published the journal Nature yesterday (May 15, 2013) and has already fascinated people around the world. Geologist Chris Ballentine, a member of the research team, pointed out that the findings are “doubly interesting” because the water carries the ingredients necessary to support life. He said the isolated water provides:

… secluded biomes, ecosystems, in which life, you can speculate, might have even originated.

These researchers say they don’t know yet if anything is living in the ancient water, but they have measured high levels of methane and hydrogen in it, which are good ingredients for supporting life.

Ballentine, a geologist at the University of Manchester, UK, and his team carefully captured water flowing through fractures in 2.7-billion-year-old sulphide deposits in a copper and zinc mine near Timmins, Ontario. They used special techniques to ensure that the water didn’t come into contact with the air. They determined that the water couldn’t have contacted Earth’s atmosphere — and so hasn’t been at the planet’s surface — for at least 1 billion years, and possibly for as long as 2.64 billion years, not long after the rocks it flows through formed.

http://www.smithsoni...-188843001.html


For 40 Years, This Russian Family Was Cut Off From All Human Contact, Unaware of WWII

In 1978, Soviet geologists prospecting in the wilds of Siberia discovered a family of six, lost in the taiga




The Siberian taiga in the Abakan district. Six members of the Lykov family lived in this remote wilderness for more than 40 years—utterly isolated and more than 150 miles from the nearest human settlement. (Wiki Commons)

Siberian summers do not last long. The snows linger into May, and the cold weather returns again during September, freezing the taiga into a still life awesome in its desolation: endless miles of straggly pine and birch forests scattered with sleeping bears and hungry wolves; steep-sided mountains; white-water rivers that pour in torrents through the valleys; a hundred thousand icy bogs. This forest is the last and greatest of Earth's wildernesses. It stretches from the furthest tip of Russia's arctic regions as far south as Mongolia, and east from the Urals to the Pacific: five million square miles of nothingness, with a population, outside a handful of towns, that amounts to only a few thousand people.

When the warm days do arrive, though, the taiga blooms, and for a few short months it can seem almost welcoming. It is then that man can see most clearly into this hidden world—not on land, for the taiga can swallow whole armies of explorers, but from the air. Siberia is the source of most of Russia's oil and mineral resources, and, over the years, even its most distant parts have been overflown by oil prospectors and surveyors on their way to backwoods camps where the work of extracting wealth is carried on.

Karp Lykov and his daughter Agafia, wearing clothes donated by Soviet geologists not long after their family was rediscovered.

Thus it was in the remote south of the forest in the summer of 1978. A helicopter sent to find a safe spot to land a party of geologists was skimming the treeline a hundred or so miles from the Mongolian border when it dropped into the thickly wooded valley of an unnamed tributary of the Abakan, a seething ribbon of water rushing through dangerous terrain. The valley walls were narrow, with sides that were close to vertical in places, and the skinny pine and birch trees swaying in the rotors' downdraft were so thickly clustered that there was no chance of finding a spot to set the aircraft down. But, peering intently through his windscreen in search of a landing place, the pilot saw something that should not have been there. It was a clearing, 6,000 feet up a mountainside, wedged between the pine and larch and scored with what looked like long, dark furrows. The baffled helicopter crew made several passes before reluctantly concluding that this was evidence of human habitation—a garden that, from the size and shape of the clearing, must have been there for a long time.

It was an astounding discovery. The mountain was more than 150 miles from the nearest settlement, in a spot that had never been explored. The Soviet authorities had no records of anyone living in the district.

The Lykovs lived in this hand-built log cabin, lit by a single window "the size of a backpack pocket" and warmed by a smoky wood-fired stove.

The four scientists sent into the district to prospect for iron ore were told about the pilots' sighting, and it perplexed and worried them. "It's less dangerous," the writer Vasily Peskov notes of this part of the taiga, "to run across a wild animal than a stranger," and rather than wait at their own temporary base, 10 miles away, the scientists decided to investigate. Led by a geologist named Galina Pismenskaya, they "chose a fine day and put gifts in our packs for our prospective friends"—though, just to be sure, she recalled, "I did check the pistol that hung at my side."

As the intruders scrambled up the mountain, heading for the spot pinpointed by their pilots, they began to come across signs of human activity: a rough path, a staff, a log laid across a stream, and finally a small shed filled with birch-bark containers of cut-up dried potatoes. Then, Pismenskaya said,

beside a stream there was a dwelling. Blackened by time and rain, the hut was piled up on all sides with taiga rubbish—bark, poles, planks. If it hadn't been for a window the size of my backpack pocket, it would have been hard to believe that people lived there. But they did, no doubt about it.... Our arrival had been noticed, as we could see.

The low door creaked, and the figure of a very old man emerged into the light of day, straight out of a fairy tale. Barefoot. Wearing a patched and repatched shirt made of sacking. He wore trousers of the same material, also in patches, and had an uncombed beard. His hair was disheveled. He looked frightened and was very attentive.... We had to say something, so I began: 'Greetings, grandfather! We've come to visit!'

The old man did not reply immediately.... Finally, we heard a soft, uncertain voice: 'Well, since you have traveled this far, you might as well come in.'

The sight that greeted the geologists as they entered the cabin was like something from the middle ages. Jerry-built from whatever materials came to hand, the dwelling was not much more than a burrow—"a low, soot-blackened log kennel that was as cold as a cellar," with a floor consisting of potato peel and pine-nut shells. Looking around in the dim light, the visitors saw that it consisted of a single room. It was cramped, musty and indescribably filthy, propped up by sagging joists—and, astonishingly, home to a family of five:

The silence was suddenly broken by sobs and lamentations. Only then did we see the silhouettes of two women. One was in hysterics, praying: 'This is for our sins, our sins.' The other, keeping behind a post... sank slowly to the floor. The light from the little window fell on her wide, terrified eyes, and we realized we had to get out of there as quickly as possible.

Agafia Lykova (left) with her sister, Natalia.

Led by Pismenskaya, the scientists backed hurriedly out of the hut and retreated to a spot a few yards away, where they took out some provisions and began to eat. After about half an hour, the door of the cabin creaked open, and the old man and his two daughters emerged—no longer hysterical and, though still obviously frightened, "frankly curious." Warily, the three strange figures approached and sat down with their visitors, rejecting everything that they were offered—jam, tea, bread—with a muttered, "We are not allowed that!" When Pismenskaya asked, "Have you ever eaten bread?" the old man answered: "I have. But they have not. They have never seen it." At least he was intelligible. The daughters spoke a language distorted by a lifetime of isolation. "When the sisters talked to each other, it sounded like a slow, blurred cooing."

Slowly, over several visits, the full story of the family emerged. The old man's name was Karp Lykov, and he was an Old Believer—a member of a fundamentalist Russian Orthodox sect, worshiping in a style unchanged since the 17th century. Old Believers had been persecuted since the days of Peter the Great, and Lykov talked about it as though it had happened only yesterday; for him, Peter was a personal enemy and "the anti-Christ in human form"—a point he insisted had been amply proved by Tsar's campaign to modernize Russia by forcibly "chopping off the beards of Christians." But these centuries-old hatreds were conflated with more recent grievances; Karp was prone to complain in the same breath about a merchant who had refused to make a gift of 26 poods [940 pounds] of potatoes to the Old Believers sometime around 1900.

Things had only got worse for the Lykov family when the atheist Bolsheviks took power. Under the Soviets, isolated Old Believer communities that had fled to Siberia to escape persecution began to retreat ever further from civilization. During the purges of the 1930s, with Christianity itself under assault, a Communist patrol had shot Lykov's brother on the outskirts of their village while Lykov knelt working beside him. He had responded by scooping up his family and bolting into forest.

Peter the Great's attempts to modernize the Russia of the early 18th century found a focal point in a campaign to end the wearing of beards. Facial hair was taxed and non-payers were compulsorily shaved—anathema to Karp Lykov and the Old Believers.

That was in 1936, and there were only four Lykovs then—Karp; his wife, Akulina; a son named Savin, 9 years old, and Natalia, a daughter who was only 2. Taking their possessions and some seeds, they had retreated ever deeper into the taiga, building themselves a succession of crude dwelling places, until at last they had fetched up in this desolate spot. Two more children had been born in the wild—Dmitry in 1940 and Agafia in 1943—and neither of the youngest Lykov children had ever seen a human being who was not a member of their family. All that Agafia and Dmitry knew of the outside world they learned entirely from their parents' stories. The family's principal entertainment, the Russian journalist Vasily Peskov noted, "was for everyone to recount their dreams."

The Lykov children knew there were places called cities where humans lived crammed together in tall buildings. They had heard there were countries other than Russia. But such concepts were no more than abstractions to them. Their only reading matter was prayer books and an ancient family Bible. Akulina had used the gospels to teach her children to read and write, using sharpened birch sticks dipped into honeysuckle juice as pen and ink. When Agafia was shown a picture of a horse, she recognized it from her mother's Bible stories. "Look, papa," she exclaimed. "A steed!"

But if the family's isolation was hard to grasp, the unmitigated harshness of their lives was not. Traveling to the Lykov homestead on foot was astonishingly arduous, even with the help of a boat along the Abakan. On his first visit to the Lykovs, Peskov—who would appoint himself the family's chief chronicler—noted that "we traversed 250 kilometres [155 miles] without seeing a single human dwelling!"

Isolation made survival in the wilderness close to impossible. Dependent solely on their own resources, the Lykovs struggled to replace the few things they had brought into the taiga with them. They fashioned birch-bark galoshes in place of shoes. Clothes were patched and repatched until they fell apart, then replaced with hemp cloth grown from seed.

The Lykovs' mountain home, seen from a Soviet helicopter.

The Lykovs had carried a crude spinning wheel and, incredibly, the components of a loom into the taiga with them—moving these from place to place as they gradually went further into the wilderness must have required many long and arduous journeys—but they had no technology for replacing metal. A couple of kettles served them well for many years, but when rust finally overcame them, the only replacements they could fashion came from birch bark. Since these could not be placed in a fire, it became far harder to cook. By the time the Lykovs were discovered, their staple diet was potato patties mixed with ground rye and hemp seeds.

In some respects, Peskov makes clear, the taiga did offer some abundance: "Beside the dwelling ran a clear, cold stream. Stands of larch, spruce, pine and birch yielded all that anyone could take.... Bilberries and raspberries were close to hand, firewood as well, and pine nuts fell right on the roof."

Yet the Lykovs lived permanently on the edge of famine. It was not until the late 1950s, when Dmitry reached manhood, that they first trapped animals for their meat and skins. Lacking guns and even bows, they could hunt only by digging traps or pursuing prey across the mountains until the animals collapsed from exhaustion. Dmitry built up astonishing endurance, and could hunt barefoot in winter, sometimes returning to the hut after several days, having slept in the open in 40 degrees of frost, a young elk across his shoulders. More often than not, though, there was no meat, and their diet gradually became more monotonous. Wild animals destroyed their crop of carrots, and Agafia recalled the late 1950s as "the hungry years." "We ate the rowanberry leaf," she said,

roots, grass, mushrooms, potato tops, and bark, We were hungry all the time. Every year we held a council to decide whether to eat everything up or leave some for seed.

Famine was an ever-present danger in these circumstances, and in 1961 it snowed in June. The hard frost killed everything growing in their garden, and by spring the family had been reduced to eating shoes and bark. Akulina chose to see her children fed, and that year she died of starvation. The rest of the family were saved by what they regarded as a miracle: a single grain of rye sprouted in their pea patch. The Lykovs put up a fence around the shoot and guarded it zealously night and day to keep off mice and squirrels. At harvest time, the solitary spike yielded 18 grains, and from this they painstakingly rebuilt their rye crop.

Dmitry (left) and Savin in the Siberian summer.

As the Soviet geologists got to know the Lykov family, they realized that they had underestimated their abilities and intelligence. Each family member had a distinct personality; Old Karp was usually delighted by the latest innovations that the scientists brought up from their camp, and though he steadfastly refused to believe that man had set foot on the moon, he adapted swiftly to the idea of satellites. The Lykovs had noticed them as early as the 1950s, when "the stars began to go quickly across the sky," and Karp himself conceived a theory to explain this: "People have thought something up and are sending out fires that are very like stars."

"What amazed him most of all," Peskov recorded, "was a transparent cellophane package. 'Lord, what have they thought up—it is glass, but it crumples!'" And Karp held grimly to his status as head of the family, though he was well into his 80s. His eldest child, Savin, dealt with this by casting himself as the family's unbending arbiter in matters of religion. "He was strong of faith, but a harsh man," his own father said of him, and Karp seems to have worried about what would happen to his family after he died if Savin took control. Certainly the eldest son would have encountered little resistance from Natalia, who always struggled to replace her mother as cook, seamstress and nurse.

The two younger children, on the other hand, were more approachable and more open to change and innovation. "Fanaticism was not terribly marked in Agafia," Peskov said, and in time he came to realize that the youngest of the Lykovs had a sense of irony and could poke fun at herself. Agafia's unusual speech—she had a singsong voice and stretched simple words into polysyllables—convinced some of her visitors she was slow-witted; in fact she was markedly intelligent, and took charge of the difficult task, in a family that possessed no calendars, of keeping track of time. She thought nothing of hard work, either, excavating a new cellar by hand late in the fall and working on by moonlight when the sun had set. Asked by an astonished Peskov whether she was not frightened to be out alone in the wilderness after dark, she replied: "What would there be out here to hurt me?"

A Russian press photo of Karp Lykov (second left) with Dmitry and Agafia, accompanied by a Soviet geologist.

Of all the Lykovs, though, the geologists' favorite was Dmitry, a consummate outdoorsman who knew all of the taiga's moods. He was the most curious and perhaps the most forward-looking member of the family. It was he who had built the family stove, and all the birch-bark buckets that they used to store food. It was also Dmitry who spent days hand-cutting and hand-planing each log that the Lykovs felled. Perhaps it was no surprise that he was also the most enraptured by the scientists' technology. Once relations had improved to the point that the Lykovs could be persuaded to visit the Soviets' camp, downstream, he spent many happy hours in its little sawmill, marveling at how easily a circular saw and lathes could finish wood. "It's not hard to figure," Peskov wrote. "The log that took Dmitry a day or two to plane was transformed into handsome, even boards before his eyes. Dmitry felt the boards with his palm and said: 'Fine!'"

Karp Lykov fought a long and losing battle with himself to keep all this modernity at bay. When they first got to know the geologists, the family would accept only a single gift—salt. (Living without it for four decades, Karp said, had been "true torture.") Over time, however, they began to take more. They welcomed the assistance of their special friend among the geologists—a driller named Yerofei Sedov, who spent much of his spare time helping them to plant and harvest crops. They took knives, forks, handles, grain and eventually even pen and paper and an electric torch. Most of these innovations were only grudgingly acknowledged, but the sin of television, which they encountered at the geologists' camp,

proved irresistible for them.... On their rare appearances, they would invariably sit down and watch. Karp sat directly in front of the screen. Agafia watched poking her head from behind a door. She tried to pray away her transgression immediately—whispering, crossing herself.... The old man prayed afterward, diligently and in one fell swoop.

The Lykovs' homestead seen from a Soviet reconnaissance plane, 1980.

Perhaps the saddest aspect of the Lykovs' strange story was the rapidity with which the family went into decline after they re-established contact with the outside world. In the fall of 1981, three of the four children followed their mother to the grave within a few days of one another. According to Peskov, their deaths were not, as might have been expected, the result of exposure to diseases to which they had no immunity. Both Savin and Natalia suffered from kidney failure, most likely a result of their harsh diet. But Dmitry died of pneumonia, which might have begun as an infection he acquired from his new friends.

His death shook the geologists, who tried desperately to save him. They offered to call in a helicopter and have him evacuated to a hospital. But Dmitry, in extremis, would abandon neither his family nor the religion he had practiced all his life. "We are not allowed that," he whispered just before he died. "A man lives for howsoever God grants."

The Lykovs' graves. Today only Agafia survives of the family of six, living alone in the taiga.

When all three Lykovs had been buried, the geologists attempted to talk Karp and Agafia into leaving the forest and returning to be with relatives who had survived the persecutions of the purge years, and who still lived on in the same old villages. But neither of the survivors would hear of it. They rebuilt their old cabin, but stayed close to their old home.

Karp Lykov died in his sleep on February 16, 1988, 27 years to the day after his wife, Akulina. Agafia buried him on the mountain slopes with the help of the geologists, then turned and headed back to her home. The Lord would provide, and she would stay, she said—as indeed she has. A quarter of a century later, now in her seventies herself, this child of the taiga lives on alone, high above the Abakan.

She will not leave. But we must leave her, seen through the eyes of Yerofei on the day of her father's funeral:

I looked back to wave at Agafia. She was standing by the river break like a statue. She wasn't crying. She nodded: 'Go on, go on.' We went another kilometer and I looked back. She was still standing there.

Sources

Anon. 'How to live substantively in our times.' Stranniki ['Wanderers'], 20 February 2009, accessed August 2, 2011; Georg B. Michels. At War with the Church: Religious Dissent in Seventeenth Century Russia. Stanford: Stanford University Press, 1995; Isabel Colgate. A Pelican in the Wilderness: Hermits, Solitaries and Recluses. New York: HarperCollins, 2002; 'From taiga to Kremlin: a hermit's gifts to Medvedev,' rt.com, February 24, 2010, accessed August 2, 2011; G. Kramore, 'At the taiga dead end'. Suvenirograd ['Souvenirs of Interesting places'], nd, accessed August 5, 2011; Irina Paert. Old Believers, Religious Dissent and Gender in Russia, 1760-1850. Manchester: MUP, 2003; Vasily Peskov. Lost in the Taiga: One Russian Family's Fifty-Year Struggle for Survival and Religious Freedom in the Siberian Wilderness. New York: Doubleday, 1992

A documentary on the Lykovs (in Russian) which shows something of the family's isolation and living conditions, can be viewed here.

I couldn't find the tai tai discussion in another thread so decided to start a new one.

I am loosely playing with the idea of moving to Singapore or Hong Kong. To do so requires the happiness and well being of Mrs Medved (and mini Medved). I'd be keen to hear from women who have lived in those cities, particularly those who didn't/don't work... I just can't recall who they are. Just need to consider if it is viable for a wife that isn't working...

Caveat - this was written by Chris Joye.

RBA quietly increases banks’ bailout buffer
http://www.afr.com/f...lebkzfQ89p3pPAK

In a globally unique policy, the Reserve Bank of Australia will supply banks with a permanent bailout facility worth up to $380 billion by 2015.

The policy has been designed by the RBA to help banks satisfy stringent new liquidity tests which simulate “acute stress scenarios” that deny banks funding for 30 days under the post-GFC rules, Basel III.

Local regulators argue that insufficient liquid assets such as government bonds meant they had no choice but to give the banks a new taxpayer-backed “line of credit” that could be tapped at a cost just above the RBA’s cash rate. Smaller building societies and credit unions are not subject to the liquidity tests and will not, therefore, have access to the bail-out fund.

Remarkably few people inside or outside financial markets are familiar with, or understand, this “committed liquidity facility”, which will be managed by the RBA.

“Subject to the availability of the CLF, Aussie banks can’t run out of cash,” CLSA’s banking analyst Brian Johnson says. The CLF will cauterise one of the banking system’s single biggest vulnerabilities: its historically large dependence on wholesale funding. Standard & Poor’s recently cited this as a key risk to Australia’s prized AAA credit rating.

Yet there has been no public debate about the establishment of the facility, the terms under which banks can use it, the risks to which it exposes taxpayers, or the absence of independent oversight of the handful of officials who control it.


Basel Committee findings
The Australian Financial Review has been told that the Swiss-based Basel Committee, which is the supra-national regulator of bank regulators, was initially opposed to what is known as the “Australian solution”. Only one other country, South Africa, has emulated it, although Singa­pore is evaluating it.

Alongside the government’s atypical decision to offer a free guarantee of bank deposits, which the AFR revealed the RBA and Treasury have advised Wayne Swan to reconsider, the facility risks amplifying the “moral hazards” in Australia’s financial system that the International Monetary Fund aggressively criticised late last year.

Reflecting on the ruins left by the global financial crisis, the Basel committee recognised the disaster warranted at least two policy responses.

First, banks should hold more loss-absorbing “tier one” capital to cushion loan losses and, by definition, employ less leverage. It is not widely appreciated but Australia’s four major banks are leveraged 24 to 30 times their capital. This represents the ratio of the dollar value of their assets to their core tier one capital.

The tier one capital ratios quoted in the media are often higher because they assume heavily discounted – or “risk-weighted” – asset values. The Australian Prudential Regulation Authority’s Charles Lattrell says that risk-weighted assets across the major banks are “about 50 per cent” of real asset values. Use of these discounted values understates true leverage.

With actual leverage of roughly 26.5 times, a 4 per cent fall in asset values would, on average, wipe out the major banks’ capital. While the banks are regarded as being durable institutions, it does not take much duress to invoke solvency threats. The Basel Committee’s second finding was that banks should hold more liquidity in the form of high-quality liquid assets to pay out depositors and wholesale bond holders during times of stress.

Almost 60 per cent of Australian banks’ funding comes from deposits. Approximately half of these are at call, the remainder having an average term of six months. The contractual maturity of all deposits is thus less than three months. Almost one-third of other bank funds come from wholesale bonds with an average maturity of about 3.7 years.


Mismatch AT source of fragility
Much of this short-term money is used to underwrite 25-year home loans. It is this mismatch between a bank’s assets and its liabilities that’s the source of their fragility.

If depositors suddenly demand their money back, banks may not be able to meet their liabilities when they fall due. This is why central banks were created – to prevent bank failures. The RBA has a mandate to act as a “lender of last resort” to banks buffeted by irregular funding shocks. The individual credited with developing the new bailout program was once South Australia’s fastest man over 800 metres. While he loves his hard-core punk rock and is notoriously brusque, he is also one of Australia’s most talented economists.

Guy Debelle will be unlucky not to run the RBA. His fellow MIT PhD, Philip Lowe, is Glenn Stevens’s most likely successor. Before the public launch of its bailout fund, Debelle said the goal of the incoming Basel standards was “to reduce the frequency with which banks might need to seek assistance from the central bank in a liquidity event to a very small number”. “The central bank should be a last resort, not a first resort” he argued. But when the Basel Committee revealed that banks would be expected to hold liquid assets sufficient to withstand a minimum 30-day creditor shock, assessed via a “liquidity coverage ratio”, the RBA’s Martin Place mandarins realised they were in a bind.

Australian banks owe creditors north of $2.7 trillion. If they have to hold liquid assets worth, say, 20 per cent of these liabilities to meet the LCR, they might need as much as $550 billion.

The North American and European authorities championing the liquidity standards have deep government bond markets. But decades of prosperity in Australia, fused with the fact that most credit is intermediated by the four majors rather than via off balance sheet debt issuance, has meant the stock of eligible assets is very small.


‘Brute-force’ solution
If you strip out bonds owned by foreigners, the notional value of debt securities issued by federal and state governments is just $174 billion. Even if the banks owned all these bonds, they would still be short up to $380 billion. This is, therefore, about the maximum expected size of the CLF in current dollar terms. Debelle and colleagues engineered a “brute-force” solution that was novel in its simplicity: in a crisis the RBA would simply lend the banks any shortfall for as long as they needed. This became the committed liquidity facility.

The CLF has several benefits. It minimises disruptions to Australia’s tightly-held government bond market – the new Basel rules could produce a bond bubble that might disruptively burst if banks started rushing for the exits. And since the CLF is cheap for banks to tap, it reduces the likelihood additional regulatory costs will be passed on to customers.

The CLF’s mechanics are not that far removed from the RBA’s existing “market operations”.

There are, however, substantive differences. Monetary policy is set by the RBA’s independent board under its legislation and not by the staff. In contrast, the CLF is completely controlled by the RBA’s executive; the board has no apparent involvement.

Second, the CLF has no clear maximum term but finance provided under the RBA’s market operations is normally restricted to 90 days.

Third, whereas the RBA only accepts a small universe of “bullet-proof” debt securities in its open market operations, which cannot be issued by the counterparty (or related entities), under the CLF banks can use their own loans to back borrowings from the RBA.

Fourth, the RBA executive has given itself absolute discretion to “to broaden the eligibility criteria and conditions for the various asset classes [accepted as collateral] at any time”.

Finally, the CLF was established to ensure Australian banks can always meet creditors’ demands, and has nothing to do with monetary policy.

Norway Fund Flees Currencies Tainted by Stimulus Addiction

http://www.businessw...ulus-addictions

Norway’s $713 billion sovereign wealth fund is turning away from the world’s biggest currencies and their debt-laden governments as policy makers undermine their exchange rates through unprecedented stimulus measures.

The Government Pension Fund Global, the world’s largest wealth fund, cut its holdings in French and U.K. government bonds by almost half last year as it raised its share of government bonds in emerging-market currencies to 10 percent of its fixed-income holdings by adding investments in Turkey, Russia and Taiwan.

“It’s what we perceive as a risk-reducing investment strategy,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a March 8 interview in Oslo. Cutting dollar, yen, euro and pound investments is a “prudent” move, he said. “These four major currencies all have structural issues, with regards to government debt, to private sector debt, to unconventional monetary policy, and to growth and the demographic profile of the countries.”

At issue is how central bankers across the globe will eventually unwind the uncharted stimulus measures enacted to prop up global growth since the onset of the financial crisis in 2008. Debt levels have soared for governments across much of the developed world. In Europe, political leaders are trying to save the region from a fiscal crisis now in its fourth year.


Monetary Easing
Federal Reserve Chairman Ben S. Bernanke and other policy makers have signaled they will continue to act to boost sluggish economic growth, potentially setting the stage for another round of “Great Monetary Easing” according to Morgan Stanley. The International Monetary Fund predicts the world’s developed economies will grow 1.4 percent this year, half the average pace of 1994 to 2003.

Calls for greater stimulus in the U.S., Japan and Europe have also intensified concern over a so-called global currency war that risks debasing exchange rates. Even Norway’s central bank, which oversees the country’s wealth fund, has joined the push to cool the krone’s appreciation. The bank in 2011 and 2012 cut interest rates twice, in part to weaken the krone. Governor Oeystein Olsen said last month the bank was prepared to cut its benchmark again to counter further strength.

Norway, which emerged as a haven from Europe’s debt crisis, has seen its currency rise about 22 percent against the euro since early 2009.


Curbing Spending
The country will cap spending to prevent further gains in the krone from destroying industrial jobs, Finance Minister Sigbjoern Johnsen said today. “It’s very important that through the different choices we make in the budget that we do not put extra pressure on the currency,” he said ahead of government talks in Jevnaker, Norway.

Japan’s currency has fallen to its lowest level against the dollar in 3 1/2 years in anticipation of greater stimulus from Prime Minister Shinzo Abe and his preferred candidate to lead the bank of Japan (8301), Haruhiko Kuroda. In France, Industry Minister Arnaud Montebourg said last month the European Central Bank should “confront a new currency war” as the euro strengthened. Analysts surveyed by Bloomberg are also betting the pound will weaken on increased stimulus in Europe’s third-largest economy.


Bond Buying
Norway’s oil fund responded by investing about 150 billion kroner in emerging market sovereign debt last year, boosting the share of emerging market government bonds to 10.2 percent of fixed-income holdings from 0.4 percent a year earlier. Holdings in Mexican government debt grew by 14 percent to 22.6 billion kroner in the fourth quarter to become the fund’s ninth-biggest bond holding. It also made its first purchases of government bonds from Turkey, Russia and Taiwan.

The fund’s holdings in French government debt slumped 25 percent, while its investments in U.K. sovereign debt fell 13 percent. The fund is also underweight its benchmark index in yen-denominated securities, Bunny Nooryani, a spokeswoman for the investor, said by phone.

Slyngstad said last week the change in strategy in 2012 was “the most substantial” since the increase in the fund’s equity allocation to 60 percent from 2007 to 2009.

The fund is undergoing a shift in strategy to capture more global growth to safeguard the nation’s oil wealth. It said last week it posted a return of 13.4 percent in 2012, its second-best year ever.

The fund in 2012 cut its European holdings to 48 percent of total investments from 53 percent a year earlier, and has come “halfway” to its 40 percent target, Slyngstad said.

“The big shift in the strategy probably paid off so 2012 became a good year,” Olav Chen, a senior portfolio manager at Storebrand Asset Management in Oslo, who oversees about $8 billion, said in an e-mailed reply to questions.