Monday, February 28, 2011

Oil prices on the rise--inflationary or deflationary?

Nothing.  NOTHING! disrupts the global economy faster than rising oil prices.  The reason is simple--oil (in its many refined manifestations) is the specified fuel for a host of critical applications.  This isn't an "addiction" (with all the BS that word inspires) this is an industrial specification.  Turn off the oil and the global economy grinds to a halt. Without a massive rebuilding of the oil-fueled infrastructure so it could run on some other energy source, there is literally no escaping the need for oil.

Therefore, when the price of this precious substance goes up, folks have no choice but to pay the bill.  And because oil figures into such a wide assortment of market goods like food, everyone who can raise their prices to cover their oil bills will do so.  In this way, raising oil prices will automatically raise the prices of almost everything else.  When prices for everything goes up, economic commentators start screaming about "inflation."

And they would be right except for one thing--inflation cannot break out unless there is a mechanism to raise incomes to cover the higher prices.  If incomes do not rise, higher oil prices will inevitably mean that folks will simply buy less of something else.  Higher energy bills are deflationary because they crush demand.  And when demand shrinks, the folks who want to raise prices to cover their fuel costs cannot do so.  Enterprises start eating losses which if done over a long enough period of time, will put them out of business.  And failing businesses really ARE deflationary.

So the answer to whether higher oil prices are inflationary or deflationary, the answer is obviously BOTH.  In fact, in the 1970s we called this problem "stagflation" although the mechanisms for stagflation were usually misunderstood by Predator Class economists of both left and right.

Sunday, February 27, 2011

Banksters probably caused the outrage in Wisconsin

There seems to be a time lag between the criminal sliming of the economy by the money crowd and a pushback by the victims. Why it takes so long is a very good question.

Saturday, February 26, 2011

Food shortages are real

While it is easy to point fingers at the speculators for their role in the global run-up of food prices, they are speculating on real problems--starting with the fundamental madness of turning food crops into biofuels.

Friday, February 25, 2011

More on Wisconsin

No one, including me, has any idea how the events in Madison will work out.  But what has already happened is that folks are already thinking bigger thoughts of how to fight back against the evil forces of neoliberalism.  And this, my friends, is a good thing!

Thursday, February 24, 2011

On Wisconsin

My mother used to say that "we get to choose our friends but God chooses our neighbors."  It's a sweet sentiment and in the case of neighboring Wisconsin, an accurate one.  I don't even begin to claim I understand those cheeseheads but they certainly are interesting.  And they are excellent neighbors.

The first thing someone should understand about Wisconsin is that it became a state in that tumultuous year of 1848.  It was a year for revolutions in Europe and during the uproar, a guy by the name of Marx would pen his Communist Manifesto. In the political crackdown following these mostly unsuccessful revolts, many would be forced to emigrate and some of the more gifted of Germany's intelligentsia washed up in the new state.  They were called the 48ers and their ranks included a guy named Carl Schurtz who helped organize the Republican Party and made sure it had a strong abolitionist plank.

And then there was Robert LaFollette--the giant of Wisconsin politics and perhaps the ultimate Progressive.  He was a Republican but was the antithesis of what the modern Republicans have become.

But Wisconsin is also the state that sent tail-gunner Joe McCarthy--the pluperfect reactionary dingbat--to the Senate.  A raging alcoholic who saw "Commonists" under every bed, he would crystalize post-World War II USA paranoia into a movement that pushed politics far to the right.  An interesting detail--he was a graduate of Marquette University in Milwaukee--the same Jesuit school that has now given us the newest Wisconsin reactionary by the name of Scott Walker.

So in Madison today we see an excellent example of the ongoing Wisconsin conflict between the LaFollette / Schurtz politics of light and the dark forces of tail-gunner Joe.  The hand-made signs seen at the protests are in many ways an interesting distillation of over 150 years of their history.

Wednesday, February 23, 2011

Just a reminder--the Predators really ARE evil

But nobody goes to jail.

Matt Taibbi has an excellent article in Rolling Stone about how the biggest crimes of the past 50 years have gone unpunished.  It is called:

Why Isn't Wall Street in Jail?
Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

And here is his most recent interview from Democracy Now.

Has the world reached Peak Oil?

I have been following the issues surrounding energy ever since I can remember.  A friend of my father's told me when I was in fifth grade that there were only three subjects of importance--food, drinking water, and energy.  Get those right, he would say, and everything else is easy.

But the real eye opener on energy came when I took Dr. Dean Abrahamson's famous Energy and Public Policy class in the fall of 1974 while the first Arab oil embargo was still fresh in everyone's mind.  I wrote two papers for his class--one was on the problems of retrofitting existing structures for greater energy efficiency and the other was on the problems of large crude supertankers.

Did some work on retrofitting houses--enough in fact to come to the conclusion that actually increasing energy efficiency in old buildings was damn near impossible.  Never even got close to a supertanker.  In fact, most of my experience in energy matters is that of an extremely interested amateur.  And of course, the most interesting question for anyone who wishes to watch energy policy events is when Peak Oil will happen.

Not long ago, I got the cold creepy feeling that asking when peak oil would happen had been replaced with the uglier question, Has Peak Oil already happened?  I happen to think the answer is yes.  In the following three-part series of clips, we can see that no less an authority than James Howard Kustler thinks peak oil has already occurred too.  This is VERY. INTERESTING. STUFF.

Tuesday, February 22, 2011

The fight against the Predators never ends

The battle against the mega-Predators has recently taken place in areas of the world like north Africa.  Makes sense when you think about it--it's pretty hard to organize a protest when the weather is lousy.  But folks in the north have serious grievances too--as we are reminded with the latest news out of Iceland.  It will be interesting to see what happens when spring comes to the north.

Monday, February 21, 2011

The climate keeps getting weirder

No matter what that strange ugly rodent says about winter ending when he looks for his shadow in early February, winter usually lasts until late March or early April around here.  March blizzards are especially notorious for dumping huge amounts of snow.

The reason I mention this is because we had 18" (46 cm) of snow yesterday here in E-town which made this the snowiest winter on record with the snowiest month left to go.

Sunday, February 20, 2011

The real economy continues to stagger

Idiot economics has real-world consequences.   When folks tell us that it doesn't matter if folks forget how to make things, they are just wrong.  And while it took some doing to destroy the greatest manufacturing colossus the world has ever known, it looks like the job is almost done.

Saturday, February 19, 2011

Status emulation on steriods

One of Thorstein Veblen's more brilliant insights was his observation that the human desire to ape those we believe to be our betters is so strong, it is second only to the survival instinct.

Veblen points out that status emulation's second place standing is a near thing with a wickedly funny crack about those who are well-dressed but ill clad.  When I read that, I literally laughed out loud remembering my cab-driving days when I would deliver women in flimsy cocktail dresses and high-heeled shoes to concerts on winter nights so bitterly cold, their survival out of doors would have been measured in minutes.  I also recalled those many times when my mother, the oh-so-proper preacher's wife, would show that there is literally no action goofier than one undertaken to demonstrate one's respectability.

But NOTHING has entrenched Veblen's concept of status emulation more thoroughly than television.  Before TV, one could usually envy and imitate only those who could be physically seen.  But with TV, we can now envy folks and situations that do not even exist in the real world.  In fact, that is the whole point behind most advertising.  It can be argued that TV "industrialized" status emulation.

In the following clip, a guy named Charlie Brooker covers the subjects of TV and status emulation amazingly well.  Enjoy!

Friday, February 18, 2011

Neoliberalism screws the Producing Classes (again)

The evidence that neoliberalism is little more than naked class warfare has been accumulating for several decades.  Even so, it is helpful to examine the new evidence for why this is when it appears.

Thursday, February 17, 2011

Increasing food prices are actually killing people

The sheer amount of economic barbarism associated with the "fight" against inflation is enough to put one off the whole subject like--forever.  Having lived through the regime of Paul Volcker, I now just hear the word "inflation" and wonder which crazy central banker is going to raise interest rates.

But here are the absolute basics one simply must understand about the rise in food prices.

The increase in food prices has real-world causes.  For years, the geniuses who figure out how to increase food production have managed to succeed in the face of exploding population levels, depletion of important aquifers, loss of natural soil fertility, agricultural land lost to urban sprawl, crazy weather patterns caused by climate change, diversion of food to biofuels, etc.  I know folks who understand agriculture intimately who lay awake at night wondering when this whole production rat race will come crashing down bringing whole populations with it.

Folks who claim that supply and demand curves cannot explain the recent sharp rise in food prices are also correct.  We might be on the edge of "peak food" (in fact it is almost inevitable that this is so because agricultural productions rates were forced upward on the back of petroleum products--therefore peak oil is almost by definition, peak food) but that doesn't explain everything.  And yes, the evidence that speculation in the financial markets has driven up global food prices is all over the place.  And this is possible because...

Food is perishable.  Depending on the methods used, food can be stored for short periods but generally speaking, food must be consumed when it is ripe.  This means the ideal range of production is quite narrow--the difference between not having enough and having too much is tiny.  Anyone who claims that, for example, a 2% drop in global wheat production isn't very important and shouldn't move markets is flat out wrong.

Wednesday, February 16, 2011

Like watching a train wreck in slo-mo

Time to snap back into reality.  Watching the joy in Tahrir square was obviously fun but the problems facing planet earth will not be solved in Cairo--no matter how important Egypt has been to the creation of civilization over the years.  Unless MAJOR changes are made right here in USA, the world will continue to careen from disaster to disaster.  This is the belly of the beast.  And the beast needs significant modification.

And citizens of USA are rapidly running out of excuses for doing nothing.  "We tried electoral politics and worked hard to get elected a community organizer of color and what did we get?--a thoroughly corrupt sell-out who is on his way to making Herbert Hoover look enlightened by comparison.  What else can we doooo?"

Tuesday, February 15, 2011

Neoliberal economics will produce more "Egypts"

If economic conditions have become so dire that the normally "apathetic" (terrorized into silence) Egyptian public has become very courageous to the point of revolution, it is certain these same economic conditions in other countries will spread this revolutionary fervor.

Monday, February 14, 2011

Getting it right--Egypt

Getting rid of a corrupt dictator is, unfortunately for the cheering throngs in Tahrir Square, only a beginning.  To get the sort of society most Egyptians want (most humans, actually) the folks who brought down the Mubarak government must embark on a complex and difficult pro-development agenda.

1)  Having a society with a prosperous middle class and opportunities for the children is MUCH easier if, as is the case of Egypt, the population was 20 million rather than 80+ million.  It is often said that a if everyone on planet earth were to live as the inhabitants of USA, we would need at least five more planets like earth.  This means population controls.  As nearly as I can tell, the ONLY way to reduce the birthrate is to change the culture so that sex is almost always for fun and almost never for procreation.  This is not impossible.  Look at Italy!

2)  There is probably no better predictor of economic performance than to look at indicators of corruption.  The folks at Transparency International do this on a regular basis and they found the 9 out of 10 countries at the top of their 2009 rankings were countries awash in the Protestant work ethic and 4 of those are culturally Lutheran.  All countries in the top 10 do especially well economically, and such countries as Finland "punch so far above their weight class" they are almost freakish.

There is a reason why this is so.  Those who do well in science and technology soon discover that honesty is not merely the best policy, it is the ONLY policy!  And this must be true of all levels of endeavor.  Trust me on this, you do NOT want a dishonest person fixing your brakes.  Nor do you want economic advice from someone who believes bundled sub-prime mortgages are a risk-free investment.  Since the fundamental teaching of the Protestants is a LOVE for the truth, their cultures do well by default.

The interesting exception on the TI top 10 list is Singapore.  It is not that they a doing poorly economically, it is that they are especially un-corrupt in a part of the world that is known for corrupt practices.  But this makes Singapore an even better example of the economic benefits of low corruption.  Former prime minister Lee Kuan Yew describes his anti-corruption efforts in From Third World to First : The Singapore Story: 1965-2000.  The point here is that you do not have to go "full Protestant" to have an honest society.  And if they can do it in an Asian seaport, they should be able to do it in North Africa.

Since Egypt ranks 111 in the 2009 Transparency International rankings, the absolute #1 demand the protestors in Tahrir Square now should be for a Yew-like anti-corruption government.

3) The difference between a developed country and one that isn't can be most easily seen by looking at the production and consumption of energy.  According to World Bank Stats, Egypt doesn't use a lot of energy by comparison to, say Canada so if the teeming masses along the Nile want to have a first-world life-style, they are going to have to "hire" some more mechanical slaves.  The bad news is that consuming more carbon-based energy is a recipe for disaster.  The good news is that Egypt has large population centers only short distances from some of the finest solar collection sites on earth.  The Tahrir Square revolution will have truly succeeded if in 10 years, the greatest experts on solar energy are Egyptian.

4) Egypt cannot feed itself!  Of course, neither can Singapore.  But Singapore has only 5 million people.  Eventually, Egypt will have to figure out more intensive methods of agricultre.  But as we in the USA Midwest know so well, intensive agriculture is usually a function of energy inputs.  Now it may be possible that someone can figure out how Egypt can increase its food output without fixing its energy problems but it is HIGHLY unlikely.

5) The Biggie!  No more listening to neoliberal economists. They are largely responsible for the mess you are in--they have shot their credibility.

Good Luck! Egypt.  You folks helped invent civilization itself.  It would be especially appropriate if you could develop a more enlightened civilization that would again be a model for the rest of the world.

Friday, February 11, 2011

Congratulations to the Egyptian protestors

A non-violent protest has toppled a brutal and corrupt police state!  Of course, the new government is a military dictatorship so this isn't MUCH of an improvement--but...

Goodness knows there a plenty of troubled days ahead.  For example, what do you do with the thousands of people who made their living running the surveillance apparatus and torture chambers of a police state?  It's not like such people have a lot of relevant expertise to sell in a real democracy.

And then there is the problem of what exactly Egypt could do to revive its economy.  Look at the USA.  In 2008, we had an election that on the surface provided as great a break from the past as the voters could possibly imagine.  I was at some of those parties election night--the mood was euphoric.  But when it came to economics, the same old gang of crooks and ideological fools appointed by Obama represented ZERO change.

So party hearty folks in Egypt.  You have a big job ahead if you are to get the changes you want.  IF you get the changes--the rest of the "official" world will treat you with the sort of contempt reserved for governments like Iran or Venezuela.  If your new government sells you out to the IMF and the rest of the neoliberal criminals, you can expect to be as disappointed as the typical liberal is with Obama these days.

It would be wonderful if the folks in USA could topple the kleptocrats that run our country.  If we could rid ourselves of the neoliberals and neoconservatives who have driven this country into the ditch, it would provide breathing room for the reformers in places like Egypt.  So any admonition that the Egyptians would do well to finish the revolution they have started goes triple for those in USA who wish to bring about a return to popular control of the important functions of our government.

Somehow, the closing admonition from the speech given to the American Economic Association convention in 1993 that introduced Elegant Technology to the world seems especially appropriate today.
Of course, development has always been a relative term. Compared to where we must be technologically in 50 years, United States is about the same distance away from achieving this objective as say, Egypt is from where they must go--the differences are trivial. In the final analysis, industrial environmentalism is a development project. At the very least, institutionalists have some experience in this area. The United States needs to do some serious nation-building. I hope we are all up to the task.

Thursday, February 10, 2011

Bringing it on home

Watching those incredibly brave folks in Tahrir Square standing up to one of the most evil and murderous regimes in history, one wonders when OUR downtrodden will get their act together.  Yeah, I know--the situations are very different.  In USA, hardly anyone has to survive on less than $2 per day, our food is still amazingly cheap, we have so much housing that almost 10% of it lies empty, W and Obama are not nearly as evil as Mubarak, and folks are hiding out from a really vicious winter.

Even so, our young people face a future as bleak as the youth of Egypt and one wonders how long they will stay in their parent's basements asking why they are not getting laid, why they cannot participate in their country's future, why they should pay massive amounts every month for an education that was worse than useless, etc. etc.

Pilger seems to think that it is only a matter of time before the revolutionary fever in Egypt will spread to the richer nations.  He may be right--these things do have a way of spreading.

Wednesday, February 9, 2011

Scienciness has a bad day

I have tried to ignore the ginned-up controversy over Toyota and it's so-called unintended acceleration problem.  But damn! this issue annoyed me.  I took it personally--which was probably pretty stupid but there you have it.  I have a lot invested in this.
  • We own a Toyota Camry and an Lexus LS in this household.  This story had a real-world impact on the resale value of our vehicles.
  • I spent quite a bit of time in the 1980s reading up on Toyota's successful attempt to re-invent the whole concept of quality control.  If in fact this process was flawed, I have wasted a bunch of time and have lowered my credibility because I became a minor expert on the subject--going so far as to cite their efforts favorably in Elegant Technology.
  • I like to be the car stud in any room--I have gone to some effort to be the expert on things automotive.  I have an ego at stake here.
But mostly I couldn't stand the friggen liars that were telling these utterly unbelievable fabrications about Toyota--often in the face of hard physical evidence.  What was worse, there were those--especially on the left--that not only believed these whoppers, but thought themselves morally superior to those of us who didn't.  Uff da!

Tuesday, February 8, 2011

Trying to get a rise out of downtrodden 'Merikuns

It's freaking February and it was -12°F (-24°C) this morning.  It's been a long nasty winter and anyone who isn't clinically depressed by now was probably insane to begin with.  Unfortunately, my winter blues have been compounded this year by real-life events.

The events in Egypt have been especially depressing for me because even though it is exciting to watch brave people standing up to an ugly police state, the fact that hundreds of those brave people have already been killed and hundreds more have disappeared into the torture chambers for which Egypt is so famous puts a damper on the excitement very quickly.

And then there is the coverage by Aljaazera.  I have been complaining for years about how disgustingly moronic USA "journalism" is but watching real journalism in action has picked at the ugly scab covering most of my complaints.  It doesn't much matter whether USA "journalism" is deliberately designed to produce a pathetically uninformed public or this is just a happy side effect of turning news into infotainment, the result is the same--folks who are Michelle-Bachman goofy in the highest reaches of our government.

But there was one recent event that caused an explosion of hopelessness in my already depressed world-view.  Two weeks ago in my own kitchen a dear friend who has the most elite and expensive education of anyone I know launched into an unprovoked rant about the evils of warming food in a microwave oven.  Before long he was anthropomorphizing the water molecule claiming that its life-giving properties would be damaged by microwave heating.  I listened with growing frustration to this absurd nonsense before letting fly with my ultimate insult "The Enlightenment was wasted on you."

Stephen Colbert, the brilliant satirist from Comedy Central coined a word a few years back that has worked its way into general usage--truthiness.  It is a word he uses to describe something that sounds factual but is in fact pure BS.  I believe it is time to add the word "scienciness" to describe the scientific-sounding BS that so many would rather believe than real science.  Scienciness would describe such things as coffee enemas to cure cancer, climate change denial based on the fact that AlGore is fat, creationism, parapsychology, neo-alchemy, and other New Age garbage, etc. etc.

I guess I shouldn't be so surprised when scienciness proves more popular than actual science.  After all, I know dozens of people who would MUCH rather read science fiction than science fact.  Worse, they seem to think storytelling is an acceptable substitute for science.
click for full size
It wouldn't be so bad that otherwise intelligent people confuse "scienciness" with science except for the fact that many of the most important problems facing the human race including peak oil, climate change, and MOST pollution cannot be addressed without a serious and profound understanding of science--the real thing.

Monday, February 7, 2011

Understanding Egyptian unrest as an IMF riot

Over the years whenever the IMF has been called into to help destroy a country's economy, there has usually been objections strong enough so that people take to the street.  The beloved folks at the IMF have come to expect such trouble and in fact, build in time for the the riots into their "structural adjustments."  Well, the IMF hasn't been involved recently in Egypt but the rest of the the package is the same--poor folks getting screwed over by economic forces far beyond their control deciding to "fight back."  This time the driving force is increased food prices which have real causes (changing weather, declining soil fertility, etc.) compounded by the naked greed of the speculators.

Sunday, February 6, 2011

Making things worse

Last night on NBC evening newscast, we 'learned' that many Egyptians with day jobs (who are barely making it anyway) are not at all happy with the serious economic disruption to their lives caused by the anti-Mubarak protests (no matter how much they may hate Mubarak and his ugly little police state.)  After all, if your job is to give camel rides to tourists at the pyramids and all the tourists have fled the country in terror because of a political uprising, someone else's political actions and agenda has impacted your ability to eat.

What do we know about the situation in Egypt?  We know that they are suffering from tremendous population pressures as more and more people scramble to divide up the economic pie.  Then there is the problem that the slice of the economy available to the growing mass of young Egyptians is not growing fast enough to keep up with population pressure--or is actually shrinking.  Their economic slice is shrinking in part because of corruption and economic stupidity at the top.  This is actually the easier problem to solve--a new government that rejects neoliberalism and is determined to root out corruption would go a long way towards fixing this.

The real dilemma facing the protesters in Tahrir Square is that even IF they were to get their dream government, their share of the economic pie will still shrink because the global economic pie has started to contract.  Oil has fueled global economic development for 150+ years now and that growth is coming to a halt.  If we haven't already passed Peak Oil (which I believe BTW), we will soon experience it.  Life on the downslope of global oil production will get VERY ugly as folks scramble to get their hands on a shrinking supply of this most valuable fuel.  But even worse for the poor Egyptians trying to survive on a dollar a day, Peak Oil means Peak Food.  Complicating things, food production is largely in the hands of the weather gods and climate change is making a dicy situation much worse.

But lest we get smug about the existential precariousness that makes the idealistic protests in Tahrir Square look so futile, just remember that their problems are everyone's problems.  Because the Egyptians have such a corrupt government, and because rising food costs are so much more painful for them, they are in the streets while we in USA are watching for our own amusement not understanding that we aren't any closer to solving the big problems than they are.

Friday, February 4, 2011

How to make economic collapse mathematically certain

The banksters are talking about raising interest rates. (again)  They claim they want to fight inflation.  Since current price hikes around the world are mostly in oil and food, both of which are phenomena tied to real events like peak oil and bad weather and have almost nothing to do with monetary policies, it appears that banksters are calling for higher interest rates because that is just what they do.  Nothing more.  Krugman's title is a take-off on the most famous speech on monetary theory in USA history--William Jennings Bryan's "Cross of Gold" speech from 1896.

Thursday, February 3, 2011

What the Predators will do to retain their power

The news from Egypt just gets more painful to watch by the day.  What we are seeing is an incredible demonstration of human bravery / desperation in the face of bullies, thugs, and the rest of the assorted reptilians who can always be counted on to back an evil creature like Hosni Mubarak.

Bullies and thugs tend to win these conflicts--which is why actual human progress is so rare.  Even worse, the reptilians tend to destroy the economic potential of the peaceable types necessary for true development.  A thief can steal something of value, but because he has no idea how that thing of value came to be, stealing and corruption is a certain path to economic backwardness.

But while most of us are appropriately horrified watching the worst examples of humanity wound and kill the best, the War Nerd has penned a must-read instant classic on how quickly the "powerless" can relearn the tactics that have historically allowed to best to defend themselves and fight back.  Brecher is usually right about these things which is enough to give the rest of us some hope.  (I hope)

Wednesday, February 2, 2011

The interests of the moneychangers are NOT the interests of the real economy

The fix is in--the money boys have decided that there is too much generalized prosperity and we need another round of depression / deflation.  Actually, the problem is that they are not bright enough to see past their own greed and austerity (for the rest of us) is the best 'solution' they can come up with.

Tuesday, February 1, 2011

The economics of the Egyptian uprising

It would be difficult indeed to watch the over one million Egyptians protesting their government from Tahrir Square in Cairo this morning and not be profoundly moved.  Egypt may be one of the original civilizations on earth, but recent history has not been kind--colonial exploitation, chronic underdevelopment, overpopulation, and for the last 30 years, misrule by a brutal and corrupt police state.  People of good will from around the world are cheering on the long-suffering Egyptians.  I am certainly one of them.

But I have a bad feeling about this.  While the Tunisians actually succeeded in getting rid of their kleptocracy, the economics catastrophes that have brought people into the streets from Iceland and Ireland to Greece and the UK are as real as the one in Egypt and those protests have not succeeded in changing much of importance.  Worse, the Egyptian situation is complicated by geopolitical concerns that means there are many outside forces that want as little change as possible.