Regulation of Financial Services Post Credit Crunch

Regulation of Financial Services Post Credit Crunch INTRODUCTION The financial system is the system that allows the transfer of money between savers and borrowers, and comprises a set of complex and closely interconnected financial institutions, markets, banks, instruments, services, practices, and transactions (Steven M Sheffrin, 2003). All Financial institutions in any country follow certain regulations which are placed by the central monetary authority (e.g. financial service authority) in order to provide improved service to the public and work in the best interest of the nations. Regulationis controlling human or societal behaviour by rules or restrictions (Bert Jaap Koops 2006). The purpose for regulating the institutions is to reduce the risk of failure and to attain social goals. For example banks are regulated, as they by their very nature are prone failure, and the costs paid by the public for failure is extremely high compared to the financial costs to regulate the banking system. Regulations should be fair and limited so that they as sist banks to develop new services in accordance with the customers demand, make sure competitions in financial services is strong, maintain the quantity and quality of the service provided to public and better utilisation of resources. Over the last five years, the financial system in the world has gone through its greatest crisis. The financial problems have appeared at the same time in many different countries which makes it unique from the crisis in past. The overall economic impact is felt all through the world, which is resulted from the interconnectedness of the global economy. This does not mean that the economic recession which many countries in the world now face will be anything like as bad as that of 1929-33(turner 2009). The crisis in 1930s was made worse by the policy in response. But it is clear that effective the policy response cannot prevent the large economic cost of the financial crisis. If we are to prevent or minimise the scale of future crisis there is an increased need of policy framework that can bring different factors and the corresponding powers to act positively when risks are recognized. Currently Britains existing framework is confused and the powers and capabilities split awkwardly between competing institutions, which results in nobody identifying the fundamental problems when these institutions are building up and none of the institutions can act in response to crisis as they do not have the authority to do so. In order to avoid future crisis changes in regulation and supervisory approach is needed in order to create a more robust financial system for the future. Our focus in the research is on banking institutions, and not on other areas of the financial services industry. In 2007, Britain experienced its first bank run of any significance since the reign of Queen Victoria (Reid. m, 2003). The run was on a bank called Northern Rock. Britain was free of such event not by misfortune, but because in early third quarter of nineteenth century the Bank of England developed techniques to avoid them. These techniques were used, in Britain and had worked, and appeared to be trusted. The run of northern rock was triggered by the decision to provide support for troubled institution. That run was brought to a standstill, when the Chancellor of the Exchequer (Alistair Darling2) declared that he would use taxpayers funds to guarantee deposits at Northern Rock. Unlike runs in banking history, it was a run only on that one institution as funds withdrawn from it went only to a small amount into cash, and were mostly redeposit in other banks or in building societies. The research has three major objectives: Describes the role of financial regulations and reviews the literature on role played by the regulations in financial system. To describe and evaluate the banking crisis in United Kingdom in last 5 years and the reasons of the crisis which affected the banking system. To analysis and evaluate the role and benefits of living wills in context of changes in regulation. This leads to the research question: â€Å"Can living wills address the perceived failures in the regulation of financial services highlighted by the current credit crisis?† LITERATURE REVIEW A literature review is a summary of a subject field that supports the identification of specific research questions (Rowley J Slack F, 2004). Literature review explains the role of financial regulations, discuses the banking crisis in UK in last 5 years (2005-2010), and proposed new regulations which are to counter such failures in the future and at what cost these failures can be averted. The main focus of literatures review is the Banking Industry, proposed new regulations in order to minimise the effect of such crisis. The functions of financial services industry The existence of money is taken as for granted in all advanced societies today so much so that most people are unaware of the huge contribution that the concept of money, and the industry to manage it, have made to the development of our present way of life. Moneyis anything that is generally accepted aspaymentforgoods and servicesand repayment ofdebts (Mishkin Frederic S, 2007). In earlier civilisations the process of bartering was sufficient for the exchanging goods and services. Barteringis a medium in whichgoodsorservicesare directly exchanged for other goods or services without a common unit of exchange (without the use ofmoney) (OSullivan, Arthur Steven M. Sheffrin, 2003). In modern society, people still produce goods or provide services that they could, in theory, trade with others for exchanging for things they need. Due to complexity of life and the size of some transactions make it impossible for people today to match what they have to offer against what others can supply to them. What is needed is a commodity that individuals will accept in exchange for any product, which forms a common denominator against which the value of all products can be measured. Money carries out these two important functions. In order to be acceptable as a medium of exchange, money must have certain properties. In particular it must be * Sufficient in quantity * Generally acceptable to all the parties in all transactions * Divisible into small units * Portable Money also perform as a store of value, which means it can be saved because it can be used to divide transactions in time received today as payment for work done or for goods sold can be stored in the knowledge that it can be exchanged for goods or services later when required. In order to fulfil these functions, money has to retain its exchange value or purchasing power and the effect of inflations can, of course, affect this function. The financial services industry exists largely to facilitate and to deal with the management of money. It helps commerce and government by channelling money from those who have surplus, and wish to lend it to make profit, to those who wish to borrow it, and are willing to pay for the benefit they acquire of having it. The financial organisations want to make profit from providing such services and, by doing so, they provide the public with products and services that offer, convenience ( e.g. current accounts), means of achieving otherwise difficult objectives (e.g. mortgages) and protection from risk (e.g. insurance). Prior to the 1980s, there were clear and distinct boundaries between different kinds of financial institutions; some were retails banks, some wholesale banks, others were life assurance companies or general insurance companies, and some offered both types of insurance and were called composite insurers. Today many of the distinctions have become unclear, if they have not vanished altogether, increasing numbers of mergers and takeovers have taken place across the boundaries and now even the term banc assurance, which was coined to describe banks that owned insurance companies, is inadequate to describe the complex nature of modern financial management groups. For example one major UK bank offers following range of services * Retail banking services * Mortgage services through a subsidiary that is a building society * Credit cards services * Wealth management services * Financial asset management for institutional customers * Investment banking * Insurance services Regulations Bank failures around the world have been common, large and expensive in recent years. It is common to think of banking failure as something that happens in emerging economies and countries with advanced banking system, but there have been some shocking failures of banks and banking system within the developed economies in recent decades. The scale and frequency of the bank failures and banking crises have raised doubts about the efficiency of bank regulation and raised questions as to whether the regulation itself has created an iatrogenic reaction. Regulations for banks and other financial institutions hinge on the coase (1988) argument that unregulated private actions create outcomes whereby social marginal costs greater then private marginal cost. The social marginal costs occur because bank failures has a far greater effect then throughout the economy than, say, failure of a manufacturing concern because of the wide spread use of banks. Nevertheless it should be borne in mind that regulation involves real resource costs. These costs arise from two sources (a) direct regulatory cost, (b) compliance costs bear by the firms regulated. In IMF global financial stability report (2009), it estimates that the eventual cost to British taxpayers of support for the banking sector will be 9.1% of GDP, or more than  £130 billion, that is more than five times the equivalent of 1.8% of GDP in France and three times the estimated 3.1% of GDP in Germany. The main reason for regulating the banks is firstly consumers lack market power and are prone to exploitation from the monopolistic behavior of banks. Secondly depositors are uniformed and unable to monitor banks and, therefore, require protection. Finally, governments need regulations to estimate the safety and stability of the banking system. Basel accord Basel committee for banking supervision a committee for BIS (Bank for International Settlement) was first established in 1974. This committee operates at international level and the main focus of the committee is to strengthen the capital of banks. The principle reasons for the establishment of the committee were to safeguard the financial stability of the banking system worldwide and to create a level playing field. The first major achievement of the committee was in the form of Basel I. Basel I aimed at: 1. Promote the co-ordination in the regulatory and capital adequacy standards of the member countries. 2. Guard against risk in credit worthiness 3. Finally, it suggests for the minimum capital requirements for the international banking. Since 1988 when the Basel committee introduced the first capital accord Basel I the risk management practices, the banking business and the whole financial market has changed. The New York Fed President argued that â€Å"it also has not kept pace with innovations in the way that banks measure, manage and mitigate risk.†(EBSCO, 2002) Although the accord covered fairly relevant issues but it wasnt helpful enough to make a major impact in the industry. Therefore in 1999 the initial steps were taken which led to the amended of Basel I. There were several different reasons for the amendments. One of the misunderstandings about Basel I was that it was the only way to the financial stability of a country. The positive results of implementation of Basel I were seen in the G-10 countries, as these countries were previously operating their financial industry on mostly the same rules, but still there were many new product introduced and reforms took place which remained unexplained by the accord and resulted in the financial industry either fully collapsed or got taken over by other giants. For example Grupo Financiero Bancomer, a Mexican banking giant was reported as â€Å"US- based Citibank has agreed to acquire Mexican banking giant Grupo Financiero Bancomer-Accival (Banacci) for US$12.5 billion† (All Business.co m, 2001). The initial results blinded the G-10 in the aspects of emerging markets as they got pressurized by the larger financial institutions to follow the same accord. Another failed aspect of Basel I which led to the new accord was that the old accord only focused around the credit risk. Basel I did not focused on operational risk which also supported the downfall of many financial institutions. As explained by Mohan Bhatia â€Å"Weather it is a fee-based business, emerging practices or income-based business. A bank is exposed to operational risk.†(Bhatia, 2002). Even though Basel I was not written to be applicable for the emerging markets, its functions created distortions in the banking sectors of the industrialized economies. â€Å"In countries subject to high currency inflation and sovereign default risks, the Basel I accord actually made loan books riskier by encouraging the movement of both bank and sovereign debt holdings from OECD sources to higher-yielding domestic sources† (Balin, 2008). Another problem with the 1988 accord was that it focused more on the type of loan rather than the credit status of the borrower. As the bank and large financial institutes saved just 8% for the unseen risks they had more capital left. That was used in form of loan and subprime lending which was later proved to be a real disaster for the financial institutions. Basel I created a gap between the regulatory capital and the economic capital as bank would choose to hold. The commonly know regulatory capital is different to the economic capital. The economic capital aims to enhance the value of the investor and is based on the internal risk assessment of the organization. Whereas on the other hand the regulatory capital secures the banking stability and the regulator decides it for the protection of the depositor. Considering the drastic effects of the Basel I accord the committee published the reforms in 2003 namely Basel II. â€Å"Basel II is a response to the need for the regulatory system governing the global banking industry.†(Garside, Bech, 2003) Basel II brought many reforms to the old accord and was based on three pillars. The first pillar was minimum capital requirement which explained explicit treatment for operational risk in the financial industry. However the market risk remained with the same explanation as from Basel I. The Basel II brought some new methods of measuring the credit risk by introducing the public and internal ratings which provided good risk mitigation techniques. Furthermore the second pillar explained the supervisory review of capital adequacy. The basic purpose of this pillar was to keep a check on the financial institution that they hold excess of minimum level of capital required. The regulator can intervene at the initial stage if this requirement was not fulfilled. Finally the third pillar was brought into place to bring a much better market discipline. The market is considered to be the role played by the shareholders, government or employees whether proper capital is maintained or not. With this improvement Basel II was considered to help both the lender and the borrower. Basel II spots the weakness in Basel I and proposed effective risk measurement, mitigation techniques and elaborates valuables for market discipline for good banking system and good financial stability as explained â€Å"we at the Federal Reserve had even more reasons for the most finely tuned Basel II framework: Not only are we the umbrella supervisor over all financial stability companies but, as the nations central bank, we are responsible for maintaining nations financial stability.† (Poole, 2005) The fines of Basel II are basically explained by the three pillars of it as the very dexterously explain how and where the accord will be effective. The first pillar of minimum capital requirement was extremely advantageous in providing enhanced risk measurement by helping the large financial institutions and big banks to measure the risk involved in their functions and operations more sophisticatedly. Risk management proposals were useful for the capital they require to hold in case of unexpected losses. The new accord proposed different approaches for the measurement of credit risk. The standardised approached being the more or less the same as the old accord was more risk sensitive for the creditworthiness of the customers and improved the requirement which was previously based on type of loan instead of the credit status of the customer. This approach explained the birth of credit rating of individuals but the problem with this approach was that the culture of rating is not popular in every European country and other countries with strong and effective economies. Whereas the internal ratings-based approach was based on the internal key risk drivers and therefore the potential for more risk sensitive capital was substantial in a way to mitigate the risk. But the internal ratings-based approach is not enough to calculate the capital required for the risks. â€Å"The approaches for calculating the risk-weighted assets are intended to provide improved bank assessments of risk and thu s to make the resulting capital ratios more meaningful† (Pitschke Bone-Winkel, 2006). Operational risk which the Basel I failed to examine is a crucial element and was elucidated by Basel II in three operational risk alleviation approaches. The first method called the Basic indicator approach advice the banks to hold capital equal to 15% of average gross income earned by banks in the past three years. The second method named the standardized approach separates every business to hold capital to shield itself against the operational risk. Finally the third method of advance method approach allows the banks to calculate their own capital requirement to protect themselves against the operational risk. A disadvantage of the first pillar was that it allowed the banks to set their own risk assessment techniques. This gave over sanguine reports to reduce the capital required. Furthermore it even maximized the return on equity. For a much better market discipline regulators must approve the requirement. As explained by (Lind, 2006) â€Å"banks must have methods and systems fo r risk management which are subject to adequate corporate governance processes throughout the banks.† The pillar II of The Basel Accord is based on Supervisory Review. It certifies that the banks should have enough capital to sustain all the unexpected risk in an organization and also provides with much more better techniques to monitor and mitigate those risks. It advises the banks to calculate their risks internally. It requires the regulators to assess the banks risk management processes and capital position to maintain a target level of solvency. â€Å"Pillar II recognises that national supervisors may have different ways of entering into such discussions and provides flexibility to accommodate those differences† (Caruana, 2003). It was helpful in a way to evaluate funding strategies and also gave an insight to the risk mitigation policies to the banks. In total the second pillar had two positive proposals. Firstly, it gave more power to the regulators to keep a check of the minimum capital requirement by banks as calculated in pillar 1. And secondly it alarms the repetiti on of the financial crises such as in countries like Korea and China by taking early actions and offering rapid remedial actions. â€Å"Some of the data submitted by individual institutions was not complete; in some cases banks did not have estimates of loss in stress periodsor used estimates that we thought were not sophisticatewhich caused minimum regulatory capital to be underestimated† (Bies, 2006). At the same time while the corporate governance is in place the accord gave absolutely no information regarding the liquidity. Banks remained unaware of the true financial conditions of each other which forced them to stop lending and the State Bank of England was highlighted as the last resort to rescue. Pillar III based on the market discipline helped maintain discipline in the market place by greater disclosure of the banks risk profiles. The pillar III is connected to pillar I and pillar II as it complements the minimum capital requirement and the supervisory review process. â€Å"Market discipline can contribute to a safe and sound banking environment and supervisors require firms to operate in a safe and sound manner† (BIS, 2005). The disclosure is important for the benefit of the stakeholders. Therefore a disclosure of market risk, operational risk, interest rate risk and the disclosure of capital structure is required. The information should be disclosed timely. â€Å"It will fundamentally transform financial reporting for banks by demanding increased depth and breadth of disclosure† (Garside, Bech, 2003). One of the other disadvantages of Basel II is the complexity and potential cost of the framework. It is a defected draft of 450 pages and the cost of implementing it is too high for the banks. Banks were also afraid to lend because of the fear of Basel II as they would operate against the rules of Basel II on certain occasions. According to the Basel book the banks have to meet a certain level of capital reserves and in todays scenario of credit crunch it is difficult. As Peter Spencer explains â€Å"the Basel system of banking regulations, which determine how much capital banks must raise to keep their books in order, are the root cause of the crunch and were serving to worsen the Citys plight† (Conway, 2007). The Basel committee produced the old and new accords which to an extent were successful for the strengthening of the capital of banks and also took into account the risk throughout the procedures. But the new accord did not changed with new reforms in the system which made it just a box to be ticked in a form and had no connection with the reality or implementation. Most of the organizations ticked the boxes and yet carried on with the risky decision which seemed profitable but yet proved out to be wrong such as Northern Rock. These decisions were not even against any of the accords as the Basel committee never updated to the new market. Financial Services Authority (FSA) Regulations of the financial services industry in the UK is a 5 tier process: * First level: European legislation that impacts on the UK financial industry * Second level: the acts of the parliament that set out what can and cannot be done. * Third level: the regulatory bodies that monitor the regulations and issue rules about how the requirements of the legislation are to be met in practice. The main regulatory body is now the Financial Services Authority (FSA), which has taken over the regulatory responsibilities of the number of other bodies, including the bank of England. * Fourth level: the policies and practices of the financial institutions themselves and the internal departments that ensure they operate legally and competently. * Fifth level: the arbitration schemes to which consumers complaints can be referred. For most cases, this will now be the financial ombudsman service, which takeover the responsibilities of a number of earlier ombudsman bureaux and arbitration schemes Before the arrival of the financial services act 1986, the UK financial services industry was self regulating. Standards were maintained by a promise that those in the financial industry had a common set of values and were able, and willing, to exclude those who violated them. The 1986 act moved the UK to a system which became known as self regulation within a statutory framework. Once authorised, firms and individuals would be regulated by self regulating organisations (SROs), such as IMRO, SFA or PIA. The financial services act 1986 covered investment activities only. Retail banking, general insurance, Lloyds of London and mortgages were all covered by different acts and codes. When labour party came in power in 1997 it wanted to amend the regulation of financial services. The late 1990s saw more fundamental development of the financial services system with the fusion of most aspects of financial services regulation over a single statutory regulator, the financial services authorit y (FSA) process took place in two phases. First the bank of Englands responsibilities for banking supervision was shifted to the financial services authority (FSA) as part of the bank of England act 1998. The second phase of development consisted of a new act covering financial services which would revoke key provisions of the financial services act 1986 and little other legislation. All the earlier work on regulation would be swept away and the FSA would regulate investment business, insurance business, banking, building societies, friendly societies, mortgages and Lloyds. On 30 November 2001 the act, the financial services and market act 2000 (FSMA 2000) came to form a system of statutory regulation. The creation of the FSA as the UKs single statutory regulator for the industry brought together regulation of investment, insurance and banking. The FSA took over the responsibilities for prudential supervision of all firms, which involves monitoring the adequacy of their management, financial resources and internal systems and controls, and Conducting of business regulations of those firms doing investment business. This involves overseeing firms dealing with investors to ensure for example information provided is clear and not misleading. Adair Turner (2009) argued that FSAs regulatory and supervisory approach, before the 2007-2008 crises, was based on a sometimes implicit but at times quite obvious philosophy which believed that * Markets in general are self-correcting and disciplined which acts as effective tools than regulation or supervisory oversight to ensure firms strategies are sound and risks contained * Main responsibility for managing risks was of senior management and boards of the firms, who were thought to be at better place to evaluate business risk than bank regulators, and who are better off in making appropriate decisions about the balance between risk and return, provided proper systems, procedures and skilled people are in place. * Customers protection cannot ensured by product regulation or direct markets intervention, but by making sure that wholesale markets are tolerant and transparent as possible, and thats the way in which firms conducts business is appropriate. Turner argued that this philosophy in supervisory approach resulted in: A focus makes sure that systems and processes were defined well instead of challenging the business models and strategies. Risk Mitigation Programs set out after ARROW reviews therefore tended to focus more on organization structures, systems and reporting procedures, than on overall risks in business models. A focus within the FSAs failure to notice of approved persons on checking that there were no issues of honesty raised by past conduct, instead of evaluating technical skills, with the assumption that management and boards were in a superior position to assess the appropriateness of particular individuals for particular roles. A balance between business regulation and prudential regulation which, with the benefit of observation, appears biased towards the former. This was not the case in all sectors of the financial industry: the FSA for instance introduced in 2002-04 major and very important changes in the prudential supervision of insurance companies which have significantly improved the ability of those companies to face the challenges created by the current crisis. But it was to a degree the case in banking, where a long period of reduced economic volatility, which was attributed by many informed observers to the positive benefits of the securitized credit model, helped foster inadequate focus on system-wide prudential risks. Failure of Current Regulation Based on the â€Å"Geneva Report†, the â€Å"G30 Report†, and the â€Å"NYU-Stern Report† failure of current regulation Systemic risk:Reports established a point of view that the financial regulatory frameworks around the world pay little consideration to systemic risk. Carmichael and Pomerleano (2002) define systemic risk as systemic instability that â€Å"arises where failure of one institution to honour its promises leads to a general panic, as individuals fear that similar promises made by other institutions also may be dishonoured. Acharya, Pedersen, Philippon and Richardson (2009) argue that Current financial regulations seek to limit each institutions risk seen in isolation; they are not focused on systemic risk. As a result supervisions focus on individual institutions, instead of having it on the whole system, while individual risks are properly dealt with in normal times, the system itself remains, or is encouraged to be, weak and exposed to large macroeconomic shocks This focus was a common feature and a common failing, of bank regulation and supervisory systems in the world. As per the Ge neva Report regulations wholly assumes that it can make the system as a whole safe by simply making sure that individual banks are safe which is misleading. Pro-cyclical risk taking: Reports also agreed that financial regulations encourage pro-cyclical risking taking which increases the possibility of financial crises and their severity when they occur. Any economic quantity that is positivelycorrelatedwith the overall state of theeconomyis said to be pro-cyclical (Gordy MB and Howells B. 2004). Financial intermediation as a whole is inherently pro-cyclical. Financial activity such as new bond issues and total bank lending tend to increase more during economic booms than during downturns. Higher levels of economic growth lead to higher values of potential collateral, thereby loosening credit constraints and making access to debt financing easier. Another contributing factor to the financial systems pro-cyclicality is that financial market participants behave as if risk is counter-cyclical. For instance, bank loan standards tend to be most lax during economic booms (Lown et al 2000)) and banking supervisors have historically been most vig ilant during downturns (Syron (1991)). Regulations lead towards stability and reduce statistical measures of risk and encourage excessive risk taking. In bad times, the pendulum swings back producing excessive risk aversion. Large Complex Financial Institutions (LCFIs): All reports agree that current regulations do not deal effectively with LCFIs, defining LCFIs as â€Å"financial intermediaries engaged in some combination of commercial banking, investment banking, asset management and insurance, whose failure poses a systemic risk or `externality to the financial system as a whole.† (Saunders, Smith and Walter, 2009). The growing role of LCFIs poses various challenges.The complexity of these institutions has made it hard for financial analysis and effective supervisors oversight. The linkages among business areas within LCFIs are close which leads to increase of risk contamination from one business area to another as well as across jurisdiction. All reports also insist on the danger induce by implicit Too-Big-To-Fail guarantees. Too big to fail is an expression that refers to the idea that ineconomic regulation, the largest and most interconnected businesses are so big that a government cannot le t them to declare bankruptcy for the reason that said failure would have disastrous consequences on the overall economy. Mervyn King on June 17th, 2009, the governor of theBank of England, called for banks that are too big to fail to be cut down to size, as a solution to the problem of banks having taxpaye

Wabash Watershed

Global warming is a resultant of Heat-trapping gases in the atmosphere. The release of these gases has increased in the last 500 years since the industrial revolution. There is an expectation that global warming will result to rising sea levels, droughts, fires, heat waves, extreme storms, heavy rainfall, floods, and melting of snow and ice. These changes as envisaged would affect agriculture and general food availability with devastating consequences for existence of life on earth. In additional, life would change completely because many systems are tied to the climate.For example, temperature changes would affect breeding cycle of insect, and this has implications on pollination and food availability for humans. Although short-term weather variations are normal and expected, long-term changes are deleterious to the environment and life on earth (Houghton, 2004). There is evidence that global warming is becoming worse primarily due to rise in carbon dioxide concentration in the atmo sphere. In 1950s, the concentration of carbon dioxide was at 315 parts per million. Currently, the concentration is about 385 parts per million.To discover an increase in concentration of carbon dioxide throughout history, scientists have used bubbles of air trapped in ice and results show that the current concentration of carbon dioxide is the highest and has been, for more than 10,000 years (Maslin, 2007). Atmospheric carbon dioxide was 280 parts per million before the industrial revolution. During the ice age, concentration was only 100 parts and 300 during warm periods. Other green houses gases such as methane and nitrous oxide have increased at the same rate as carbon dioxide since then.The rising levels of carbon dioxide and vapor in the atmosphere are projected as causing wide ranging climatic changes, in the form of heavy rainfall and droughts occurring within a few years. The increasing level would flood cities and destroy infrastructure in low-lying areas. In the past, ser ious floods that used to occur once or twice in a period of 100 to 500 years are now regular occurrence. Small changes in precipitation, moisture, and local temperature will have a tremendous impact on human life due to their expected impact on food production.Since 1880s, annual mean temperature has increased, and projections based on factors in existence suggest the temperature increase will accelerate (Houghton, 2004). According to global warming theory, increase in temperature means more evaporation from the ocean. Presently, the ocean holds more than 4 percent more moisture compared to 30 years ago. This has resulted to experiencing tremendous and frequent storms. It is expected that as the temperature keep rising, the moisture in the ocean will increase, and storms will get worse.Additionally, warm air over land will either extend drought. The loss of summer ice in the arctic region has altered winter in North America and Western Europe. The melting ice adds to the sea volume that partly explains the increase in sea levels. The permanent ice that is melting in the Polar Regions is releasing methane, which is a greenhouse gas. Therefore, global warming is creating a condition for accelerated warming. Severe winter that was recorded in eastern US and northern US is related to temperature changes in the arctic region.Warm air over the arctic melts the ice that moves into the ocean, which becomes darker. Consequently, the ocean takes in more rays placing more warmth over the arctic region. This weakens the tight swirling vortex of the jet stream, which drives weather patterns in Western Europe. A weaker jet stream in 2010 dipped further south delivering storm tracks and bringing arctic air in middle air, increasing the possibility of severe winter (Houghton, 2004). That is what happened in 2010 in eastern USA and northern Europe. People contribute to the global warming phenomena by burning fossil fuel.Burning fossil fuels releases carbon dioxide that produce s greenhouse effect over the surface of the earth; thereby, trapping more solar radiation. Additionally, when people cut down trees, the amounts of carbon dioxide in the atmosphere increase precipitously because trees and forests acts as a carbon sink. Other than burning fossil fuels and deforestation, other human activities behind global warming are industrial processes and mining, landfills, septic, water systems, fertilizer application, manure and management (Maslin, 2007).Currently in the tropics, massive deforestation is taking place. In the Amazon basin, millions of acres are cleared annually to pave the way for ranches to rear beef animals for meat export to Europe and North America. Western Europe and North America have the utmost per capita use of meat in the world. Deforestation is also carried out in order to satisfy the huge demand for timber product in Brazil, a country that is developing fast. Deforestation has gains for the country. Trees in the Amazon and Congo basin s are significant.The two largest forest basins act as the â€Å"world lungs† because they absorb excess carbon dioxide produced by burning fossil fuels. Forests also play a critical role in reducing flooding and are a great source of hydroelectric power, which is clean. Of the hydroelectric power of the two great rivers and elsewhere in the world, the need for burning fossil fuel to produce electricity would reduce dramatically further leading to less pollution. The current environmental crisis such as global warming, water scarcity, ozone depletion, and biodiversity depletion is caused by anthropocentric perception of nature.In accordance with anthropocentric view of environment, trees are cut down in order to gratify the huge demand for tree products or to pave the way for farming or ranching. Removal of trees leaves the earth unable to absorb excess carbon dioxide released into the atmosphere through burning of biomass (Archer, 2012). As a result, increasing levels of car bon dioxide in the atmosphere is contributing to global warming and climate change. Deforestation is also causing the extinction of species.People view trees as mere resources that can only be exploited to provide building materials, avail jobs for the low-income people among other uses, totally disregarding the intrinsic value of forests or trees, which is to act as a carbon sink (Robbins and Hintz 60). As a result, this has caused massive environmental damage with global ramifications. From the data collected for the Wabash water basic, this paper consider temperature, precipitation, evapotraspiraition, moisture deficit, and surface for evidence of global warming. TemperatureAlthough data presented is not consistent, there are indications that there is an overall warming of the environment. On average, maximum temperature increased over the period, and minimum temperature increased. According to global warming theory, increase in global and local temperatures lead to increased eva poration that cause more cloud cover/fog or haze that hold more temperature increasing minimum temperature in the process. The increase in minimum temperature recorded during the 30-year period can be construed to mean the presence of global warming.In the 80s, average temperatures increased rapidly suggesting that the world was warming up rapidly. Hover, the increase slowed down in the 90s. The average daily temperature has declined in the 30 years under study. According to global warming theory, increase in greenhouse gases increases the ability of earth atmosphere to hold onto nighttime warmth more effectively than increases in mid-day temperature. The decline in average temperature range supports the view that the globe is warming. Precipitation On average, annual precipitation at the valley has increased.The precipitation rises from 39 inches to 42, which is a significant increase. The increase in precipitation is consistent with the earlier data that demonstrated an increase i n temperature. Global warming theory predicts a situation where increase in temperature leads to more water vapor due to evaporation leading to an increase in precipitation. Based on the findings that precipitation has increased in the 30 years, conclusion can be made that global warming is a reality. However, there are other facts that do not support the supposition of global warming.The global warming theory predicts that continental landmasses would receive less rainfall. Decline in temperature gradient between equatorial regions and regions removed from the centre would decline, leading to weak storm system that transports moisture from the oceans to the landmasses for precipitation. In the continental United States, the amount of precipitation should have declined as weak storm systems should have been able to transport moisture from the Gulf of Mexico. Increase in precipitation contradicts global warming theory.Additionally, draught is brought by low precipitation and high eva poration. Precipitation recorded is high. Over the period, the day where there is light precipitation has increased peaking in the 70s. The numbers of recorded days with moderate precipitation also increased. In the 80s, there are more days of moderate precipitation. This period coincided with higher temperatures suggesting that increase in temperature and evaporation was creating drought conditions. This view is also supported by the view that annual day on heavy precipitation declines over the period.The number of days with recorded heavy precipitation show great variability that is not possible to extract a visible pattern to link to the global warming. The number of days where precipitation over 0. 01 inches and above is recorded increases over the period. The increase is probably due to light precipitation days that follow the same trend. This information alone cannot absolutely indicate the presence of global warming. However, the data in itself shows that there is more moistu re in the atmosphere or evaporation and resulting condensation due to temperature increase.Evapotranspiration The rate of evapotranspiration as the data shows increase over the period and peaks in the 70s. According to global warming theory, evapotranspiration would increase in tandem with an increase in precipitation and temperature. The increase in a period of a general increase in temperature and precipitation is consistent with what would be expected as predicted by the global warming theory. Moisture deficit Moisture deficit declined suggesting that drought induced deficit should have been the case.Annual surplus moisture is recorded, and this supports the theory of global warming. Runoff There is an increase in runoff due to increased precipitation. The 5-year running means that the data seemed to run in the 2-3 year cycles of maximums and minimums, but the peaks of the cycles grew to extreme high levels. As far as we understand about the consequences of global warming, this d ata does not seem to agree them. Views Based on the data presented about the Wabash watershed, there is a strong suggestion that global warming is real.All the variables largely behave in a way people would expect in a warm environment. For example, theorists predicted that temperature would rise, and there would be a drop in the range of temperature. According to the date, temperature has increased during the period, and the difference between minimum and maximum temperature has declined. The results of the data fulfill the predictions. Despite evidence for global warming, some of the date collected from the watershed opposes what should happen in theory.For example, more droughts should have happened during the period that does not turn out to be precisely the case. However, the wild variability of key variables is a pointer to a potential problem. In a tropical region, the wide variability could have resulted to observable drought like conditions. Conclusion Global warming is a p roblem with serious consequences. The carbon dioxide concentration in the atmosphere is expected to drive the present global temperature further north. The changes in the arctic region and the ocean have implication for the weather patterns worldwide.According to the data presented for the Wabash watershed, both minimum and maximum temperatures increased during the 30-year period and the difference between them decreased. Global warming theory precisely suggests the same thing. Increase in average temperature suggests that moisture levels at land and sea would increase. As an indication, precipitation levels would increase, and more severe storms in the sea would be experienced due to high moisture levels. In the last few years, violent storms have been witnessed at sea indicating that moisture levels at the oceans are increasing.Global warming theory predicts lower precipitation levels due to the disturbance of delicate pressure balance in the tropics and regions that are not close . The global warming theory predicts that continental landmasses would receive less rainfall. Decline in temperature, gradient between equatorial regions and regions removed from the centre would decline leading to weak storm system that transport moisture from the oceans to the land masses for precipitation. Because precipitation increased at Wabash watershed for the period under review, the results do not quite agree with the theory.However, in all other respect, the behavior of the variables that were under study suggests that global warming is real. In tandem with an increase in precipitation, runoff increased. Annual surplus moisture is recorded, and this supports the theory of global warming. The implication of Wabash watershed is that in general, the earth is growing warmer, but some predictions of global warming are not turning out as expected (Archer, 2012). This could be due to some hidden variables or known variables interacting in a way that is not fully understood.

A Comparison of Democratization Process in China and India

The term â€Å"democracy† first emerged in the societies of ancient Greece where it is meant to be a form of decision-making where the community is allowed to participate, which later on served as the system used for governance (Woolf & Rawcliffe, 2005). Bryce (2009) noted that the term is used to describe the power that is legally bestowed by the people to the government.Likewise, the term â€Å"people† moved farther away from the privileged few and focused more on the entire community. As a result, the consideration for the rights and the voice of the citizens became a central theme in democratic governments.Aside from the political aspects of democracy, the free market structure is also an element that has become inseparable from that of democracy (as cited in Snauwaert, 1993). In the free market system, the government has less control over the affairs of the market and individuals are given the chance to choose among several options (Snauwaert, 1993).In the present day, democracy has become a very popular system of government as the West and other advocates continue to hail it as a suitable form of governing the society. Based on the arguments of Francis Fukuyama, a resolution is reached regarding the best way to organize the political and economic aspects of the society and suggested democracy as the answer.In addition, Fukuyama contends that â€Å"democracy, in the political realm, and markets, in the economic realm, had triumphed over all challengers and were in the process of becoming the universal forms of political and economic organization† (Bova, 2003, p. 243).In history, nations did not immediately employ democracy. Some have taken other paths, such as India and China that experienced the colonial rule and Communist rule, respectively. Both countries have experienced undergoing a process of democratization, which is said to â€Å"[begin] when the principle of citizenship is acknowledged by a regime in certain ways by allowing the opposition to become involved in politics† (Des Forges, Luo, & Wu, 1993, p. 231).In addition, the democratization process proceeds from the distribution of power and responsibilities throughout the community (Des Forges, Luo, & Wu, 1993).From the previous systems of government, India proved that it can undergo the process of democratization and sustain it until 50 years after. On the other hand, China remains a communist state amidst its futile attempts to apply several democratic principles from the West (Central Intelligence Agency [CIA], 2010; He & Feng, 2008).The two countries, China and India, are both Asian countries that are striving hard to apply and implement the concepts of democracy as it is observed from the Western ideals.The interesting experiences of the two nations with regard to the process of democratization serve as the focus of the present paper, which would also highlight the differences and similarities between the experiences of the two nations. In s o doing, emphasis is placed on theDemocratization Process in IndiaNational ProfileIndia is a member of the Southern Asian region and has a total area of 3,165,596 sq km (Oldenburg, 2008). The 7 union territories and 28 states are ruled by a President, who is the head of state, and a Prime Minster, who serves as the head of government (Oldenburg, 2008).The present form of government is Federal Republic and is governed by the Constitution that was amended last 2002 (Oldenburg, 2008). India also has an existing legislature, which is composed of the Lok Sabha (House of the People) and the Rajya Sabha (Council of States) (Oldenburg, 2008). The Judicial branch of the Indian government is headed by the Supreme Court (Oldenburg, 2008).For a lengthy period of time until 1947, India was subjected to British colonial rule (Mishar, 2000). The country gained independence through the Indian Independence Act, which received the Royal Assent on 1947 (Mishra, 2000).The Indian Independence Act served as an important factor in the process of democratization in the country because it gave way for a Provisional government that would later on take the form of a democracy. At the day when the said Act took into effect, Jawaharlal Nehru said that it is a time when â€Å"India discovers herself again,† (as cited in Hukam, 2005, pp. 309-10).In relation to this, it is important to identify the events surrounding before and after the promulgation of the Indian Independence Act in 1947 and the progress towards democracy that was made up to the present time. More specifically, emphasis is placed on the economic and political changes in the country and the actors and elements that allowed for successful democratization.

Gothic Literature by Poe Essay - 469 Words

Gothic literature was a popular writing tradition of the eighteenth and nineteenth centuries and is still used today. Gothic literature explores the wicked, perverse and dark desires. Gothic conventions can include burial alive, ghosts, hysteria, ruined bodies, tales within tales, undead characters, underground spaces, and more. Gothic themes are guilt, sex, violence, death, and cosmic struggle. Gothic stories or poems should inspire terror or horror. Edgar Allen Poe was one of the many well-known Gothic writers. In his stories he uses a variety of themes to carry out the gothic theme. In the story, The Tell-Tale Heart, Poe uses a psychological approach to gothic. I was never kinder to the old man than during the whole week†¦show more content†¦Another one of Poes genius ways in hiding a dead body. Lastly, Poe also uses the gothic theme of guilt in this story. I admit the deed! Tear up the planks. The police came to the house and the narrator felt he was in trouble. Finally, he confessed to where the body was because of his guilty conscience. Edgar Allen Poes, Masque of the Red Death also has many gothic themes. A bloody disease called the Red Death has ravaged a country. Prince Prospero thinks he can hide from this plague and throws a ball to celebrate his victory over it. First, Poe uses several words in this play conveying horror such as fatal, bleeding, blood, redness, and chambers, which are all clue to death. The seven rooms in the house also conveyed stages in life ending with death. These rooms were set up from east to west. This meaning that the sun comes up in the east and goes down in the west, and death comes in the darkness. In this chamber only, the color of the windows failed to correspond with the decorations. The panes here were scarlet--a deep blood color. The guests avoided this room because it was a sign of death. The giant clock also was symbol of horror in the story. Its pendulum swung to and fro with a dull, heavy, monotonous clang. Every hour the clockShow MoreRelatedGothic Literature : Edgar Allan Poe928 Words   |  4 PagesGothic is a term associated with a plethora of authors, a few names that arise in the mind when mentioning the genre’s influence on American grounds are William Faulkner (associated with the sub-genre Southern Gothic), Washington Irving and the ever-so-famous Edgar Allan-Poe. The latter being known as one of the prominent authors of American Gothicism. Poe, just like every great author, had his influences in Gothicism. First of all, Gothic is a term in literature that describes a combination ofRead MoreEdgar Allan Poe : The Father Of Gothic Literature1393 Words   |  6 Pages2017 Edgar Allan Poe Studies say that Edgar Allan Poe was the father of gothic literature. As an American writer and critic, he went through the struggles of living in poverty, having a drinking and gambling problem, and being judge based on his decisions. 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He wrote many short stories and poems that include horror, gothic, andRead MoreEdgar Allan Poe : The Thematic Elements Of Gothic Literature1209 Words   |  5 Pages Gothic literature contains many thematic elements such as horror, death, and even at times romanticism. This type of literature incorporates various different elements, in order to evoke the emotions of terror. There are many authors who are extremely talented and are still remembered and read in classrooms today. These are authors like Edgar Allan Poe, best known for his mysterious poems and short stories, Richard Matheson and Horacio Quiroga, who have all incorporated psychological problems andRead MoreGothic Literature- the Black Cat by Edgar Allen Poe and Dracula by Bram Stoker1687 Words   |  7 PagesBram Stoker and The Black Cat by Edgar Allen Poe Any text that is composed is written to fit into the society that it is written for. A genre must evolve and modernise itself to remain relevant and interesting to the target audience. In â€Å"The Black Cat† by Edgar Allen Poe and â€Å"Dracula† by Bram Stoker, the composers have both adapted their stories to appeal the people of their time. â€Å"Dracula† by Bram Stoker used many of the conventions of the gothic genre to appeal to the Victorian Society. StokerRead MoreEdgar Allan Poe And The Cask Of Amontillado1384 Words   |  6 PagesWhat makes Edgar Allan Poe work unique? Other than being a strange individual, Poe has become a remarkable literature writer. The Raven, Annabel Lee, and The Cask of Amontillado are just a few of Poe’s work that staples the theme of gothic literature. This essay will allow you to see the gothic elements Edgar Allan Poe uses through his most common poems. Gothic literature has many elements which play into its definition. The actual definition is a style of writing that is characterized by elementsRead MoreGothic Literature : `` Tell Tale Heart `` And `` The Raven ``1698 Words   |  7 Pages2/21/17 Gothic Literature Gothic Literature has been around since the late 17th century, slowly progressing in popularity until the mid 19th century where it had much success demonstrated through Edgar allan Poe. Edgar Allan has a number of common Themes, motifs and structures that make his work easily recognizable and more importantly, fits his stories into the classification of the gothic. Among these elements, they include the theme of death and decay, which is almost always in Gothic fictionRead MoreGothic Fiction : The Castle Of Otranto1443 Words   |  6 PagesAngelic TR – 8a-9:15a Comp. 2 Gothic literature was almost single handedly invented by Horace Walpole with his novel The Castle of Otranto in 1765. A mix of romance and horror, many authors today and many authors in the past have used gothic fiction to fill the readers with suspense and terror. Edgar Allan Poe used elements such as suspense, setting, and language to create a plethora of gothic fiction stories. Stories such as Poe’s Cask of Amontillado capture the gothic element perfectly. A combinationRead MoreAnalysis Of Edgar Allen Poe s The Cask 1563 Words   |  7 PagesBlaine Bowman Mrs. McKay American Literature 10 November, 2015 Gothic Elements in Poe’s Captivating Stories Edgar Allen Poe can be described as a master of gothic literature. Poe enjoyed incorporating the gothic theme into his stories (â€Å"The Cask† 52). The free dictionary website describes gothicism as a style in fictional literature characterized by gloomy settings, violent or grotesque action, and a mood of decay, degeneration, and decadence. Edgar Allen Poe experienced many failures and disappointmentsRead MoreThe American Gothic in The Fall of the House of Usher by Edgar Allan Poe1539 Words   |  7 Pagesof the eighteenth century brought about the beginning of a new genre of literature in America; the American Gothic. Already a popular genre in Europe, this new strain of literature in America arose to create a rather abrupt contrast to the Enlightenment foundations upon which American was born. Instead of concerning subjects of liberty and the pursuit of happiness; key elements of the American dream, American Gothic literature embodies and gives voice to the dark nightmare that is the underside