Jan 022015
 
 January 2, 2015  Posted by at 7:06 pm Finance Tagged with: , , , , ,  9 Responses »


Gordon Parks A scene at the Fulton Fish Market, New York Jun 1943

In his 1944 play Huis Clos (loosely yet officially translated as No Exit, or Closed Door), French philosopher Jean-Paul Sartre said: “L’enfer, c’est les autres.” Or: Hell is (the) other people. Which can be very true. And Sartre makes his point in a masterful way. He describes a group of people locked up together with no escape, and for eternity, who have a bitter go at each other. Something we all recognize. People can be a nuisance, and even drive one as far as suicide.

But then, the opposite is just as true. In more ways than one. Not only is hell the absence of other people (though I know there are monks who choose full separation), but heaven is the other people too. Or, as normal mortals would say: ‘(Wo)men, can’t live with them, can’t live without them’. Or something along those lines.

It’s who we are. We are social animals. Lions, not tigers. We’re tribal. We cannot give our lives meaning of and by ourselves, we need the other people to give it meaning. Though you may have gotten a different notion in your lifetime, the meaning of your life cannot be measured by something as fleeting as the size of your bank account. It cannot even by measured at all by ‘you’ yourself. Our lives derive their meaning from other people’s lives.

Over the Christmas season, many versions of Dickens’ Scrooge passed by our screens again. He’s a good example to use. In the beginning of the story, Scrooge is wealthy but his life has no meaning. That is Dickens’ core message. His life means nothing. It isn’t until he starts caring about others, and in the process giving – some of – his wealth away, that his life becomes meaningful. This is not a value judgment, and it isn’t for any religious or even philosophical reasons, it’s simple biology.

Religious leaders like Pope Francis and the Archbishop of Canterbury, Justin Welby, get it. The ebola nurses and doctors get it. But that’s not nearly enough. We should all realize who we really are, and why. We all resemble Scrooge much more than we’re willing to admit. Problem is, we have no education system left to tell us about it. Our schools and colleges instead tell us to compete: our education focuses on the ‘Hell Is The Others’ side of our brains. The ‘Heaven Is The Others’ side is out of fashion.

And the education system is not the only problem. We also have a very big problem in that our present economic system doesn’t reflect, or fit in with, our natural-born psychology, our inbuilt mental set-up. Our economic system reflects, and appeals to, the part of our brain that tells us to outdo others, not cooperate with them.

Of course this is a complex issue, if only because our brains just happen to be made up of different parts. Still, if we are ever to enable the newest part of it, that which makes us human, and sets us apart from our non-human ancestors, from the simplest amoeba to far more advanced primates, to take control, if we are ever to achieve that, we will first have to recognize things for what they are. And then act on that.

Endless and forever competition from our earliest childhood days all the way to our graves clearly doesn’t seem the way to go. Look around you. It makes us destructive beings. It makes us unkind to each other, and distant from one another. Those are the very things that tear apart the social fabric our very biology says we need. If we don’t make a strong conscious effort to allow our ‘human brain’ to control our ‘animal brain’, we have no chance, we will be lost. Today, what we do is use our human intelligence to amplify the destructive properties of our animal brain.

This is evident in what we are doing to our living environment. We are at present no better than the yeast in the wine vat, who multiply at fast as they can until all the sugar is gone and then die off in the blink of an eye. Only, for us, the earth itself is both our wine vat and our sugar, and unlike the yeast we can do grave danger to our entire environment. We’re not just killing ourselves, we’re murdering just about everything around us.

A wonderful image of how this works, one that should make us think, was painted last week in the LA Times by James K. Boyce, economics professor at the University of Massachusetts, Amherst.

Amid Climate Change, What’s More Important? Protecting Money Or People?

[..] .. it is too late to prevent climate change, no matter how fast we ultimately act to limit it. [We] now confront an issue that many had hoped to avoid: adaptation. Adapting to climate change will carry a high price tag. [..] Because adaptation won’t come cheap, we must decide which investments are worth the cost.

A thought experiment illustrates the choices we face. Imagine that without major new investments in adaptation, climate change will cause world incomes to fall in the next two decades by 25% across the board, with everyone’s income going down, from the poorest farmworker in Bangladesh to the wealthiest real estate baron in Manhattan. Adaptation can cushion some but not all of these losses. What should be our priority: reduce losses for the farmworker or the baron?

For the farmworker, and a billion others in the world who live on about $1 a day, this 25% income loss will be a disaster, perhaps the difference between life and death. Yet in dollars, the loss is just 25 cents a day. For the land baron and other “one-percenters” in the U.S. with average incomes of about $2,000 a day, the 25% income loss would be a matter of regret, not survival. He’ll find a way to get by on $1,500 a day. In human terms, the baron’s loss pales compared with that of the farmworker. But in dollar terms, it’s 2,000 times larger.

Conventional economic models would prescribe spending more to protect the barons than the farmworkers of the world. The rationale was set forth with brutal clarity in a memorandum leaked in 1992 that was signed by Lawrence Summers, then chief economist of the World Bank. The memo asked whether the bank should encourage more migration of dirty industries to developing countries and concluded that “the economic logic of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.” Climate change is just a new kind of toxic waste.

The “economic logic” of the Summers memo – later said to have been penned tongue-in-cheek to provoke debate, which it certainly did – rests on a doctrine of “efficiency” that counts all dollars equally. Whether it goes to a starving child or a millionaire, a dollar is a dollar. [..] A different way to set adaptation priorities is to count each person equally, not each dollar. This approach rests on the ethical principle that a healthy environment is a human right, not a commodity to be distributed on the basis of purchasing power, or a privilege to be distributed on the basis of political power.

This equity principle is widely embraced around the world, from the affirmation in the U.S. Declaration of Independence that people have an inalienable right to “life, liberty and the pursuit of happiness,” to the guarantee in the South African Constitution that everyone has the right “to an environment that is not harmful to their health or well-being.” It puts safeguarding the lives of the poor ahead of safeguarding the property of the rich.

In the years ahead, climate change will confront the world with hard choices: whether to protect as many dollars as possible, or to protect as many people as we can.

It’s obvious. The choice is, as I wrote above, between human terms or dollar terms. In which dollar terms stands for choosing the primitive parts of our brain. Most likely, given the way we have organized our societies, our education systems and our economic systems, the rich part of the world will spend hundreds of billions protecting their sea-side villas, while entire poorer nations, and the people living in them, threaten to disappear.

In our own countries as well, that choice will be made, favoring well-to-do over poor. After all, what are the economic reasons for water-proofing a slum? Where 10,000 people can each afford to maybe contribute $100 to the work, while a ‘baron’ can easily afford $10 million to secure his summer home a few miles away?

In today’s world, it’s not even a question. But then in today’s world, money rules the political system, which should in an ideal world be holding a society together, not tearing it apart. Which it very much does. Our political systems separate the rich from the poor, like they’re not of the same species, like there’s nothing that ties them together.

It probably doesn’t even sound as a actual choice to you. You most likely think that these things go as they do, that ‘they’ have all the power anyway and there’s nothing you can do. But that doesn’t seem very human, does it, and certainly not very American, to just give up without a fight. And it’s starting to look as if you don’t stand up now for your self, your progeny and all other people, you needn’t bother anymore.

Then again, perhaps it’s not all that hard. We have a spectacularly failed economic system anyway, and we’re in dire need of a new one. So why not catch two birds with one stone (sorry, Tweetie, just an expression) and redo both our education systems and our economic systems, and make sure our adaptation to climate change gets organized on a one man one vote, instead of a one dollar one vote basis? It’s a place to start. Try and recognize which part of you, yourself, is a dumb predator and which part is a ‘social being human’. And pick the latter for all of your future decisions.

And teach yourself, and your kids, that Scrooge is you, we are all Scrooge, that’s what Dickens meant to say, and that the meaning of your life, too, derives its meaning from other people’s lives, not from itself. Once you got that down, you’re halfway there.

We tend towards thinking our ‘elected’ political leaders should, and will, take care of issues such as these, and in a fair way too. But in fact they’re the very last ones who will do so. Because they owe their positions to the very educational and economic systems that have ‘designed’ the way things are running out of hand.

We need to move, our societies, and the entire earth, need us to move to a ‘people’, as opposed to a ‘dollar’, point of view.

The separation between rich and poor doesn’t of course only come to the fore in climate change adaptation issues. We’re living today inside these narratives of an economic recovery, at the same time that poverty even in western societies rises fast. The rich are doing well, and that’s what we see reflected in ‘official’ economic numbers. But it’s all just pure predation.

What you can do is perhaps to vote for another party, but in many countries that’s not an option, the status quo has far too firm a handle on the entire political system. So you’re going to have to come up with something else, and if need be, take to the streets. Or the internet.

And as you do, think about Scrooge, and about to what extent his fictional, intentionally over the top caricaturized, persona reflects the real life you. As I said, once you got that down, you’re halfway there.

Dec 282014
 
 December 28, 2014  Posted by at 12:28 pm Finance Tagged with: , , , , , , , ,  4 Responses »


DPC Cuyahoga River, Lift Bridge and Superior Avenue viaduct, Cleveland, Ohio 1912

Pope Francis Climate Change Encyclical To Anger Deniers, US Churches (Observer)
Hungry Britain: Millions Struggle To Feed Themselves, Face Malnourishment (Ind.)
Decline in Oil Could Cost OPEC $257 Billion in 2015 (Daily Finance)
US Oil-Producing States See Budgets, Jobs at Risk as Price Falls (NY Times)
China’s 3.5% Trade Growth in 2014 Falling Far Short Of 7.5% Target (Reuters)
Japan Approves $29 Billion Stimulus Plan, Impact In Doubt (Reuters)
Japan Approves $29 Billion Spending Package to Boost Economy
The Keynesian End Game Crystalizes In Japan’s Monetary Madness (Stockman)
How Central Banks Saved The World (Stocks) In 2014 (Zero Hedge)
Now Whitehall’s Crazy Eco Zealots Want To Ban Your Gas Cooker (Daily Mail)
Mexico Withdraws $3.4 Billion From Pemex as Oil Revenue Shrinks (Bloomberg)
Greece Faces New ‘Catastrophe’ As PM Battles To Avert Snap Elections (Observer)
Challenging UK Party Games Ahead As Greece Threatens 2nd Debt Crisis (Observer)
You Can Put The Next Crash On Your 2016 Calendar Now (Paul B. Farrell)
2014: The Year The Internet Came Of Age (Guardian)
China Needs Millions of Brides ASAP (Bloomberg)
Rising Oceans Force Bangladeshi Farmers Inland for New Jobs (Bloomberg)
Siberian Dog Allowed To Stay In Hospital Where Owner Died 1 Year Ago (RT)

A Papal Encyclical is a big deal.

Pope Francis Climate Change Encyclical To Anger Deniers, US Churches (Observer)

He has been called the “superman pope”, and it would be hard to deny that Pope Francis has had a good December. Cited by President Barack Obama as a key player in the thawing relations between the US and Cuba, the Argentinian pontiff followed that by lecturing his cardinals on the need to clean up Vatican politics. But can Francis achieve a feat that has so far eluded secular powers and inspire decisive action on climate change? It looks as if he will give it a go. In 2015, the pope will issue a lengthy message on the subject to the world’s 1.2 billion Catholics, give an address to the UN general assembly and call a summit of the world’s main religions. The reason for such frenetic activity, says Bishop Marcelo Sorondo, chancellor of the Vatican’s Pontifical Academy of Sciences, is the pope’s wish to directly influence next year’s crucial UN climate meeting in Paris, when countries will try to conclude 20 years of fraught negotiations with a universal commitment to reduce emissions.

“Our academics supported the pope’s initiative to influence next year’s crucial decisions,” Sorondo told Cafod, the Catholic development agency, at a meeting in London. “The idea is to convene a meeting with leaders of the main religions to make all people aware of the state of our climate and the tragedy of social exclusion.” Following a visit in March to Tacloban, the Philippine city devastated in 2012 by typhoon Haiyan, the pope will publish a rare encyclical on climate change and human ecology. Urging all Catholics to take action on moral and scientific grounds, the document will be sent to the world’s 5,000 Catholic bishops and 400,000 priests, who will distribute it to parishioners. According to Vatican insiders, Francis will meet other faith leaders and lobby politicians at the general assembly in New York in September, when countries will sign up to new anti-poverty and environmental goals.

In recent months, the pope has argued for a radical new financial and economic system to avoid human inequality and ecological devastation. In October he told a meeting of Latin American and Asian landless peasants and other social movements: “An economic system centred on the god of money needs to plunder nature to sustain the frenetic rhythm of consumption that is inherent to it. “The system continues unchanged, since what dominates are the dynamics of an economy and a finance that are lacking in ethics. It is no longer man who commands, but money. Cash commands. “The monopolising of lands, deforestation, the appropriation of water, inadequate agro-toxics are some of the evils that tear man from the land of his birth. Climate change, the loss of biodiversity and deforestation are already showing their devastating effects in the great cataclysms we witness,” he said.

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Dickens never died.

Hungry Britain: Millions Struggle To Feed Themselves, Face Malnourishment (Ind.)

Millions of the poorest people in Britain are struggling to get enough food to maintain their body weight, according to official figures published this month. The Government’s Family Food report reveals that the poorest 10% of the population – some 6.4 million people – ate an average of 1,997 calories a day last year, compared with the average guideline figure of about 2,080 calories. This data covers all age groups. One expert said the figures were a “powerful marker” that there is a problem with food poverty in Britain and it was clear there were “substantial numbers of people who are going hungry and eating a pretty miserable diet”. The use of food banks in the UK has surged in recent years. The Trussell Trust, a charity which runs more than 400 food banks, said it had given three days worth of food, and support, to more than 492,600 people between April and September this year, up 38% on the same period in 2013.

Based on an annual survey of 6,000 UK households, the Family Food report said the population as a whole was consuming 5% more calories than required. Tables of figures attached to the report reveal the average calorie consumption for the poorest 10%, but the report itself did not highlight this. Chris Goodall, an award-winning author who writes about energy, discovered the figures while investigating human use of food resources. “The data absolutely shocked me. What it shows is for the first time since the Second World War, if you are poor you cannot afford to eat sufficient calories,” he said. He also highlights a widening consumption gap between rich and poor. In 2001/2, there was little difference, with the richest 10th consuming a total of 2,420 calories daily, about 4% more than the poorest. But in 2013, the richest group consumed 2,294 calories, about 15% more than the poorest. The report, published by the Department for Environment, Food & Rural Affairs, also found that the poorest people spent 22% more on food in 2013 than in 2007 but received 6.7% less.

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2012 revenues: $900 billion. 2015: $446 billion.

Decline in Oil Could Cost OPEC $257 Billion in 2015 (Daily Finance)

Falling oil prices are giving a huge boost to the U.S. economy just in time for the holidays, and the reprieve from high gas prices doesn’t look like it will stop anytime soon. But elsewhere around the world, the drop in oil might not be looked upon so kindly. Most of OPEC’s 12 member countries rely on oil as a major source of revenue, not only supporting their domestic economies but also balancing national budgets. The amount of potential revenue they’ve lost as crude oil prices have fallen is staggering. If you’re a country like Saudi Arabia, Kuwait or Iraq, which rely on oil as a major revenue source, the drop in oil prices can impact your country dramatically. The U.S. Energy Information Administration just estimated that next year’s OPEC oil export revenue (excluding Iran) will drop an incredible $257 billion to $446 billion. That’s off its peak of nearly $900 billion in 2012.

The chart above shows the scale of OPEC’s potential revenue drop and the chart below shows who has the most at stake. Interestingly, Saudi Arabia is leading the charge against cutting OPEC’s production, which is keeping oil prices low, despite having the most money at stake. The reason may be a long-term need for greater market share in the oil market.

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“Nothing is off the table at this point.”

US Oil-Producing States See Budgets, Jobs at Risk as Price Falls (NY Times)

States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies. The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom. “The crunch is coming,” said Gunnar Knapp, a professor of economics and the director of the Institute of Social and Economic Research at the University of Alaska Anchorage. Experts and elected officials say an extended downturn in oil prices seems unlikely to create the economic disasters that accompanied the 1980s oil bust, because energy-producing states that were left reeling for years have diversified their economies. The effects on the states are nothing like the crises facing big oil-exporting nations like Russia, Iran and Venezuela.

But here in Houston, which proudly bills itself as the energy capital of the world, Hercules Offshore announced it would lay off about 300 employees who work on the company’s rigs in the Gulf of Mexico at the end of the month. Texas already lost 2,300 oil and gas jobs in October and November, according to preliminary data released last week by the federal Bureau of Labor Statistics. On the same day, Fitch Ratings warned that home prices in Texas “may be unsustainable” as the price of oil continues to plummet. The American benchmark for crude oil, known as West Texas Intermediate, was $54.73 per barrel on Friday, having fallen from more than $100 a barrel in June. In Louisiana, the drop in oil prices had a hand in increasing the state’s projected 2015-16 budget shortfall to $1.4 billion and prompting cuts that eliminated 162 vacant positions in state government, reduced contracts across the state and froze expenses for items like travel and supplies at all state agencies. Another round of reductions is expected as soon as January.

And in Alaska – where about 90% of state government is funded by oil, allowing residents to pay no state sales or income taxes – the drop in oil prices has worsened the budget deficit and could force a 50% cut in capital spending for bridges and roads. Moody’s, the credit rating service, recently lowered Alaska’s credit outlook from stable to negative. States that have become accustomed to the benefits of energy production — budgets fattened by oil and gas taxes, ample jobs and healthy rainy-day funds — are now nervously eyeing the changed landscape and wondering how much they will lose from falling prices that have been an unexpected present to drivers across the country this holiday season. The price of natural gas is falling, too. “Our approach to the 2016 budget includes a full review of every activity in every agency’s budget and the cost associated with them,” said Kristy Nichols, the chief budget adviser to Gov. Bobby Jindal of Louisiana. “Nothing is off the table at this point.”

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“.. according to a report on the Ministry of Commerce’s website that was subsequently revised to remove the numbers.”

China’s 3.5% Trade Growth in 2014 Falling Far Short Of 7.5% Target (Reuters)

China’s trade will grow 3.5% in 2014, implying the country will fall short of a current 7.5% official growth target, according to a report on the Ministry of Commerce’s website that was subsequently revised to remove the numbers. The initial version of the report published on the website on Saturday, which quoted Minister of Commerce Gao Hucheng, was replaced with a new version that had identical wording but with all the numbers and percentages removed. The Commerce Ministry did not answer calls requesting comment on the reason for the change. China’s trade figures have repeatedly fallen short of expectations in the second half of this year, providing more evidence that China’s economy may be facing a sharper slowdown. Foreign direct investment will amount to $120 billion for the year, the earlier version of Ministry of Commerce report said, in line with official forecasts.

The earlier version of the report also said outward non-financial investment from China could also come in around the same level. That would mark the first time outward flows have pulled even with inward investment flows in China, and would imply a major surge in outward investment in December given that the current accumulated level stands slightly below $90 billion. The earlier version of the report also predicted that retail sales growth would come in at 12% for 2014, in line with the current average growth rate. In a separate report, the Chinese Academy of Social Sciences predicted that real estate prices in Chinese cities would continue to slide in 2015, with third- and fourth-tier cities hit hardest. But it said the market would have a soft landing as local governments take action to provide further policy support to the market.

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“.. the government will avoid fresh debt issuance and fund the package with unspent money from previous budgets and tax revenues that have exceeded budget forecasts due to economic recovery ..”

Japan Approves $29 Billion Stimulus Plan, Impact In Doubt (Reuters)

Japan’s government approved on Saturday stimulus spending worth $29 billion aimed at helping the country’s lagging regions and households with subsidies, merchandise vouchers and other steps, but analysts are skeptical about how much it can spur growth. The package, worth 3.5 trillion yen ($29.12 billion) was unveiled two weeks after a massive election victory by Prime Minister Shinzo Abe’s ruling coalition gave him a fresh mandate to push through his “Abenomics” stimulus policies. The government said it expects the stimulus plan to boost Japan’s GDP by 0.7%. Given Japan’s dire public finances, the government will avoid fresh debt issuance and fund the package with unspent money from previous budgets and tax revenues that have exceeded budget forecasts due to economic recovery.

With nationwide local elections planned in April which Abe’s ruling bloc must win to cement his grip on power, the package centers on subsidies to regional governments to carry out steps to stimulate private consumption and support small firms. Of the total, 1.8 trillion yen will be spent on measures such as distributing coupons to buy merchandise, providing low-income households with subsidies for fuel purchases, supporting funding at small firms and reviving regional economies. The remaining 1.7 trillion yen will be used for disaster-prevention and rebuilding disaster-hit areas including those affected by the March 2011 tsunami. Tokyo will also seek to bolster the housing market by lowering the mortgage rates offered by a governmental home-loan agency. “It’s better than doing nothing, but I don’t think this stimulus will have a big impact on boosting the economy,” said Masaki Kuwahara, a senior economist at Nomura Securities.

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Shopping vouchers?

Japan Approves $29 Billion Spending Package to Boost Economy

Japan’s government approved a 3.5 trillion yen ($29 billion) fiscal stimulus package to boost the economy after April’s sales tax hike caused consumption to slump. The measures include shopping vouchers, subsidized heating fuel for the poor and low interest loans for small businesses hurt by rising input costs, and will boost gross domestic product by 0.7%, the government estimates. The spending will be paid for with tax revenue and unspent funds and won’t need new bond issuance, Economy Minister Akira Amari said today in Tokyo. Unexpected falls in output and retail sales in November underscore the continued weakness in the economy. With little sign of a rebound in domestic demand, getting growth back on a recovery track is a priority for Prime Minister Shinzo Abe.

“This will support private consumption and boost regional economies, so that the virtuous economic cycle spreads to all corners of the nation,” Abe said in Tokyo after the decision. About 1.7 trillion yen will be spent on public works in areas damaged by natural disasters and to improve disaster preparedness, with 600 billion yen for revitalizing regional economies and 1.2 trillion yen to support people and small businesses hurt by the current economic situation, according to documents released by the Cabinet Office. The package is part of an extra budget for the fiscal year through March which will be adopted by the cabinet on Jan. 9, Finance Minister Taro Aso said in Tokyo today. The budget then needs to be approved by parliament, which is controlled by the ruling coalition.

Abe last month delayed the planned further hike in the sales tax by 18 months after data showed the economy fell into recession. GDP shrank an annualized 1.9% last quarter, more than initially estimated, after a 6.7% contraction in the three months from April, when the levy was raised for the first time since 1997. The postponement fueled concern about the government’s effort to rein in the world’s heaviest debt and prompted Moody’s Investors Service to cut its credit rating on Japan.

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“Japan’s work force of 80 million will drop to 40 million by 2060.”

The Keynesian End Game Crystalizes In Japan’s Monetary Madness (Stockman)

If the BOJ’s mad money printers were treated as monetary pariahs by the rest of the world, it would at least imply that a modicum of sanity remains on the planet. But just the opposite is the case. Establishment institutions like the IMF, the US treasury and the other major central banks urge them on, while the Keynesian arson squad led by Professor Krugman actually faults Japan for being too tepid with its “stimulus”. Now comes several new data points that absolutely confirm Japan is a financial mad house – even as its policy model is embraced by mainstream officials and analysts peering from a distance. Front and center is the newly reported fact from the Cabinet Office that Japan’s household savings rate plunged to minus 1.3% in the most recent fiscal year, thereby entering negative territory for the first time since records were started in 1955.

Indeed, Japan had been heralded as a nation of savers only a generation ago. During the era before it’s plunge into bubble finance in the late 1980s, households routinely saved 15-25% of income. But after nearly three decades of Keynesian policies, Japan has now stumbled into an insuperable demographic/financial trap; and one that is unusually transparent and rigidly delineated, to boot. Since Japan famously and doggedly refuses to accept immigrants, its long-term demographics are rigidly baked into the cake. Accordingly, anyone who will make a difference over the next several decades has already been born, counted, factored and attrited into the projections.

Japan’s work force of 80 million will thus drop to 40 million by 2060. At the same time, its current 30 million retirees will continue to rise, meaning that its retiree rolls will ultimately exceed the number of workers. Given those daunting facts, it follows that on the eve of its demographic bust Japan needs high savings and generous interest rates to augment retirement nest eggs; a strong exchange rate to attract foreign capital to help absorb its staggering $12 trillion of public debt, which already stands at a world leading 230% of GDP; and rising real incomes in order to shoulder the heavy taxation that is unavoidably necessary to close its fiscal gap and contain its mushrooming public debt.

With its debilitating Keynesian fiscal and monetary policies now re-upped on steroids under Abenomics, however, it goes without saying that nearly the opposite conditions prevail. Most notably, no household or institution anywhere in Japan can earn anything on liquid savings. The money market rate which determines deposit money yields was driven from a “high” of 100 basis points (as ridiculous as that sounds) at the time of the financial crisis to 10 basis points today, which is to say, nothing. But what is even more astounding is that the yield on the 10-year JGB dipped to an all-time low of 0.31% in recent trading. Given the militant insistence of the BOJ that it will hit its 2% inflation target come hell or high water, it is accurate to say that the official policy of Abenomics is to cause holders of the government’s long-term debt to loose their shirts.

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“Escape velocity”. Hadn’t heard that in while.

How Central Banks Saved The World (Stocks) In 2014 (Zero Hedge)

2014 was awash with potentially status quo destabilizing ‘realities’ to the “we’re back on track and world economic growth is about to reach escape velocity” meme… but time after time, the well-conditioned ‘investor’ was rescued… here’s how… Because – fun-durr-mentals.

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Love the picture.

Now Whitehall’s Crazy Eco Zealots Want To Ban Your Gas Cooker (Daily Mail)

As many as 14 million households slid their turkey into a gas oven yesterday, then waited for a succulent, browned and delicious meal to emerge. But such a familiar festive scene will be a thing of the past just a few years down the line, if the Government has its way. As for turning up the thermostat to ensure our gas boiler keeps our home snug and warm on a chilly festive morning – that simple action too, is under threat, even though some 90% of all homes in Britain are heated by gas. Householders across the country will be horrified to learn that, over the next decade or two, the Government plans to phase out all our gas-fired cookers and heating systems – forcing us to replace them at a cost of untold billions. Official documents reveal the Government is seriously contemplating that, within 25 years or so, gas will be all but banned — along with petrol and diesel.

The intention is that not only our cooking and heating but much else, including our cars and most of the vehicles on Britain’s roads, will have to be powered by electricity. The Government admits this astonishingly ambitious plan will be the most far-reaching energy revolution since electricity itself was discovered. But it is not being planned because our gas and oil supplies will have run out – or even because of any looming shortage. On the contrary, the world is now facing a glut of gas and oil, thanks in part to the ‘shale gas revolution’ led by the U.S., a country which almost overnight, has become the world’s largest natural gas producer as a result of a process called fracking – where water and sand are fired at high pressure into shale rock to release the oil and gas inside. This has led to plummeting prices, and prompted many industries to switch to gas.

Yet our own rulers want to abandon it. Astonishingly, the plan to change the way we cook our food and heat our homes is being instigated by the Government as the only way by which we can meet a statutory requirement under the Climate Change Act. This particular piece of legislative folly was pushed through Parliament six years ago by Ed Miliband, as our first ever Secretary of State for Energy and Climate Change, and decreed that Britain must cut its emissions of carbon dioxide from fossil fuels by a staggering 80% within 35 years. When this Act passed almost unanimously through Parliament in 2008, not a single MP, let alone Mr Miliband, had the faintest idea how we could actually meet such an improbable target.

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Got to admire the spin: “.. to “make management of public-sector finances more efficient ..”

Mexico Withdraws $3.4 Billion From Pemex as Oil Revenue Shrinks (Bloomberg)

Mexico’s Finance Ministry took out 50 billion pesos ($3.4 billion) from the state oil company Petroleos Mexicanos, according to a statement sent to the Mexican Stock Exchange. The payment this month was meant to “make management of public-sector finances more efficient,” according to the filing from the oil company, known as Pemex. The withdrawal marks a departure from the government’s usual methods of obtaining revenue from Pemex, which include taxes and royalties.

Pemex typically provides about a third of the federal budget, and its contributions dropped this year as the oil company faced production declines and falling crude prices. During the first 11 months of 2014, taxes paid by Mexico City-based Pemex declined by about 260 billion pesos, or 22%, from the same period of 2013, according to records. The withdrawal shows “a near addiction to Pemex’s revenue by the ministry,” Fluvio Ruiz, a board member of the oil company’s petrochemical unit, said in a phone interview. He said he had no prior knowledge of the disclosure through his role at the company.

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I don’t think he still believes in it.

Greece Faces New ‘Catastrophe’ As PM Battles To Avert Snap Elections (Observer)

Greece’s embattled prime minister, Antonis Samaras, issued an eleventh-hour appeal to parliamentarians on Saturday in an attempt to avert snap elections that would almost certainly plunge the eurozone into renewed crisis. In an impassioned plea, he urged MPs to rid the country of “menacing clouds” gathering over it by supporting the government’s presidential candidate when they gather for the final round of a three-stage vote on Monday. Failure would automatically trigger elections that radical leftists would be likely to win. The ballot has therefore electrified Greece, rattled markets and unnerved Europe. “I am once again appealing to all MPs, of all parties, to vote for the president of the republic,” Samaras told state television. “If we don’t elect a president the responsibility will hang heavily over those who don’t vote for [him]. They will be remembered by everyone, especially history.”

Samaras’s high-stakes gamble of calling the poll two months early has brought him face-to-face with the spectre of losing power if he fails to convince 12 MPs to back Stavros Dimas, his choice for the presidential post. A former European commissioner, Dimas received 168 ballots in a second round of voting last week – well short of the 200 required. On Monday he must amass 180 to be elected. Following a Christmas of frantic behind-the-scenes politicking, the prime minister warned of the perils of taking the debt-stricken country down the road of “absurd adventure” if deputies failed to endorse Dimas. “People do not want early elections… We gave sweat and blood in recent years to keep Greece standing upright.”

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Understatement of the day/week/month/year: “With so much cheap money sloshing around the global markets, a second financial crisis cannot be ruled out.”

Challenging UK Party Games Ahead As Greece Threatens 2nd Debt Crisis (Observer)

Europe. Emerging markets. Earnings. Equality. And the election. Look out, because 2015 is going to be the year of the five Es. In the UK, it will be the election that dominates the economic and business scene, particularly in the first half of the year and for much longer if the result is inconclusive. The prospect of a minority government living from hand to mouth would certainly unsettle the markets. But the election result will be influenced by the four other Es, starting with Europe, where the first crunch moment comes tomorrow in Greece with the third and final chance for the government of Antonis Samaras to get its choice of a new president through parliament. If he fails to secure 180 votes, there will be a snap election that the anti-austerity Syriza party is currently favourite to win. That would prompt fears of a fresh leg to Europe’s debt crisis, which began in Greece more than six years ago. This is something Europe can ill afford. The eurozone economy is barely growing; the German locomotive is slowing; and falling oil prices bring with them the threat of deflation.

The issue for the European Central Bank in 2015 is whether to take the plunge with a quantitative easing programme, something the Germans have resisted up until now. Berlin’s hardline stance has, however, softened in recent months as the situation in Russia – the key emerging market to watch – has deteriorated. Europe’s trade links with Russia are not all that important, but there are two big concerns. The first is of heightened geopolitical risk. Russia is being squeezed by western sanctions and now faces the inevitability of a deep recession in 2015. This might make Vladimir Putin more willing to come to terms over Ukraine, but it might not. The second risk is that the collapse of the rouble puts intolerable strain on Russian companies and Russian banks, with corporate losses ricocheting through the entire global financial system through the sort of highly leveraged derivatives trades that caused the 2007 meltdown. With so much cheap money sloshing around the global markets, a second financial crisis cannot be ruled out.

The third E is equality, brought to prominence in the past year not just by the bestselling book Capital by the French economist Thomas Piketty, but by evidence from the IMF and the Organisation for Economic Co-operation and Development that inequality is bad for growth. Standing trickle-down economics on its head, the OECD said recently that UK growth in the two decades from 1990 to 2010 would have been nine percentage points higher had it not been for widening inequality. Given that the trend towards greater inequality has been evident for the past three decades, it is worth asking why it has become a political issue now. The answer is simple. In the years leading up to the financial crisis, incomes were rising across the board. People on low and middle incomes didn’t mind all that much that the bankers and hedge fund owners were earning stratospheric sums when their own pay packets were going up.

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Think it’ll take that long?

You Can Put The Next Crash On Your 2016 Calendar Now (Paul B. Farrell)

With the recent budget bill, the too-big-to-fail banks were handed even more of what they’ve wanted: a further delay of the Volcker Rule, which could effectively kill it, and, worse, a rollback of Dodd-Frank provisions that protected taxpayers against abusive gambling in the shadowy global derivatives casino using Main Street depositors’ money. It’s as if we’re back to 1999, when the banks got Congress to erase the Glass-Steagall Act, which for 80 years protected Main Street by separating retail banks and investment banking. Now the banks are back to their speculation and gambling, exposing the economy to great risk, just as they were before the 1929 crash. As MarketWatch’s David Weidner put it, Yellen’s Fed looks to have forgotten that banks caused the Great Recession: that hellish era that was set off by the Bear Stearns, Lehman, Countrywide, AIG, Merrill, Freddie, Sallie and the other disasters.

Now Yellen’s Fed and our too-big-to-fail banks and their mainly Republican co-conspirators have set another big trap. A huge trap. As Stephen Roach, former chairman of Morgan Stanley Asia, wrote for Project Syndicate, Yellen’s Federal Reserve “is headed down a familiar — and highly dangerous — path.” “Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences,” writes Roach, “could be similarly catastrophic.” The next crash is due in 2016, around the presidential election. Why? Yellen’s brain is trapped in the same myopic capitalist dogma that blinded Greenspan for 18 years, forcing him to confess he “really didn’t get it till very late,” long after the $10 trillion market loss was a reality.

Same with Yellen. It will happen again. Losses bigger than 2000 and 2008 combined. Think I’m kidding? Bet against this at your peril. Jeremy Grantham’s already on record predicting that “around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.” That could translate to the DJIA crashing – which on Friday posted the week’s (and history’s) second close above the 18,000 level – to around 10,000. The Dow crashing all the way back down to 10,000? Wow. Unimaginable. No wonder our brains tune out. Instead, we prefer the happy talk that will just keep coming out of Wall Street and Washington till 2016. We’ll keep denying reality … till it’s too late, and another $10 trillion loss is in the books.

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So the question is: did the internet facilitate the rise in propaganda?

2014: The Year The Internet Came Of Age (Guardian)

The best we can say about 2014 is that it was the year when we finally began to have a glimmer of what the internet might mean for society. Not the internet that we fantasised about in the early years, but the network as it has evolved from an exotic curiosity into the mundane underpinning of our lives – a general-purpose technology or GPT. And, in a way, the timescale is about right. The internet that we use today was switched on in January 1983, but it didn’t really become a mainstream medium until the web began to explode in 1993. So we’re about 21 years into the revolution. And what we know from the history of other GPTs is that it generally takes at least two decades before they form the unremarked-upon backdrops to everyday life.

In 1999, Andy Grove, then the CEO of Intel, the dominant chip-maker of the time, made a famous prediction. In five years’ time, he said, “companies that aren’t internet companies won’t be companies at all”. He was widely ridiculed for this pronouncement at the time. But in fact he was just being prescient. What he was trying to communicate was that the internet would one day become like the telephone or mains electricity – something that we take for granted. Grove’s point was that companies that boasted that they “were now on the internet” in 2004 would already be regarded as ridiculous. And so indeed they were.

Could we live without the net? Answer: on an individual level possibly, but on a societal level no – simply because so many of the services on which industrialised societies depend now rely on internet connectivity. In that sense, the network has become the nervous system of the planet. This is why it now makes no more sense to argue about whether the internet is good or bad than to debate whether oxygen or water are desirable. We’ve got it and we’re stuck with it. Which means that we’re also stuck with its downsides. While offline crime has decreased dramatically – car-related theft has reduced by 79% since 1995 and burglary by 67%, for example, what’s happened is that much serious crime has now moved online, where its scale is staggering, even if the official statistics do not count it.

The same goes for industrial espionage (at which the Chinese are currently the world champions) and counter-espionage and counter-terrorism (at which the NSA and GCHQ currently top the international league tables). And we’re just getting started on cyberwarfare. So here we are at the end of 2014, finally wising up to what we’ve got ourselves into: an internet that provides us with much that we love and value and would be hard put to do without. But an internet that is also dangerous, untrustworthy and comprehensively monitored. The question for 2015 and beyond is whether we can have more of the former and less of the latter. Happy New Year!

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A problem still in its infancy.

China Needs Millions of Brides ASAP (Bloomberg)

In the villages outside of Handan, China, a bachelor looking to marry a local girl needs to have as much as $64,000 – the price tag for a suitable home and obligatory gifts. That’s a bit out of the price range of many of the farmers who live in the area. So in recent years, according to the Beijing News, local men have been turning to a Vietnamese marriage broker, paying as much as $18,500 for an imported wife, complete with a money-back guarantee in case the bride fled. But that fairy tale soon fell apart. On the morning of November 21, sometime after breakfast, as many as 100 of Handan’s imported Vietnamese wives – together with the broker – disappeared without a trace. It was a peculiarly Chinese instance of fraud. The victims are a local subset of a fast-growing underclass: millions of poor, mostly rural men, who can’t meet familial and social expectations that a man marry and start a family because of the country’s skewed demographics.

In January, the director of China’s National Bureau of Statistics announced that China is home to 33.8 million more men than women out of a population exceeding 1.3 billion. China’s vast population of unmarried men is sure to pose an array of challenges for China, and perhaps its neighbors, for decades to come. What’s already clear is that fraudulent mail-order wives are only the start of a much larger problem. The immediate cause of China’s gender imbalance is a long-standing cultural preference for boys. In China’s patrilineal culture, they’re expected to carry on the family name, as well as serve as a social security policy for aging parents. In the 1970s, China’s so-called One Child policy transformed this preference into an imperative that parents fulfilled via sex selective abortions (made possible by the widespread availability of ultrasounds). As a result, millions of girls never made it onto China’s population rolls.

In 2013, for example, the government reported 117.6 boys were born for every 100 girls. (The natural rate is 103 to 106 boys to every 100 girls.) In the countryside, the ratio can run much higher — Mara Hvistendahl, in her 2011 book, Unnatural Selection, reports on a town where ratios run as high as 150 to 100. Long-term, such imbalances can create an excess of males that might reach 20% of the overall male population by 2020, according to one estimate. Of course, social expectations aren’t just confined to boys. In China, daughters are expected to marry up – and in a country where men far outnumber women, the opportunities to do so are excellent, especially in the cities to which so many of China’s rural women move. The result is that bride prices – essentially dowries paid to the families of daughters – are rising, especially in the countryside. One 2011 study on bride prices found that they’d increased seventy-fold between the 1960s and 1990s in just one representative, rural hamlet.

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Very real. Not some theory.

Rising Oceans Force Bangladeshi Farmers Inland for New Jobs (Bloomberg)

About seven years ago, Gaur Mondol noticed he couldn’t grow as much rice on his land as salty water seeped in from the Passur River, which stretches from his home in Bangladesh’s interior all the way to the Indian Ocean. Now the rice paddies are completely inundated, leaving the land barren. To find work, he must walk for miles each day to other villages. His annual income has fallen by half to 36,000 taka ($460). He makes about $4 a day if he’s lucky, and most of that goes to buy food for his family of four. “I’m always worried that my house will be washed away someday,” Mondol said from his home in Mongla sub-district, pointing to a river-side tamarind tree with water swirling around its exposed roots. “My family is constantly under threat as the river creeps in.” Rising sea levels are one of the biggest threats to the $150-billion economy over the next half a century, with farmers like Mondol already facing the consequences.

Bangladesh, which needs to grow at 8% pace to pull people out of poverty, stands to lose about 2% of gross domestic product each year by 2050, according to the Asian Development Bank. “The sea-level rise and extreme climate events are the two ways that salinity intrudes into the freshwater system,” Mahfuzuddin Ahmed, an adviser in the ADB’s regional and sustainable development department, said by phone from Manila. “The implication for food security is quite big.” Bangladesh is one of the world’s most densely populated countries, with half the U.S. population crammed into an area the size of New York state. About 50% of its citizens are directly dependent on agriculture for their livelihoods, a quarter live in the coastal zone, and 21% of these lands are affected by an excess of salinity.

The proportion of arable land has fallen 7.3% between 2000-2010, faster than South Asia’s 2% decline, with geography playing a large role. Bangladesh is nestled at a point where tidal waves from the Indian Ocean flow into the Bay of Bengal. While these create the Sundarbans mangroves, home to the endangered Bengal tiger, winds and currents cause saline water to mix with upstream rivers. Global weather changes worsen this. Bangladesh’s average peak-summer temperature in May has climbed to 28.1 degrees Celsius (83 Fahrenheit) in 1990-2009 from 26.9 in 1900-1930, and could rise to 31.5 degrees in 2080-2099, World Bank data show. Average June rainfall has dropped to 467.1 millimeter from 517.5 in that time.

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Wonderful.

Siberian Dog Allowed To Stay In Hospital Where Owner Died 1 Year Ago (RT)

The holiday spirit is alive and well in a hospital in Siberia, where Masha, Russia’s own ‘Hachiko’ dog was given permanent residence status. For a whole year the loyal pet kept ‘dogging’ the hospital, waiting for her owner who had passed away. Despite a number of attempts to have Masha adopted, the heartbroken pooch kept running away and coming back to the Novosibirsk District Hospital Number One, where she last saw her owner in December, 2013. “Masha will always stay here, because she is waiting for her owner. I think that even if we took her to his grave, she wouldn’t believe it. She’s waiting for him alive, not dead,” nurse Alla Vorontsova told the Siberian Times.

The dog’s heartbreaking story has gathered quite a bit of attention in Russia and even abroad, after it went viral in the media. The sad dachshund was adopted a number of times, but all unsuccessfully. “People in Russia tried to adopt her three times, but she always came back. I also heard that a number of foreigners wanted to adopt her too, but it is impossible – she doesn’t want to leave the hospital. And besides, we love her and she loves us. How could she live somewhere far away? She would just pine away,” Vorontsova said. For a year, hospital workers fed and walked Masha, and now they have finally managed to make it official; Masha has her own cozy spot inside the building.

“Here all the patients come to her, stroke her and give something tasty, especially the older people. She warms their hearts,” the nurse added. Masha’s elderly owner was admitted to the hospital and his dog was his sole visitor there. Masha’s loyalty earned her the media nickname Hachiko – in reference to the famous story of a Japanese Akita dog. Agricultural science professor Hidesaburo Ueno got Hachiko in 1924. The dog would greet the owner at the station every day. After Ueno passed away, Hachiko kept returning to the train station for 10 years, waiting for him to come back. The amazing story turned the pet into a national hero and later inspired a Hollywood movie, ‘Hachiko: A Dog’s Tale,’ starring Richard Gere.

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Mar 262014
 
 March 26, 2014  Posted by at 7:40 pm Earth Tagged with: , , ,  9 Responses »


Detroit Publishing Co Galveston Flood disaster cyclorama, Coney Island 1904

If there’s one thing that defines why we, and the world we live in, are doomed, it can be found – once more – in a recent spat of (leaked) reactions to the upcoming new IPCC report. We’ve come a long way since skeptics started budging in the way creationists demand equal time on the new Cosmos series – only more successful – and now we’re way past mere skepticism. Not only has it become totally acceptable to pooh pooh and hush hush climate change, we’ve arrived at the point where we go look for positive angles.

The first step in the new message is that things are not nearly as bad as we were once told, as is so craftfully put in words by the subtle change from ‘mitigation’ to ‘adaptation’. Throwing in the term ‘resilience’ further enforces the positive notion. As the Telegraph puts it:

Climate Change: The Debate Is About To Change Radically

The latest report from the UN’s Intergovernmental Panel on Climate Change (IPCC) is due out next week. If the leaked draft is reflected in the published report, it will constitute the formal moving on of the debate from the past, futile focus upon “mitigation” to a new debate about resilience and adaptation.

The new report will apparently tell us that the global GDP costs of an expected global average temperature increase of 2.5 degrees Celsius over the 21st century will be between 0.2% and 2%. To place that in context, the well-known Stern Review of 2006 estimated the costs as 5-20% of GDP. Stern estimates the costs of his recommended policies for mitigating climate change at 2% of GDP – and his estimates are widely regarded as relatively optimistic (others estimate mitigation costs as high as 10% of global GDP).

Achieving material mitigation, at a cost of 2% and more of global GDP, would require international co-ordination that we have known since the failure of the Copenhagen conference on climate change simply was not going to happen. Even if it did happen, and were conducted optimally, it would mitigate only a fraction of the total rise, and might create its own risks. And to add to all this, now we are told that the cost might be as low as 0.2% of GDP. At a 2.4% annual GDP growth rate, the global economy increases 0.2% every month.

See? We would be robbing ourselves by paying any further attention to Nicolas Stern, who just 8 years ago exaggerated the economical costs of climate change as much as 1000%. Has Stern now been found out to be a charlatan? Well, that too, and the science has greatly improved, through the addition of think tanks and scientists that know before they start researching that all dire warnings are just bogus anyway.

And no-one can seriously expect us to do anything drastic like shaking up the comfort we live in if the dollar cost is so low in comparison to the inconveniences we would have to suffer, can they?

So the mitigation deal has become this: Accept enormous inconvenience, placing authoritarian control into the hands of global agencies, at huge costs that in some cases exceed 17 times the benefits even on the Government’s own evaluation criteria, with a global cost of 2% of GDP at the low end and the risk that the cost will be vastly greater, and do all of this for an entire century, and then maybe – just maybe – we might save between one and ten months of global GDP growth. Can anyone seriously claim, with a straight face, that that should be regarded as an attractive deal or that the public is suffering from a psychological disorder if it resists mitigation policies?

But don’t let’s stop there; It’s not only that monetary costs are now claimed to be less than thought before, no, climate change should even be seen as offering opportunities:

Global warming poses risks, but also opportunities: IPCC

“Although it focuses on a whole analytical and sometimes depressing view of the challenges we face, it also looks at the opportunities we face,” said Christopher B. Field, the co-chair of the Intergovernmental Panel on Climate Change. “This can not only help us to deal with climate change but ultimately build a better world.”

This is of course just another way of saying: “how much money can we make from destroying the world we live in?” But that’s undoubtedly not how the IPCCs Mr Field would like you to see it. The IPCC long ago stopped being a serious research organization. Institutes and corporations who felt threatened in their ability to make money and hold on to power have successfully infiltrated it and demanded “equal airtime”.

And that’s a perfect reflection of the societal model we live in. Every single thing in our lives gets reduced to its dollar value. And if it’s too costly, sorry, but we must throw it out. Every plant, every river, every animal, every sunset and every human being only have a value insofar as it can be expressed in dollar terms.

Which is bad news for polar bears and lions and rhinos – and ultimately people, first in Africa, Asia, South America, then at home -, since they have value only as tourist attractions. And isn’t it much more convenient and cost effective to dump a few of each in a zoo somewhere so we can simply drive to go see them, instead of going on safari’s or Arctic cruises?

Nature is useless on its own; it only has a perceived value where we can stick a price tag on it. No matter that nature is where we come from and are an integral part of, and it never came with a bottom line until we invented one. Despite the fact that we have very little idea of how nature actually works. But then, that is the core of our tragedy, isn’t it? We manage to fool ourselves into believing that we are mighty smart. That’s a surefire way to get everything that really counts all wrong.

Our children and children’s children are going to find out that the only thing we really know about complex systems is that we don’t know much of anything about them. And that when risking to disturb them, the precautionary principle should always be the first thing on our minds.

Assigning dollar values to everything we see around us is a convenient simplification of things, and it guarantees that those who already have most dollars stay on top, but there’s nothing smart about it when you look at it in terms of complex systems or the precautionary principle.

But the worst part must be that it doesn’t make anyone any happier, either. And that we’re not capable of understanding that. We don’t know what makes us happy. We need other people to tell us what does. And there’s a lot of other people who see profit opportunities in that.

Anyway, this is why we’re doomed: if we don’t understand the consequences of our actions, then we just ignore them. Thinking that if we don’t understand them, how bad can they be? Since we are very smart, right? Thing is, if we were so smart, why do we feel the need to almost infinitely simplify our view of the planet’s almost infinitely complex system, by attaching price tags to everything? Either from a rational, scientific point of view, or from an emotional point of view, how does that make sense?

The US Is Now Spending 26% Of Available Tax Revenue To Pay Interest (Sovereign Man)

By the 19th century, the Ottoman Empire had become a has-been power whose glory days as the world’s superpower were well behind them. They had been supplanted the French, the British, and the Russian empires in all matters of economic, military, and diplomatic strength. Much of this was due to the Ottoman Empire’s massive debt burden. In 1868, the Ottoman government spent 17% of its entire tax revenue just to pay interest on the debt.

And they were well past the point of no return where they had to borrow money just to pay interest on the money they had already borrowed. The increased debt meant the interest payments also increased. And three years later in 1871, the government was spending 32% of its tax revenue just to pay interest. By 1877, the Ottoman government was spending 52% of its tax revenue just to pay interest. And at that point they were finished. They defaulted that year.

This is a common story throughout history. The French government saw a meteoric rise in their debt throughout the late 1700s. By 1788, on the eve of the French Revolution, they spent 62% of their tax revenue to pay interest on the debt. Charles I of Spain had so much debt that by 1559, interest payments exceeded ordinary revenue of the Habsburg monarchy. Spain defaulted four times on its debt before the end of the century.

It doesn’t take a rocket scientist to figure out that an unsustainable debt burden soundly tolls the death knell of a nation’s economy, and its government. Unfortunately, it can sometimes take a rocket scientist to figure out what the real numbers are; governments have a vested interest in not being transparent about their debts and interest payments.

[..] … total US interest payments in Fiscal Year 2013 were a whopping $415 billion, roughly 17% of total tax revenue. Just like the Ottoman Empire was at in 1868. Here’s the thing, though– it’s inappropriate to look at total tax revenue when we’re talking about making interest payments. The IRS collected $2.49 trillion in taxes last year (net of refunds). But of this amount, $891 billion was from payroll tax. According to FICA and the Social Security Act of 1935, however, this amount is tied directly to funding Social Security and Medicare. It is not to be used for interest payments.

Based on this data, the amount of tax revenue that the US government had available to pay for its operations was $1.599 trillion in FY2013. This means they actually spent approximately 26% of their available tax revenue just to pay interest last year… a much higher number than 17%. This is an unbelievable figure. The only thing more unbelievable is how masterfully they understate reality… and the level of deception they employ to conceal the truth.

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You’re Still Giving the Big Banks a Handout (Bloomberg)

The largest U.S. banks and their lobbyists have been trying hard to counteract the growing impression that they present an unacceptable threat to the economy. In a new series of papers, the Federal Reserve Bank of New York offers some evidence that they probably won’t like. Critics of the big banks assert that repeated government bailouts have created a perverse incentive: The bigger and more systemically important a bank becomes, the more certain its creditors can be that they will get rescued in an emergency. Such too-big-to-fail status, the logic goes, allows banks to borrow more cheaply than they otherwise would — a taxpayer subsidy that encourages them to take the kind of risks that lead to disasters.

The contributions from the New York Fed economists support this narrative in two ways: They place a value on the big banks’ funding advantage, and they suggest that banks with government support do tend to take bigger risks. Looking at new bond issues from 1985 to 2009, New York Fed Vice President Joao Santos estimates that the largest banks paid 0.31%age point less when they issue A-rated debt than when their smaller peers did (after controlling for some idiosyncratic features of the bonds). He also found that the discount was significantly greater than what large companies enjoyed in other industries, undermining bank lobbyists’ argument that the funding advantage stems from the general benefits of size rather than from their too-big-to-fail status.

The study has some important blind spots. Its bond data go only through 2009, so it can’t show what, if anything, the 2010 Dodd-Frank financial-reform law may have done to reduce the taxpayer subsidy. Also, when grouping bonds by rating category, it ignores the rating uplift the largest banks receive thanks to the expectation of government support. This would have the effect of underestimating their funding advantage — a problem common among studies of the too-big-to-fail subsidy.

Perhaps more interesting is a separate paper in which Santos and two co-authors find that banks make more bad loans when they have a reasonable expectation of getting bailed out in a crisis. Specifically, the authors look at a special credit rating, issued by Fitch, that assesses the likelihood of government support. A one-notch increase in the rating — say, from A-minus to A — is associated with an 8% increase in a bank’s ratio of non-performing loans.

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Hundreds Rush To Rural Chinese Banks After Solvency Rumours (Reuters)

Hundreds of people rushed on Tuesday to withdraw money from branches of two small Chinese banks after rumours spread about solvency at one of them, reflecting growing anxiety among investors as regulators signal greater tolerance for credit defaults. The case highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, as Chinese grow increasingly nervous about the impact of slowing economic growth on financial institutions. Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.

Domestic media reported, and a local official confirmed, that ordinary depositors swarmed a branch of Jiangsu Sheyang Rural Commercial Bank in Yancheng in economically troubled Jiangsu province on Monday. The semi-official China News Service quoted the bank’s chairman, Zang Zhengzhi, as saying it would ensure payments to all the depositors. The report did not say how the rumour originated. Chen Dequn, a resident in Yandong, just outside Yancheng, said she saw a crowd of about 70 to 80 people gathering in a branch of Sheyang Rural Commercial Bank in her town on Tuesday. “At the moment there are about 70 or 80 people in there. Normally there’d only be about 10,” she told Reuters by telephone.

Officials at another small bank, Rural Commercial Bank of Huanghai, said they had faced similar rushes by depositors, triggered by rumours of insolvency at Sheyang. “We will be holding an emergency meeting tonight,” an official at the bank’s administration office told Reuters, but declined to comment further. Why Yancheng investors suddenly lost confidence in the security of their bank deposits is not clear, given that the Sheyang bank is subject to formal reserve requirements, loan-to-deposit ratios and other rules to ensure it keeps sufficient cash on hand to meet demand. Bank failures in China are virtually unknown, as Chinese banks are considered to operate under an implicit guarantee from the government.

Finally, money market interest rates have eased since February, and traders say liquidity in the interbank market – where banks like Sheyang can tap short-term funds to meet depositor demand – remains relatively relaxed. “It’s true that these rumours exist, but actually (the bank going bankrupt) is impossible. It’s a completely different situation from the problem with the cooperatives,” said Zhang Chaoyang, an official at the propaganda department of the Communist Party committee in Tinghu district, where the bank branch is located. Zhang was referring to an incident that rattled depositors in Yancheng in January, when some rural cooperatives – which are not subject to the supervision of the bank regulator – ran out of cash and locked their doors.

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High Debt, Slow Sales Loom Over Chinese Property Firms (SCMP)

All eyes are now on a few Chinese real estate developers particularly vulnerable to slow sales and tight credit, as mainland China’s property market enters a new downturn. On the watch list are Hopson Development, Renhe Commercial, Glorious Property and Coastal Greenland, all suffering from either weak sales or high debt ratios, according to global ratings agencies. These companies are scheduled to announce annual results Thursday or Friday.

Glorious Property issued a profit warning last week, saying that lower gross profit margin, provision for impairment losses on some unsold units and smaller gains in the fair value of investment properties would result in “a significant decrease” in net profit for last year. At the end of June, Glorious Property (36%) and Hopson (42.8%) had the lowest ratio of cash versus short-term debt among all mainland Chinese developers rated by Moody’s.

Adding to their cash strain is the extra caution being exercised by domestic banks when lending to developers after the collapse of a small private property firm in Ningbo and the first onshore debt default by a solar energy firm earlier this month that shattered the long-held belief that Beijing would always bail out struggling firms. “In this environment, we believe financiers and investors will become more selective and favour borrowers with relatively strong credit quality, thereby further pressuring the liquidity of financially weak developers,” said Franco Leung, a property analyst at Moody’s Investors Service.

Both Leung and Matthew Kong from Standard & Poor’s ruled out the possibility of any short-term systemic risk, while expecting bigger developers to become even stronger. “The key lies in developers’ sales execution this year,” Kong said. “But bankruptcies are less likely, as they can opt to sell assets to peers and quit the market.” Shou Bainian, chief executive of Greentown China, said on Monday: “If their assets are good, there is still hope (of survival).” “But if their assets are not so good, neither is their reputation – then it will become more difficult.”

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China Poised To Ramp Up Its Stimulus Policies (SMH)

Signs that China’s economy is coming off the boil are fuelling speculation that the country’s government will step in with new stimulus measures and could even cut official interest rates. But any stimulus measures are expected to stop short of the massive economic “pump priming” undertaken by the country in 2008-09, when the central government announced a four trillion yuan package.

“Can growth stabilise without a major change of policy stance? We believe it cannot, as tight labour market conditions suggest that potential growth has already dropped to around 7% or below,” analysts at Japanese broker Nomura said in a note. “From a cyclical perspective the cumulative policy tightening since mid-2013 will likely damage investment momentum in coming quarters unless the policy stance loosens.”

While the Chinese government has sought to pursue its long-term policy of reforming the country’s economy and shifting it away from investment-led growth, Nomura said it could turn back to its short-term goals if, as expected, the growth target for this year is not reached. China set a growth target of 7.5% this year, the same level of economic expansion it had targeted over the past two years. Economists have said that recent data, such as a weakening in manufacturing activity, meant that the government would have loosen fiscal and monetary policies if it wants to met its GDP target.

“When short-term objectives are challenged, the government usually shifts its focus toward promoting growth. We have witnessed this ‘two-step forward, one-step back’ style of policy swings in the past,” the analysts wrote. The latest reading of manufacturing activity, from HSBC’s March preliminary survey, showed that the sector had shrunk for the third-straight month. It also followed a fall in exports and weaker industrial output figures. Some economists have also revised down their outlook for Chinese growth.

Policy levers that the central government looks most likely to pull include cuts to banks’ reserve requirement ratio (RRR) to boost growth amid high overall financing costs. Nomura’s analysts are tipping RRR cuts of 50 basis points in the second-quarter of this year, and further easing of 50 basis points in the third-quarter. The supply of credit through bank loans and total social financing is also expected to rise, while the likelihood of interest rate cuts is increasing, the analysts wrote.

Economists said the recent weakening of the yuan, while seen as being part of the People’s Bank of China’s attempts to punish speculators betting on the continued rise of the renminbi, could also provide some relief to local exporters. At the same time, the weakening of the currency, which analysts believe was through the central bank’s intervention in foreign exchange markets, has lowered domestic interest rates and made funding cheaper for borrowers.

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Morgan Stanley Dismisses Talk of China Minsky Moment (Bloomberg)

Morgan Stanley is sticking to its buy recommendation on Chinese stocks, saying concern that there’ll be a “significant market disruption” in the world’s second-largest economy is overstated. China’s consumption and services are bigger than officially reported, giving the economy more room to cope with slowing productivity growth, the Morgan Stanley analysts said. The government’s reforms and its “formidable” financial resources will help policy makers transform the economy without triggering a debt crisis, the analysts wrote in a report in which they kept their overweight calls on both Chinese and Russian equities.

The economy’s slowdown and rising debt levels pushed the Hang Seng China Enterprise Index (HSCEI), which tracks Chinese firms listed in Hong Kong, into a bear market on March 20. While Morgan Stanley’s analysts said that debate is mounting about whether China is approaching a “Minsky moment,” a term used to explain an asset collapse following the exhaustion of credit expansion, they said they remain bullish. “The apparent deterioration in productivity and diminishing returns to leverage are not as severe as the consensus thinks when one takes into account true activity” in the consumer and service sectors of the economy, Morgan Stanley analysts led by Jonathan Garner wrote in the note.

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China Finds The Credit Habit Hard To Kick (Satyajit Das)

China has had a 35-year addiction to cheap credit. The 2007/2008 global financial crisis and the resulting rare synchronous recessions in the developed world exposed China’s economy, especially its export sectors, to a large external demand shock – slowing growth. The recovery has been driven by a significant expansion in credit (known as TSF – total social financing). Post-crisis, new lending by Chinese banks has been consistently about 30% or more of GDP. About 90% of this lending was directed towards investment in building, plant, machinery and infrastructure, especially by state-owned enterprises.

According to the World Bank, almost all of China’s growth since 2008 has come from “government-influenced expenditure”. This expansion led to a rapid increase in the level of debt. Most estimates now put Chinese government (including local government), corporate and household debt at about 200-250% of GDP, up from about 140-150% in 2008. According to a 2013 report by China’s National Audit Office, Chinese government debt, including local government debt, is about 55% of GDP –about $5 trillion (£3 trillion) – an increase of about 60% from 2010.

But the official Chinese government debt figure may not be complete, as it may exclude debts from local governments and central departments outside the finance ministry. If these items are included, China’s government debt including contingent liabilities would be higher, perhaps 90% of GDP. There has been a parallel increase in private sector debt. Corporate debt has increased sharply, approaching 150% of GDP. Traditionally considered compulsive savers, Chinese households have increased borrowing levels from about 20-30% to 40-50% of GDP. Inflation has driven increases in household borrowing, with sharply higher home prices requiring greater borrowings and devaluation of purchasing power encouraging debt-fuelled consumption.

China’s overall debt is high, especially when benchmarked against comparable emerging markets. Many Asian emerging markets had lower debt and higher per capita GDP before the Asian monetary crisis of 1997/1998. The rapid rate of increase in debt is also seriously concerning. An increase in debt of about 30% of GDP in five or less years is regarded as problematic. Several economies – Japan in the late 1980s, South Korea in the 1990s, not to mention the US and UK in the early 2000s – experienced similar rapid growth rates in credit, resulting in serious financial crises.

Another measure is the credit gap – the difference between increases in private sector credit growth and economic output. Research studies have found that 33 countries with credit gaps experienced a subsequent rapid slowdown in growth, typically by at least 50%. In China, the credit gap since 2008 is over 70% of GDP. Chinese credit intensity (the amount of debt needed to create additional economic activity) has increased. China now needs about $3-$5 to generate $1 of additional economic growth, although some economists put it even higher, at $6-$8. This is an increase from the $1-$2 needed for each dollar of growth 8 to 10 years ago.

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Hong Kong’s Soaring Bank Exposure to China Sparks Credit Concerns (Reuters)

In just a few years, Hong Kong banks have ramped up lending to China from near zero to $430 billion, fueling concerns about their credit exposure to the mainland at a time when sliding economic growth and defaults are making investors nervous. Even a modest increase in non-performing loans would have a significant impact on Hong Kong bank profits, suggesting the sector will be a sensitive indicator of China’s debt markets in the year ahead.

A landmark domestic bond default earlier this month and headlines of bankruptcies – highlighted last week by Zhejiang Xingrun Real Estate Co – have underscored concerns that an unprecedented surge in company debt in China is now showing signs of unraveling. “The quality of these loans extended by Hong Kong banks to Chinese companies has not been tested,” said Mirza Baig, head of foreign exchange and interest rate strategy at BNP Paribas in Singapore. “That is a concern in the backdrop of the rapid rise in exposure.”

Foreign bank claims on China hit $1 trillion last year, up from nearly zero 10 years ago, Bank of International Settlements data shows. The biggest portion of that is provided by Hong Kong, according to analyst estimates of the BIS data. The $430 billion in loans outstanding represents 165% of Hong Kong’s GDP, figures in Hong Kong Monetary Authority (HKMA) reports show.

Data from the HKMA, the city’s de-facto central bank, showed a similar astonishing rise. By the end of 2013, Hong Kong banks’ net claims on China as a percentage of their total loan book was nearing 40 percent, compared with zero in 2010. The rival financial center of Singapore has ramped up its China loans as well, but its exposure is the equivalent of 15% of its GDP, figures from its monetary authority show.

Local banks in both these centers have taken over lending that foreign banks once dominated, drawn by cheap funding rates following the global financial crisis, a voracious appetite from Chinese borrowers and healthy growth in the world’s second-biggest economy.

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Bank of Japan Decision on Extra Easing Possible in May (Bloomberg)

The Bank of Japan could decide as soon as mid-May whether further stimulus is needed to keep inflation on track for its 2% target after a sales-tax bump next month, an adviser to Prime Minister Shinzo Abe said. “If the BOJ judges that the economy has fallen off its projected path, it will act appropriately and flexibly, and further easing is possible,” Etsuro Honda said in an interview at the Prime Minister’s Office in Tokyo yesterday. “I believe the BOJ will act if it sees changes in price expectations.”

While Honda, 59, said he’s become more confident the economy will withstand the higher levy as inflation expectations take root and price gains accelerate, the first indications of the extent of the blow will appear in May. Honda said he sees “considerable” room for the BOJ to boost the pace it buys exchange-traded funds should it deem more stimulus is needed. The economy is forecast to contract an annualized 3.5% in the three months from April, when the sales levy will rise to 8% from 5%. Abe is lifting the tax in an effort to rein in the world’s biggest debt burden, even as he tries to end 15 years of deflation with fiscal and monetary stimulus and steps to boost private-sector growth.

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Bundesbank Opens The Door To QE Blitz (AEP)

The last bastion is tumbling. Even the venerable Bundesbank is edging crablike towards quantitative easing. It seems that tumbling inflation in Germany itself has at last shaken the monetary priesthood out of its ideological certainties. Or put another way, the Pfennig has dropped that euroland is just one Chinese shock away from a deflation trap, an outcome that would play havoc with the debt dynamics of southern Europe, render the euro unworkable, and ultimately inflict massive damage on Germany.

Bundesbank chief Jens Weidmann was not exactly panting for QE in comments to Market News published this morning, it has to be said, but the tone marks a clear shift in policy. “The unconventional measures under consideration are largely uncharted territory. This means that we need a discussion about their effectiveness and also about their costs and sideeffects”, he said. “This does not mean that a QE programme is generally out of the question. But we have to ensure that the prohibition of monetary financing is respected”.

At least we can put to rest the bogus argument that EU Treaty law (Article 123) prohibits QE by the European Central Bank. This claim was always a smokescreen. Bond purchases are what used to be known as open market operations, a tool of central banks dating back into the mist of monetary history. Purchasing bonds across the board (not just the bonds of insolvent states) is a plain vanilla liquidity management tool.

Mr Weidmann says he prefers negative interest rates as the first resort. This is an admission that the ECB is alarmed by the strength of the euro as it hovers near the pain barrier of $1.40, since negative rates are a sure-fire way to drive down the currency. “If you wanted to counter the consequences of a strong appreciation of the euro for the inflation outlook, negative rates would, however, appear to be a more appropriate measure than others”, he said. Quite so.

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ECB Bank Stress Tests Hit Legal Blind Spot (BusinessWeek)

The European Central Bank will soon find out how hard it can be to keep a secret. The ECB’s plan to keep its health check on euro-area lenders under wraps until the completion of a stress test in October could be undermined by national rules requiring disclosure far sooner. Domestic regulators may order banks to tap the market immediately if an Asset Quality Review ending in July shows they need more capital, according to law firms including Clifford Chance LLP.

The risk is that market volatility could rise if multiple announcements cast doubt on the ECB’s control of a process designed to clean up balance sheets. Officials from the 128 lenders in the appraisal are meeting supervisory staff in Frankfurt today for an update on the Comprehensive Assessment, which includes both the AQR and the stress test. The ECB has said the exam will be more credible than previous efforts to restore trust to the financial system.

“This is the biggest blind spot in the ECB’s program,” said Nicolas Veron, a fellow at the Bruegel institute in Brussels and the Peterson Institute for International Economics in Washington. “The banks are still subject to national law, and it’s not clear to me that the ECB had fully integrated this into their planning for the Comprehensive Assessment. They don’t seem to have a very clear stance.” The ECB has said the AQR and stress test are related stages in a single exercise and there will be no partial reporting of results before the process finishes in October. The central bank will become the euro area’s bank supervisor on Nov. 4.

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Mirage of the ‘new economy’ (Caixin)

The current Internet boom, centered around social networking, e-commerce and online gaming, has not produced a significant productivity boost for the economy and likely will not in the future. The boom is mostly about redistributing existing demand from offline to online. As most hot businesses have gained market share with cheap financing and without profit, it is doubtful that the demand re-slicing is entirely due to a more efficient channel of distribution. Cheap financing, i.e., a liquidity bubble, may have been the main engine for the Internet boom.

The bubble may not inflict much damage on its own because the amount of financing is small relative to the overall size of investment in the global economy. The danger to China is that it offers false hope that it can revive the economy. The false hope becomes an excuse not to implement painful structural reforms. If one envisions a rising tide to lift the economy ahead, where is the incentive to reform?

How a product is sold is insignificant compared to the product itself. Steve Jobs had the iPhone to sell. Whether the phones are sold online or through posh Apple stores is not important. A sustainable economy is based on businesses that make better products at lower costs over time. An economy full of colorful middlemen and no unique or high-value products cannot go far.

China’s only path forward is to increase efficiency on the supply side and shift the savings to the household sector as an increase in real purchasing power. This requires major reductions in government and state-owned enterprise spending, and boosting competition by eliminating government-approved market access. A necessary condition is for the high-yield debt bubble to burst.

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Brazil at risk of recession as S&P downgrades debt to near junk (AEP)

Brazil’s sovereign debt is one step away from junk after Standard & Poor’s downgraded Latin America’s powerhouse economy, prompting a furious reaction from the Brazilian treasury. The rating agency cut Brazil’s debt one notch to BBB-, citing “fiscal slippage”, bad economic management, and one-off tricks that flattered the public accounts. It warned of a widening trade deficit and weak growth for years to come.

Marcelo Carvalho from BNP Paribas said the former darling of the BRICs quartet is staring “down the barrel of a recession”, a viewed echoed on Tuesday by Mark Mobius from Templeton Emerging Markets. The economy escaped recession with a rebound in the fourth quarter but has relapsed this year as punitive borrowing costs exact their toll. Carlyle Group had to inject $67m this month into its Urbplan real estate venture as unsold malls and commercial projects build up in the major cities. Rental prices fell 15% in Sao Paulo last year.

Marcelo Ribera from the hedge fund Pentagono Asset Management in Brazil said the country’s “decade-long bubble” has burst, warning that the real is likely to fall by 40% against the dollar as the excesses are purged from the system. Brazil, Russia, and Turkey are each on the brink of recession after tightening monetary policy to defend their currencies. All three neglected reforms during the boom years and now face much harsher global conditions as the US Federal Reserve turns off the spigot of dollar liquidity.

Brazil’s authorities rejected S&P’s claims as completely “unfounded”, insisting that the country has a primary budget surplus of 1.9% of GDP, “one of the highest in the world”. The downgrade is a harsh blow for President Dilma Rousseff as she prepares to host the World Cup and braces for elections this year, though the government is unlikely to change policy. S&P said Brazil has yet to feel the full impact of a 350 basis point rise in interest rates. Yields are now an eye-watering 13%, or 7% in real terms. This has sucked in a rush of foreign money but at a high economic cost.

Brazil has come down to earth with a thud after the glory days of the commodity boom, when the economy seemed near take-off as the top supplier of iron ore and grains for China. It became a textbook case of the “Dutch disease”, suffering from an overvalued currency that “hollowed out” core industry. Industrial output is barely higher today than in 2008, a picture more like Italy than an Asian tiger.

Neil Shearing from Capital Economics said private sector credit has soared by over 40 percentage points of GDP in a decade, the third most extreme case after China and Thailand. This sort of increase is often the precursor for banking crises in emerging markets. “The lessons from history are ominous. The fall-out tends to be especially painful when lending is funded by borrowing from overseas and denominated in foreign currencies”, he said. “This is a particularly toxic combination since, when the bubble bursts, investors tend to pull the plug, exchange rates collapse and the local currency cost of servicing debt jumps. This in turn causes default rates to soar and the economic downturn to deepen.”

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Ukraine Only Has Enough Gasoline For A Month (Zero Hedge)

Nothing to see here, move along. While it appears the Russians are willing to pay the price of modest sanctions from the west to ‘liberate’ their fellow countrymen, the fallout from further tension with Ukraine could “boomerang” once again on the divided nation. As RBC Ukraine reports, the Minister of Energy and Coal Industry Yuriy Prodan said at a press conference today that “oil reserves will last for 28-29 days” in Ukraine. After that, the negotiation begins as Ukraine already owes billions for previously delivered gas – as Ukraine’s storage levels more than halved in the last 3 months.

Via RBC Ukraine,

Stocks of petroleum products in Ukraine will last for 28-29 days, said at today’s press conference, the Minister of Energy and Coal Industry Yuriy Prodan. “Speaking on the situation with oil, then ensure there is quite stable. Today oil reserves will last for 28-29 days,” – he said, the ” RBC-Ukraine . ”

At the same time, the Minister noted the significant risk reduction in the supply and rising gas prices. As of March 25, 2014 in Ukrainian underground gas storage facilities located 7 billion cubic meters of gas. “Up there can be about 2 billion is not the quantity that scares experts, it would be possible to hold only a week. It all depends on what kind of regime will be whether we can take about 20 million cubic meters. Meters of gas to reverse and so on “- said Prodan.

According to the company “Ukrtransgaz” abnormally warm winter 2013 2014 has reduced gas extraction from underground storage by an average of 37% compared to the same period last year: it was 60 million cubic meters per day. In late December 2013. occupied at the time the post of Minister of Energy and Coal Industry of Edward Stawicki reported that Ukrainian gas reserves in underground storage is 16.5 billion cubic meters.

We suspect any further military intervention will only crimp this supply even faster.

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Lithuania Pleads For US Gas Exports To Counter Russia (BBC)

Lithuania’s energy minister has called on the US Senate to speed up the export of natural gas to Europe. Jaroslav Neverovic said that Lithuania was being forced to pay a “political price” for being entirely dependent on Russian gas supplies. The crisis in Ukraine has led to calls for the US to ease its current restrictions on gas exports. Some analysts have suggested that doing so would help challenge Russia’s dominance in the sector.

In his statement to a US Senate committee, Mr Neverovic urged members to do everything within their power to release natural gas resources “into the world market”. “A law enacted in your country some 75 years ago denies us access to your abundant and affordably priced energy resources,” he said. The energy minister said customers in Lithuania were having to pay 30% more for natural gas than other European nations, because they were “beholden to a monopolistic supplier.” “This is not just unfair,” said Mr Neverovic. “This is abuse of monopolist position.”

The crisis in Ukraine has seen the US and European Union impose sanctions targeting members of the Russian political elite. They have had their European and US assets frozen, and travel bans have been put in place to restrict their movements. However, some analysts have argued that these moves are symbolic and any sanctions would only work if they impacted the wider Russian economy.

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Milk Row Threatens To Sour Greece’s Latest Bailout Deal (Reuters)

Greece’s government risks another rebellion over bailout terms this week after milk producers lobbied against a move to free up prices as part of efforts to make the economy more competitive. The country’s international lenders want it to ditch rules, such as limiting the shelf life of fresh milk to five days, that effectively deter importers. But Greek dairy producers and lawmakers representing farming constituencies are fighting the move to call milk up to 11 days old ‘fresh’ – the latest in a long line of last-minute disruptions to Greece’s bailout reviews with the European Union and International Monetary Fund.

Six lawmakers from within the ruling coalition – three from Prime Minister Antonis Samaras’s New Democracy party and three from the Socialist PASOK – have opposed the proposal that will be submitted to parliament on Friday as part of an omnibus reform bill that Greece must pass to secure bailout aid. If they vote against it, Samaras and PASOK leader Evangelos Venizelos could be forced to expel them, further reducing the government’s slim majority of just 153 seats in the 300-seat assembly.

The bill – which will pave for the way for up to 10 billion euros ($14 billion) of aid – is expected to pass after last-minute wrangling, but the row has highlighted how powerfullobbies can undermine the country’s bailout lifeline. “You don’t need to be an expert to understand that extending the shelf life is aimed at allowing milk from abroad to be labelled as fresh,” PASOK lawmaker Mihalis Kassis told Greek radio at the weekend. “If that’s a prerequisite by the (EU/IMF) troika then we deserve what we get.”

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U.S. Farmers Mark Spring by Planting GMO Corn Banned in China (Bloomberg)

Archer-Daniels-Midland Co. and Bunge Ltd. , two of the world’s largest grain traders, are facing a new obstacle in their quest to expand corn exports to China – U.S. farmers. Six months after China began rejecting shipments of a genetically modified corn, Bunge says it won’t take deliveries of the variety developed by Switzerland’s Syngenta AG. ADM will test the corn and may reject it as well. Even so, farmers will soon begin planting it this spring, more interested in its high yield for the domestic market than for exports.

Exporters and farmers going in two different directions on GMO corn underscores a new set of challenges faced by international agricultural commodity traders. Even as demand continues to grow in line with the global population, China and other countries have been slower than the U.S. to approve new types of crops amid concerns about food safety and threats to biodiversity from genetically modified organisms, or GMOs. China’s curbs on some modified corn threaten to block millions of tons of imports and in so doing cut into the profits of international trading houses.

“It’s a significant issue for major North American traders,” said Andrew Russell, a New York-based analyst for Macquarie Group who recommends buying ADM and Bunge shares. “Anything that puts Chinese growth potential at risk is a significant issue.” Traders rerouting shipments originally destined for China to other markets may lose $30 to $50 a ton, said Tim Burrack, an Iowa corn and soybean farmer who’s also the former chairman of the U.S. Grains Council’s trade committee.

China may also be motivated by wanting to protect domestic corn prices after a record harvest, said Burrack, 62. “When China needs corn imports, they will ramp up the approval process.” White Plains, New York-based Bunge isn’t buying the Syngenta GMO corn, an insect-repelling variety called Agrisure Viptera, or another modified variety from the Swiss company called Agrisure Duracade. ADM, the world’s largest corn processor, said in a Feb. 21 statement it won’t accept Duracade until the GMO is approved by China and other major importers. And the company remains uncommitted to Viptera.

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The Priciest Baseball Park in the Whole Atlantic Ocean (Bloomberg)

Something odd happens to the neighborhood around Marlins Park, Miami’s new $650 million baseball stadium, when you overlay 21st-century sea-level rise projections. It sinks below the waterline. It’s a shame. The park has a retractable, cloud-white roof to shield players and spectators from the summer sun. It recycles, sips energy and water, and is plugged into public transit. It has 27 flood gates, and was built one foot higher than floods are supposed to reach in once-in-500-year storms. The total, publicly financed package, with debt servicing, could cost Miami $2.4 billion by 2049.

If the Atlantic inches in as projected, eventually it might not matter how many flood gates there are. Oceans are swelling as they absorb heat, and ice sheets in Greenland and Antarctica have been melting faster since the early 1990s. Sea-level rise estimates for later this century have been revised upward, to a global average of a foot and a half to three feet by 2100, without aggressive carbon-cutting, according to the Intergovernmental Panel on Climate Change.

South Florida is a national leader in understanding the changing world. But politics and even policy change much more quickly than bureaucracy. That makes Marlins Park a symbol for cities in transition, a future relic from a time when the people who could build really cool things worked more or less independently from the people who monitored how fast the seas were rising.

The same potential problem exists wherever cities are laying down infrastructure expected to last into the second half of the century. Boston’s “Big Dig” highway project, a generation in the making, wasn’t driven by late 21st-century storm surge considerations. Oil and gas platforms in the Gulf of Mexico have never been built with permanent sea-level rise in mind. Another newish baseball stadium, Nationals Park, stands yards from Washington’s Anacostia River. Marlins Park checked enough LEED boxes to make it “the most sustainable stadium in Major League Baseball,” according to the team’s website.

Green building standards became common before a city’s ability to bounce back from large-scale shocks, or resilience, surfaced as a popular idea. The U.S. Green Building Council (USGBC) developed its widely used LEED building practices to promote efficiency in the use of energy, water and materials, and other practices related to construction, safety and maintenance; not necessarily to help people live through some of the charms that might await us in a hotter world — extreme heat, stronger storms and encroaching seas, to name three.

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IPCC Report Downplays Economic Impacts Of Climate Change (SMH)

An upcoming United Nations report on climate change has been altered after the expert review stage, with changes added that downplay the economic impacts of a warming planet, according to one of the reviewers. Bob Ward, an expert reviewer for the Intergovernmental Panel on Climate Change, also said alterations to the economics chapter of the draft report sent to governments included an assessment of a paper by the chapter’s own convening lead author Richard Tol that contained at least one error.

An added section also included a line likely to be hotly contested if it survives a final review by IPCC delegates gathered this week in Yokohama, Japan, to approve the Working Group II report: “Estimates agree on the size of the impact (small relative to economic growth) but disagree on the sign.” Mr Ward said disagreement over whether the sign of climate change’s economic impact is positive or negative “is patently not supported by the evidence presented”.

Of the data assessed, only one study out of about 18 suggests there would be a significant positive impact on gross domestic product from global warming, Mr Ward told the IPCC in an email seen by Fairfax Media. Earlier analysis of economic costs by one of the assessed papers – by Professor Tol – also “excluded a long list of important impacts, including those relating to recreation, tourism, extreme weather, fisheries, construction, transport, energy supply and morbidity,” said Mr Ward, who is also a policy director at the London School of Economics.

Professor Tol, who is a professor at University of Sussex in the UK, said Mr Ward’s complaints were reviewed “and found that most of them were unfounded”. One typo was identified and a dropped minus sign was re-instated. “Both errors have been corrected,” Professor Tol said. In a paper published last year, Professor Tol stated that “the impact of a century of climate change is roughly equivalent to a year’s growth in the global economy,” and that “carbon dioxide emissions are probably a negative externality”.

Professor Tol is a member of the academic advisory council for The Global Warming Policy Foundation, a climate change sceptic think tank founded by the UK’s Lord Lawson. The council also includes prominent Australian sceptics Bob Carter and Ian Plimer, according to its website. Unless resolved in the final week, a row over the contents of UN report may cast a cloud over some of its major findings, which include the prospect of widespread social dislocation of climate change and big impacts for eco-systems such as Australia’s Great Barrier Reef.

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Climate Change: The Debate Is About To Change Radically (Telegraph)

The latest report from the UN’s Intergovernmental Panel on Climate Change (IPCC) is due out next week. If the leaked draft is reflected in the published report, it will constitute the formal moving on of the debate from the past, futile focus upon “mitigation” to a new debate about resilience and adaptation.

The new report will apparently tell us that the global GDP costs of an expected global average temperature increase of 2.5  degrees Celsius over the 21st century will be between 0.2 and 2%. To place that in context, the well-known Stern Review of 2006 estimated the costs as 5-20% of GDP. Stern estimates the costs of his recommended policies for mitigating climate change at 2% of GDP – and his estimates are widely regarded as relatively optimistic (others estimate mitigation costs as high as 10% of global GDP).

Achieving material mitigation, at a cost of 2% and more of global GDP, would require international co-ordination that we have known since the failure of the Copenhagen conference on climate change simply was not going to happen. Even if it did happen, and were conducted optimally, it would mitigate only a fraction of the total rise, and might create its own risks. And to add to all this, now we are told that the cost might be as low as 0.2% of GDP. At a 2.4% annual GDP growth rate, the global economy increases 0.2% every month.

So the mitigation deal has become this: Accept enormous inconvenience, placing authoritarian control into the hands of global agencies, at huge costs that in some cases exceed 17 times the benefits even on the Government’s own evaluation criteria, with a global cost of 2% of GDP at the low end and the risk that the cost will be vastly greater, and do all of this for an entire century, and then maybe – just maybe – we might save between one and ten months of global GDP growth. Can anyone seriously claim, with a straight face, that that should be regarded as an attractive deal or that the public is suffering from a psychological disorder if it resists mitigation policies?

The 2014 Budget recognised reality, with the Government now introducing special measures to keep energy prices low for energy intensive firms – abandoning what little pretence remained that it was attempting to prevent climate change by limiting energy use so as to limit CO2 emissions. The new IPCC report – though it remains as robust as ever in saying that there will be climate change and its effects will be material (points that relatively few mitigation policy sceptics deny) – has a marked change of focus from the 2007 report.

Whereas previously the IPCC emphasised the effects climate change could have if not prevented, now the focus has moved on to how to make economies and societies resilient and to adapt to warming now considered inevitable. Climate exceptionalism – the notion that climate change is a challenge of a different order from, say, recessions or social inclusion or female education or many other important global policy goals – is to be down played. Instead, the new report emphasised that adapting to climate change is one of many challenges that policymakers will face but should have its proper place alongside other policies.

Quite so. It has been known since the late 1970s that there would be material warming during the 21st century and we will need to adapt to it. At present, though, in the UK we still carry the legacy of a panoply of enormously expensive but futile policies that were designed to be pieces of a global effort to mitigate that is just not going to happen. Our first step in adapting to climate change should be to accept that we aren’t going to mitigate it. We’re going to have to adapt. That doesn’t mean there might not be the odd mitigation-type policy, around the edges, that is cheap and feasible and worthwhile. But it does mean that the grandiloquent schemes for preventing climate change should go. Their day is done. Even the IPCC – albeit implicitly – sees that now.

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Global warming poses risks, but also opportunities: IPCC (AP)

Along with the enormous risks global warming poses for humanity are opportunities to improve public health and build a better world, scientists gathered in Yokohama for a climate change conference said Tuesday. The hundreds of scientists from 100 countries meeting in this Japanese port city are putting finishing touches on a massive report emphasizing the gravity of the threat the changing climate poses for communities from the polar regions to the tropics.

“Although it focuses on a whole analytical and sometimes depressing view of the challenges we face, it also looks at the opportunities we face,” said Christopher B. Field, the co-chair of the Intergovernmental Panel on Climate Change. “This can not only help us to deal with climate change but ultimately build a better world.”

Japan’s awareness of the severity of climate change has been driven home by record temperatures of over 40 C , and in Yokohama, by unusually heavy snows this winter, said the environment minister, Nobuteru Ishihara.

Japan plans to release an adaptation plan of its own by the summer of 2015 that would focus on a more “eco-friendly lifestyle,” he said. That includes improvements in energy efficiency ahead of the 2020 Tokyo Olympic games.

“We aim to take full environmental consideration so that the Tokyo Games will be the ‘environmental Olympics,’” Ishihara said.

Japan is struggling to rein in its own emissions of greenhouse gases after it shut down its nuclear plants following the disaster in Fukushima after the March 2011 earthquake and tsunami. Increased burning of natural gas, coal and oil to compensate for lost generating capacity have undone much of the progress the country had made in cutting carbon emissions.

While each region faces its own mix of challenges, research conducted by thousands of scientists around the world underscores the need for urgent measures, J. Lengoasa, deputy head of the World Meteorological Organization, said in a recorded message to Tuesday’s meeting.

He said countries in Africa already spend $7 billion to $15 billion a year on climate adaptation. “Time is running out. We must take action,” he said. “It is our obligation and our duty to inform the world of the prospects and risks that lie ahead.”

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Jan 092014
 
 January 9, 2014  Posted by at 1:44 pm Finance Tagged with: , , , , ,  33 Responses »


Dorothea Lange “Mr. Dougherty and kid. Warm Springs, Malheur County, Oregon” October 1939

David Holmgren, for whom I have the utmost respect, is best known as one of the co-originators of the permaculture concept. Permaculture is an ecological design method for regenerative agriculture, where the principles of natural systems are employed in order to create a self-sustaining means for food production while building soil fertility.

I am increasingly involved with permaculture (teaching it in Belize this February), as it represents one of the most important paths towards building workable life-support systems in our era of limits to growth. We are rapidly running out of options as we deplete our natural capital worldwide. While we badly need to make some informed hard choices, we collectively do not, as our consumptive system has tremendous inertia. As we reach the limits that lie in our not too distant future, permaculture can be of tremendous use, for those who implement it, in mitigating the impacts and facilitating rebuilding from the bottom-up.


David Holmgren’s Future Scenarios

Aside from his main body of work, Holmgren has also devoted significant consideration to exploring possible future energy descent scenarios, grounded in the twin threats of peak oil and climate change. See Future Scenarios from 2009. His thought modelling looks at how these limiting factors might intertwine with sociopolitical responses to create four classes of potential outcome.



The Brown Tech scenario was seen as one of modest energy supply decline combined with rapid climate change, in a centrally controlled, corporatist context emphasizing the development of unconventional fossil fuels and nuclear power. The impact of climate disruption and other discontinuities would lead to a greater need, and support, for large-scale government intervention. This scenario summarized as top down constriction of consumption.

The Green Tech route was envisaged as gradual energy descent, gradual climate impact, and would be typified by a controlled powerdown based on a shift towards renewable energy and electrification. The minimally disruptive move towards smaller-scale, relocalized, and distributed adaptations was seen as leading to greater egalitarianism.

Earth Steward describes a situation of rapid energy supply decline leading to economic collapse and major upheaval, reducing emissions sufficiently to address climate change, but eliminating larger political power structures. A rebuild from the bottom up would be required and would allow for design principles such as permaculture to be applied.

The final scenario – Lifeboats – involves both rapid energy supply collapse and severe climate impacts. Violent collapse would result in civilizational triage in isolated locations, with small-scale attempts to preserve knowledge through a long dark age.

Holmgren points out that these scenarios operate at inherently different scales in terms of energy density and organizational power, with Brown Tech operating at national scale, followed by Green Tech at city state scale, Earth Steward at the level of local community and finally Lifeboat at household scale. As such they can be described as nested. This is interesting as it is analogous to the nested adaptive cycles inherent in a fractal view of human and natural systems that we have described at The Automatic Earth . Scale is indeed a critical factor, and is primarily a function of energy availability. Holmgren argues that to some extent all scenarios are emerging simultaneously, operating at their different scales.



The initial scenario work was followed up in 2010 by a new essay, Money vs Fossil Energy: The battle for control of the world, looking at the financial system, and its interactions with the energy sector, as an additional important and limiting factor in models of how the future might play out in practice.  This perspective has recently been combined with an updated version of the scenario paper in Crash on Demand: Welcome to the Brown Tech Future. In this latest essay, Holmgren acknowledges he draws on our work here at The Automatic Earth, particularly in relation to projections for the global financial system and its role as a driver of global economic contraction. As such it seems appropriate to respond in order to extend the discussion.

In his recent essay, Holmgren says that he had initially been expecting a more rapid contraction in available energy, and with it a substantial fall in greenhouse gas emissions. Instead, new forms of unconventional fossil fuels have been exploited, sustaining supply for the time being, but at the cost of raising emissions, since these fuels are far more carbon intensive to produce. Holmgren understands perfectly well that unconventional fossil fuels are no answer to peak oil, given the terribly low energy profit ratio, but the temporary boost to supply has postponed the rapid contraction he, and others, had initially predicted. In addition, demand has been falling in major consuming countries as a result of the impact of financial crisis on the real economy since 2008, further easing energy supply concerns. For this reason, the Green Tech and Brown Tech scenarios, based on modest energy decline, appear more plausible to him than the Earth Steward and Lifeboat scenarios predicated upon rapid energy supply collapse. However, Green Tech would have required a major renewable energy boom sufficient to revitalize rural economies, and he recognizes that there appears to be no time for that to occur. Nor is there the collective political will to take actions to power-down or reduce emissions.

He concludes that the Brown Tech scenario appears by far the most likely, and is, in fact, already emerging. Rather than geological, biological, energetic or climate limits striking first, he suggests, in line with our view at TAE, that perturbations in the highly complex global financial system are likely to shape the future in the shorter term. As such he has become far more interested in finance, recognizing that the world has been pushed further into overshoot by throwing money at the banks, while transferring risk to the public on a massive scale, which is setting us up for a major financial reset. In combination with the climate chaos Holmgren anticipates that governments will need to assume control, moving from a market to a command economy.


Finance, Energy and Complexity

There is much I agree with here, most notably the primacy of financial collapse as a driver of short term change. The situation we find ourselves in is at such an extreme in terms of comparing the enormous overhang of virtual wealth in the form of IOUs with the actual underlying collateral that the reset could be both rapid and devastating. This could produce a number of cascading impacts on supply chains in a short space of time, as Holmgren acknowledges in citing David Korowicz’s excellent essay on the subject – Trade Off. This is likely to make governments choose to take control, but also likely to make that very difficult, and therefore very unpleasant. In some places control may win out, leading to a Brown Tech type of outcome after the dust has settled, and in others a more chaotic state may dominate, leading to more of a Lifeboat scenario. The difference may not hinge on energy supply alone, although this may well be a significant factor in some places.

It is our view at TAE that for a time energy limits are not likely to manifest, as lack of money will be the limiting factor in a major financial crisis. At the present time, with modestly increasing energy supply, the delusion of far greater increases to come, and falling demand, energy is already ceasing to be a pressing concern. As liquidity dries up, and demand falls much further as a result of both lack of purchasing power and plummeting economic activity, this will be even more the case. The perception of glut lowers prices, and this will hit the energy industry very hard due to its rapidly increasing cost base, and therefore its dependency on high prices. As prices fall and the business case disappears, much of the expensive supply will dry up, including most, if not all, of the unconventional fossil fuels currently touted as the solution.

Prices are likely to fall faster than the cost of production, leaving profit margins fatally squeezed. While money remains the limiting factor, few may worry about the energy future, but the demand collapse will lead to a supply collapse in the future due to lack of investment for a long time, the concurrent decay of existing infrastructure no one can afford to maintain, transport disruption due to a lack of letters of credit, and the impact of intentional damage inflicted by angry people. Financial crisis takes the pressure off temporarily, but a the cost of aggravating the energy shortfall, and the impact of that shortfall, in the longer term.

Producing energy from “low energy profit ratio” energy sources requires a financial system capable of providing copious amounts of affordable capital, and is dependent on the availability of cheap conventional fossil fuels in order to supply the up-front energy necessary for what are highly energy intensive processes. In energy terms, low energy profit ratio energy sources are nothing more than an extension of the current high energy profit ratio conventional fossil fuel era, which is what sustains the current level of socioeconomic complexity. The financial system is one of its most complex manifestations, and therefore one of its most vulnerable.

Once the financial system has the accident that is clearly coming, we will be looking at a substantial fall in societal complexity, but that fall in complexity will eliminate the possibility of engaging in such highly complex activities as fracking, horizontal drilling, exploiting the deep offshore or producing solar photovoltaic panels and inverters. “Low energy profit ratio” energy sources cannot by themselves maintain a level of socioeconomic complexity necessary to produce them, hence they will never be a meaningful energy source.

This is true of both unconventional fossil fuels and renewable power generation. The development of low energy profit ratio energy sources rests largely on Ponzi dynamics, and Ponzi schemes tend to come to an abrupt end.

Once this becomes clear, the gradual fall in supply is likely to morph into a rapid one. As the ability to project power at a distance depends on energy supply, and that may be compromised, perhaps within a decade, maintaining any kind of large scale command economy may not be possible for that long. However, consolidating access to a falling energy supply at the political centre under a command scenario, at the expense of the population at large, may sustain that centre for somewhat longer.

Seen through an energy profit ratio and complexity lens, a Green Tech scenario appears increasingly implausible. Green Tech – the use of technology to capture renewable energy and convert it into a concentrated form capable of doing work – is critically dependent on the fossil fuel economy to build and maintain its infrastructure, and also to maintain the level of socioeconomic complexity necessary for it, and the machinery it is meant to run, to function. A renewable energy distant future is certainly likely, but not a technological one. One can have green or tech, but ultimately not both.


Scale, Hierarchy and ‘Functional Stupidity’:

A substantial point of agreement between Holmgren’s work and ours here at TAE is that the scale Brown Tech would operate on in a constrained future would be national rather than international. There are many who worry about One World Government under a fascist model. This may have been the trajectory we have been on taken to its logical conclusion, but if crisis is indeed proximate, then we are very unlikely to reach this point. We have likened layers of political control to trophic levels in an ecosystem, as all political structures concentrate wealth at the centre at the expense of the periphery which they ‘feed upon’:

The number of levels of predation a natural system can support depends essentially on the amount of energy available at the level of primary production and the amount of energy required to harvest it. More richly endowed areas will be able to support -more- complex food webs with many levels of predation. The ocean has been able to support more levels of predation than the land, as it requires less energy to cover large distances, and primary production has been plentiful. A predator such as the tuna fish is the equivalent, in food chain terms, of a hypothetical land predator that would have eaten primarily lions. On land, ecosystems cannot support that high a level predator, as much more energy is required to harvest less plentiful energy sources.

If one thinks of political structures in similar terms, one can see that the available energy, in many forms, is a key driver of how complex and wide-ranging spheres of political control can become. Ancient imperiums achieved a great deal with energy in the forms of wood, grain and slaves from their respective peripheries. Today, we have achieved a much more all-encompassing degree of global integration thanks to the energy subsidy inherent in fossil fuels. Without this supply of energy (in fact without being able to constantly increase this supply to match population growth), the structures we have built cannot be maintained.

The international level of governance is comparable to a top level predator. When the energy supply at the base of the pyramid is reduced, and the energy required to obtain it increases, as will inevitably be the case in this era of sharply falling energy profit ratios, the system will lose the ability to support as many layers of ‘predation’. We are very likely to lose at least the top level, if not more levels on the way down as energy descent continues. A national level of Brown Tech may last for a while, but as energy descent continues, so will the diminution of the scale and complexity at which society can operate.

Living on an energy income, supplemented with limited storage in the form of grain or firewood or water stored high in the landscape, and also limited ability to physically leverage effort with slavery or the use of draft animals, does not provide the same range of possibilities as living on our energy inheritance has done. Without fossil fuels, the technology of the ancient world (Rome for instance) is probably the most that an imperial degree of energy concentration can provide. Greater concentration is possible when a wide geographical area comes under a single political hegemony and feeds a single political centre at a high level of political organization. Lower levels of political organization (ie during the inter-regnem in between successive imperiums) would provide for less resource concentration and therefore would sustain a lower level of socioeconomic complexity and ‘technology’.

Energy is not the only factor determining effective organizational scale, however. The functionality of the financial system is a major determinant of the integrity of supply chains, and hence social stability. Societal trust is vital, and can be extremely ephemeral. The more disruptive a future of limits to growth, across a range of parameters, the further downward through Holmgren’s nested scenarios we are likely to go.

In building scenarios, I would add rapid versus gradual financial crisis as a separate parameter. Personally, I believe a rapid financial crash combined with an initially slow, but then increasingly rapid fall in energy supply is the most likely scenario. Financial crisis can cause many of the effects Holmgren discusses in his scenario work in relation to energy and climate impacts.

This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!

As for the climate change portion of the analysis, Holmgren points out that mainstream policy is shifting from mitigation to adaptation, in recognition of the failure to achieve any kind of progress on emissions control at the international level. Substantive action to reduce emissions is seen, for obvious reasons, as precipitating economic contraction, and no government is prepared to take that risk, especially when so many are on the edge financially in any case. Holmgren also addresses the growing realizations that reductions in emissions in one region may be bought at the expense of increases in another, with no net decrease overall, and that no decoupling between resource use and economic growth is feasible.

This is very much a position I would agree with. Decoupling is nothing but an illusion. There has always been a very close correlation between energy use in particular and economic growth. In the era of globalization we claim to have reduced the energy intensity of our developed economies, but we have in fact merely displaced the energy used to the new manufacturing centres. We import goods manufactured on some other economy’s energy budget (and water budget and other resources as well). The prospects for any kind of international agreement on emissions reduction, or any kind of efficacious top-down policy response at all, seem to be bleak to non-existent.

Internationally, no one party will agree to disadvantage itself in a competitive global economy when it does not trust that others will do the same. Nationally, policies favour growth and profit. Even policies ostensibly conceived to increase energy efficiency and reduce emissions may well be implemented in a manner having the opposite effect because some aspect of that implementation was profitable for some well connected party. For instance, a policy mandating high-tech smart metering for electricity requires complex manufacturing facilities a great cost in terms of both money and energy, but can deliver only minor load shifting, leading likely to a net increase in both energy use and emissions. Low-tech metering with consumer feedback could achieve far more in terms of energy savings at far less energy cost up front, but is less profitable, and so is not implemented.

Expecting governments to deliver any improvement whatsoever in this regard appears to be quite unrealistic. Governments achieve the exact opposite of their stated policy goals with remarkable regularity, all too often making bad situations worse as expensively as possible. Dimitri Orlov quotes, and further develops, a convincing explanation for this phenomenon or large scale ‘functional stupidity’:

Mats Alvesson and André Spicer, writing in Journal of Management Studies (49:7 November 2012) present “A Stupidity-Based Theory of Organizations” in which they define a key term: functional stupidity. It is functional in that it is required in order for hierarchically structured organizations to avoid disintegration or, at the very least, to function without a great deal of internal friction. It is stupid in that it is a form of intellectual impairment: “Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications.” Alvesson and Spicer go on to define the various “…forms of stupidity management that repress or marginalize doubt and block communicative action” and to diagram the information flows which are instrumental to generating and maintaining sufficient levels of stupidity within organizations.

Hence any meaningful change will need to come from the bottom-up.


Climate

I do not focus on climate change in my own work, partly because top-down policies vary between useless and counter-productive, and partly because, in my opinion, the science is far more complex and less predictable than commonly thought, and finally because success in generating a genuine fear of climate change is likely to produce human responses that achieve far more harm than good.

Many people seem to believe there is a linear relationship between carbon dioxide as a driver and increasing temperature as the result, but if there is one thing we know about climate it is that it is not linear. The models, while complex, have not been accurate predictors of the current situation and are therefore incomplete. As for the future, the models do not include factors such as the impact of an economic collapse or a large fall in energy use. There are multiple complex feedback loops that are not well enough understood, all of which interact with each other in highly complex ways. There is also a very long term cycle of natural forcings (note the time scale in thousands of years) providing the backdrop to anthropogenic impacts, and that is also not well enough understood. The net effect of the the very long term natural cycle and the much shorter term anthropogenic impacts is unknown. Global dimming, due to particulate matter in the atmosphere, affects incident solar radiation reaching the Earth. This could change on a much faster time scale than carbon dioxide, which has a very long residence time in the atmosphere, under conditions of economic collapse. This is also not adequately modelled.

In my view the situation is too complex and chaotic to make reliable predictions. In some ways what we think we know, on the basis of assuming a system to be simpler than it actually is, can be more dangerous than what we acknowledge we do not know, as we may take entirely the wrong actions and end up compounding the problem. See for instance Allan Savory’s excellent lecture on the attempt to reverse desertification (a major source of greenhouse gas emissions) through culling fauna, finding it had the opposite effect, and now attempting to remedy the situation while haunted by regret. His talk illustrates both a very important, but mostly ignored, factor in relation to climate change, and also the dangers inherent on relying on received wisdom. Overly simplistic models are often flawed, and applying them can easily cause, or fail to avoid, substantial harm that may then be difficult to reverse.

Apocalyptic predictions of near term human extinction have been made by some commentators, and drastic ‘solutions’ proposed as a result. I would regard such predictions as unlikely, disempowering and dangerous, in the sense that they could, when fear is in the ascendancy anyway, provoke a disproportionate fear response that could in itself be very destructive. When people become collectively fearful, they tend to over-react as a crowd, potentially causing more damage through that over-reaction than might have been caused by the circumstance itself. Fear can be exploited to provide a political mandate for extremists who would then be able to wreak havoc on the fabric of society. Fear needs no encouragement at such times. It will get more than enough traction, and do more than enough damage, all by itself. Actively undermining it is a better approach, as may keep more people in a constructive headspace.

If fear of apocalyptic climate change did grab the collective imagination, there are a number of outcomes which seem particularly plausible. All of them are counter-productive in some way. The first we have already seen – carbon trading system ponzi schemes. This involves financializing yet another aspect of reality, when over-financialization, and the consequent ballooning of virtual wealth, are what have led to our current debt crisis. Financialization is popular with the powerful, because it generates substantial, and concentrable, profits, feeding greater central control by Big Capital. It would probably also generate far more greenhouse gas emissions. Carbon trading allows the wealthy to continue business as usual while paying the poor to address the problems caused, but there is no guarantee that doing so would be effective. Perverse incentives would probably see the funds used for very different purposes.

The second predictable action is massive infrastructure investment in adaptation, which could consume large amounts of finite resources and generate substantial emissions. Large scale public procurement contracts are profitable, secure sources of on-going corporate income and are highly sought-after, as we have seen in Iraq for instance. Companies able to exploit the fear could benefit very handsomely today by building things that may or may not have any value in the future. They would have an incentive to play up the fear in order to extract contracts, and this would be harmful in itself.

The third possibility is widespread geo-engineering – the deliberate release of particulate matter into the atmosphere in order to increase global dimming. This amounts to interfering in a complex and delicate system with a blunt instrument, but it fits with the prevailing technological hubris and would probably generate substantial profits for someone, hence it is all too likely to catch on. The mentality behind it is that the problems of complexity can always be addressed with greater complexity, or in other words, business as usual must continue at any price, and the consequences can always be dealt with through technological intensification. Those consequences are unpredictable and could be disastrous.

The fourth plausible response is eco-fascism, along the lines of Holmgren’s Brown Tech scenario, but with a greenwash. Times of economic contraction tend to be times when people seek control over others, and control over access to the remaining supply of resources. Any excuse will do as a pretext for establishing command and control. Eco-fascism is simply fascism at the end of the day – a mechanism for depriving the masses and consolidating, and generally abusing, tight control in the hands of the few. It would make quality of life immeasurably worse and probably not reduce carbon emissions significantly, as control mechanisms are energy intensive.

Finally, we could see a mood of collective self-flagellation take hold, with the impulse to destroy what we have built on the grounds that it is purely destructive of the natural world. Being destructive in order to remedy destructiveness seems perverse, but is already being presented as a serious imperative in some circles. If implemented it would probably lead to the general demonization of environmentalists and the full range of ideas they propose, as well as do great harm to those least able to get out of the way.

Given that these five possibilities seem the most likely responses to real fear of climate change, and that all of them are likely to make the situation worse in some way, generating fear of climate change seems to be a counter-productive strategy. We could even see several of them at once, for a truly ghastly outcome causing harm on many fronts, and at many scales, simultaneously.

Where awareness is raised without visceral fear, climate change still does not seem to be a motivator for the kind of constructive behaviours that might make a difference in the aggregate. The scale is too large for people to feel that individual actions could ever be useful, which is disempowering. The time-frame is too remote, leading to complacency, and the consequences are not perceived as personal. As humans we are not typically very good at addressing problems which are neither personal nor immediate.

The economic contraction that is coming is very likely to have a far more substantial impact on emissions than any deliberate policy or collective action. The combination of this contraction and constructive collective action could be very powerful indeed, but achieving the latter action is not best done on the grounds of climate change. The same actions that would best address climate change in the aggregate are also the prescription for dealing with financial crisis and peak oil – hold no debt, consume less, relocalize, increase community self-sufficiency, reduce dependency on centralized life-support systems.

The difference is that both financial crisis and peak oil are far more personal and immediate than climate change, and so are far bigger motivators of behavioural change. For this reason, addressing arguments in these terms is far more likely to be effective. In other words, the best way to address climate change is not to talk about it.


Grass Roots Initiatives

Holmgren argues that time is running out for bottom-up initiatives to blunt the impact of falling fossil fuel supply. While simpler ways of doing things at the household and community level could sustain a less energy dependent world, uptake is limited and time is short. Holmgren points out that during the Soviet collapse, the informal economy was the country’s saving grace, allowing people to survive the collapse of much of the larger system. For instance, when the collective farms failed, the population fed themselves on 10% of the arable land by gardening in every space to which they had access. This kind of self-reliance can be very powerful, but the ability to adapt is path-dependent. Where a society finds itself prior to collapse – in terms of physical capacity, civil society and political culture – determines how the collapse will be handled. Dale Allen Pfeiffer’s excellent book Eating Fossil Fuels, comparing the Cuban and North Korean abrupt loss of energy supplies, makes this point very clearly. Cuba, with its much better developed civil society and greater flexibility was able to adapt, albeit painfully, while the rigidly hierarchical North Korea saw very much larger impacts.

Dimitri Orlov has argued very persuasively that the Soviet Union was far better prepared than the western world to face such circumstances, as the informal economy was much better developed. The larger system was so inefficient and ineffectual that people had become accustomed to providing for themselves, and had acquired the necessary skills, both physical and organizational. Their expectations were modest in comparison with typical westerners, and their system was far less dependent on money in circulation. One would not be thrown out of a home, or have utilities cut off, for want of payment, hence people were able to withstand being paid months late if at all and were still prepared to perform the tasks which kept supply chains from collapsing.

The economic efficiency of western economies, with very little spare capacity in a system operating near its limits, is their major vulnerability. As James Howard Kunstler has put it, “efficiency is the straightest path to hell”, because there is little or no capacity to adapt in a maxed out system. The combination of little physical resilience, enormous debt, substantial vulnerability even to small a small rise in interest rates, the potential for price collapse on leveraged assets, a relatively small skill base, legal obstacles to small scale decentralized solutions, an acute dependence on money in circulation and sky high expectations in the context of widespread ignorance as to approaching limits is set to turn the collapse of the western financial system into a perfect storm.

Time is indeed short and there will be a limit to what can possibly be accomplished. However, whatever people do manage to achieve could make a difference in their local area. It is very much worth the effort, even if the task at hand appears overwhelming. Given that a top-down approach stands very little chance of altering the course of the Titanic, we might as well direct our efforts towards things that can potentially be successful as there is no better way to proceed. Reaching limits to growth will impose severe consequences, but these can be mitigated. Acting to create conditions conducive to adaptation in advance can make a difference to how crises are handled and the impact they ultimately have.

Holmgren argues that collapse in fact offers the best way forward, that a reckoning postponed will be worse when the inevitable limit is finally reached. The longer the expansion phase of the cycle continues, the greater the debt mountain and the structural dependence on cheap energy become, and the more greenhouse gas emissions are produced. Considerable pain is inflicted on the masses by the attempt to sustain the unsustainable at any cost. If we need to learn to live within limits, we should do so sooner rather than later. Holmgren focuses particularly on the potential for collapse to sharply reduce emissions, thereby perhaps preventing the climate catastrophe built into the Brown Tech scenario.

He raises the possibility that concerted effort by a large enough minority of middle class westerners to convert from dependent consumers to independent producers could derail an already over-stretched and vulnerable financial system which requires perpetual growth to survive. He suggests that a 50% reduction in consumption and a 50% conversion of assets into building resilience by 10% of the population of developed countries would create a 5% reduction in demand and savings capital available for banks to lend.

This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!

An involuntary demand collapse is, in any case, characteristic of periods of economic depression. Conversion of assets from the virtual wealth of the financial world to something tangible would have to be done well in advance of financial crisis, as the value of purely financial assets is likely to evaporate in a large scale repricing event, leaving nothing to convert. There are far more financial assets that constitute claims to underlying real wealth than there is real wealth to be claimed, and only the early movers will be able to make a claim. This is already well underway among the elite who are aware that financial crisis is approaching. In a world where banks create money as debt at the stroke of a pen, a pool of savings is not actually necessary for lending. Lending rests to a much greater extent on the perception of risk in the financial system. The impacts of proposed actions would not be linear, as the financial system is not mechanistic, meaning that quantitative outcomes would not necessarily be predictable. Holmgren recognizes this in his acknowledgement that small changes in the balance of supply and demand can have a disproportionate impact on prices.

Holmgren realizes the risks inherent in explicitly advocating such an approach, both at a personal level and in terms of the permaculture movement as a whole. These concerns are very valid. Permaculture has a very positive image as a solution to the need for perpetual growth, and this might be put at risk if it became associated with any deliberate attempt to cause system failure. While I understand why Holmgren would open a discussion on this front, given what is at stake, it is indeed dangerous to ‘grasp the third rail’ in this way. This approach has some aspects in common with Deep Green Resistance, which also advocates bringing down the existing system, although in their case in a more overtly destructive manner. In a command economy scenario, which seems at least temporarily likely, such explicitly stated goals become the focus, regardless of the least-worst-option rationale and the positive means by which the goals are meant to be pursued. A movement best placed to make a difference could find itself demonized and its practices uncomprehendingly banned, which would be simply tragic.

Decentralization initiatives already face opposition, but this could become significantly worse if perceived to be even more of a direct threat to the establishment. While they hold the potential to render people who disengage from the larger system very much better off, on the grounds of increased self-reliance, they also hold the potential to make targets of the early adopters who would be required to lead the charge. Much better, in my opinion, to continue the good work with the declared, and entirely defensible, goals of building greater local resilience and security of supply while preserving and regenerating the natural world. While almost any form of advance preparation for a major crisis of civilization would have the side-effect of weakening an existing system that increasingly requires total buy-in, there is a difference between side-effect and stated goal.

The global financial system is teetering on the brink of a major crisis in any case. It does not need any action taken to bring it down as it has already had easily enough rope to hang itself. Inviting blame for an inevitable outcome seems somewhat reckless given the likelihood that many will be casting about for scapegoats. Holmgren argues that, as those who warn of a crash are likely to be blamed for causing it anyway, they might as well be proactive about it. Personally, I would rather not provide a convenient justification for misplaced blame.

Holmgren discusses the case for seeking disinvestment from fossil fuel industries, citing the report Unburnable Carbon 2013: Wasted Capital and Stranded Assets. The premise of this report is that 60-80% of the fossil fuel reserves on the books of energy companies could become worthless stranded assets if governments implemented decisive action on climate change. If this perception caught on, the authors suggest it might cause investors to dump the sector rapidly, causing a proportionate loss of share value as a result. Financial markets do not work this way. Prices are not based on the fundamentals, and the prevailing positive feedback dynamics cause disproportionate reactions in both directions. Shares in fossil fuel companies will never be valued rationally in accordance with the supposedly predictable impacts of government regulation. Just as they are over-valued at times when commodities are prices peaking on fear of imminent shortages, they become undervalued in the following bust. First they are bid up beyond what the fundamentals would justify, then they crash to far below.

Personally, I regard the probability of governments acting to actually constrain emissions as negligible in any case, for reasons already discussed. Comprehensive regulatory capture has ensured that Big Capital writes the rules by which it is regulated. It is not going to impose controls which harm its own profitability. Energy is inherently valuable, and will only become more so in an energy constrained future. (However, the value of energy and the value of energy companies are not the same thing.) While low energy profit ratio energy sources are only a manifestation of the current bubble, and will eventually be abandoned out of necessity, remaining high energy profit ratio energy sources are highly unlikely to be left underground in the longer term, whatever the impact of burning them might be.

Their exploitation may well be delayed during a period of economic depression where demand would be low, financial risk would be high as price would fall faster than the cost of production, and economic visibility would be low. Very little investment occurs during contractionary times, but as the economy eventually moves into a form of limited recovery, demand would pick up and resource constraints would reassert themselves as limiting factors. At that point, anything which could be exploited almost certainly would be, and there may well be conflict over the right to exploit resources. Oil remains liquid hegemonic power and adequately accessible reserves will never become stranded assets.

In a world of short term priorities, longer term considerations are not taken into consideration, and the destabilization inherent in a period of crisis only aggravates short-termism by causing discount rates to spike. Unfortunately, environmental concerns are longer term.

Holmgren emphasizes the need to prioritize local investment in the real economy, with which I very much agree. He points out that affluent nations have a long history of extracting wealth from the informal household and community sectors for the benefit of the formal, monetized economy, but that we have little experience of reversing that trend. Michael Shuman’s excellent book Local Dollars, Local Sense makes the case for the substantial benefits that could be achievable if such a shift were to take place. Of course, as already discussed, time is short, but still, any informed action taken in advance of crisis could have disproportionately beneficial effects later on. For instance, promoting business entities with a cooperative structure can be a powerful tool for maintaining relatively local control.

One way to promote local spending is to introduce a local currency. While it may well be impossible to persuade people to spend national currency only locally if it meant paying more or limiting choices, a local currency must be spent locally as it would not be accepted elsewhere. Every monetary unit spent, and therefore circulating, locally has far more beneficial effect than one spent outside the area. External spending siphons wealth away from communities, and we have been encouraged to spend almost everything externally in recent years. Cheaper alternatives operating with economies of scale have deprived local business of a market for their goods and services, often eliminating those local options over time. This is how the centre thrives at the expense of the periphery. Reversing this trend may well require instituting a monetary system which removes the option to spend it elsewhere. This, if it can persist for long enough, should act as a driver for the provision of local goods and services.

Local currencies can run in tandem with national currencies and can act to expand the money supply in a defined area. As such they can be particularly useful to address the artificial scarcity of a liquidity crunch, where people and resources still exist, but cannot be deployed for lack of money in circulation. Local currencies can be designed to depreciate, which acts as an explicit support for the velocity of money. However, this may cause difficulties if local and national currency are convertible and the national currency does not depreciate. On the other hand, lack of convertibility could make it more difficult to confer value and full acceptability on the local currency. An alternative currency which can be used to pay local taxes will have a distinct advantage in terms of acceptability as was the case in the classic example – the depression-era Austrian town of Wörgl.

Of course a money monopoly is a very significant power, and as such is very likely to be defended, as indeed it was in depression-era Austria. This limits the prospects, and likely the duration, for alternative currencies, but they nevertheless achieve a great deal while they operate, as they currently are doing in Greece. Eventually, in a period of sufficient upheaval, a money monopoly may be impossible to sustain, then local currencies would be freer to operate. They would still be subject to distortions for political gain, money printing and ponzi dynamics over the longer term, given that they would still be operated by corruptible human beings, but at least these would exist on a smaller scale, not representing systemic risk as the flaws in the larger financial system currently do. Essentially there is no such thing as an inflation-proof, peer to peer system which would be expected to be stable over the long term, as monetary systems move in cycles of boom and bust. It is our job to navigate the waves of expansion and contraction which we cannot eliminate.

Any initiative which reduces our dependence on national currency in circulation is going to be useful in this regard, including barter networks, time-banking, tool and seed libraries, and gifting. There are already well established barter networks in some countries operating at a national scale, for instance Barter Card in New Zealand and the WIR network in Switzerland. Additional networks at a local scale could also be very useful, although more inherently limited in scope. Time-banking, libraries and gifting are more profoundly local, and act not just as means of exchange without the need for money, but also as mechanisms to build trust and community cohesiveness. This is a tremendous benefit in its own right, as a major boost for local resilience.

Holmgren points out that holding cash under one’s own control, outside of the banking system can greatly increase resilience by reducing dependency on the solvency of middle men. This is very much in accordance with our position at TAE, as cash is king in a period of deflation. People who spend in cash tend to spend less as it feels more like spending than electronic payments do. They tend therefore to be less likely to be overstretched and vulnerable to a financial collapse.


Building Parallel Systems

Holmgren stresses the urgent need to opt out of the increasingly centralized and destructive mainstream though building parallel systems prior to the advent of a Brown Tech future, which he feels could last many decades before descending further into a low-energy Lifeboat scenario. He points out that at the moment we have the luxury of keeping one foot in each camp, so that we have the opportunity to develop alternatives before we have to rely on the results. We can experiment, but with a safety net.

I am in agreement, with the exception of the timeframe for the longevity of a Brown Tech system. The scale of the coming disruption, albeit initially due to financial rather than energy crisis, is likely to be large enough to shorten the length of time the political centre can maintain the ability to project power at a distance. Learning curve time for opt-out solutions, short as it may be, could be very valuable. Unfortunately, attempting to straddle two worlds simultaneously can involve all the work of both with few of the benefits of either, hence moving over as far as possible to concentrate on the opt-out position is probably more adaptive.

As Buckminster Fuller said, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” In other words, change comes incrementally and organically from the bottom-up, rather than by fighting to change top-down policies. Initially, pushing for grass roots change can require considerable human energy input, but once a critical mass is reached the movement can take on a life of its own very rapidly, especially if it suddenly coincides greater advantage as prevailing circumstances shift. The proactive phase is difficult, as people rarely prepare in advance for approaching change, but proactive can become reactive as the change is reached, and the earlier effort can help to shape the direction that eventual reactive response will take.

Ideas that hit the zeitgeist can become fashionable, and this imparts much greater momentum. For instance, the tiny house movement is making it a matter of pride to live in smaller and simpler dwellings, with greater emphasis on good design than physical space. More and more young people are choosing to opt out of the path taken by their peers, as that path towards debt slavery becomes ever more obviously disadvantageous. The non-passive portion of this  group is looking for direction, and is prepared to find it in non-mainstream places. Providing this could amount to seeding very fertile ground.

Being beneath the notice of larger powers hoping to maintain monopolies and control can be protective. Hence working at small scale, but in many locations simultaneously, could allow systems conferring greater local independence and resilience to become established with a lower likelihood of being suppressed as a threat by the powers-that-be.  

Permaculture should be a major building-block of any kind of system reboot following the operating system crash that a financial crisis represents. After all, once we navigate that period of artificial scarcity, we will have to address the real scarcity inherent in looming resource limits. We will have to deal with the fact we are far into overshoot in comparison with the carrying capacity of the Earth, even with the artificially boosted carrying capacity we have thanks to fossil fuels (where about half of the nitrogen in the food supply comes from the artificial fixation of nitrogen from fossil fuels for instance). We have been strip mining soil fertility with intensive agri-business, disrupting the critical nitrogen cycle and poisoning the soil micro-organisms critical for fertility with pesticides such as round-up. We will have to undo all of the damage, but it will take us a very long time, and in the meantime we have over 7 billion mouths to feed. Permaculture, with its emphasis on soil regeneration, is the best possible way (click for video) to do this. If we are ever to approximate, at least temporarily, an Earth Steward scenario (in the distant future, once the dust has settled), this is the path we must take.

As Holmgren says, “A permaculture way of life empowers us to take responsibility for our own welfare, provides endless opportunities for creativity and innovation, and connects us to nature and community in ways that make sense of the world around us.” Motivated by enlightened self-interest, and operating at a manageable human scale, we can apply our knowledge of natural and human systems in the real world, without being overwhelmed by the task of feeling we are personally responsible for saving the whole world. It can be difficult to let go of the top-down approach, to stop putting all our efforts into trying to change government policies or get the ‘right’ people elected, as if this would somehow solve our problems.

We need to get down to the business of doing the things on the ground that matter, and to look after our own local reality. We can expect considerable opposition from those who have long benefited from the status quo, but if enough people are involved, change can become unstoppable. It won’t solve our problems in the sense of allowing us to continue any kind of business as usual scenario, and it won’t prevent us from having to address the consequences of overshoot, but a goal to move us through the coming bottleneck with a minimum amount of suffering is worth striving for.


This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!